Penn State students' default rates for Stafford loans have decreased during the past two years, but the national rate continues to increase, sparking debate among universities, state agencies and national agencies.

The default rate at Penn State is 3.1 percent, down from 4.8 percent in fiscal year 1986, said Robert Evans, University assistant vice president for financial said.

According to an Office of Student Aid statement issued in October, 351 of the more than 11,000 borrowers currently in repayment are not meeting their obligations.

To comply with the U.S. Department of Education's reduction measures, Penn State began a program last semester entailing both entrance and exit loan counseling, Evans said.

Entrance counseling, aimed at first-time freshman borrowers, features a video tape outlining the obligations and responsibilities of getting a loan, Evans said.

Exit counseling begins in March for graduating students and includes a summary of loan obligations, information on deferring payment for continuing education students and advice on consolidating loans for the easiest repayment plan, he said.

Evans said it is too early to determine whether the programs will be successful in lowering the University's default rate -- one of lowest rates in the nation.

Ken McInerney, assistant director of government affairs for the National Association of Financial Aid Administrators, said several explanations exist for the high national-default rate.

"During the course of the Reagan years, there was a drastic shift in loans versus grants," McInerney said.

The current imbalance between loans and grants in favor of loans is forcing more students to borrow regardless of their income, he said.

Congress intended loan programs to provide supplemental funding for middle-income students. Grants are geared toward lower income students, McInerney said.

An increase in the number of trade and technical schools -- called proprietary schools -- also have caused high default rates, McInerney said.

Default rates are highest among borrowers from proprietary schools, raising another debate among members of the higher education community, he added.

"There has been a call from some to separate proprietary schools from the guaranteed loan programs because the perceived rate is so high," McInerney said.

McInerney said U.S. Secretary of Education Lauro Cavazos has he will not agree to closing proprietary schools out of guaranteed loan programs.

The budget proposal for the Department of Education lists several possible Stafford loan program reforms, some aimed at lowering the default rate among proprietary school students, McInerney said.

One such reform would require a 30-day delay in disbursements to freshmen who are first-time borrowers. That is geared toward vocational and trade school students because of the high drop-out rate among those students, he added.