Loan Defaults

Student Loan Defaults Have Serious Consequences

UofA graduate student Whitney King unexpectedly found her student loan in default during the transition from Jonesboro to Fayetteville. Photo by Abbi Ross

By Abbi Ross, Brooke Borgognoni and Emily Thompson
The Razorback Reporter

Whitney King had a plan. She had just graduated from Arkansas State University with her bachelors’ degree in journalism and was accepted into a masters program at the University of Arkansas.

She made the move from Jonesboro, Arkansas, to Fayetteville and thought she was set. Then she got an email on August 15 saying that a payment was overdue by 11 days — a loan she thought she would not have to start paying back until after she graduated with her masters’ degree.

King, 24, said she thinks there needs to be more information given to a borrower beforehand.

“I hadn’t taken out a loan before, so I think it would be beneficial to know the ins and outs,” King said. “It was a lot of information thrown at me on that day.

Out of all Arkansas college students that graduated between 2015 and 2017, on average, 14 percent defaulted on their student loans. The average amount of debt a student graduated school with between those two years was $14,000.

Borrowers default for various reasons, including divorce, health problems and not finishing school, Joel Doelger, Director of Community Development and Housing Counseling for the non-profit Credit Counseling of Arkansas. “There is no typical reason,” he said. A loan is considered in default after a borrower goes 270 days without making payments, Deolger said.

King said she enrolled in her graduate courses in May and thought the loan would automatically defer until after she graduated with her masters. King then got a letter informing her that loan was in default in August and quickly began the process of getting it deferred. After proving her enrollment, King is now considered to be out of default.

Todd Hertzberg, a Fayetteville-based bankruptcy attorney, said about half of his clients have student loans with some loans reaching up to $350,000.

Hertzberg urges his clients to get out of default as soon as possible, even if they plan on filing for bankruptcy. Penalties for defaulting on student loans can be severe. Unlike other creditors, student loan providers only have to send one notice before they can have employers garnish wages, meaning loan payments are forcibly taken from a paycheck. Interest rates on loans in default can spike as high as 30 percent.

There are few options for relief for those struggling to pay down student loans.

Student loans are non-dischargeable in bankruptcy, unless they pose an undue hardship. This means that even if other debt is waived through bankruptcy, student loans are not except in rare cases, Hertzberg said.

“There has been a myriad of court decisions around the country as to what constitutes undue hardship and the courts have not opened the doors very wide,” Hertzberg said. “It has been narrowed to nearly complete physical disability.”

Some undergraduates who took out loans are nervous about paying them off in the future.

Rachel Thrash, a junior advertising and public relations major at the University of Arkansas said she worries about balancing living expenses and student loan payments after graduation. She will have to begin repaying her loan six months after she graduates.

“After college, I’m going to have to start paying on an apartment and a car and all these different things and then on top of that also paying for student loans,” Thrash said.

Options for those in default are limited. A defaulted loan will be transferred from the original bank or loan servicer to a collection agency, Doelger said. Two options for borrowers after defaulting are rehabilitation and reconsolidation.

**Joel Doelger of Credit Counseling of Arkansas helps resolve student loan and debt problems. Photo by Abbi Ross**

For rehabilitation, a borrower will contact the collection agency and ask for a rehabilitation plan where a payment amount is determined, The borrower will need to make nine payments in 10 months to get out of default, Doelger said.

If a borrower chooses rehabilitation they can have the default mark removed their credit report, Doelger said.

If a borrower has more than one loan, they can consolidate them, Doelger said. The consolidation process can take borrower out of default in one to two months, a quicker option that rehabilitation, Doelger said.

It also offers a wider range of payment options, but consolidation does not allow the default mark to be removed from credit scores, Doelger said. Income-driven plans are available for both options, Doelger said.

Some students do not understand the full implications of taking out student loans and the repayment process, he said.

“I think it’s human nature to be more aware of what’s going on today than what’s going to happen six years down the line when loans are going to be payable,” Doelger said.

Noel Morris, UA Financial Literacy Professor

Noel Morris, a finance professor at the Sam Walton College of Business at the UofA, said students need to approach student loans like any other loan.

“It has the same impact as if you stop paying for your car or you stop paying for your house,” said Morris. “They cannot repossess it like they would a car, but it will not go away. It will hurt your credit for about seven years.”

November 1, 2019November 1, 2019

Students Seek Student Loan Financial Advice

By Emily Thompson & Brooke Borgognoni
The Razorback Reporter

As Kat de Sonnaville, a 21-year-old senior, wraps up her studies at the University of Arkansas, she wishes the college offered one more course: financial literacy to help her navigate the student loan application and repayment process.

Kat de Sonnaville said financial literacy courses are needed to understand student loans. Photo by Brooke Borgognoni

“I think the university should make a financial literacy course a requirement for all students who take out loans,” said de Sonnaville, who faces $18,500 in student loan debt. “I want to know what paying back my loans are going to look like, how long I’ll have to pay them back and helpful tips on staying on top of debt after college.”

Students graduating from the University of Arkansas, the state’s largest school, had median student loan debt of $21,500 in 2016-17, unchanged from the year earlier, according to College Scorecard, a U.S. Department of Education database. The UofA had 22,254 students enrolled in 2016-2017 and tuition was $22,000. According to College Scorecard, 47 percent of them received Pell grants.

The average student loan debt in Arkansas was $14,926 in the 2016-17 academic year, up $136 from the year earlier, according to College Scorecard. The median debt loads ranged from $3,500 at East Arkansas Community College to $34,240 at Strayer University for the 2016-17 academic year.

