WASHINGTON – Five Maryland trade schools will lose funds from national student aid programs because of students’ failure to repay their loans, according to a report released Friday by the U.S. Department of Education.
Northwest Beauty School in Baltimore headed the list of defaulting schools in Maryland, with about 59 percent of its students failing to pay back loans in 1993. The government this year is kicking the school out of the national student aid program because of its consistently high rate, the Education Department report said.
Other Maryland schools this year will lose some aid from federal programs, because their default rates have been higher than 25 percent for three years.
They are the Maryland Drafting Institute in Langley Park, which had a 38 percent default rate; Gordon Phillips School of Beauty Culture in Baltimore, with a 35 percent rate; the Roberts Institute of Hair Design in Langley Park, with a 33 percent rate; and the Baltimore Studio of Hair Design, with a 31 percent rate.
Ronald Prell, the owner of Northwest Beauty School, said the blame for loan defaults should not be placed on the schools.
“We handle inner-city kids and a lot of students don’t pay their loans. Period,” he said.
Prell said many of his 40 students are single mothers who leave the program when they become pregnant. Once they leave, he said, they are untraceable.
“Their phone numbers change like the wind,” Prell said.
Prell said the government’s action should not have much impact on students at his school. He said for the last three years, he has been offering them a better deal. He set up a system in which those with perfect attendance records receive a $300 scholarship to cover part of their $700 tuition.
Maryland’s average loan default rate for fiscal year 1993, the most recent year for which figures are available, was about 11 percent, on a par with the national average, the report said.
Almost 50 percent of Maryland’s post-secondary schools improved their student loan default rates between fiscal years 1992 and 1993, the report indicated.
Deputy Education Secretary Madeline Kunin credited her department’s campaign to crack down on defaulters for reducing the nationwide rate from 15 percent in 1992 to nearly 12 percent in 1993.
“We now have many more tools at our disposal,” Kunin said, outlining some of the department’s new initiatives.
In addition to retaining borrowers’ federal income tax refunds, Kunin said the government is now able to garnish their wages and block access to other loans, such as mortgages.
Kunin said a high student loan default rates reflects a school’s poor quality of education.
“Some of the bad apples are out,” she said, referring to the loan program. “The system is working to weed out schools that are not providing a good education to their students.”
The University of Maryland at College Park came in 68th out of 89 Maryland schools on the list. It saw its default rate increase from 3.4 percent in 1992 to 4.5 percent in 1993.
William Leith, director of financial aid at the university, said one of the reasons for the rate increase is an increase in the school’s loan volume.
Loans totaled about $20 million before 1992, he said. Now, students at the university borrow about $65 million, he said.
“More students are borrowing a lot more money than they did in 1992,” Leith said. Eight schools in Maryland did not have any defaulted loans, the Education Department reported. They included the Baltimore Hebrew University, the Harbor Hospital School of Nursing in Baltimore and the Washington Theological Union in Silver Spring. -30-