Minnesota student-loan default rates on the rise

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More Minnesotans are defaulting on their student loans within three years after leaving school -- but we're still doing better than much of the nation.

The state's overall failure rate rose from 9 percent to 11 percent of borrowers. That's better than the national average and the average default rate for Big Ten states, both of which were 14 percent.

State Office of Higher Education analyst Tricia Grimes says the latest rates for two-year community and technical colleges are a concern, because that's where a big share of Minnesota's enrollment is.

But they should be placed in an economic perspective, she says:

"Keep in mind they include students who were supposed to go into repayment when the economy was particularly bad. As the new rates come out in the next year and the year after, they may be better because they include more time when the economy was better."

The hardest-hit Minnesotans continue to be borrowers from public two-year colleges.

They defaulted at an average rate of 18 percent. That's higher than the 11.3 percent rate for the state's for-profits.

But Grimes cautioned:

"A number of the public twos that have the highest rates are in parts of the state where there was a mining and forestry or forest-products industry. And those were particularly hard hit in this recession."

She also said for-profit colleges tend not to have a strong presence in such areas.

This year's report tracks borrowers who were to begin repaying their loans during the 2010 federal fiscal year. Last year's tracked those who started in 2009.

Here's a summary of how the three-year default rates changed for each sector from last year's report to this year's:

Note: I've chosen to focus on three-year default rates. The report uses both two- and three-year rates, but the feds will use only three-year rates beginning next year. The idea is that three-year rates provide a more accurate picture of repayment.

Rasmussen College Chief Academic Officer Trenda Boyum-Breen says her college has taken two steps to lower its default rates.

Since January 2011, she said, the college has become more selective in whom it enrolls. It has instituted orientation programs to ensure students are prepared for college. Boyum-Breen says that has led Rasmussen to deny enrollment to 20 percent of its applicants.

In January of this year, Rasmussen also instituted tuition cuts that in Minnesota averaged 18 percent. That should make it easier for people to make their payments, because they'll have less debt to pay off.

"We feel confident that our three-year default rates have peaked," Boyum-Breen said, "and we'll start to see that dramatically decline."

Improvement, she said, should come as early as next year's report.

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