A lawsuit filed by Yale last spring against a former student who defaulted on federal loan repayments has recently garnered national attention as an indicator of the growing amount of debt college students incur.
The University sued Elizabeth Triggs ’05 in March 2012 for nonpayment of a loan from the Federal Perkins Loan Program, a low-interest loan given to students in need of additional financing for postsecondary education. According to a filing before the New Haven Superior Court last year, Triggs defaulted in September 2010, when she left a combined balance of $8,255 — a principal balance of $6,455 and $2,880 in collection fees. Federal law mandates that all universities must pursue legal action against students with unpaid bad credit payday loans as a last resort for loan repayment.
Yale’s suit against Triggs, who could not be reached for comment, was first reported in a Feb. 5 article published by Bloomberg that outlined defaults on Perkins loans at several United States universities
Dorothy Robinson, University vice president and general counsel, said in a Sunday email that Yale’s default rate on Perkins loans is less than 1 percent, adding that only a “small fraction” of Yale graduates who default on Perkins loans eventually get sued by the University. Yale has not made any Perkins loans to undergraduates since 2008, when Robinson said Yale expanded its grant aid and reduced the required self-help contributions in students’ financial aid packages. In 2011, 22 percent of Yale graduates took out loans, compared to 43 percent in 2002.
“There are very few individuals whom Yale has had to sue in order to collect defaulted loans,” Robinson said. “Litigation is truly a last resort in the collection process, which is mandated by the federal government.”
Yale spokesman Tom Conroy said in a Monday email that Yale usually does not sue former students who default on Perkins loans, adding that the national issue of student debt and default “is not a Yale problem” and both the number of undergraduates at Yale who borrow and the average amount of money borrowed have been declining.
“The best thing any school can do regarding student debt is to provide aid for students in need so that they do not need to borrow, and thanks to Yale College’s generous financial aid, Yale does that better than, or as well as, any school in the country,” Conroy said.
According to government data, students nationwide defaulted on $964 million in Perkins loans in 2011 — a 20 percent increase from the amount defaulted in 2006.
While most student loans are distributed and collected by the federal government, Perkins loans are administered by individual universities and the repayment money is recycled for loans to other students. Because Perkins loans are often given to the students with the greatest financial need, the students “may have the least ability to pay it back,” Nancy Coolidge, associate director of student financial support for the University of California system, told Bloomberg.
The Federal Student Aid Handbook instructs universities to provide borrowers with “maximum opportunity to repay” and notes that schools should take steps such as billing the student, sending overdue notices, conducting address searches and — as a “more aggressive collection step” if billing procedures fail — hiring a collection firm or entering litigation. Students who default are given an initial grace period of nine months.
Other universities involved in lawsuits with former students over Perkins loans include George Washington University and the University of Pennsylvania, which filed more than a dozen Perkins lawsuits last year, according to court records. Bloomberg reported last week that Penn gave out more than $8 million in Perkins loans in the fiscal year that ended in June 2012.