WASHINGTON – The percent of Maryland college students who defaulted on their school loans fell below the national average in fiscal 1997, an improvement that state officials believe was helped by a thriving economy.
The U.S. Department of Education reported Tuesday that 8.1 percent of Maryland’s college students did not pay back their school loans in fiscal 1997, compared to a national default rate of 8.8 percent. Those numbers were down from a 9.8 percent default rate in Maryland and a 9.6 percent default rate nationally the year before, the department said.
The strong economy may have contributed to the decrease, said Jeff Welsh, spokesman for the Maryland Higher Education Commission.
“As the economy has improved, graduates have been able to pay off loans with less trouble,” Welsh said.
The actual number of Maryland students who did not pay back their loans fell from 2,521 in fiscal 1996 to 2,414 in fiscal 1997, according to the federal report.
Federal officials said the national default rate has declined steadily since 1990, when 22.4 percent of students were in default. The drop has come as the total amount of student loans nationally has more than tripled.
In fiscal 1999, the Education Department said, 9 million students took out loans that totaled $42.9 billion. Nine years earlier, 4.1 million students took out loans that totaled $11.7 billion, the department reported.
The numbers released Tuesday reflect default rates for schools that participated in the Family Federal Education Loan Program and the William Ford Federal Direct Loan Program, which make up the bulk of federal student loan programs.
Schools with high default rates may be not be eligible for certain federal student aid programs. A default rate of 25 percent or more for three consecutive years might make a school ineligible for the Family Federal Education Loan Program, the Pell Grant Program and direct loan programs, according to the Education Department.
Maryland schools varied widely in their default rates in 1997, according to the federal report.
Among schools that offer an associate’s degree or higher, Morgan State University had the highest default rate among public colleges in the state and Baltimore International College was highest among private schools. At Morgan State, 20.2 percent of students defaulted on their loans in fiscal 1997, while at Baltimore International College the default rate was 13.1 percent.
Morgan State officials had not seen the report Tuesday and declined to comment until after they could review it. The spokesman at Baltimore International College could not be reached to comment Tuesday.
Harford Community College had the largest increase in its default rate over a two-year period, rising from 5 percent in fiscal 1995 to 13.9 percent in fiscal 1997.
On the other end of the spectrum, Wor-Wic Community College in Salisbury, Western Maryland College in Westminster and the University of Maryland Baltimore had default rates of 1.8 percent in fiscal 1997.
“These numbers mean that the overwhelming majority of students are meeting their responsibilities to repay their loans,” said U.S. Education Secretary Richard Riley, in a prepared statement. “And the department is succeeding in its mission of providing our young adults with the financial means to attend college or trade school, while safeguarding taxpayer dollars.”