In a sign of hard times, a soaring number of former students of Santa Rosa Junior College and Santa Rosa-based Empire College are failing to repay their school loans.
The latest federal figures show 12.6 percent of SRJC students who were due to begin repayment in 2009 defaulted by Oct. 1, 2010, a 110 percent increase from the rate two years earlier.
The rising default rate comes in tandem with increased student borrowing at the two-year school. Between 2006-2007 and 2009-2010, federal loans to SRJC students jumped from $2 million to $4.3 million a year, a 115 percent increase.
The default rate was even greater at private Empire College, which offers career training in fields such as medicine and information technology. Tuition at the business school can top $16,000, and the default rate jumped to one of the highest in California, going from 14.2 percent to 22.8 percent in two years.
Kris Shear, SRJC's financial aid director, said the economy has made it harder for students to work during and after their schooling, which increased the need for loans while making it harder to repay them.
At the same time, changes in federal regulations have allowed students to take bigger loans, she said. In 2006, a first-year student was limited to borrowing $6,625. That amount has now risen to $9,500.
Shear cautioned against making too much of SRJC's default rate because most students do not take federal loans.
And she said that the loss of Doyle Scholarship money was not a factor because the grants were widely distributed, but were relatively small. Exchange Bank put the 61-year scholarship program on hold in 2009 because the difficult economy had forced it to suspend dividends.
Just 2 percent of SRJC students receive federal loans, according to the National Center for Education Statistics. By comparison, more than 40 percent of Empire College students do.
Empire President Roy Hurd acknowledged the loan payment problem, saying the bleak economy had made it harder for graduates to find jobs.
Three months ago, the college contracted with Champion College Services to help former students form repayment plans and find ways to avoid default. Struggling borrowers, including those who are unemployed, can avoid default by participating in an income-based repayment program.
"We are too small to handle this by ourselves," Hurd said. "This is difficult times for all colleges and schools."
Empire's high default rate, similar to provisional numbers released in May, is mirrored by other for-profit colleges, a trend that's provoking nationwide debate.
Nationally, for-profit schools had a default rate of 15 percent, more than twice the rate for public institutions that frequently have much lower tuitions.
Tuition at Empireis approximately 20 times the cost of SRJC, though the private for-profit school can assure students access to the classes they want and to specialized training geared to the workplace.
Nearly 80 percent of undergraduates who started at Empire in fall 2006 finished their studies within the "normal time" for their program, according to federal figures. Just 11 percent of SRJC students did.
Hurd, who recently was selected into the California Association of Private Postsecondary Schools Hall of Fame, said Empire would not be celebrating its 50th anniversary this year if it didn't provide excellent education.
"You don't stay in business for 50 years if you're producing some sort of shoddy output," he said.
Like SRJC and Empire, Sonoma State University's default rate also has been trending upward, but it remains low.
The latest figures indicate 2 percent of former SSU students required to begin repaying loans within the two-year period ending Oct. 1, 2010, defaulted, up from 1.4 percent two years ago.
Shear said SSU faces a different set of borrowers from a community college, which admits all comers, most with a right to pursue federal loans.
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