Nearly 1 million lack access to federal loans

Nearly one million community college students nationwide — about 8.5 percent of the total — can’t take out federal student loans because their college doesn’t participate in the program, according to a report by The Institute For College Access and Success (TICAS).

Denied access to “the safest and most affordable way to borrow for college,” some students turn to “more costly and risky forms of borrowing such as credit cards or private loans,” reports At What Cost?  Others reduce their “chances of graduating by working longer hours or cutting back on classes.”

“Most community college students still don’t use loans to pay for their education, but for those who need to borrow, federal student loans can make the difference between graduating and having to drop out,” said Debbie Cochrane, TICAS’s research director and the report’s lead author. “Only 17% of community college students take out loans, but 37% of community college associate’s degree graduates have federal loans.”

Native-American, African-American, and Latino community college students were the most likely to lack access, reports TICAS.

The report takes a closer look at California, Georgia, and North Carolina.

Community colleges can avoid defaults by helping students borrow wisely, argues TICAS, citing Albany Technical College in Georgia.

“Barring access to federal student loans doesn’t keep students from borrowing—it just keeps them from borrowing federal loans, which are the safest option,” said Cochrane.

Community college students could lose access to Pell Grants if their college has a high default rate, said the American Association of Community Colleges in astatement. “Some community colleges are faced with a loss of eligibility later this year.”

If a college participates in the federal loan program, financial aid officers can’t limit loans to students who are unlikely to be able to make loan payments.

If colleges could control overborrowing and not risk Pell eligibility, they’d be more willing to offer federal loans, AACC’s David Baime told Inside Higher Ed.  “We strongly believe that the penalty of losing the Pell eligibility for nonpayment of loans doesn’t make much sense and we wish that policy would be changed,” he said. “The threat of that loss is tremendous, and it’s a very serious concern for colleges.”

Community colleges, along with other types of institutions of higher education, have been pressing Congress to give them the power to limit the amount their students can borrow in federal loans, as a tool to safeguard against overborrowing.

This year, colleges and universities face sanctions for high default rates. A community college in rural Texas could lose eligibility for federal student aid.

Aid leader: Link ratings to ‘social responsibility’

Rate colleges on “social responsibility,” said the departing chair of the National Association of Student Financial Aid Administrators at the group’s annual conference. Instead of President Obama’s proposed ratings system, colleges should be recognized for educating low-income students, said Craig Munier, who directs financial aid at the University of Nebraska at Lincoln.

The plan, which is modeled on the LEED ratings of green buildings, would assign institutions ratings of silver, gold, or platinum based on a calculation that would take the percentage of a college’s undergraduate students who are eligible for Pell Grants, multiply the number by a ratio of credit hours earned to credit hours attempted, and divide it by the institution’s cohort-default rate.

Part of the goal, Mr. Munier said, “is to create a little public embarrassment” for institutions that are not fulfilling their duty to educate needy students. He jokingly called the plan “Craig’s LEED certification on social responsibility.”

Panelist Marcus D. Szymanoski, manager of regulatory affairs at DeVry University, argued for multiple metrics that would recognize that different students have different priorities.

CC defaults soar, despite low debt

Community colleges are struggling to pay back their student loans, writes Andrew Kelly in Forbes.  While two-year public colleges charge low tuition, the default rate is high.

Only about 20 percent of community college students borrow, and 70 percent borrow less than $6,000. But low graduation rates put even small borrowers at risk of owing more than they can repay.

“Unfortunately, less debt does not equal fewer defaults,” writes Kelly. “And default’s consequences, like wage garnishment and severe credit damage, can hurt borrowers even more than a bloated loan balance.”

Policymakers should turn their attention from total debt to students’ ability to repay, Kelly argues. Income-based repayment plans “try to do exactly this, but they are far too generous to graduate students,” who often have high debts and high incomes.

The “front-end problem” is that “student loan programs encourage attendance at any program, at any college, and at any price.”

