Default Prevention Grant helps students avoid loan default

The program encourages students to return and finish their degree.

By Joey Soto

Published Sept. 11, 2008

There are second chances in college when it comes to finances, a top MU administrator said this week.

Ann Korschgen, the vice provost for enrollment management, said the university got access last month to the Default Prevention Grant. The grant provides funding for 25 post-secondary institutions in Missouri to help educate students about managing debt and avoiding loan default.

Korschgen said the program has two primary objectives.

"Our focus has been to recruit back students to campus who left in good academic standing but did not graduate, and to ensure students receive good advice to help prevent their defaulting on their student loans," Korschgen said.

Defaulting on a loan happens when a person fails to make a payment on time.

This is the third year MU has received the grant. Korschgen said she considers it to be a "recruit-back project."

Marilyn Landrum, coordinator of the Default Prevention Grant program, said the grant has been used to improve student retention rates.

"Retention plays an important role in default prevention, and schools are beginning to focus more on retention as a default prevention initiative," she said.

Retention rates have risen in the past five years, Landrum said. She said the average retention rate of the original schools participating in the program for the 2001-2002 academic year was 63.1 percent, and the rate for the 2006-2007 of the schools still in the program increased to 71.4 percent.

In addition to the efforts from the Default Prevention Program, the Office of Cashiers offers loan counseling to students. Cashiers associate Sandra Murray helps guide students when looking for student loans.

"We provide basic information about loans so people can understand the rights and responsibilities of taking out a loan," Murray said.

Murray also serves as a member on the recruit back committee. She provides data about which students have taken out loans, something that gives the committee a way to target students potentially in need.

The program's initial focus is to entice students who left the university without a degree to come back to school without defaulting on a loan, Murray said.

"We're trying to get those students back before they default so they can make more money with a degree and not default," Murray said.

The goal of the program is expanding, Murray said. Although the focus is currently on preventing students from defaulting on a loan, eventually students who have already defaulted will be targeted and given aid to stop defaulting on their loans.

There are several ways students can stop defaulting on a loan. The first is to catch up on minimum payments until there is no longer a deficit. Another method is to consolidate the loan by selling it to a different company.