Even as Citigroup Inc. reached a deal to divest assets of its Student Loan Corp. unit in Stamford, new federal data showed that Connecticut collegiate students had a harder time making their payments on the eve of the collapse of the credit markets in 2008.
The U.S. Department of Education published default data for the fiscal year ending in June 2008, a period marked by upheaval among lenders like Student Loan Corp. that found themselves unable to package loans for resale in auctions that were a key component of their liquidity. In mid-September, New York City-based Citi announced it would sell a $28 billion portfolio of securitized federal student loans to Sallie Mae, with Discover Financial Services acquiring Student Loan Corp.”™s private lending business for $600 million.
Earlier this year, Student Loan Corp. stopped lending under the Federal Family Education Loan program, after the White House announced it would cancel the guaranteed loan program in favor of lending money directly to students.
Student loan borrowers in Connecticut had a 6.3 percent default rate in the fiscal year ending June 2008, up from 6.1 percent the previous year and 4.3 percent in fiscal 2006.
While Connecticut”™s default rate was below the U.S. rate of 7 percent in fiscal 2008, it was well above some of its New England neighbors like Massachusetts, New Hampshire and Vermont. New York had a 6 percent default rate in fiscal 2008.
“This data confirms what we already know: that many students are struggling to pay back their student loans during very difficult economic times,” said Arne Duncan, U.S. Secretary of Education, in a prepared statement. “That’s why the administration has expanded programs like income-based repayment and Pell grants to help students in financial need.”
Of colleges with broad-based education programs, Connecticut College in New London led the state with zero defaults in fiscal 2008. At the other end of the scale, Asnuntuck Community College had the worst record in Connecticut, with more than 24 percent of the Enfield school”™s students in repayment in default in fiscal 2008 ”“ albeit just 11 people due to the small number of community college students that owe borrow under the Direct Loan or the Federal Family Education Loan programs.