That means we subsidize a lot of failure. According to my analysis of the most recent federal data, about 37 percent of loan disbursements in the Stafford and Parent PLUS programs (loans for undergraduates) in 2012-2013 went to colleges with six-year graduation rates that were 40 percent or lower. That’s a lot of loans to people whose chances of finishing a degree are worse than flipping a coin.

What we need are policies that push students toward more effective and affordable options on the front end: better consumer information, income-share agreements, and risk-sharing that gives colleges skin in the game.

 The Student Loan Ranger has advice for community college students on how to avoid the debt trap. 

Ed Trust: Cut off aid to low-quality colleges

Every year, $15 billion goes to “college dropout factories” and “diploma mills,” according to Tough Love, a new Education Trust report. These are four-year colleges and universities in the bottom 5 percent nationally in graduation rates and student loan repayment rates. In addition, some institutions — including some state universities — admit few low- and moderate-income students eligible for Pell Grants. Tough Love proposes linking federal aid, tax benefits and charitable deductions to minimum standards for access and success:

Pell, full-time freshman enrollment: 17 percent

Six-year, full-time freshman graduation rate: 15 percent

Student loan repayment rate (three-year cohort default rate: 28 percent)

Colleges would have three to four years to meet the standards, the report proposes.

“The federal government writes a $180 billion check annually to thousands of colleges and universities using taxpayer dollars to fund schools from the highest performing to the lowest, with virtually no consideration of institutional performance on access, success, or student loan repayment measures,” said Michael Dannenberg, director of higher education and education finance policy and a co-author of the report. “Schools falling beneath the bottom fifth percentile on these measures represent the ‘worst of the worst,’” said Mary Nguyen Barry, higher education policy analyst and co-author. “Establishing goals without consequences . . . won’t protect students from a lifetime of mounds of debt, a meaningless degree, or no degree at all.”

Many for-profit colleges enroll a high percentage of low-income, non-white and adult students. They tend to have low graduation rates and high default rates. However, also in the bottom 5 percent are a number of historically black colleges as well as “minority-serving” institutions with heavy Latino and Native American enrollments. Linking aid to student success would be politically difficult.

Elite universities and private colleges that can’t afford much financial aid tend to admit few Pell-eligible students. These “engines of inequality” have a lot of political clout too.

Gainful employment regs for everyone?

The Gainful Employment Rule Is Coming For Everyone, warns Edububble. For now, the for-profit colleges are being forced to “generate a real return for their students,” but it won’t stop there, he writes.

Once the world starts getting the bill for Income-Based Repayment, this will be the only choice for the Republic. Come after the source of the pain and that means all of those twits studying cross-disciplinary BioTheater and other overpriced courses like English or even Bio.

. . . There are too many defaults and the government is just going to have to shut down the free money fountain.

The gainful-employment rule applies to career programs at public and private nonprofit colleges, as well as to for-profits. If too many students in a career program default on loans or run up a high level of debt relative to their earnings, that program’s students would lose access to federal student aid. Community colleges, which have a rising number of borrowers and high default rates, are plenty worried about it already.

The U.S. Education Department’s revised proposal is “flawed, arbitrary, and biased,” and will shut millions of students out of college, contends the Association of Private Sector Colleges and Universities, which represents the for-profit sector, reports the Chronicle of Higher Education.

A 100-age report by economists at Charles River Associates, funded by the for-profit trade group, attacked the regulations for using the level of students’ earnings rather than their earnings gains to measure a program’s effectiveness.

While the Education Department estimates 31 percent of students would be affected, potentially losing access to student aid, the report predicts as many as 44 percent would be enrolled in programs that fail the federal test.

Coupled with income-based repayment, the proposed rules would protect programs whose graduates have very low earnings, writes Ben Miller on EdCentral. “Allowing programs to pass solely based on the annual debt-to-earnings measure makes it possible for a program with sub-poverty wages to still avoid failing the metrics.”

