Default is a rare case for Pace graduates. Over the past 3 years only 4.8% of those that had initiated payment have defaulted i.e. stopped payment within 270 days of their first repayment.That might not sound high statistically but it does represent 117 students whose financial life has been dealt a serious blow that will be very difficult to overcome.
I know that no one defaults unless they are at a dead end and they have no other choice. If that is the case then one must accept the consequences and adjust as best as possible to the tough conditions. But this is rarely the case. Many of those that default are not aware of the variety of options available to them.The students themselves are to blame for not being totally informed but the blame is also to be shared by the lending institutions that fail to keep the borrowers abreast of all the new developments as well as the educational institutions themselves who have also failed to keep their former students up to date.
The following example might help shed light on why is it that I feel strongly that no student should ever default: Let us assume that Jane is single, owes #50,000 in Federal Student Loans, has an AGI of $30,000 and that the loans carry a 6.8%. Let us also assume that Jane received her first loan after Sept30, 2007 and that she also received a loan after Sept. 30 2011.
What are some of her repayment option?
A Standard Repayment plans: $575.40 / month for 120 payments
347.04 / month for 300 payments
B IBR (Income Based Repayment) $166.00 / month for 300 payments
C Pay-As-You-Earn $110.00/ month capped at 10% of Income and forgivness of
the balance after 300 payments.
There are a few other options but as the above example illustrates very clearly it is very difficult to justify default given all these repayment options.
