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Thu, Sept. 19

State: Student loan default rate tops in the nation

PHOENIX - A U.S. Department of Education report lists Arizona as having the nation's highest rate of student loan defaults, but where the state really stands comes down to how you view the numbers.

That's because the report counts loan defaults by schools based in a state. That means the for-profit University of Phoenix, with its nationwide student body, counts toward Arizona's rate.

And count it does.

While the report lists the state's default rate at 10.9 percent for fiscal 2008, removing the University of Phoenix lowers Arizona's rate to around 8 percent. That's much closer to the national rate of 7 percent.

Those attending the University of Phoenix, which had a default rate of 12.9 percent, accounted for 70 percent of loan defaults attributed to Arizona, the report showed.

"That has an impact on the state's default rate and is part of the reason that the state is a national leader on student loan defaults," Sara Gast, a Department of Education spokeswoman, said in an e-mail.

Vicki Polheber, a University of Phoenix spokeswoman, declined an interview request, citing a large number of media inquiries.

Arizona's default rate was 9.8 percent in fiscal 2007, when it also was highest in the nation. The default rate in fiscal 2006 was 9.2 percent, placing Arizona second behind Kentucky.

Jake Stillwell, spokesman for the United States Student Association, a Washington, D.C.-based student group, said for-profit universities such as University of Phoenix typically have higher default rates because they attract lower-income students who struggle to repay loans.

"The average student borrower is graduating an average $25,000 in debt into one of the worst job markets in history," Stillwell said.

Youth unemployment is now at 20 percent, the highest since the 1940s, hindering borrowers from paying off their loans, he added.

The report also shows community colleges tend to have higher default rates, with 14 out of the state's 20 colleges above 10 percent.

In contrast, the state's public universities all have rates in the low single-digits: 3 percent at Arizona State University, 4.3 percent at Northern Arizona University and 4 percent at the University of Arizona.

The report represented borrowers who entered repayment in the 2008 fiscal year but defaulted before Sept. 30, 2009. That is a total of 3.4 million borrowers nationwide, of which more than 238,000 have defaulted, it said.

Including University of Phoenix, Arizona had 223,468 loans in repayment with 24,531 in default for that period, the report said.

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