Academic Rip-Offs

The Greening of America notwithstanding, Consciousness Three's grip on campus leaves something to be desired. At least that is the feeling of many frustrated bank-loan officers. The default rates among student recipients of federally insured education loans are commonly running at 4% to 6%, van average of less than 1% for ordinary auto, home-improvement and other consumer loans. The student delinquency problem is especially severe in California. The Bank of America reports that some 15% of its federally insured student loans go sour.

The news is a discouraging omen for colleges and the Nixon Administration, which are eager to expand student loans to erase the financial squeeze in higher education. Bankers blame the high default rates on the nature of the loans themselves. To begin with, there is the difficulty of tracking down a borrower after he has graduated and perhaps moved away. Most important, unlike the majority of consumer loans, student loans are not secured by collateral. Asks one frustrated loan administrator in Illinois: "If the kid doesn't pay up, what are we going to do, repossess his diploma?"

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