De Sonnaville, a first generation student, gained information about student journalism scholarships by speaking with her professors during office hours. She now credits the School of Journalism and Strategic Media for providing that guidance and making it financially possible to finish out her degree at the UofA.

Average Tuition Costs for Arkansas Colleges, 2016-2017 school year. Graphic By Emily Thompson and Brooke Borgognoni

“I have received many scholarships from my department, the School of Journalism and Strategic Media,” de Sonnaville said.

Between jobs and scholarships, de Sonnaville does not have to take out loans this year. De Sonnaville supports herself through two on-campus jobs. She works as a Resident Advisor for Maple Hill South and as a multimedia intern at the College of Engineering. These two jobs provide de Sonnaville with free room and board, a monthly stipend and biweekly paychecks.

De Sonnaville said that she is concerned that the UofA will not reach out to her about paying off the loans after she graduates in May. Each loan provider has their own rules and regulations on when and how student loans must be repaid.

The University of Arkansas offers a variety of scholarships and programs aimed at keeping costs down for students. Some of these scholarships total up to $16,000, offering a $4,000 award renewable for up to four years. They also offer programming to help students navigate the challenges that come with college life.

Student Support Services is a federally funded program through the Department of Education that helps first-generation students, low income students and students with disabilities obtain a college education. Student Support Services is a national program and the services it provides varies based on the college. At the UofA, some of the services it provides include workshops on topics like applying for financial and time management, one-on-one guidance with student support specialists and grants.

Ramon Balderas, a UofA student development specialist and student retention coordinator, said that college, particularly learning how to finance it, can be more difficult for first-generation students.

“You could be the most intelligent student, get straight A’s all through high school, but if you are put into a system that you don’t know how to navigate, it’s going to complicate your journey,” said Balderas, a first-generation college student.

De Sonnaville, however, said initiatives like Student Support Services did not provide the loan counseling and financial literacy services she needed.

Shorter College students saw the biggest increase in student debt in 2016-17. The median student debt load for Shorter College students increased $4,000 between 2015-16 and 2016-17 academic years to $28,000 for 2016-17 at Shorter College.

Shorter College is a private, faith-based, two-year liberal arts college in North Little Rock. It is also one of 110 Historically Black Colleges and Universities in the U.S. Graduates of Shorter College earn an associates degree in general studies, according to their website.

There were 446 students attending Shorter College in 2017. The average cost for the 2016-2017 academic year was $20,500. According to College Scorecard, 87 percent of Shorter College’s students receive a federal Pell grant for low-income families.

November 6, 2018October 27, 2019

Grant Could Help Crack Down on Concrete Deficiencies

Senior Walk, an integral part of the University of Arkansas campus, spans five miles of pavement etched with graduates’ names reaching back to 1876.

As the university’s oldest tradition, and as the only Senior Walk in the country, preservation of the pavement is vital. When walking around campus, however, it is hard not to notice the cracks and wear that stretch along the pathways.

Now Senior Walk and other future campus concrete projects might benefit from research supported by a recent $500,000 gift from the Oklahoma/Arkansas chapter of the American Concrete Pavement Association. The intent is for researchers to study methods of creating stronger, more cost efficient concrete.

The half-million-dollar pledge will make the U of A a national leader in concrete pavement research, said Cameron Murray, assistant professor in the Department of Civil Engineering. It also supports Campaign Arkansas, the university’s $1.25 billion capital campaign to advance academic opportunity.

This gift comes at an appropriate time; many noticeable sections of campus pavement could use a touch up, including portions of Senior Walk that have been mauled by construction or simply become worn over time.

“We have cracking sometimes. Concrete cracks,” Mike Johnson, the associate vice chancellor for facilities management, said. “We try to put in joints so it cracks where we want it to crack. We’re quasi-successful.”

New concrete is always tested when it is placed, Johnson said.

“They’ll take cylinders and they’ll break cylinders at 7, 14 and 28 days and look at the compression to make sure we actually have what we paid for,” Johnson said.

The association gift will be provided in five yearly installments and will support teaching and research activities in the concrete laboratory at the Engineering Research Center, Murray said.

“Early on it looks like we will mostly use the money to fund graduate students who will do work related to concrete pavements,” Murray said. “In particular we will be looking at ways to make more efficient, more cost effective concrete pavements.”

More cost efficient concrete could make it easier for the university to make some quick fixes around campus.

They can approach the matter of more efficient pavements by either selecting more cost effective combinations of ingredients for concrete or by proposing different designs to the pavement, Murray said.

“For example, we can look at how the ‘structure’ of the pavement is designed, trying to use a thinner section that will be more cost effective,” Murray said.

Concrete is designed for its specific application, said Daniel Clairmont, the director of engineering and construction.

“Foundations, patios, sidewalks and roads are all different strengths and different thicknesses,” Clairmont said. “If it is expected to carry heavy loads, it would generally be thicker and stronger.”

These differences in the pavement around campus might explain why some portions look pristine and have held up well over the years, while adjacent areas are cracked or otherwise damaged.

“Senior walk is a totally separate formula and process because it has to be a very smooth surface so we can glue down the rubber stencils and do the sand blasting,” Johnson said. “So it’s higher strength; we pay more attention on how it’s finished and that type of thing.”

The quality of the base on which the concrete is poured also plays a factor in its longevity, Clairmont said.

“A poorly compacted base, or if it is not protected from water infiltration and erosion, will almost guarantee the concrete will crack and fail,” Clairmont said.

As graduating classes are added to Senior Walk, alumni will appreciate any effort to preserve the names that have been engraved for decades.

“Concrete is pretty simple,” Johnson said.