CC must cut defaults or lose federal aid

Lane Community College students will lose access to federal loans and grants unless the Oregon college can cut the default rate, reports the Register-Guard.

More than 30 percent of LCC borrowers who began repayment in 2010 were in default within three years, according to the U.S. Department of Education. 

More than two-thirds of LCC students take out student loans — an unusually high percentage for a community college. The average borrower owes $11,789, which suggests they’re borrowing to cover living expenses, not just tuition and books.

Most borrowers leave Lane without a certificate or degree, making it difficult to earn enough to pay back loans.

“If it’s more than 30 percent for three years in a row or 40 percent in a single year, the school will lose eligibility for federal student aid,” stressed Mark Kantrowitz, a national expert on student aid and publisher of Edvisors. “That could be a death sentence for the school.

Lane is one of 18 community colleges on a “red flag” list created by Andrew Gillen, senior researcher for education at the American Institutes for Research.

“A typical student who enrolls and then borrows to attend Lane Community College has a higher chance of defaulting than they do of graduating,” Gillen said. “What I would say to the student who was considering enrolling at Lane is, ‘Make sure you think long and hard about what you’re borrowing and what your chance of success are.’ ”

In a report to the government, LCC officials wrote that Lane students are disproportionately low income and the first in their families to attend college. “They have sometimes not had the opportunity to develop the reading comprehension, math skills and critical thinking skills to help them make well-considered borrowing choices,” the report said.

College administrators are trying to lower the default rate by “tightening up loan procedures, ensuring that students review their levels of borrowing and bringing in a third-party vendor” to help students and former students work out a repayment plan, reports the Register-Guard.

Till this year, all students were offered “unsubsidized loans — loans beyond the federal calculation of what students need — as part of their annual financial aid package.” Many borrowed the maximum, assuming that all loan options would be affordable, the LCC report said. 

Now, students have to request the unsubsidized loan. “The application requires students to look up their current debt, acknowledge the monthly payment it will require and figure out the total the student is likely to borrow before completing their education,” reports the Register-Guard.  The number of students taking out unsubsidized loans has been cut in half.

AACC’s wish list for higher ed act

Community college leaders must speak out on revisions to the Higher Education Act before it’s too late, said Belle S. Wheelan at the annual convention of the American Association of Community Colleges in Washington, D.C.

Wheelan, president of the Southern Association of Colleges and Schools Commission on Colleges, said a reauthorized HEA could hurt open-access colleges, reports Community College Week.

It could include provisions tying the receipt of federal money to minimum completion rates. It might create new penalties for colleges with high student loan default rates. And it’s up to community college leaders to tell Congress how unpalatable measures like that are, before they become law, Wheelan said.

“If you look at the policies coming out of Washington, they are still focused on that 18-21 year old cohort, which is only 13 percent of out students,” she said. “We are trying to get the folks in Washington to understand that. Help us help the powers that be understand that.”

The AACC and the the Association of Community College Trustees have a wish list for the reauthorized Higher Education Act reports Community College Week.

Protecting Pell Grant funding, reinstating the year-round grant and increasing Pell flexibility top the list. Community colleges attract many Pell-eligible students from low- and moderate-income families.

Measuring student success accurately also is a priority. 

Current metrics used by the federal government exclude significant numbers of community college completers, causing distortions in public perceptions of institutional outcomes.

. . . The federal government must ensure that students are tracked throughout their course in postsecondary education. There are different routes to achieving this end, but the lack of national framework for monitoring student progress, such as a federal unit record database, must be addressed.

Community college leaders also want to see a redesigned index to track student loan defaults, simplification of student aid and income-based repayment schemes and the authority to discourage “overborrowing” by part-time students.

Duncan uses bogus stat to hit for-profit colleges

“Of the for-profit gainful employment programs that our department could analyze, and which could be affected by our actions today, the majority — the significant majority, 72 percent — produce graduates who on average earned less than high school dropouts.” So said Education Secretary Arne Duncan at a White House news conference on March 14. That earned two “Pinocchios” for lying from the Washington Post’s fact-checker.

