Thursday, September 9, 2010

In New York state, collegians have defaulted on almost $2 billion

ALBANY -- At New York's colleges and universities, the arrival of a new school year brings anticipation tinged with anxiety. For many students, the second emotion is prompted by one nagging question: How am I going to pay for this?

Many of them won't be able to find an answer. The Higher Education Services Corp., which services and collects federally backed college loans in New York, has almost $2 billion worth of defaulted debt on its hands.

As of July 1, HESC listed 145,437 accounts with $1,983,922,931 in college loans that had gone into default. That's up from last year, when there were 144,216 borrowers for a total of $1,895,211,727 by the end of July.

In 1991, the defaulted sum was just $230 million.

HESC, a state-operated agency, was in the news last month when Inspector General Joseph Fisch reported that some of its employees, including Assistant Vice President of Collection and Default Management Joseph Catalano, had given preferential treatment to a handful of friends and acquaintances. Additionally, Fisch's office found that in an effort to save state jobs. HESC personnel tried to obstruct the turning over of $1.25 million in accounts to private collectors. Six HESC employees were subsequently suspended.

Despite the IG's findings, some observers say the rising defaults simply reflect tough economic times and rising college costs.

"Students are graduating and they don't have jobs," said state Sen. Toby Stavisky, D-Queens, who chairs the Senate Higher Education Committee.

"Are people being encouraged to take on more debt than they can reasonably be expected to repay?" asked Assemblywoman Deborah Glick, D-Manhattan, who chairs the Assembly's Higher Education Committee.

Along with the lack of jobs, college prices have been rising at rates two and three times that of inflation, said Barmak Nassirian, associate executive director for the American Association of Collegiate Registrars and Admissions Officers.

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