Most college students in Nevada receive some sort of tuition assistance throughout their college careers.
Many are left paying off thousands of dollars in debt after they graduate, under the assumption that the added income from having a college degree will pay off the debt.
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But college students in Nevada have the highest rate of defaulting on those federal student loans among the 50 states.
Couple that statistic with the notoriously low graduation rate among Nevada's colleges and universities, and the by-product is thousands of young people with no degree but still saddled with college debt.
"It's a college-wide issue," said Sharon Wurm, director of financial aid for the Nevada System of Higher Education.
Students in Nevada's public and private universities default on their federal loans at a rate of 8.3 percent, according to 2004 figures by the U.S. Department of Education. West Virginia ranked second at 7.5 percent.
Officials blame Nevada's transient population as the main contributor to the high default rate, but other problems persist in reducing the rate.
"You also have the situation where we have lower graduation rates," Wurm said. "If students graduate college, they're less likely to default on their loan."
Jane Glickman, a spokeswoman for the U.S. Department of Education, said the default rate has dropped considerably since 1990, when it was at its all-time high of 22.4 percent.
"The default rate had gotten completely out of hand," Glickman said. "I mean, 22 percent is just crazy."
Congress held several hearings on the matter and required the Department of Education to cut off financial services to schools that have a default rate of 25 percent or more for three years in a row.
Congress also allowed graduates to pay back their loans over a longer period of time and pay those loans back at a pace flexible with the graduates' incomes.
While students are responsible for not repaying their loans, Glickman said colleges also contribute to the high default rate.
"They're not blameless," Glickman said of colleges. "We've found that the highest percentage of defaults were among students who attended proprietary schools."
Glickman said in the 1980s and 1990s, proprietary schools were awarding loans to students who should not have qualified to receive them.
Proprietary schools, or private occupational schools, have among the highest rates of default in Nevada.
Las Vegas College, for example, had a default rate of 16.2 percent in 2004. In 2003, the Academy of Healing Arts in Las Vegas had a rate of 21.8 percent, with 108 of 495 students defaulting on their loans.
Neither schools returned calls for comment.
Community colleges also typically have higher default rates.
Truckee Meadows Community College, which has campuses in Reno, had a 2004 default rate of 12.3 percent, according to the Department of Education.
Debra Buringrud, the student loan coordinator at the college, said many of the students who default on their loans at the college are single mothers or students who struggle with gambling or substance abuse.
Their most common characteristic is that they don't complete college, she said.
"They're very challenged," Buringrud said. "They start off from a low point, so I think for them to get ahead they really have to struggle."
The college requires students go through a loan workshop before they receive federal loans. Before those students graduate, they have to go to counselors, who take down their future contact information and the contact information for their families and relatives.
Buringrud said she sends letters to students who have defaulted, urging them to contact their lender, who often can provide temporary debt relief for those students.
In 2004, Western Nevada Community College had a default rate of 11.9 percent, and the Community College of Southern Nevada had a default rate of 13.2 percent.
The rate at Nevada's two universities are well below the average.
The University of Nevada, Reno, and the University of Nevada, Las Vegas, had default rates of 3.1 percent and 3.8 percent, respectively, among their students in 2004.
"I can tell you that our NSHE (Nevada System of Higher Education) schools are diligent about trying to work with the defaulted students," Wurm said.
She said the consequences of defaulting on a loan are severe.
Students have six or nine months after graduation from college to start repaying their federal loans. After 270 days of nonpayment for loans that require a payment each month, the government declares the loan in default.
From there, repayment may be turned over to a collection agency, or the federal government may invoke administrative wage garnishment, under which the government requires the student's employer to withdraw up to 15 percent of the student's paycheck to repay the loan.
But the most severe consequence might be that the student's credit will suffer, as credit bureaus can be notified of the default.
HIGHEST STUDENT LOAN DEFAULT RATES AMONG STATES, 2004