Embedded image permalinkEssentially, Duncan compares apples to oranges — with a few lemons thrown in — to make for-profit colleges look bad.

The Education Department estimates that high school dropouts average $24,492 year. The Labor Department puts the median annual wage at $18,580 to $22,860. A Census estimate is $20,241.

Then, Duncan compares employed dropouts’ earnings to all recent for-profit graduates. Comparing all dropouts to all for-profit graduates — or employed dropouts to employed graduates — would show a very different picture.

Comparing dropouts of all ages, including many with job experience, to less-experienced for-profit graduates also skews the results.

Duncan’s number looks at the number of programs that produce low-earning graduates, not at the number of graduates. “The Education Department does not have individual student data, so it could well be that most graduates do fine, especially from the larger programs,” reports the Post.
Six-year outcomes by starting institution type (Source: National Student Clearinghouse)A third of community college programs’ graduates earn less than high school dropouts, by the Department’s measure, observes the Post.  “Graduates of 57 percent of private institutions — a list that includes Harvard’s Dental School but also child-care training programs — earn less than high school dropouts.”

For-profit colleges enroll many low-income, minority and adult students, who are the least likely to succeed in college. Tuition is higher, since the for-profits aren’t subsidized by taxpayers. Students depend heavily on federal loans and default rates are high.

Community college students averaged $2,300 in tuition in 2009-10 compared to $15,000 for students at for-profit two-year colleges, according to one study. However, 62.4 percent of students at for-profit two-year colleges complete a credential in six years, compared to 39.9 percent of community college students, according to the National Student Clearinghouse.

‘Gainful employment’ rules are ‘awful’

The new “gainful employment” rules are “awful,” “unfair and discriminatory,” writes Richard Vedder on Minding the Campus. An Ohio University economist, Vedder directs the Center for College Affordability and Productivity.

The gainful employment rules apply to vocational programs at career colleges (primarily for-profit) and community colleges. If the goal is to stop wasting government money,”why not scrutinize students majoring in, for example, sociology, from Wayne State University?” asks Vedder. “Only 10 percent of students graduate in four years at Wayne State, and over twice as many default on loans as graduate in that time span.”

Moreover, while dropouts and loan defaults are high at many for-profits, when one corrects for the socioeconomic and academic characteristics of the students, the findings are decidedly more mixed. For example, the for-profits have roughly double the proportion of African-American students as do other institutions, and black students disproportionately come from low-income homes with high incidence of college attrition.

. . . I happen to disagree fundamentally with the “college for all” approach of the Obama Administration, but if you are going to pursue it, why attack the very providers who most aggressively are trying to help meet your goals? The for-profits disproportionately enroll poor first-generation students, and who are members of minorities. Moreover, accounted for properly (including state subsidies for public schools, taxes paid by for-profits, etc.), the for-profits use fewer of society’s resources per student.

The six-year completion rate for students at two-year for-profit colleges is 62.4 percent, the National Student Clearinghouse reports. At community colleges, which also enroll many disadvantaged students, the completion rate is 39.9 percent.

Finally, the “gainful employment” regulations say a borrower shouldn’t have to spend more than 12 percent of total income (20 to 30 percent of so-called discretionary income) to repay student loans. A person earning $35,000 a year with $4,800 annual loan repayments would not be considered gainfully employed. “If the individual in question went from a $20,000 job before going to school to a $35,000 job with a $4,800 loan commitment, that person has advanced considerably,” Vedder argues.

Repeal the Higher Education Act and “radically rethink federal provision of aid to students,” he concludes.

Students at a community college in rural Texas may lose all access to federal aid, including Pell Grants, because of a new regulation on defaults, reports Inside Higher Ed.

CC students borrow — and default — more

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.