Aug 31, 2010

Colleges Where Students are Most Likely to Pay Off Federal Loans

At which colleges are students most likely to pay down their debts? The US Department of Education recently released this information as part of a federal student loan repayment report designed to be a first step toward giving students and parents a more complete view of the financial aid landscape.

In its report, the government analyzed the repayment rates of 8,412 institutions including a wide variety of cosmetology and trade schools as well as those pricier name institutions that perennially sit atop college ranking lists. Without going into how quickly loans are repaid, the government summarized all the federal student debts of all students who graduated or left college between October 2004 and March 2008. The bar for repayment wasn’t too high—students only needed to pay $1 of principal to be considered active.

And the results, though controversial, are very interesting. It turns out that the schools with the “highest loan repayment rates are some tech, nursing, liberal arts, and religiously-affiliated colleges” according to an analysis completed by US News & World Report. Ninety-two percent of recent Cal Tech grads were paying loans in 2009, which was the highest level reached among schools analyzed.

Other high rates of repayment were found at colleges costing well above $50,000 such as Gettysburg, Lafayette, and Williams. These schools are also known to offer generous financial aid packages.

The report also documents the number of loans and median debt levels at each institution. Not surprisingly, the University of Phoenix had the greatest number of loans at 347,157. Among nonprofit institutions, Pennsylvania State University listed the most loans—41,679, with a median debt of $14,149.

Also predictable, high-end professional schools came in with the highest median debts. The New York Institute of Technology School of Osteopathic Medicine topped the list at $113,771, for 1,190 students. Slightly further down the list, Georgetown University School of Medicine listed a median debt of $85,715 for 715 med students.

Locally, the highest repayment rates could be found at James Madison University (79%), Georgetown University (79%), the University of Mary Washington (78%), Virginia Tech (77%), George Washington (77%), and St. Mary’s College of Maryland (76%). Some of the lowest levels were found at Bowie State (22%) and the University of the District of Columbia (29%).

Schools at the bottom of the list complained that the government’s analysis was unfair. Borrowers who go on to graduate school and properly defer payment were counted as nonpayers as were some graduates who signed up for the new income-based repayment program.

But more to the point, the Department of Education’s analysis doesn’t examine private student loans, which suggests an overly optimistic view of the amount students borrow and how much they are able to repay.

Picture of JMU courtesy of Wikipedia.

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