MIT students have had a much lower default rate on federal educational loans than other American university students since 1980, according to the latest data compiled by the Bursar's Office and the federal government.
From 1980 to 1992, the national default rate for the Federal Perkins Loan program (previously called the National Direct Student Loan Program) was about 8.3 percent, but the MIT average default rate was only 2 percent. Similarly, the national default rate for the Federal Stafford Student Loan Program (formerly the Guaranteed Student Loan Program) was 15 percent over the same time period, while MIT's rate was 3.2 percent.
The term "default rate" does not refer to the actual percentage of students who fail to repay their loans; it is a fraction whose numerator is dollars that are a certain number of days overdue and whose denominator is dollars in matured loans plus loans paid in full.
MIT awarded $3.7 million in Perkins loans (which are provided by the federal government) in 1992-93. The Institute's total Perkins loan portfolio as of June 30, 1993 was $27.9 million. The repayment period for this type of loan depends on the amount borrowed, though it cannot exceed 10 years, and the annual interest rate is fixed at five percent.
Depending on need, a student can borrow up to $15,000 as an undergraduate and $5,000 a year in Perkins loans as a graduate student for a total debt of up to $30,000. However, federal guidelines allow students to borrow more in some instances if their school has a default rate no higher than 7.5 percent.
Stafford funds are issued by banks and other lenders, including MIT itself. Dependent undergrduates are eligible to borrow $2,625 to $5,500 per year, while graduate students may borrow up to $18,500 a year. The repayment period is structured in the same way as that for Perkins loans, although the interest rate is variable and is revised each year. For 1993-94, it is 6.2 percent annually. As a lender, MIT awarded $300,000 in Stafford loans in 1992-93, and students borrowed another $10.3 million from other sources. The total MIT Stafford loan portfolio as of June 30 was $3.8 million.
The US Department of Education has not yet released complete national average data for 1992 and 1993.
A version of this article appeared in the February 2, 1994 issue of MIT Tech Talk (Volume 38, Number 21).