Here's your degree -- and a lawsuit

Some universities are suing students who can't or won't repay their school loans.

By Bruce Kennedy Feb 6, 2013 9:28AM
Image: Graduation cap (Stephen Wisbauer/Getty Images)Compared with earlier generations,  current college students face a very different world once they enter the workforce. Unemployment remains high, entry-level jobs are scarce, and many available jobs require skills that simply did not exist 20 and even 10 years ago.

Recent graduates are also having more trouble paying off their college loans, and many are being threatened with legal action from their alma maters for nonpayment of tuition and other bills.

The University of Pennsylvania filed six lawsuits against former students in November, demanding repayments from $13,000 to $27,000. A university spokeswoman told the Daily Pennsylvanian that students who graduate or leave the university with an outstanding balance will see their debt transferred to the school's collections office. Past-due balances, she said, are subject to a late-payment penalty of 1.5% per month.

And universities have other unique ways of pressuring students who can't or won't pay their bills. Kenya Shujaa, a former graduate student at Penn, faced a lawsuit and also saw the university withhold access to her transcript, which she said "limited the kinds of jobs that I could have." But Shujaa, who settled her debts last year, says she understands the university's actions. "That's the rule when you owe them money," she said.

Students who borrowed funds for college and earned bachelor's degrees in 2011 left school with an average of $26,600 in student loan debt, up 5% from 2010, according to a recent report by the Project on Student Debt, by The Institute for College Access and Success.

Last year, the Department of Education reported a 13.4% national student loan default rate -- with for-profit institutions having the highest average three-year default rate of 22.7%, public institutions at 11% and private, nonprofit schools at 7.5%.

"We continue to be concerned about default rates and want to ensure that all borrowers have the tools to manage their debt," U.S. Secretary of Education Arne Duncan said in a press release. "In addition to helping borrowers, we will also hold schools accountable for ensuring their students are not saddled with unmanageable student loan debt."

Not surprisingly, educators say getting a college degree increases a student's chances of finding a job that pays well. But some also stress that both students and parents need to educate themselves about the loan process.

"Students and parents need to know that, even at similar looking schools, debt levels can be wildly different," said Lauren Asher, the president of The Institute for College Access and Success. "And if they do need to borrow to get through school, federal student loans, with options like income-based repayment, are the safest way to go."

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Tags: Economy
Feb 6, 2013 10:58AM
Now the colleges should be prepared for being sued for promoting degrees that do not lead to sustainable incomes or jobs. They are guilty of fraud, manipulation, and misrepresentation. Contractually they have not provided a fair value in exchange for the student's (and parent's) investment.  When some attorneys figure out how to pursue a class action lawsuit against these bloted schools, then maybe the trustees will stop treating the country as its cash cow. 
Feb 6, 2013 10:57AM
As a college grad i will make this statement.  Save your money kids it's not worth it!
Feb 6, 2013 10:49AM
The cost of college is over-inflated anyways. That's what needs to happen, colleges need to reduce spending so that they can also offer at least a little more affordable tuition costs. As with anything else, greed is the issue.
Feb 6, 2013 10:47AM

In my opinion, colleges are the next bubble. Tuition increases always seem to be double to triple

inflation. Student loan rates were very high in the last decade, and the coursework appears to

outdated. Job related skills can probably be learned somewhere else. Already our colleges have

significantly more foreign students just to fill up the classes.


Since so much funding comes from alumni, litigating against them seems to be biting the hand

that will eventually feed. If the colleges don't believe these students will be the next generation of donors, then they are in real trouble as the product that they are selling is overpriced.


Eventually, the college experience may be like Amazon, order your course DVD and go to kiosk for testing. College will be for liberal arts education, similar to what it was like in the past.

Feb 6, 2013 10:40AM
Good idea.  It's about time these liberal institutions start suing deadbeats.
Feb 6, 2013 10:30AM
If someone can't pay, what makes them think suing will get them money any faster.
Feb 6, 2013 10:29AM

You can't get blood from a turnip. This is just the next shoe falling on tax payers. The responsible working tax paying middle class person is the "unwilling consumer" for all the deadbeats leaching off the government.


Same thing they did with housing......... O hey .. you can't afford a house here is a loan anyway we will let the tax payer pick up the tab as we save the bankers.

Feb 6, 2013 10:21AM

Maybe now colleges will drop ridiculous unmarketable majors.


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