Worse Comes to Worst: Student Loan Default Rates in Nevada

1
Worse Comes to Worst Student Loan Default Rates
in Nevada

• Christopher A. Kypuros,
• University of Nevada Las Vegas (UNLV)

2

• A special thanks to Sandy Baum, Matt Steiner, and
  Jennie Woo for their important research on
  student loan default.

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So why Worse Comes to Worst?

• Nevada ranks
• 39th nationally for its high school graduation
  rate
• 46th in the percentage of in-migrants with
  college degrees
• (Nevada is not a place where college grads move
  to)
• 46th in educational attainment of the workforce
• (Only 21 with BA or better)
• 49th in the percentage of the adult population in
  college

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The Worst of Continued

• Nevada ranks
• 49th for the number of college students who drop
  out their freshman year
• 49th for the number of students who earn a
  bachelors degree within 6 yrs or an associates
  degree within 3 yrs
• 50th in educational attainment of the 25 to 34
  year old population
• 50th for the number of students who go to
  college directly after high school

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The Worst of Continued

• "Nevada has one of the lowest graduation rates in
  9th through 12th grades, and one of the lowest
  college-going rates in the country as well as one
  of the lowest college graduation rates," said
  Patrick Kelly of the National Center for Higher
  Education Management Systems.

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• In recent years, the announcement of the national
  cohort default rate is followed with celebration
  by many higher education institutions.
• For good reason
• The FY 2003 national cohort default rate set a
  record low of 4.5.
• The FY 2004 national cohort default rate
  increased slightly to 5.1 resulting in default
  rates remaining at all time lows for higher ed
  institutions.

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Nevada Higher Education Institutions

• Nevada Proprietary Institutions
• Academy of Healing Arts
• Heritage College
• Las Vegas College
• Career College of Northern Nevada
• Carson City Beauty Academy
• Crescent City School of Gaming Bartending
• Southern Nevada University of Cosmetology
• Art Institute of Las Vegas
• Academy of Hair Design
• Nevada Public Two-Year Institutions
• Community College of Southern Nevada
• Truckee Meadows Community College
• Western Nevada Community College
• Great Basin College

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2004 FY Cohort Default Rate

• Im pleased to see that default rates remain at
  historically low levels. The new rate is the
  second lowest ever recorded. As the federally
  guaranteed student loan portfolio continues to
  grow, it is more important than ever that we
  continue our outreach to student borrowers to
  educate them about their responsibilities and the
  resources available to assist them in their
  repayment obligations.
• -Margaret Spellings, U.S. Secretary of Education
  (September, 13, 2006).

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Unprecedented Era in US History
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• While many states are successful at keeping
• their default rates low, other states are
• struggling.
• The State of Nevada is struggling

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What Does a High Default Rate State Look Like?

• As one of the worst states in the nation, Nevada
  has a statewide default rate of 8.3.
• Are University of Nevada Reno students gambling
  their student loans away in the Biggest Little
  City in the World?
• Do University of Nevada Las Vegas students
  default on their loans hoping to be forgiven as
  citizens of Sin City?

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State of Nevada Perceptions on Default

• "It's a college-wide issue," said Sharon Wurm,
  director of financial aid for the Nevada System
  of Higher Education.
• Officials blame Nevada's transient population as
  the main contributor to the high default rate,
  but other problems persist in reducing the rate.

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State of Nevada Perceptions on Default

• We have lower graduation rates if students
  graduate college, they're less likely to default
  on their loan.
• "We've found the highest percentage of defaults
  were among students who attended proprietary
  schools.

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State of Nevada Perceptions on Default

• Many of the students who default on their loans
  at the college are single mothers or students who
  struggle with gambling or substance abuse.
• The most common characteristic is that they
  don't complete college.

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STUDENT LOANSDefault rate high in NevadaMar.
19, 2007Las Vegas Review-Journal

• college students in Nevada have the
• highest rate of defaulting on those federal
• student loans among the 50 states.

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Purpose of Study

• This research examines the primary source or
  sources driving up Nevadas default rate.
• Included in this analysis are Nevada Public
  Two-Year, Public Four-Year and Proprietary
  Institutions.

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The University of Nevada Las Vegas
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So whats the problem?
UNLV has been consistently at or below the
national average.
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Nevada Proprietary Institutions
2004 FY Cohort Default Rate
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Finding

• The top four proprietary institutions default
  rates range from 13.6 to 20.1.
• This confirms proprietary institutions are
  driving up Nevadas Cohort Default Rate.
• However, Nevadas dismal ranking is also caused
  by another source.

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Nevada Public Two-Year Institutions
2004 FY Cohort Default Rate
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Finding

• Community Colleges in the Nevada System of Higher
  Education (NSHE) fall right behind Nevadas
  proprietary institutions.
• All of the 2 yr Nevada public institutions
  maintain double digit default rates ranging from
  11.2 to 13.2.
• The National CDR for 2 to 3 yr institutions is
  8.1.
• At 12.1, the NSHE CC default average rate exceed
  both the national average (5.1) and Nevadas
  average (8.3).

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Nevada Public Four-Year Institutions
2004 FY Cohort Default Rate
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Finding

• The national CDR for Public 4 yr institutions is
  3.5.
• University of Nevada Las Vegas exceeds the
  national average by.3, with a CDR of 3.8.
• University of Nevada Reno (3.1) falls below the
  national CDR.

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Nevada System of Higher Education Institutions
Cohort Default Rates Three-Year Trend
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Federal Intervention

• U.S. Department of Education intervenes
• In November 2004, John Pierson Eileen Marcy, of
  the U.S. Department of Education Default
  Prevention Division, organize a meeting with
  Nevada.
• Meeting was a brainstorming session sharing best
  practices in default management.
• Project dies (lack of travel funding for
  Department staff to NV).

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Federal Intervention

• Department staff return for Nevada Association of
  Financial Aid Administrators annual conference
  for November 2005 2006.
• Recommendation NSHE will support all staff
  training in default management.
• Late Stage Delinquency Assistance Program
  initiated at some institutions.

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Conclusion

• Strong argument Nevada proprietary schools at
  fault
• Stronger evidence finds Nevada Public Two-Year
  institutions driving up rates
• Nevada perceptions on default are valid
• Nevadas Worst of rankings do not help the
  default rate problem

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Future Research

• Nevadas statewide default rate has caught the
  attention of the United States Department of
  Education.
• Since 2004 proactive measures were taken to
  improve Nevadas default rate image.
• Did federal intervention improve the state of
  default in Nevada?
• Future research will attempt to address this
  question when new cohort default rates are
  published in September 2007.