Community college students are defaulting on their student loans at high rates, writes Brittany Hackett, an editor at the National Association of Student Financial Aid Administrators, on Community College Daily. Although community college tuition remains relatively low, students are more likely to borrow and to take out larger loans than in the past. Many are using student loans to pay for living expenses, not for tuition and books, say financial aid counselors.
Community colleges now have the largest two-year cohort default rates (CDR) of any higher education sector, according to the U.S. Department of Education. The two-year community college CDR was 15 percent for the FY 2011 cohort, and the three-year community college CDR was nearly 21 percent for the FY 2010 cohort.
“Swirling” students may transfer to community college with loan debt accumulated elsewhere. Some “are already underwater before they get started,” says Laurie Wolf, executive dean of student services at Des Moines Area Community College. Students borrow to earn certificates in fields such as day care that pay very low wages.
Students pay lower interest rates on student loans than on credit cards, points out Lisa Hopper, director of financial aid at National Park Community College in Hot Springs, Ark.
Students have “found out about loans as an easy source of money, says Pat Hurley, associate dean of student financial aid services at Glendale Community College in California. She worries that students are borrowing almost entirely to pay for living expenses.
Federal law requires that schools award students the full amount for which they are eligible, regardless of whether they need to the money for academic expenses. Many high-risk students borrow, drop out and never earn enough to pay back their loans, which can’t be discharged in bankruptcy.
Financial aid counselors need flexibility to counsel community college students on their borrowing decisions and set loan limits, recommends a National Association of Student Financial Aid Administrators (NASFAA) task force.