Provost Steven Lerman defended Friday the controversial practice of suing alumni who default on their University-issued student loans, saying that it’s a last-resort move required by law.
After an Al Jazeera report published last week depicted alumni struggling to pay basic living costs and then facing GW in court, Lerman said at a Faculty Senate meeting that the practice is an extreme method GW takes when it doesn’t have other options.
“Anyone who makes a reasonable effort to communicate with us and any even reasonably token effort to try to work with us, of course we’re not going to bring in to court,” Lerman said. “But many of these are people who have refused to communicate with us over multiple years, and we have sort of reached the point where we think the law has required us to pursue these.”
Perkins Loans consist of federal dollars given to GW, of which the University matches about one-third.
He added that GW’s Perkins Loans pool, at about $4.5 million, is smaller than other scholarship options. The financial aid office needs to recover the money in that pool from indebted students to loan out more money to current and prospective students.
“It is not being replenished, and so when we do manage to collect money for it, the first thing that happens with that money is it gets cycled out to be additional loans. And if we don’t get the money, unfortunately, we cannot make future loans,” Lerman said.
In 2012, GW sued more than two dozen former students for failing to pay off their loans. GW is now one of four East Coast schools – including Yale University and the University of Pennsylvania – that have brought missed payments to court.
The report, which follows a Bloomberg story that featured GW last year, has dragged the University through headlines as it is trying to shake off its reputation as an expensive college that graduates students with significant debt.
While student loan debt and defaults have soared across the nation over the past decade, only 1.5 percent of GW students default on their loans, a relatively low rate. More than 11 percent of borrowers nationwide couldn’t make their payments in 2012.
The average debt load with which GW students graduated in 2012 was $33,399.
Even though the practice has plenty of critics, experts say suing defaulters could become more popular among colleges nationwide.
Mark Kantrowitz, the founder and publisher of FinAid.org, said generally that those graduates who are taken to court by colleges aren’t impoverished, but simply choose not to pay off their loans.
“They’re not going to sue someone who is insolvent. They’re going to sue someone who can pay,” he said. “It’s not surprising that during economic downturn there would be an increase in default and also an increase in lawsuits. It’s always a last resort.”
One of the students featured in the Al Jazeera story, 32-year-old GW business school alumnus David Acevedo, has been unable to pay his loans back since starting school in 1999. After avoiding the payments since he owed $3,084 in 2004, a D.C. court ordered him to pay $7,050 for his loan, interest and legal fees, he told Al Jazeera.
Aaron Graff, a 31-year-old also sued by GW in 2012, said he won’t play the victim card, but that the real conversation should be about the high cost of attendance.
“I’ve heard that by me not paying this $4,300 back, I’m making it difficult for other students who are having a hard time paying for college to go to college,” he told Al Jazeera. “It should be, ‘Why is college so expensive in the first place?’”
The student loans that don’t get put back into GW’s pocket turn up on GW’s bottom line as well – as negatives counted towards its “bad debt” total. This year, GW has budgeted for at most $2 million in bad debt.
