Low federal loan rates to help prevent student default - FOX 8 WVUE New Orleans News, Weather, Sports

Low federal loan rates to help prevent student default

Updated:

New Orleans, La - There is good news for students and parents prepping for college: It won't cost as much to borrow money.

On Wednesday, the U.S. House of Representatives gave final approval to a plan for a new loan structure. The plan could be good news for schools in the New Orleans area that have high numbers of students defaulting on their loans.

"I've been in the financial aid office saying, ‘Hey, you know, I need some kind of help here or it'll be difficult for me to return,'" said University of New Orleans graduate student Kyle Griffith. "So luckily I was able to fill that gap with loans."

Griffith said he was lucky to get through undergraduate school at the University of Miami without defaulting.

"I probably wouldn't have continued to go there if I couldn't get the loans, so I mean, they're important, but at the same time they're hard to get rid of," he said.

Nationally, more than 9 percent of students defaulted on the most recently granted two-year federal loans, according to the Department of Education.

FOX 8 compiled a list for schools in New Orleans and LSU schools with Department of Education statistics, and found that most of the default rates are below the national average: LSU's main campus stands at 3.4 percent, Tulane at 4 percent and UNO at 6.5 percent.

But some schools have higher than the 9 percent national average, such as Delgado at 9.7 percent, LSU Eunice at 14.3 percent and Cameron College at 36 percent.

A Cameron College representative said the school has a higher drop-out rate due to transportation and child care issues -- common reasons why many students default, according to financial planner Robin Weeks.

Weeks said the new legislation should help in large part because of the new rate cap set 8.25 percent for undergraduates, 9.5 percent for graduate students and 10.5 percent for parents.

"This helps them put together a budget so they can estimate what their expenses are going to be," Weeks said. "Because the parents and / or students can plan for the worst scenario."

At UNO, one-fourth of the student body has federal loans -- that's 2,300 students who are excited to see interest rates back down at 3.9 percent for undergraduates and 5.4 percent for graduates.

"Tuition is less than $6,000 a year for an in-state, full-time student, so we're not talking about huge sums of money," said UNO spokesman Adam Norris. "Although certainly this will put a smile on our student's faces knowing they won't have to face double the interest rate they're getting for their federal loan."

It's especially true for Griffith, who would like to pay off his loans as soon as possible.

"I mean, it makes a big difference in the long run," he said.

All schools have a default management plan required by the government, and many offer financial literacy classes to try to help students stay in school.

To see a certain school's official two-year cohort default rate click here

 

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