Wealthy colleges sue students over defaulted loans

George Washington University, Yale have filed lawsuits against former students

POSTED: 11:13 AM Feb 06 2013   UPDATED: 11:13 AM Feb 06 2013
Piggy bank, graduation, college savings

Several wealthy, reputable universities are taking former students to court in an attempt to collect on past-due Perkins student loan payments.

George Washington University, Yale University and the University of Pennsylvania have all filed lawsuits against students who have defaulted on their student loans, Bloomberg reports. Temple University is also going after unpaid loans and tuition.

Unlike Stafford or direct federal student loans, which are distributed and collected by the government, Perkins loans are administered by the colleges themselves. When students don’t repay, colleges say they are obliged to recover the money on behalf of taxpayers. Schools including George Washington say they first try to work with delinquent students to repay the loans, then warn them they may be sued and only then turn to debt collectors and the courts.

President Barack Obama, meanwhile, has proposed to remake the Perkins loan program by rewarding institutions that rein in tuition and produce good student outcomes.

According to Bloomberg, students defaulted on $964 million in Perkins loans in fiscal year 2011, which is up 20 percent from five years earlier.