Rate of Loan Defaults at CSUN Drops : Student aid: The campus had a 10.2% mark in 1988. By comparison, Cal State Dominguez Hills was at 19.5%

While the federally guaranteed student loan program at one state university in Los Angeles County had the highest default rate in the system for the second consecutive year, the rate at Cal State Northridge has actually declined.

And CSUN administrators aim to keep it that way. “I would like to see it go even lower,” said Vu Tran, associate director of the university’s financial aid program.

The default rate for Cal State Dominguez Hills in 1988, the latest year for which the U. S. Department of Education has figures, was 19.5%. The rate at CSUN was 10.2%.

Nationwide, 15.6% of students defaulted on bank-administered Stafford loans. Last year, defaults on these loans cost the nation’s taxpayers almost $2 billion, said Rodger Murphey, a Department of Education spokesman. He said that for every dollar lent, 37 cents is not repaid.

The CSUN student loan default rate has remained fairly constant for the last three years and has even improved somewhat, the figures showed. In 1987, the student loan default rate was 11.8%. It was 10.6% in 1986. Figures are not yet available for 1989.

At Northridge, 214 students who were to begin repaying loans in the 1988 fiscal year failed to do so. These loans totaled $885,074. There are about 30,000 students at the campus.

About 140 loans issued to Dominguez Hills students--totaling more than $708,000--are considered to be in default, according to the Department of Education. There are 9,200 students there.

Tran said CSUN hopes to lower its default rate through a program started in October, 1989, that requires each student who applies for financial assistance to attend a loan counseling session.

“We try to inform them of their responsibilities,” he said. “They’re all spelled out in the loan papers, but many do not read them. They forget.”

Many students default on the loans simply “out of ignorance or lack of attention” to their responsibilities, Tran said. For example, some students do not know that if they transfer to another school, they will be listed in default if they do not notify the lending institution.

“We’re trying to identify potential problems and deal with them ahead of time,” he added.

Tran said Northridge officials will not know if their program has been successful until new loan default figures are released by the Department of Education at the end of this year.

Statewide, the Northridge student loan repayment rate is better than those at the Cal State campuses at Bakersfield, Los Angeles, San Bernardino and San Francisco, in addition to Dominguez Hills. CSUN’s default rate is within one or two percentage points of 10 other state university campuses.

Only Cal Poly San Luis Obispo, with a 3% default rate, was significantly lower, according to the Department of Education figures.

The Dominguez Hills default rate of 19.5% means that one in five students failed to make payments on their loans. The rate was 16.8% in 1987.

Officials at the Carson campus say the school’s default rate is due in large part to the makeup of its student population; many of the borrowers are low-income, first-generation college students who sometimes do not complete their studies. Campus officials say worsening economic conditions have also contributed to the difficulty even successful students have in starting careers after school and repaying their loans.

In the last two years, both Congress and the Department of Education have approved rules that would penalize student aid programs at schools that do not maintain certain minimum default rates.

Last year, the department said a school with a default rate of more than 60% could become ineligible or face other sanctions on all of its federally backed financial aid programs; that rate will be lowered annually by 5% until it reaches 40%.

Congress took further steps and, in November, adopted a separate rule that automatically terminates Stafford loans if a school exceeds a 35% default rate for three years running. The program would be retroactive.

At a time when default rates are being used to penalize campuses, the accuracy of the data itself is coming into question. Campus administrators have criticized the data, saying federal default figures often count students more than once and do not remove loans from the default category if the student starts to repay the debt.

At the same time, the top federal official overseeing the loan program says default figures for many of California’s 250 institutions may be artificially low.

Bill Moran, director of the student assistance program in the federal office of postsecondary education, said a number of schools have loans that were not listed because claims were never made on them by their servicing or collection agencies.

Many of these problems stem from foul-ups involving United Education & Software, a servicing operation that federal officials said had failed to properly handle more than $1 billion in student loans. United Education was accused by federal officials of failing to send out thousands of letters to delinquent borrowers and sending letters to wrong addresses. The Encino-based firm has blamed the errors on software problems.

The 1988 figures, Moran said, are being recalculated for all California institutions in the loan program, and it is unknown how the changes will affect rates.

Several Los Angeles County institutions--including Compton College and Los Angeles Southwest College--are among those whose programs are threatened if their rates do not improve.

Compton, a feeder school for Dominguez Hills, turned in a whopping 52.7% default rate for 1988, up from 46.7% the previous year. El Camino College also experienced an increase, with its rate at 25.2% for 1988, up from 23.2%.

Colleges considered feeder schools for Northridge fared somewhat better. The default rate at Valley College in Van Nuys rose from 16.7% in 1987 to 19.6% in 1988. On the other hand, Pierce College in Woodland Hills showed a decrease with a rate of 17.7% in 1988, down from 20.1%. The rate at Glendale College rose from 20.1% to 21.5%.

CSUN also holds workshops at nearby community colleges to inform transferring students of available financial assistance, as well as of their responsibilities to repay loans. This also has helped keep CSUN default rates lower, officials said.

The highest dollar loss in California, with a default rate of 47%, was the $7.8 million posted by the Lawton School for Medical and Dental Assistants in San Jose, according to the Department of Education. Private vocational institutions tend to have higher default rates, federal officials said.

Interestingly, campus-administered loans, known as Perkins loans, have a default rate almost half the national average as the bank-administered Stafford loans.

The programs differ in that Perkins loans are funded with federal and school funds, and are repaid directly to the schools. Stafford loans are funded and administered privately by institutions, such as banks, credit unions or saving and loan associations. Perkins loans, which are for the most disadvantaged students, carry 5% interest rates; there is an 8% interest rate on Stafford loans.

Perhaps the most frequent criticism of the government crackdown on default rates is that it penalizes institutions, which are not responsible for collecting loans. Under Stafford loans, the institutions disburse the privately funded loans and the lender is responsible for collection. Federal sanctions underscore the fact that the federal government wants schools to take some responsibility for reducing default rates.

Stafford loans are becoming more popular. In the California State University and University of California systems, the number of Stafford loans increased 11.2% and 12.7%, respectively, from the 1988-89 fiscal year to 1989-90. Students at each of the two systems accounted for about $110 million in guaranteed loans.

In 1989-90, Tran said his office processed $6.25 million in loans to 2,404 CSUN students, a slight increase from the previous year.

To qualify, undergraduate or graduate students certify that they are earning less than $30,000 a year and are enrolled in at least six units (generally two courses) of study at an accredited school or college.

Perkins loans are similar in eligibility requirements, although each school sets a limit on how much a student may borrow and what the income requirements are. Students who need more money may also borrow from the Stafford program.