Student loan repayment rates reach record high

UW–Madison students have one of the highest loan repayment rates in the nation, according to an analysis by the Office of Student Financial Services (OSFS).

Students borrowing through the Federal Stafford Loan Program, the largest loan program at UW–Madison, have a record low default rate of 0.3 percent for the most recent year for which information is available, 2003–04. This compares to the national average default rate of 5.1 percent.

Similarly, UW–Madison’s Federal Perkins Loan default rate for 2005–06 was 1.30 percent. Comparable national figures won’t be available until spring, but the 2004-05 rate was 8.12 percent.

OSFS director Susan Fischer says that in addition to student borrowers, the student loan unit of the bursar’s office as well as the student loan servicing unit within the OSFS also deserve credit for providing educational materials that make the payment process easy to understand.

The bursar’s staff handles exit interviews and billing for all loans except those in the Federal Family Educational Loan Program (FFELP), and the student loan servicing staff work with former students whose loans other than FFELP become delinquent.

A low default rate for Perkins Loans is important because repayments stay on campus to be loaned to other students. The federal government uses default rates to determine whether a school will be allowed to continue participating in federal financial aid programs.

During the past few years, default rates around the country have reached historical lows as a result of a spate of student loan consolidation, improved credit counseling and more flexible repayment schedules.