By Rebecca Huff, Senior Staff Writer
Miami's regional campuses in Hamilton and Middletown have significantly higher loan default rates than its main campus in Oxford.
Defaulting occurs when a graduate stops making payments toward his or her student loans for 270 to 360 days.
In a previous article, The Miami Student reported that Miami's student default rate is about 14.4 percent, comparable to the national average of 13.7 percent.
However, that number combines Oxford and both regional campuses, which skew the results. The default rate for Hamilton and Middletown campuses is approximately 24 percent, while Oxford's is just 3.3 percent, according to Brent Shock, director of student financial assistance.
Several factors explain this discrepancy.
Miami's regional campuses are comprised of what are called "non-traditional students." So, while Oxford enrolls students primarily between the ages of 18 and 22, Hamilton and Middletown campuses enroll students ranging from 15 to 79 years old.
With such a varied population - not only in age, but in socioeconomic, family and academic backgrounds - otherwise unaccounted for expenses, like home and car insurance, food, electricity and water bills, etc., come into play. These factors have to be considered in understanding the significant loan default rate on the regional campuses, said Brittany Staton, regional director of financial aid.
"It is a different environment," she said, "so it's a little bit of a piece that we have, that's a little bit different than what Oxford has, since they have a lot of students that are coming right out of high school [and] living on campus."
Tuition among regional campuses in Ohio tends to be the most affordable. Tuition rates are based on students' credit hours. So, the tuition for a full-time, in-state regional student with fewer than 68 credit hours is $2,385 per semester ($4,770 a year). If that student has more than 68 credit hours, the tuition increases to $3,708 ($7,416 a year).
Oxford's tuition, on the other hand, is significantly higher. For one year, it costs a full time, in-state student $13,533 - excluding costs of room and board, which Oxford students must pay to live on campus.
To afford the tuition, many students apply for loans, which they have to pay back in the future.
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Income, GPA and students' completion rates are highly considered before being approved for a student loan.
Completion rate is the number of credit hours the student has earned divided by the number of credit hours attempted, according to Shybria Peeples, a financial aid counselor.
"Let's say your 'earned' is 46 but your 'attempted' is 72. So, you have dropped 26 credit hours - your completion rate would be 63 percent," Peeples said. "In order to get financial aid, you have to have at least a 67 percent."
Direct subsidized and direct unsubsidized loans are the most common student loans.
With subsidized loans, the interest rate accumulates after students graduate, withdraw or drop below half-time enrollment. With unsubsidized loans, the interest accumulates while the student is still in school.
Each academic year, the loan amount increases by $1,000. So, for first-years, the unsubsidized loan annual cost is $9,500, for sophomores it's $10,500 and juniors and seniors it's $12,500.
The subsidized loan yearly amount for first-years is $5,500, for sophomores it's $6,500 and juniors and seniors it's $7,500.
Not every student gets approved for subsidized loans, but every student is offered some amount of the unsubsidized loan. Accepting the full amount offered is not required, as the offer often exceeds the cost of tuition.
For example, if a student is approved for the full amount of the unsubsidized loan at $3,500 per semester ($9,500 a year) and the tuition is only $2,385 per semester, the student will get a semesterly refund check for $1,115.
That refund check is intended to go toward other educational fees, but is oftentimes squandered away on outside expenses, Peeples said.
"If a student is enrolled for two years and he or she accepts the freshman amount of $9,500 and the sophomore amount of $10,500, they are already $20,000 in debt," she said.
If the student only accepted the amount necessary to cover tuition, he or she could have been only $12,186 in debt.
To put that in perspective, if a sophomore had attended Miami for two years, accepted the full amount of unsubsidized loans (equaling $20,000), and dropped 26 credit hours, that student is no longer eligible for another unsubsidized loan because his or her completion rate is below 67 percent. Since he or she can't afford to pay for college out of pocket, the student can't enroll the next semester or semesters to come.
Six months later, the student has to start paying off that $20,000 but doesn't have a high-paying job because he or she doesn't have a degree. That's when defaulting occurs. The student feels as if he or she has no other options.
Defaulting on a loan severely hurts your credit score, which can affect your ability to buy a house or a car.
"It becomes something that we struggle with at the regional campuses a lot because we do have a higher population of adult students that are returning," Staton said.
However, there are ways to avoid this, like accepting only the minimum amount necessary and communicating with the lender.
"[The lender will] want to see a hardship letter, so something that gave you that hardship not to be able to pay it. They'll want specifics," said Ann Marie Grasso, manager for Chase Bank.
A hardship letter details any extenuating circumstances that caused the student to default on the loan. Such circumstances may include getting laid off, becoming hospitalized due to illness, death to a spouse or any other circumstances beyond the student's control.
However, loan forgiveness is completely subjective to the lender.
"Some companies will not work with you, but I would send something every month to show that you're making some type of payment. It shows your initiative to repay the loan," Grasso said.
Staton also said the occurrence of defaulting could decrease if students become more informed about the risks associated with accepting student loans.
"We're really working on educating students about smart borrowing and financial literacy," Staton said.