State officials fret over Minnesota student loan defaults

More than 9,500 higher education students in Minnesota have defaulted on federal student loans in the past three years, new data from the U.S. Department of Education shows, the Star Tribune reports. The overall default rate is lower than the national average, but state officials are still eyeing the statistics with concern.

Author:: BMTN Staff
Publish date:: Oct 22, 2012

Nationwide, student loan default rates are higher than in Minnesota, the Star Tribune reports. But the newspaper says state officials are still worried: more than 9,500 higher education students in the state have defaulted in the past three years, new data from the U.S. Department of Education shows.

Several schools have especially troubling statistics: Rasmussen College and Capella University have more students in default than all of the private schools combined.

A report released last week showed that Minnesota has the third-highest total average student loan debt in the nation.

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The Office of Higher Education reports Minnesota students are taking out more loans and going deeper into debt. Overall borrowing was up ten percent in two years. Some of that is due to an increase in students but the office's director says it may also reflect more financial need amid the sluggish economy.

College students looking for private loans have fewer options. Minnesota Daily reports after nearly 40 years in the student-loan business, Minneapolis-based U.S. Bancorp is going to pull out of the student loan market. A company spokesperson said U.S. Bank was a "very small player" with less than 1.5 percent of the student-lending market share. JPMorgan Chase has also decided to only lend student loans to existing customers.

College students in Minnesota carry the third-highest average loan debt in the nation, at $29,739 per student, according to a new report. And the state ranks No. 5 on a list of graduates who carry student loan debt – 71 percent. Nationwide, about two-thirds of students graduate with debt.

As chairman of the House Education and the Workforce Committee, Rep. John Kline has challenged President Obama every turn. But it's his stance on Stafford Loans for college students, which could double on July 1, that has sparked a national debate. The Star Tribune looks at how this debate is reverberating across the Minnesota and the nation.

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1.1 million Americans defaulted on their student loans last year, putting them at the risk of penalties.