Western Citizen

Source: U.S. Dept. of Education data compiled by Ross Perez, Tableau.

It may too late for me but dreaming of making my last installment to Sallie Mae in a wheelbarrow full of nickles got me through that long 20-year repayment schedule.

The historic student financial aid legislation signed by President Barack Obama may have been overshadowed by the health care reform but it’s big news nonetheless.

A $36 billion boost to Pell grants and eliminating the bank-based system for federally-subsidized student loans is about half the amount the president initially sought. Loan payments will also be structured based on the graduate’s income — 10 percent for new loans after 2014 down from 15 percent — and includes an accelerated forgiveness program after 20 years of on-time payments, shaving five years off the current rate.

The expanded direct-lending program will save taxpayers an estimated $61 billion over 10 years, according to the nonpartisan Congressional Budget Office reports the New York Times.

Starting July 1, government-backed loans will be secured through the college’s financial aid office rather than the much-despised Sallie Mae or NelNet, the two largest for-profit loan servicers. Banks may still lend money for college expenses but they won’t be guaranteed repayment by the government if the student skips out.

What’s unclear is how cutting out the middleman will affect ballooning default rates when the larger problem appears to be certain post-secondary schools pushing ill-prepared students to lard up with loans they can’t repay.

The average default rate for just graduated students is 7.2 percent for bank-backed loans while government direct loans rank at 4.8 percent per Dept. of Education number-crunchers. But those rates skyrocket for proprietary and other schools compared to public and private four-year institutions.

That trend matches the default rates in the Mountain West. Click on the dot next to the state name in the top chart to see how your state fares.