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N.C. Community Colleges Lobby Against Federal Student Loans

The presidents of 38 North Carolina community colleges have come together to oppose a new state law that requires them to offer federal student loans to their student bodies beginning July 1, 2011.

By: Jeff Mictabor
Category: Education:Financial-Aid
: Finance:Loans
Posted: Mar 09, 2011
Updated: Mar 09, 2011
Views: 297

The presidents of 38 North Carolina community colleges have come together to oppose a new state law that requires them to offer federal student loans to their student bodies beginning July 1, 2011.

As written, the law would make community college participation in the federal student loan program mandatory. The non-participating community colleges say that they are afraid of losing all federal student aid — which includes grants for low-income students — if too many student loans enter default.

Current federal regulations penalize colleges and universities whose default rates on federal education loans exceed 25 percent by making those schools ineligible for federal financial aid funds for students. A school’s default rate is currently measured by looking at how many of its students default on a federal education loan within two years of having entered repayment on that loan.

Under new federal higher education reform rules that will take effect in 2012, the default rate threshold for federal financial aid eligibility will rise to 30 percent but will be measured over three years, rather than two years. Nationally, the federal student loan default rate jumps from 7 percent to nearly 14 percent when measured over three years rather than two.

Currently, North Carolina operates the nation’s third-largest community college system. Community college graduates account for about half of all college degrees earned in North Carolina.

State lawmakers passed the new legislation in 2010 as a response to the persistent economic downturn and a finding that North Carolina is one of just four states where at least 40 percent of community college students don’t have access to federal education loans. Nearly 200,000 North Carolina community college students would become eligible for federal loans under the new bill.

Supporters of the legislation say that students should be given the opportunity to determine for themselves how to pay for their college education, while critics charge that students have access to other college scholarships and grants that diminish or even eliminate the need for school loans.

More than 116,000 students enrolled in a degree program at one of the state’s community college campuses in the 2008–09 school year — about half of all degree students — received financial assistance. At the community colleges that do participate in the federal student loan program, about 25,000 students have taken out federal college loans. These borrowers account for about 10 percent of the state’s student loan recipients.

Community college campus presidents who are opposed to the mandate to offer federal school loans say that their students don’t need additional access to loans and that granting such access could allow students to spend their federal loan dollars on non-essential and non-educational expenses.

Other presidents say that their college campuses have dozens of scholarships and foundation grants that aren’t being awarded because students simply don’t apply for the funds. Still others say that their student bodies are comprised mainly of students who are among the first in their families to attend college and may lack the background or resources to carefully manage academic loans.

The view that community college students don’t need school loans to help pay for their academic expenses is supported by the American Association of Community Colleges, which argues that community college programs are designed specifically to minimize the need for significant financial assistance.

However, while tuition costs at North Carolina’s two-year colleges average only slightly more than $1,800, the annual cost of attendance rises to more than $15,000 when the cost of books, fees, and living expenses is factored in.

Not all campus heads of North Carolina’s community colleges share concerns about their students taking on debt from federal college loans. Some community colleges welcome the legislation, saying that offering federal education loans is a way to ensure that their students can avoid having to choose between staying in the classroom and paying for rent or child care.

Deborah Lamm, the president of Edgecombe Community College, a school in one of the state’s poorest regions, says that students need access to school loans in order to attend college because the need for financial aid is increasing. She cited a nearly 50 percent growth in her school’s enrollment over the past two years and a jump in the number of Edgecombe’s students who took out school loans to 18 percent in 2009 from 8 percent in 2007.

Officials from the U.S. Department of Education say that none of the North Carolina community colleges that participate in the federal student loan program are currently in danger of being sanctioned for high default rates.

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