Community College Students Denied Federal Loans: Report

More than one million community college students in 31 states are denied access to federal loans, according to a report released by the Project on Student Debt.

The report, titled "Still Denied: How Community Colleges Shortchange Students by Not Offering Federal Loans" (PDF) found that 9.2 percent of community college students go to colleges that do not participate in Federal Loan Programs, such as Stafford loans. The figure is higher for minorities — 18.5 and 16.4 percent of Native American and African American community college students, respectively.

In eight states, including six in the South, more than 20 percent of junior college students were barred from access to federal loans.

Community colleges have been reluctant to participate in federal programs because they fear loss of Pell grants and other government subsidies in the event of student defaults. They also contend that community college tuition is generally low enough to make borrowing unnecessary, and that access to low-risk loans will launch students into debt for no reason.
Report authors, however, say that these concerns are unwarranted, explaining that institutions can offer financial fluency programs to prevent defaults and that high extra-tuition fees make borrowing a necessity for some students.

In a press release, primary author Debbie Cochrane said that federal loans would benefit both students and their schools. "By offering federal student loans and helping students make wise decisions about whether and how much to borrow, community colleges can help their students stay enrolled and graduate while minimizing risks for both students and schools," she said.

The Project on Student Debt looked at data from the U.S. Department of Education that listed community colleges offering students federal loans in the 2010-2011 academic year. Schools that did not give students Stafford loans were counted as not giving federal aid, and non-participation in the program was then confirmed by each institution. Other data was provided by the Integrated Postsecondary Education Data System



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