Elite universities promise a world-class education and imply access to movers and shakers and lucrative career opportunities. Bloomberg reports, however, that Ivy League colleges Yale and Penn are suing graduates for defaulted federal Perkins loans. Perkins loans are offered to students with significant financial need and are administered by the universities. Bloomberg notes that Yale, which has an endowment of $19.3 billion – second only to Harvard – stopped offering Perkins loans a few years back. Nevertheless, when top-tier universities sue graduates in court, they tack on considerable collection fees. The articles states, “On the first attempt, schools can charge 30 percent of loan principal, along with interest and late fees. They can charge 40 percent for the second effort and an additional 40 percent on litigation.”
Unlike federal Stafford loans, Perkins loans recipients aren’t eligible for newer income-based repayment plans. However, President Obama is advocating an increase in the money available for Perkins loans, and is proposing that the Department of Education service the loans. Conceivably, future Perkins borrowers would be eligible for modified repayment programs and would be charged less for collection fees.