Last May, David Piccirilli graduated from Duke with a diploma in hand and $170,000 in loans in the back of his mind. He must now enlist help from his parents to help repay his loans or face default.
“My job doesn’t pay very much compared to the jobs of other students,” said Piccirilli, a market control assistant at a inter-dealer brokerage firm in New York City. “With rent and daily expenses, I would barely be able to make minimum payments on my loans on my own.”
Piccirilli is part of an increasing number of borrowers who may be at risk of defaulting on their student loans. At Duke, one-third undergraduates take out loans during their college career, said Irene Jasper, director of Duke’s Office of Student Loans in the Financial Aid Office.
Duke’s default rate rose from 0.5 percent in fiscal year 2008 to 0.7 percent in fiscal year 2009, according to the most recent data from the U.S. Department of Education. Nationally, the default rate increased from 7 percent to 8.8 percent across the same years. Duke’s rate is slightly lower than the 4.6 percent default rate for private institutions in fiscal year 2009.
Although Duke’s default rate increased, Jasper said it is still considered “extremely low.” She added that she is not too concerned about students defaulting on their loans.
In 2010, Duke students graduated with an average debt of $21,884—a decrease from $23,093 in 2009, The Chronicle reported April 22. Last year, average student loan debt nationally was $24,000, which is slightly greater than Duke’s average.
Even so, Jasper acknowledged the challenges that students face while repaying their loans.
“Just because students are not defaulting does not mean that they aren’t struggling,” Jasper said.
Duke’s Financial Aid Initiative, a fundraising effort that began in 2005, raised $308 million over five years and enhanced its need-based financial aid programs. At this time, Duke also provided more counseling and workshops to educate students about their loans.
“We realized that there was a big need for general financial education, and we hope to increase awareness on how to plan financially for the future,” Jasper said.
Jasper noted that it is important for people to distinguish among default rates at for-profit, public and private institutions.
Public schools in North Carolina varied in their default rates. At North Carolina Central University, a historically black public university in Durham, the default rate rose from 10.1 to 10.9 percent from 2008 to 2009. In contrast, the University of North Carolina in Chapel Hill’s default rate decreased from 0.7 percent to 0.5 percent. The default rate for public institutions across the nation increased from 6 percent to 7.2 percent.
The default rate at for-profit institutions increased the most substantially—from 11.6 percent to 15 percent.
Jacob Vigdor, professor of public policy and economics at the Sanford School of Public Policy, said default rates at for-profit institutions are higher than at not-for-profit schools largely because private universities are more selective and attract students of high caliber.
“The typical student who comes to Duke shows great promise and a great degree of employability, whereas for-profit institutions and community colleges will take any type of student,” Vigdor said.
Although Duke has a relatively low loan default rate, Vigdor noted, the nationally high default rate may have possible ramifications for all college students in the future.
Schools with high default rates are at risk of losing eligibility in their federal student aid programs. Some students, like Piccirilli, need to start paying back their loans as early as six months after graduation—though it can be earlier or later depending on the specific requirements of the lender.
“When default rates increase, it means that lending is riskier,” Vigdor said. “If lending is riskier, it may be tougher for anybody trying to get a loan to pay for college, or students may find that they can’t borrow as much.”
Zach Fuller, Trinity ’11, borrowed money during all four years at Duke and must start paying back his loans next month. Even so, Fuller said his debt is manageable, adding that he is not overly concerned with his ability to repay his loans in the future.
“As long as I have a job, it’s fairly [doable] to pay off my loans,” Fuller said. “I think that the debt I incurred at Duke was pretty fair for the education I received, and I think it was worth it.”
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