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By Paul Bradley  /  
2011 May 16 - 12:00 am

TRACKING TRENDS : Report Finds More than 1M Students Denied Access To Federal Student Loans

More than a million community college students in 31 states — about 9 percent of total enrollment — are being denied the most affordable way to borrow for college because their schools have opted out of the federal student loan program.

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That is the principle conclusion of a new report by the Project on Student Debt, which warns in “Still Denied: How Community Colleges Shortchange Students by Not Offering Federal Loans” that many students who need to borrow may turn to credit cards or private loans — or worse, drop out, work excessive hours, or take fewer classes, all choices that reduce their odds of earning a degree or certificate.

“Federal student loans are the best option for students who need to borrow to get to and through college,” said Lauren Asher, president of the Institute for College Access & Success (TICAS), home of the Project on Student Debt. “Opting out of the federal loan program doesn’t keep students from borrowing — it just keeps them from using the safest type of loans.”

The report found that African-American and Native-American students are least likely to have access to federal loans.Nationwide, nearly one in five Native-American community college students (18.5 percent) and one in six African-American students (16.4 percent) attend schools that do not participate in the federal loan program, the paper said.

While community colleges commonly cite fears of high default rates and excessive student borrowing as reasons for not offering federal loans, the project’s analysis indicates that those fears are unwarranted.

Sanctions for high default rates – which can prevent colleges from offering students federal grants — are rare and avoidable, the report said. No community college is being sanctioned based on its most recent default rate, and there are exemptions for colleges where a relatively small share of students borrows.

The report suggests that colleges can also use loan counseling and preventive strategies to help limit student defaults. And while community colleges may worry about students borrowing more than they need, national data indicate that less than 3 percent of all community college students borrow the maximum available in federal loans, the report said.

“Especially in these tough times, all community college students should have access to federal loans if they need to borrow. But right now that’s not true in 31 states,” said Debbie Cochrane, TICAS program director and the report’s primary author. “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.”

The report highlights three notable changes in program participation at the state or local level:

In Chicago, all seven of the City Colleges now participate in the loan program.In 2007-08, three of the colleges did not offer loans.

In North Carolina, recent state legislation requires all of the state’s 58 community colleges to offer federal loans by 2011-12. North Carolina currently has the largest share (57 percent) of community college students without access to loans in the nation.

California now has the largest number of community college students – about 214,000 – without access to federal loans. Since 2007-08, six of the state’s colleges have withdrawn from the federal student loan program, and two have entered it.

The report includes several specific recommendations for both colleges and the U.S. Department of Education. It’s available at www.projectonstudentdebt.org.

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