Colleges Suing Students Over Unpaid Loans

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Three high profile colleges in America are suing students over unpaid student loans, according to a new report by Bloomberg News.

Lawsuits have been filed by Yale University, George Washington University, and the University of Pennsylvania after some student loans fell into default.

The loans are all through the Perkins loan program, which gives low income students a subsidized loan with an interest rate of five percent, no default fees and options for loan forgiveness.

Aaron Graff, one plaintiff, graduated from George Washington three years ago and received $5,000 in Perkins loans which he has defaulted on.

“I live on the bare minimum,” Graff said. He earned about $800 teaching high school equivalency courses. “It’s not like I’m defaulting on my student loans to live the lavish life. I’m defaulting on my loans because I really don’t have it.”

Though his school declined to comment on the matter, they have drawn attention recently for being one of the most expensive schools in the country. It does provide grants and loans to students in need, but a feature in the Washington Monthly explained the school made a deliberate effort to increase tuition so it could promote itself in national rankings.

Kyle P. Lopinto faces a lawsuit from the University of Pennsylvania over $7,000 in Perkins loans, $15,039 in unpaid tuition, $3,027 in attorney fees and $387 in court fees.

Lopinto graduated in 2010 from the school’s design school. The university said it is standard practice to refer Perkins loans to collections agencies after 120 days.

Two of the schools suing students are among the universities with the country’s largest endowments. Yale’s follows Harvard at $19.3 billion, while University of Pennsylvania is 11th in the country at $6.8 billion.

Changes have been proposed for the Perkins loan program, including an expansion of the lending pot to $8.5 billion per year over the current $1 billion. The government would also take charge of managing the loans and increase the interest rate from 5 to 6.8 percent. This would make a Perkins loan much like an unsubsidized Stafford loan.

Many believe these changes to be the loan program’s “last best hope,” as budget cutters will likely target the program in their effort to trim the deficit.

Inside Higher Ed said the proposed changes would make the loan more efficient:

“[It could] save money that could be used to expand Pell Grants. Others at the panel said transforming the Perkins program was the only way to save it.”

Bloomberg News, Raw Story