The University of Pennsylvania, Yale, and George Washington University are suing former students over failure to pay back student loans, according to court records obtained by Bloomberg.
Records indicate that former graduates of these universities defaulted on $964 million in federal Perkins loans in 2011, according to Bloomberg.
The University of Pennsylvania also filed over a dozen lawsuits related to defaults on Perkins loans last year, according to Bloomberg.
Perkins loans are administered by colleges rather than the government, unlike most student loans in the U.S.
Repayment money from these loans is then used to lend to other students who are encountering financial hardship. This means current students who require Perkins loans may suffer as a result of the defaults.
Due to this, it is in the universities’ best interest to exercise all means of recovering the money, according to Candace Smith, a spokesperson for George Washington University.
“Perkins loans are issued from a revolving fund, so any monies recovered through litigation increase universities’ ability to help other students with education costs,” Smith told Bloomberg via email.
Beyond this, U.S. federal law requires that the universities attempt to collect unpaid Perkins money, Yale press secretary Tom Conroy told Bloomberg.
“Litigation is a last resort collection effort for all of our student-loan borrowers,” he said.
The grace period granted before borrowers must begin repaying Perkins loans is generally nine months after dropping below half-time enrolment. Following this period, the interest rate on loans is five per cent.
Representatives from both Penn and Yale declined to comment further on the lawsuits.
However, Conroy noted that the university does not offer Perkins loans to undergraduates.
“The extensive financial aid offered by Yale . . . makes borrowing by undergraduates unnecessary,” Conroy said via email.
