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V GAMEGOCK , Thursday, March 10, 1977 University of South Carolina, Columbia S.C. Vol. LXVIII, No. 36 r W7L W hen is By CYNTHIA CONNOLY Gamecock Staff Writer and MARK J. LUNDGREN News Editor The consequences after a student defaults on a federal student loan program can prevent him from receiving further loans of any type, damage his credit rating nationwide and result in federal prosecution. THIS IS becoming an increasing problem as the two major federal loan programs for students show a <n 1 J ? " iu per cent aeiauu rate nationwide despite stricter legislation, according to the March 7 issue of Newsweek. The major federal loan program is the National Defense Direct Loan (ifSSq ?L r a studen ...When the (NDLS) program. Under this plan, students, whether or not they are state residents, receive funds through the university from the federal government. Last fiscal year, USC distributed about $800,000 in federal funds and about $60,000 in matching funds from USC, Edward Killian III, USC supervisor of student loans and scholarships - accounting, said. ABOUT 5 PER cent of USC graduates owing payment on loans for the fiscal year 1075-76 are delinquent in their payments, and about 70 per cent of that figure have defaulted on their loans, Killian said. A Alumni must begin repayment of their loan one year after graduation and have 10 years to complete t loan no *-, . s student won' repayment. Killian defined delinquent loans as ones (Hi which a 1 1?r~nmmmwmmm*~ > ?t a loan? t pay it back repaying oniy $suu may De sued for See LOANS, page 3 V "er- Ji\\ 4BMET^m payment installment has not been received within 180 days of the due date. A student will not necessarily suffer serious consequences until his loan is considered defaulted. A defaulted loan is one which has been referred to a collection agency, Killian said. An alumni is given ample opportunity to prevent his name from being registered with a collection agency. The alumni is first sent a bill for the amount due and then receives two warnings in the form of past due notices, one after 30 days, the second after 60 days of the date the original bill was sent. >.y k <* -.. ' IF THE payment has not been received within 90 days of the hhStvavn J /jV original Dili, a certified letter is sent to the graduate. This states the amount due, restates that the graduate is delinquent and the consequences if payment is not received. If the student has not responded within 180 days of the original bill, his name then goes to a collection agency. The collection agency, which has the authority to recom mend legal action, tries to make arrangements with the graduate for immediate payment. If this fails the agency may notify the credit bureau of the outstanding debt. This may prevent the student from getting credit for credit cards, automobiles or houses. 1 If the debt remains outstanding, the collection agency may recommend legal action. Since the student is required o commit himself to a payment schedule during his last semester, the student's negligence may be used as a basis for legal action, Killian said. KILLIAN CITED as an example a hypothetical graduate whose total repayment bill is $1,000, but is late in