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Archive for Friday, September 2, 1994

PROBLEMS WITH LOANS HIT SCHOOLS

September 2, 1994

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— Chronic defaults on student loans have left 10 Kansas schools in jeopardy of losing participation in federal student aid programs, according to the Department of Education.

Four are beauty schools, but the list also includes Garden City Community College and Wichita Business College.

Among those in jeopardy is the Kansas School of Hair Styling in Wichita, which had the state's highest 1992 student loan default rate at 46.2 percent, the department reported Thursday.

Ninth on the list was a local private school, Hairbenders School of Hairstyling, 3300 Clinton Parkway, a one-year program with 30.8 default rate.

George Irwin, financial aid officer and president of Hairbenders, said the school is appealing the findings.

"We have found the data to be incorrect," he said, adding that the school claims a default rate "substantially lower" than the education department's number.

"I suspect there will be several other schools appealing this also," he said.

The school, which has been in Lawrence since 1973 and enrolls 50 or 60 students per year, still is processing loans, he said.

Overall, the Kansas student loan default rate for 1992 was 13.2 percent, down from 16.5 percent in 1991. The total number of borrowers in default in 1992 was 3,374.

The Kansas numbers reflect a national trend that has shown a decline in default rates for three straight years, Education Secretary Richard Riley said. The national default rate for 1992 was 15 percent.

Still, the federal government will pay out $2 billion to cover defaulted loans in the 1994 fiscal year.

``After years of rising defaults, it's going the other way,'' Riley said. ``Yet, more progress needs to be made.''

A loan is considered in default if no payment is made for 180 days. Those who default lose eligibility for further loans, can suffer damage to credit and possibly have wages garnisheed.

For schools with persistently high default rates, federal law allows the department to impose sanctions. There are two ways that can happen.

Schools with default rates of 25 percent or greater for three straight years can lose eligibility to participate in the Federal Family Education Loan Program, the main student loan package.

Nine Kansas schools were listed in that category.

Schools with 1992 default rates of 45 percent or greater -- or higher than 40 percent without a reduction of at least 5 percentage points from the previous year -- can have their eligibility for all federal student aid restricted or terminated.

Two Kansas schools made that list, and one of them, Amtech Institute of Wichita, was on both lists. The other on the second list was the Kansas School of Hair Styling.

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