Worse Comes to Worst: Student Loan Default Rates in Nevada

1. Worse Comes to Worst: Student Loan Default Rates in Nevada Christopher A. Kypuros, University of Nevada Las Vegas (UNLV)

2. A special thanks to Sandy Baum, Matt Steiner, and Jennie Woo for their important research on student loan default.

3. So why “Worse Comes to Worst?” • Nevada ranks: • 39th nationally for its high school graduation rate • 46th in the percentage of in-migrants with college degrees • (Nevada is not a place where college grads move to) • 46th in educational attainment of the workforce • (Only 21% with BA or better) • 49th in the percentage of the adult population in college

4. The Worst of: Continued • Nevada ranks: • 49th for the number of college students who drop out their freshman year • 49th for the number of students who earn a bachelor’s degree within 6 yrs or an associate’s degree within 3 yrs • 50th in educational attainment of the 25 to 34 year old population • 50th for the number of students who go to college directly after high school

5. The Worst of: Continued • "Nevada has one of the lowest graduation rates in 9th through 12th grades, and one of the lowest college-going rates in the country as well as one of the lowest college graduation rates," said Patrick Kelly of the National Center for Higher Education Management Systems.

6. In recent years, the announcement of the national cohort default rate is followed with celebration by many higher education institutions. • For good reason: • The FY 2003 national cohort default rate set a record low of 4.5%. • The FY 2004 national cohort default rate increased slightly to 5.1% resulting in default rates remaining at all time lows for higher ed institutions.

7. Nevada Higher Education Institutions Nevada Proprietary Institutions Academy of Healing Arts Heritage College Las Vegas College Career College of Northern Nevada Carson City Beauty Academy Crescent City School of Gaming & Bartending Southern Nevada University of Cosmetology Art Institute of Las Vegas Academy of Hair Design Nevada Public Two-Year Institutions Community College of Southern Nevada Truckee Meadows Community College Western Nevada Community College Great Basin College Nevada Public Four-Year Institutions University of Nevada Las Vegas University of Nevada Reno

8. 2004 FY Cohort Default Rate • “I’m pleased to see that default rates remain at historically low levels. The new rate is the second lowest ever recorded. As the federally guaranteed student loan portfolio continues to grow, it is more important than ever that we continue our outreach to student borrowers to educate them about their responsibilities and the resources available to assist them in their repayment obligations.” -Margaret Spellings, U.S. Secretary of Education (September, 13, 2006).

9. Unprecedented Era in US History

10. While many states are successful at keeping their default rates low, other states are struggling. The State of Nevada is struggling…

11. What Does a High Default Rate State Look Like? • As one of the worst states in the nation, Nevada has a statewide default rate of 8.3%. • Are University of Nevada Reno students gambling their student loans away in the Biggest Little City in the World? • Do University of Nevada Las Vegas students default on their loans hoping to be forgiven as citizens of Sin City?

12. State of Nevada Perceptions on Default • "It's a college-wide issue," said Sharon Wurm, director of financial aid for the Nevada System of Higher Education. • Officials blame Nevada's transient population as the main contributor to the high default rate, but other problems persist in reducing the rate.

13. State of Nevada Perceptions on Default • “We have lower graduation rates; if students graduate college, they're less likely to default on their loan.” • "We've found the highest percentage of defaults were among students who attended proprietary schools.“

14. State of Nevada Perceptions on Default • “Many of the students who default on their loans at the college are single mothers or students who struggle with gambling or substance abuse.” • “The most common characteristic is that they don't complete college.”

15. STUDENT LOANS:Default rate high in NevadaMar. 19, 2007Las Vegas Review-Journal “…college students in Nevada have the highest rate of defaulting on those federal student loans among the 50 states.”

16. Purpose of Study • This research examines the primary source or sources driving up Nevada’s default rate. • Included in this analysis are Nevada Public Two-Year, Public Four-Year and Proprietary Institutions.

17. The University of Nevada Las Vegas

18. So what’s the problem? UNLV has been consistently at or below the national average.

19. Nevada Proprietary Institutions 2004 FY Cohort Default Rate

20. Finding • The top four proprietary institutions default rates range from 13.6% to 20.1%. • This confirms proprietary institutions are driving up Nevada’s Cohort Default Rate. • However, Nevada’s dismal ranking is also caused by another source.

21. Nevada Public Two-Year Institutions 2004 FY Cohort Default Rate

22. Finding • Community Colleges in the Nevada System of Higher Education (NSHE) fall right behind Nevada’s proprietary institutions. • All of the 2 yr Nevada public institutions maintain double digit default rates ranging from 11.2% to 13.2%. • The National CDR for 2 to 3 yr institutions is 8.1%. • At 12.1%, the NSHE CC default average rate exceed both the national average (5.1%) and Nevada’s average (8.3%).

23. Nevada Public Four-Year Institutions 2004 FY Cohort Default Rate

24. Finding • The national CDR for Public 4 yr institutions is 3.5%. • University of Nevada Las Vegas exceeds the national average by.3%, with a CDR of 3.8%. • University of Nevada Reno (3.1%) falls below the national CDR.

25. Nevada System of Higher Education Institutions Cohort Default Rates Three-Year Trend

26. Federal Intervention • U.S. Department of Education intervenes • In November 2004, John Pierson & Eileen Marcy, of the U.S. Department of Education Default Prevention Division, organize a meeting with Nevada. • Meeting was a brainstorming session sharing best practices in default management. • Project dies (lack of travel funding for Department staff to NV).

27. Federal Intervention • Department staff return for Nevada Association of Financial Aid Administrator’s annual conference for November 2005 & 2006. • Recommendation: NSHE will support all staff training in default management. • Late Stage Delinquency Assistance Program initiated at some institutions.

28. Conclusion • Strong argument Nevada proprietary schools at fault • Stronger evidence finds Nevada Public Two-Year institutions driving up rates • Nevada perceptions on default are valid • Nevada’s “Worst of” rankings do not help the default rate problem

29. Future Research • Nevada’s statewide default rate has caught the attention of the United States Department of Education. • Since 2004 proactive measures were taken to improve Nevada’s default rate image. • Did federal intervention improve the state of default in Nevada? • Future research will attempt to address this question when new cohort default rates are published in September 2007.