asu in the news 02-06-08 to - ASU News - Arizona State University

ASU in the News
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Source: EastValleyTribune.com
Title: Low diploma rates hurt UA, ASU loans
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Full Text: Low graduation rates at Arizona’s public universities might keep students from an
increasingly popular cash source for college expenses. Sallie Mae, the nation’s largest student loan
firm, is reeling from the loss of at least $1.2 billion last year on defaulted private loans. The firm
recently announced it intends to stop making such loans to those enrolled at schools struggling to
graduate a large share of their students. Most of those bad loans came from students who dropped
out of school, said Martha Holler, a Sallie Mae spokeswoman. "That’s why we’re so focused on
graduation rates moving forward," Holler said. Arizona State University and the University of Arizona
are among the worst large, public research universities at guiding students to diplomas within six
years. ASU and UA have slightly improved their graduation rates - 56 percent and 58 percent,
respectively - during the past five years. Northern Arizona University graduates only about 45 percent
of its students. Those rates measure how many full-time students graduate within six years of
enrolling. Sallie Mae hasn’t decided how low is too low when it comes to graduation rates, Holler said.
Asked if ASU could be among those excluded from the firm’s private loans, she responded: "That’s a
great question." It’s unknown how many ASU students have received private loans from Sallie Mae.
Craig Fennell, ASU’s financial aid director, declined to comment. He said he could not provide details
last week on how much private loan business the lender does at Arizona State. No matter what Sallie
Mae decides, ASU Provost Elizabeth Capaldi argues the graduation rates paint a misleading picture
of how universities are performing. Students count as dropouts if they take fewer than 12 credit hours
in a semester, transfer to another university, or even if they graduate after leaving school for a period
of time. Even so, Capaldi has spent much of her 18 months at ASU working to increase the
graduation rate. "I’m not proud of it," Capaldi said, "but we’re not as bad as lots of people." ASU’s
graduation rate is low for a number of reasons. The university accepts about 90 percent of applicants,
including many not prepared for college course work. Another obstacle is that many ASU students
must balance work and studies. "I don’t know if you’ve ever been at graduation where (ASU
President) Michael (Crow) says, ’How many of you have worked?’ One-hundred percent of our
students raise their hand," she said. People who earn a bachelor’s degree can enter higher-paying
careers, enabling them to repay loans more easily. Those who drop out of college typically gain little
financial benefit from their educations and are more likely to default on their loans. Most students rely
on federal loans guaranteeing low interest rates and flexible repayment plans. Private loans are,
traditionally, students’ last resort because they come with far higher interest rates than federal loans.
Student advocacy groups are celebrating Sallie Mae’s retreat on private loans. "Frankly, it’s good that
Sallie Mae is going to stop aggressively marketing costly and risky loans to students they know can’t
afford to pay them back," said Lauren Asher, associate director of the Project on Student Debt. Asher
argues undergraduate students at public universities, like Arizona’s, should be able to limit their
borrowing to federal loans. Regardless, the private loan business has grown at a startling pace -
particularly at ASU. In 2005, the university’s students, and their parents, took on at least $31 million in
private loans, according to data from the Arizona Board of Regents. By last school year, that amount
swelled to nearly $62 million. And those figures are likely below the real amount borrowed, said Dan
Anderson, a research analyst for the regents. ASU’s financial aid office cannot track how many
parents take on second mortgages, or use other types of borrowing, to help pay college expenses.
The number of ASU students borrowing from the federal government has slowly dropped the past two
years, regents data shows. But private loans appear to have more than made up the difference. Two
years ago, 41 percent of the university’s undergraduate students used federal loans, compared with
just 6 percent for private loans. Now, only 37 percent take federal loans and 9 percent use private
loans - which, in raw numbers, means that almost twice as many students are taking the expensive
loans. Private loans have more than doubled at NAU, regents data shows. Student advocates and
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