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Over a three-year period beginning in 2008, the default rate on student loans at some Montana colleges increased sharply, with all but one of the state’s 13 campuses reporting rates of more than 10 percent.

The increase was particularly steep at Montana Tech, while two of the state’s three community colleges reported the highest default rates in the Montana University System.

“This is a serious concern for all of us as board members,” said Major Robinson, a regent from Billings. “The rates continue to rise, and that’s incredibly alarming.”

Montana State University reported the lowest default rate over the three-year span at 5.7 percent, while the University of Montana reported a rate of 10.3 percent.

Flathead Valley Community College had the highest default rate in Montana at 17.4 percent, followed by Dawson Community College at 16.9 percent.

“These numbers are too darned high,” said Paul Tuss, a regent from Havre. “Is there anything we’re not doing that we should be doing to get these rates lower than what they are?”

Ron Muffick, director of student affairs with the Office of the Commissioner of Higher Education, told regents Friday that the state is taking a proactive approach in driving down the rates.

Regents created an affordability task force to study costs, he said, and increases were given to need-based financial aid. Funding also was made to improve the financial literacy of students who borrow money to pay for college.

“We are being proactive about this, and we are making a difference for our students,” Muffick said. “We’re the first state in the country to provide default prevention services to our students.”

Muffick cited a number of contributing factors driving the rates, including an economy that makes it hard for students to land jobs after graduating and repay their loans. He also named college affordability and changes to the way federal loans are managed.

Statewide, he said, the rates increased from 7.1 percent in 2008 to 10.6 percent in 2011. If the rates continue to climb, they could bring consequences to some of the state’s colleges.

“It could impact a campus’ ability to participate in Title IV aid programs,” Muffick said. “If the rate is over 30 percent for over a year, a campus goes on a suspension plan. If it’s over 30 for more than three years, it loses Title IV funding. A lot of community colleges in the country are ceasing direct loan programs to avoid those sanctions.”

Muffick said students often run into trouble when taking out the maximum loan amount offered under various federal programs. The state is working with students to help them understand the meaning of debt, how to borrow smartly and what resources are available.

The state also is tracking students, looking to identify those who could run into problems. Muffick said 167,000 attempts were made in 2013 to contact student borrowers.

“I think these rates will stabilize, personally,” Muffick said. “The rates have come down at a number of these schools based on our efforts. The default rates typically track the economy, and if we weren’t doing this, I think our rates would be worse.”

Regent Jeffrey Krauss of Bozeman said efforts to reduce the size of the military could also change the way many students pay for education. Veterans typically turn to the GI Bill to help pay for college.

Fewer opportunities in the military, he said, could alter the way many students look to pay for their education.

“It could be that method of paying for education may dwindle,” Krauss said. “Loans and grants are going to be a part of an ever-growing piece of how people fund education. It could affect our business model altogether.”

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