Graduate student borrowers are defaulting on almost US$1 billion in federal loans that were given out to the poor. Universities in the United States such as Yale, Penn State and George Washington are going after them in the courts, suing for non-payment.
All three institutions have pursued lawsuits against students who defaulted on their Perkins loans. The exact number of lawsuits is not known, but last year alone the University of Pennsylvania filed at least a dozen lawsuits over the Federal Perkins Loan, Bloomberg reported.
Perkins loans are given out by institutions to students who demonstrate extreme financial hardship. Universities depend on repayment of money to finance new Perkins loans, and so when graduates fail to pay back the borrowed sum, current students are put at risk of not receiving new loans.
Between June 2010 and 2011 students defaulted on $964 million in Perkins loans, 20% more than five years ago, according to Bloomberg.
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