Student Access Loan is Georgia’s student loan program of last resort, a low-interest loan that allows students who may not meet the merit-grant or other economic requirements of loans to get paid to pursue a degree at a technical college or four-year college. But within three years, 31% of SAL loan recipients defaulted, according to a report last month from the Georgia Department of Audit and Accounts.
“The SAL program is a loan of last resort, and in order to get the loan, a student must have a specific need, but they don’t have to go through a credit check or have a co-signature to qualify for a loan,” said Lisa Keefer, deputy director in the performance audit division who worked on the report. “So just by the nature of the loan program itself, it’s likely that it’s loans to the people most likely to default in the first place.”
The loan is administered by the Student Finance Authority of Georgia. The loans can provide up to $36,000 to students, depending on the program, at 1% interest with a 15-year repayment. Unlike most other loan programs, the state legislature authorized funding for the program but did not codify the program into law, leaving the details of its management to the GSFA.
“I think part of the problem is that the agency is sort of working on the payments between loans for people who are more likely to default but also need, and at the same time run a need-based loan program,” Kiefer said. “This kind of push and pull for this program was a place where we thought additional guidance from the General Assembly might be helpful to see what area of focus is most important.”
Some SAL loans can be forgiven, but according to the report they are rare and only apply to a few lenders. Students who attended technical colleges, were eligible for need-based federal PELL grants, or who did not graduate were more likely to default.
“It would be interesting to see more studies that say, among the students who took out a SAL loan and faltered, are those students who graduated from their programs, their special programs and their careers, or those students who unfortunately could not finish college?” said Charbel Aoun. , president of Georgia FirstGen, an organization focused on supporting the first generation of students to succeed in college.
Aoun is a first-generation student in his first year of pharmacy school. He said he believed that having something like a SAL program could benefit students, but that it could pose challenges for first-generation students.
“What makes it difficult for some of these first-generation students is that sometimes they don’t realize that there is funding like SAL,” he said. “And the understanding that this is a loan sometimes prevents people from applying for it.”
Aoun believes that moving away from loans could make the program more beneficial for students.
“If the program is going to focus on an opportunity for need-based grants or some kind of micro-grants and sort of push funding towards a grant-based program rather than a loan-based program, that would be very interesting,” he said.
Those who default on loans damage their credit history, and the interest rate rises to 5%, which increases the overall debt obligation, according to Keefer.
The auditor’s report includes some suggestions for improving the software. There is a minimum repayment of $50 per month, but many loans can be paid off within 15 years with much smaller monthly payments.
“Reducing the minimum monthly payment from $50 was one of the things that we thought would be most impactful in helping reduce the default rate on the things that the agency can take action on at the moment,” Kiefer said.
The report also suggests that creating automated payment systems and sharing more information with students who borrow would help reduce default rates. GSFA’s responses to the findings were included in the audit report, and the organization largely agreed with the findings and said it would be happy to provide any information lawmakers need. A GSFA spokesman declined to comment further.
The Chronicle contacted the House and Senate leadership to see if any lawmakers were considering making changes to the program.
“I have not yet heard of any legislative proposals regarding the Student Access Loan Program,” Caleb McMishne, director of communications for House Speaker David Ralston, wrote. “Given the performance report released by the Audit and Accounts Department just two weeks ago, this is not unusual and you may see proposed legislation after it is reviewed by members and employees.”