Universities Sue Students Over Defaulted Perkins Loans

Several major universities are taking former students to court in an attempt to collect on past-due bills under the Perkins student loan program.

George Washington University, Yale University and the University of Pennsylvania have all filed lawsuits against students who defaulted on their Perkins loan repayments, Bloomberg reports.

Yale spokesman Tom Conroy told Bloomberg that the school was required by federal law to collect unpaid Perkins money and that accounts that are at least 120 days past due could be sent to a collection agency. Penn's associate vice president, Michelle Brown-Nevers, told the news service that the school tries "all practices possible" before going to court. Penn filed at least a dozen Perkins suits last year.

Temple University is also going after unpaid loans and tuition, using the same debt collections attorney who's representing Penn in these suits, the Daily Pennsylvanian reports.

Unlike Stafford or direct federal student loans, which are distributed and collected by the government, Bloomberg explains, Perkins loans are administered by the colleges themselves. According to Bloomberg, students defaulted on $964 million in Perkins loans in fiscal year 2011.

President Barack Obama, meanwhile, has proposed to remake the Perkins loan program by rewarding institutions that rein in tuition and produce good student outcomes, according to the Chronicle of Higher Education.

Federal student loan default rates have increased in recent years, although the latest data from the Education Department show rates appear to be stabilizing. Nevertheless, the default rate for recent college graduates nearly doubled between 2005 and 2010, according to The Wall Street Journal.

MDRC, a nonprofit research center, has called for more financial literacy education and more one-on-one counseling to explain to students how much they'll owe. The New America Foundation recently proposed overhauling the federal student aid system by expanding grant opportunities to reduce post-graduation debt loads.

Members of Congress have tried to help in recent years by passing legislation that would have required greater disclosure from both lenders and schools to students when they take out loans, but the lawmakers didn't get very far.



States With The Most Student Debt - Ranked By Average Student Debt, As Of 2011, From The Project On Student Debt