The D.C. Department of Human Resources has organized an intensive effort to collect $2.5 million in delinquent payments on 2,000 college student loans, acting DHR director Albert P. Russo announced yesterday.
The loans, made to students by local banks with payment guaranteed by the city government, were suspended last fall because of the high rate of defaults. DHR, the administering agency, previously had no mechanism for pursuing late payments, Russo said.
"This program has been mismanaged grossly," Russo said. "Both my predecessor (Joseph R. Yeldell) and I are aware of it and candidly admit it."
Under the crackdown, Russo said, DHR will first demand repayment by delinquent students in a series of monthly letters for 90 days. If that fails, national collection agency will be hired to pursue the funds, he said.
Persistent failure to pay will result in "punitive measures" against borrowers, Russo said, including court action and possibly adverse credit ratings.
About 14,000 students have borrowed $14.2 million under the program since it began here in 1967. The default rate was less than 10 per cent until 1975 when it rose to 30 per cent.
Since the D.C. Bankers Association refused to continue the loans, the U.S. Office of Education has attempted to reinstitute the program with federal guarantees of repayment.
The Office of Education has asked 180 city lending insitutions to participate in the federally backed program, but only three credit unions have agreed, a spokeswoman for Office of Education said yesterday.
Previously, the District was liable for 20 per cent repayment and the federal government for 80 per cent on defaulted loans.
The 2,000 loans totalling $2.5 million in delinquent payments, were made to about 700 persons, Russo said. Students are allowed to borrow up to $1,500 a year for graduate school or $1,000 for undergraduate, but no more than $7,500 in all.
Federal officials are attempting to determine how strenously DHR and the banks sought repayment on the loans in the past.
"What we are doing now should have been done since the program was established," Russo said. He said he has assigned eight workers to begin the concentrated collection effort next week.
Russo said DHR has agreements for help in locating the defaulters from several city agencies including the Department of Finance and Revenue, Motor Vehicles Service Bureau and Personnel Department. Current addresses also will be sought through the D.C. Board of Elections and Ethics, students' former schools and professional groups.
DHR will suspend collection efforts for borrowers who are unemployed, sick, on welfare or have had emergency expenses, according to Russo's plan.