The U.S. universities such as Yale, Penn and George Washington, are suing students over failure to repay Federal Perkins Loan.
The University of Pennsylvania filed at least a dozen Perkins lawsuits last year as it had sanctioned $8 million in Perkins loans by the end of June.
The universities, who are part of Federal Perkins Loan program, administer and offer loans to students with exceptional financial needs.
The interest rate is just 5 percent and the students get a nine-month grace period after graduation.
When students fail to repay them, the institutions, initially, hold repayment talks with the students, issue warnings and later approach debt collectors and the courts to recover the borrowed money.
"If you borrow to go to school, it may not be just the government that ends up coming after you if you can't pay," Deanne Loonin, an attorney with the National Consumer Law Center, told Bloomberg. "We offer credit very easily." If the student doesn't benefit financially from the education, the government or the school comes after them very aggressively.
It is necessary for the universities to adopt strict measures as it needs to replenish the funds and make it available to the next needy student.
In 2010-11, student defaults accounted for $964 million in Perkins loans. This figure represents a 20 percent increase when compared to the data five years earlier.
"I live on the bare minimum. It's not like I'm defaulting on my student loans to live the lavish life. I'm defaulting on my loans because I really don't have it," said Aaron Graff, a 2010 graduate from George Washington to the newspaper.
He owes $4,000 to the university.
Graff , 30, hasn't been able to find a full-time job since then. Currently, he teaches high-school equivalency courses and restores basements for extra money.
Nancy Coolidge, associate director of student financial support for the University of California system said that students prefer repaying private student loans first as they carry much higher interest rates. As a result, they postpone Perkins loans.
