Out of the Default Danger Zone

WILBERFORCE, Ohio — Central State University here has received a highly anticipated and quite welcome notice from the U.S. Department of Education: It is no longer threatened with being booted out of the federal student loan program.
The 1,050-student school, which has had a turbulent history but is in the midst of a rebuilding effort, has made steady progress in reducing its student loan default rate, department officials said in making the decision late last month.
Dr. John Garland, Central State's president, says the college's most recent loan-default rates for fiscal years 1997 and 1998 were comfortably below 25 percent, which lifted the threat that it would be barred from federal student loan programs.
"The department's records indicate that your school has already reduced its fiscal year 1997 [loan] default rate below 25 percent. Therefore, your school is no longer subject to the loss of eligibility to participate" in federal loan and grant programs, Education Department officials wrote in a letter notifying the school of the decision.
Schools that show a loan-default rate of 25 percent or more for three consecutive years face escalating sanctions and risk disqualification from federal loan programs, an action most colleges find devastating if not fatal. More than 90 percent of Central State's students receive some type of federal financial aid.
Garland says the decline in default rates "demonstrates that we're attracting better students. It shows that they're enjoying their academic experience here, they're staying, they're graduating and they're paying back their loans."
Central State employs a loan default manager who works with students to ensure they know their repayment responsibilities when they arrive on campus and when they're about to depart, Garland says.
Nearly one in three students who left or graduated from Central State in 1996 failed to repay their loans in a timely manner, the school's third consecutive year of default rates above 25 percent.
But the loan default rate for students who left the university in 1997 dropped to 21.9 percent, and for students who left in 1998, the rate calculated by the Education Department dropped to 16 percent, Central State officials say.
The university has submitted a default-reduction plan to federal education officials that outlines strategies to reduce defaults to a goal of 13 percent for fiscal year 2000, which will be calculated and released in 2002.