Repaying student loans
Surely few persons could fault the US Department of Education for cracking down on educational institutions where default rates on student loans are running at particularly high levels. In fact, it could well be asked - as some congressmen now are doing - why it has taken the government so long to get its act together and take action against academic institutions and persons who do not repay loans made with taxpayer dollars.
The loans were granted under the National Direct Student Loan Program, enacted back in 1958. Under the program, federal funds are made directly available to educational institutions, which, in turn, make low-interest loans to students. Since 1958 the government has provided $7.5 billion to schools under the program. Of that amount, some $896 million is in default.
At some 528 institutions, mainly trade and technical schools - although some colleges and universities are on the list - 25 percent or more of all outstanding loans are in default. It will be these institutions that will now face a cutoff of further loan funds unless they turn over to the government a sufficient number of loan records for collection.
By accepting the money students have made a commitment to repay it. The loans , after all, are granted at special terms and repayment conditions that are far better than can usually be obtained from a private commercial lender. There are also some steps which can - and should - be taken if the students need a grace period before repayment. Such consideration may be especially needed because of strains caused by high unemployment.
Thus the educational institutions have a special responsibility to ensure that the terms of such loans are fulfilled. Default is not only dishonest. It deprives future students from drawing upon the replenished funds as they flow back into the school coffers.
Studies repeatedly indicate that defaults on federal loans, including those made to US government employees, can be found in almost all major loan programs. In the past many agencies have been reluctant to crack down on such defaulters. The Department of Education - and the Reagan administration - deserve credit for taking firm action now. Defaulting on a student loan is hardly conducive to developing the integrity that graduates must have as they enter the larger world of commerce and industry.