Nebraska Students Default Less Than US Average on Student Loans

Loans, Student Loans
student-loan-default-study

Students at Nebraska colleges and universities are defaulting on their student loans at a markedly lower rate than the national average, according to a study by the U.S. Department of Education.

The study found that 8.2% of students at Nebraska postsecondary schools who were scheduled to begin paying their loans in 2013 were in default by the third year of repayment. Nebraska’s default rate was the seventh-lowest in the nation.

The overall U.S. default rate was 11.3%. (See the default rates for all 50 states.)

The study looked at more than 6,000 postsecondary schools in the nation and 45 in Nebraska, including private, public and proprietary (for-profit) schools. Among the largest in the state by enrollment, default rates were:

  • Metropolitan Community College in Omaha: 16.7%.
  • Southeast Community College: 15.5%.
  • Bellevue University: 6.1%.
  • University of Nebraska, Omaha: 5.8%.
  • University of Nebraska, Lincoln: 2.6%.

(Click here to search the federal database for default rates by school, city or state.)

Nationwide, public community colleges had an average default rate for 2013 of 18.5%, and proprietary schools were at 15%. For four-year public colleges, the average rate was 7.3%, and for four-year private colleges it was 6.5%.

The default rates for community colleges, vocational schools and for-profit colleges tend to be higher because former students are less likely to have completed their studies or see a boost in earnings, and often can’t keep up with loan payments, according to a report in the Brookings Papers on Economic Activity.

>> MORE: Student loan default: What it means and how to deal with it

The new report provides a detailed look at default rates, but it may not show a complete picture of the debt burden on students. While the report takes a snapshot of borrowers who are within the first three-year window of their repayment phase, it doesn’t capture those who delay repayment until after the three-year measurement window expires.

Omaha financial advisor: Student loans turn ‘what should be a blessing into a burden’

People with college degrees earn more, on average, than those with only a high school diploma. In 2014, the median income of young adults with a bachelor’s degree was $49,900, compared with $30,000 for people who completed high school, according to the National Center for Education Statistics.

However, excessive student loan debt is a major burden for many Americans. It can significantly hamper borrowers’ finances by increasing their overall debt burden and cutting into money they could use for mortgages, retirement and other long-term investments. Total student loan debt was $1.36 trillion as of June, according to the Federal Reserve Board, up from $961 billion in 2011.

We asked Omaha, Nebraska-based financial advisor Sam Farrington about how families can integrate student loans into their financial lives.

How can students and families make sure their loans are a good investment in their future?

Paying off debt, including student loans, as quickly as you can with what makes sense in your finances should be your goal. Students need to realistically evaluate what they’ll need to give up in order to make future monthly loan payments. Having student loans can be extremely burdensome to your future financial life.

How does taking out student loans potentially affect students’ future financial lives?

Student loans are meant to give you the opportunity to further your education to be more valuable in the marketplace. The truth is, student loans are turning what should be a blessing into a burden. Know what you’re getting yourself into before you sign your future income away.

Add up the total estimated cost of attending college through graduation. Include tuition, housing, books, food and transportation for all four years. Then determine a realistic starting income after graduation in your chosen field — and remember that may change a time or two while you’re in college.

A starting salary of $40,000 with $30,000 of student loans may require student loan payments of nearly $300 to $350 per month. Will you be able to live the life you want to live and still have enough left over for housing, food, transportation, travel, starting a family, saving for retirement and buying the newest cell phone?

What should parents and students keep in mind when taking out student loans?

Debt means that you owe someone money. This means you’re signing up to give a good portion of your future income to the government or a private lender. Instead of doing the things you want, like saving money, buying a house and starting a family, you get to make lots of interest payments.

Before taking out any student loans, think about how you could minimize or even eliminate the need to borrow money. Some options:

  • Make applying for scholarships a full-time job.
  • Attend community college the first two years.
  • Stay in your state of residence to reduce tuition costs.
  • Get a part-time job to help pay tuition as you go.
  • Buy used textbooks.
  • Compare on- and off-campus housing options.

Also, if you know any recent graduates, ask them how student loans are affecting their ability to save, spend and give. Their answers may motivate you even more.

What options exist to improve the terms of student loan debt?

Loan forgiveness programs are an incredible option for those who qualify, but it’s critical to plan for the potential tax consequences. Forgiveness granted under an income-driven repayment plan is taxable as income in the year the debt is forgiven, which means you’d need to come up with the extra money to pay those taxes. By contrast, Public Service Loan Forgiveness isn’t taxable as income.

What should families do if they find they can’t make payments?

If you can’t make payments in your current situation, work to change your situation. You signed an agreement that said you’re going to pay. Student loans are hard to discharge in bankruptcy or to get rid of without paying.

Your best bet is to pay off the student loans as quickly as possible. Get one or two extra part-time jobs, if possible, or ask if your current employer is offering overtime. Throw your extra income at the principal balance to speed paying off your loans. Having extra jobs isn’t fun, but it’s not a forever thing. The short-term sacrifice is well worth the long-term reward of getting student loan payments out of your life.

You can also look into the options of deferment and forbearance and income-driven repayment plans.

Are income-driven repayment plans a good option?

Income-driven plans may be a good option for those who are government or nonprofit employees, high-debt borrowers or borrowers with low income compared with debt. The payments are based on a percentage of your adjusted gross income. The higher your AGI, the higher your payments will be, and the lower your AGI, the lower your payments will be.

Sam Farrington is a fee-only financial planner and founder of Sound Mind Financial Planning in Omaha, Nebraska.

State student loan default rates

The 50 states ranked from highest student loan default rate to lowest.
RankingState Percent defaulting on student loans
1.New Mexico18.9
2.





West Virginia16.2
3.Kentucky15.5
4.Mississippi14.6
5.Indiana14.2
6.Florida14.1
7.Arkansas14
8.Arizona14
9.Wyoming14
10.Oregon13.7
11.Ohio13.6
12.South Carolina13.2
13.Nevada12.7
14.Texas12.6
15.Oklahoma12.5
16.South Dakota12.3
17.Louisiana12.3
18.Alabama12.2
19.Georgia12
20.Iowa11.9
21.Michigan11.8
22.North Carolina11.6
23.Alaska11.6
24.Colorado11.5
25.Missouri11.5
26.Tennessee11.4
27.Idaho11
28.Kansas10.7
29.Washington10.4
30.California10.4
31.Hawaii10.4
32.Maine10.4
33.Delaware10
34.Maryland9.9
35.Montana9.8
36.Wisconsin9.6
37.Illinois9.4
38.Pennsylvania9.2
39.Virginia9.1
40.Utah9.1
41.New Jersey9
42.Minnesota8.8
43.Connecticut8.5
44.Nebraska8.2
45.New York8
46.Rhode Island7.9
47.New Hampshire7.8
48.Vermont7.2
49.North Dakota6.5
50.Massachusetts6.1