The student-loan default rate is on the rise at some Inland Northwest colleges, though institutions here remain below the national rate, the latest available data show and education officials here confirm. That generally upward trend, combined with fiscal pressures that are pushing tuition costs higher, is raising concerns on campuses here.

From federal fiscal years 2006 to 2008, default rates for students whose federally backed loans entered the first year of repayment during that period climbed from 3.2 percent to 5.1 percent at Eastern Washington University and from 2 percent to 3.5 percent at Washington State University, figures from the U.S. Department of Education show.

At Whitworth University, the default rate climbed from 1.1 percent to 1.7 percent over that three-year stretch, while Gonzaga University's tiny default rate of 0.6 percent, increased to 1.8 percent in fiscal year 2007, then fell back to 0.7 percent the next year, according to the data.

Default rates are much higher at Spokane's two community colleges, despite sharply lower tuition costs, but fell over the fiscal 2006-2008 period. Spokane Community College's default rate of 9.9 percent in fiscal year 2006 jumped to 10.4 percent the next year before falling back to 8.5 percent in fiscal 2008, the data show. Meanwhile, Spokane Falls Community College's default rate dipped from 8.7 percent in fiscal 2006 to 8.1 percent the next year, then bounced back up to 8.5 percent in fiscal year 2008.

Bruce DeFrates, EWU's director of financial aid and scholarships, says, "What we're seeing is that the national default rate has climbed by 2.6 percent over the last four years, and Eastern's has climbed by 2 percent over that same period. It's increasing in general and everything we're seeing so far indicates those rates are continuing to climb."

Jim White, Gonzaga's dean of student financial services, says the four-year private Jesuit school also has seen its loan delinquency rates rise recently.

"We've started to see that creep up a little bit in the number of students who are delinquent and are requesting forbearance," White says.

Loan forbearance occurs when the lender agrees to suspend or reduce payments on the loan for a specific time period, but the debtor still is responsible for paying any interest accrued during that period.

The most current national federal student loan default rate is 7 percent for students whose loans went into repayment during fiscal year 2008, says the U.S. Department of Education. During that same period, Washington's average default rate was more than a percentage point lower, at 5.7 percent. A federally backed student loan typically is considered to be in default when no payment has been made for 270 to 360 days.

Not all of the Spokane-area colleges and universities, however, are seeing this rising trend.

Wendy Olson, Whitworth's director of financial aid, says that four-year private liberal arts university's student loan default rate is low, and that "the level of debt that students have is not unreasonable."

Olson says some of the school's students who've taken out private loans from banks or other financial institutions have run into trouble during their loan's repayment period, but that the university's financial-aid counselors try to help guide students through the process of borrowing money.

"We have tried to keep the debt levels reasonable at Whitworth with other financial-aid programs as much as possible," she says. "The federal government has repayment programs tied to income, so if the student's first job out of school is a low-paying job, the payments can be set up to recognize that."

Later this year, the federal government will expand the period of time it monitors student-loan defaults, from tracking defaults during the first year of repayment to tracking defaults during the first three years of repayment. Consequently, DeFrates says, the default rate is likely to increase dramatically.

Both White and Olson also express concerns that the fact that the federal government's subsidized and unsubsidized Stafford loan borrowing limits haven't increased recently, and that the interest rates for those loans have remained higher than those in other sectors, such as the mortgage market.

Stafford loans are fixed-rate student loans issued by the federal government for undergraduate and graduate students who are attending college at least half-time.

Currently, an unsubsidized Stafford loan for an undergraduate student has a 6.8 percent fixed interest rate, and the subsidized Stafford loan's rate is fixed at 4.5 percent, Olson says.

"The interest rates are just not right," she says.

White says that because the federal student-loan borrowing limits haven't changed even as tuition across the nation has steadily increased, some students have had to take out private loans.

"The loan limits have remained fairly low for awhile, and that forces students to borrow through alternative private loans, which have higher interest rates and are more risky," he says.

"That is where the (next) loan bubble will burst if it's going to," he adds, comparing the private student-lending sector with the mortgage-market crash of 2008.

Currently, the average debt owed by students who graduate from a college or university in Washington is just under $20,000, which places the state 40th in the nation in that category, says the Project on Student Debt, a national non-profit organization.

To put that in perspective, resident undergraduate tuition at EWU for the current 2010-2011 school year is about $6,600. At the Community Colleges of Spokane, that rate is about $3,100 for a full-time student. Undergraduate tuition at Gonzaga and Whitworth universities this year is $30,440 and $29,890, respectively.

Educators here also are concerned about proposed cuts in state funding for public two- and four-year colleges and universities, as part of the state's 2011-2013 biennial budget, and by a provision that would allow further increases in tuition.

Under Gov. Christine Gregoire's budget proposal, state funding for higher education could be reduced by 4.2 percent, or $345 million, over the next two years. In turn, state colleges and universities would be authorized to raise tuition by about 10 percent each year for the next two years to offset those cuts. Gregoire's proposal says the funding reductions also would be offset by increases in financial aid, although not all of the state's programs may be maintained.

One of those programs, the State Need Grant, which helps Washington's neediest students pay for college, would receive continued funding of $91.6 million under Gregoire's proposal.

However, the state's work-study program, which funds on-campus student jobs to help needy students cover their education expenses, could be cut by 45 percent, says Rachelle Sharpe, interim director of student financial systems for the state's Higher Education Coordinating Board.

"Reductions in state funding have led to tuition increases, and in terms of financial-aid programs (being cut) right now, all we have to go by is the Governor's proposed budget," she says, adding that the state's biennial budget won't be finalized until sometime this spring.

Other merit-based scholarship programs slated for elimination include the Washington Scholars program, which recognizes top-performing high school students, she says.

Sharpe says the main concern with these proposed cuts to higher-education funding is that undergraduate borrowing has been steadily rising over the last five years as well.

For need-based students who filed what's called a Free Application for Student Aid (FAFSA), borrowing grew over the last five years by 11 percent at public state-funded institutions, 15 percent at private schools, and 37 percent at community and technical colleges, she says.

"If you look back from 2007 to now, there's been an increase of students enrolling, and the proportion of those students who are lower income is greater," she says. "There's also been a 53 percent increase in financial-aid applications that have been submitted."

Those increases are concerning to the Spokane-area's higher education institutions, who say they're fighting to keep costs down to impact their students less.

"We've kept tuition low, but we will have to raise it because of some state support going away," says Janet Gullickson, chief academic services officer for the Community Colleges of Spokane, which operates Spokane Falls Community College, Spokane Community College, and the Institute for Extended Learning. "We'll have to reduce programs, which we don't want to do at all. It's important to understand that when the state is giving less to public colleges, and after the colleges become more and more efficient, there's only one place to shift those costs, and that is to students."

Gonzaga's White says that university has seen moderate increases in tuition over the last two years of 3 percent in the 2009-2010 school year and 4 percent this academic year. That compares with yearly tuition increases during the same period of 7 percent at EWU and 14 percent at Washington State University.

"We've been spending the last two years looking at the ways we do business to identify lower cost ways of doing business," White says. "We've streamlined processes, but haven't eliminated anything."

Now, as the Legislature decides what to cut to address the state's $4.6 billion deficit, state-funded colleges and universities here wait.

"Any of the proposed cuts will pinch us even more," says EWU spokesman Dave Meany. "We're experiencing record enrollment, and the early-application trends for this fall are already looking great again, so what are we going to do? We have to have the faculty and staff to support those students."