Graduate student borrowers are defaulting on almost US$1 billion in federal loans that were given out to the poor. US colleges such as Yale, Penn State and George Washington are coming after them in the courts, suing for nonpayment.

Image: http://www.cpec.ca.gov

All three colleges have pursued lawsuits against students who defaulted on their Perkins loans. The exact number of lawsuits is not known, but just last year alone the University of Pennsylvania filed at least a dozen lawsuits over the Federal Perkins Loan, Bloomberg reported.

Colleges are suing to collect unpaid Perkins Loans, given out by individual colleges to students who demonstrate extreme financial hardship.

Colleges depend on repayment of money to finance the new Perkins loans and so when graduates fail to pay back the borrowed sum, the current students are put at risk of not receiving new loans.

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Posted by The NON-Conformist