Colleges fear loan defaults, sanctions

“A small but growing number of California community colleges have stopped participating in the federal loan program … out of fear that rising student loan default rates could lead to sanctions,” reports California Watch.

Some 16 colleges have stopped disbursing the loans, and at least one more school – Bakersfield College – is considering ending its participation in the program.

. . . College officials say they stopped participating in federal loans because they were worried that an increase in student loan defaults would jeopardize their ability to offer federal grants. Colleges where students default on federal loans at high rates for several years in a row stand to lose eligibility for federal grants under sanctions issued by the U.S. Department of Education.

Community colleges are unlikely to face sanctions, argues The Institute for College Access and Success. Without access to federal loans, students may take out high-priced private loans with less flexible repayment terms.

POSTED BY Joanne Jacobs ON September 4, 2012

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