Ivy League Schools Suing Students Over Loans

Yale, Penn among those seeing rise in defaults

By John Johnson,  Newser Staff

Posted Feb 7, 2013 6:08 PM CST

(Newser) – Another sign that the student debt problem is off the rails: Borrowers defaulted on nearly $1 billion in federal loans designated for low-income students in 2011, a jump of 20% from five years earlier, reports Bloomberg. Because these particular loans, called Perkins loans, are administered by the schools themselves, it means that former students are now facing lawsuits from their alma maters. Ivy Leaguers Yale and Penn, along with George Washington, are the three schools singled out in the story for filing such suits.

“If you borrow to go to school, it may not be just the government that ends up coming after you if you can’t pay,” says an attorney with the National Consumer Law Center. It's a double whammy of sorts: When borrowers pay back Perkins loans, schools redistribute the money to current students. More defaults, then, means less money to go around. That could change under a proposal by President Obama to significantly expand the pool of money available for Perkins loans and to have the feds administer them, notes Bloomberg.

  (Shutterstock)
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