Students Lack Home-Grown Loan Servicing

Nov 10, 2014

Credit Photo: thisisbossi via Flickr

New Mexico has the highest student loan default rate in the nation and a lack of local loan servicing providers may be to blame. We went from a 12.8 percent student loan default rate in 2009 to a 20.8 percent rate in 2011.

Michael Nemelka of the New Mexico Educational Assistance Foundation said it’s not just the economy, it’s because students who are the most at risk are also the most in need of information on income based payment plans, deferments, and forbearances.

“There needs to be these resources so that these people can be informed,” Nemelka said, “and the only way to deliver that sort of service is to deliver it locally.”

But the overhaul of the federal student loan system in 2010 shifted federal loan servicing from local providers like Nemelka’s to the feds, and Nemelka said New Mexico students, especially those that drop out before earning their degrees, may not be getting the support they need.

Nemelka’s organization is working to fill that gap, but he said they can only provide information. They can’t process requests for students who are having trouble making their loan payments.