‘Alarming’ Number of Community Colleges Blocking Access to Federal Loans, Report Finds

Though the majority of four-year colleges in the United States participate in federal student loan programs, a new report finds that an “alarming” number of community colleges don’t participate, prompting low-income students to resort to credit cards and other high-interest loans to pay for basic college expenses.

Furthermore, the report, released today by Project on Student Debt, finds that Black and American Indian students are worst impacted by this high-risk debt trend.

“African-American students are disproportionally affected by the community colleges that don’t participate in the loan programs, and given the financial needs of African-American students, it makes little sense at all to deny them access to the better loans that are available, yet that’s what appears to be happening,” says Robert Shireman, executive director of The Project on Student Debt.

According to the report, 20 percent of African-American community college students and 19 percent of American Indian students in the United States don’t have access to federal student loans, compared with nine percent of White students. The report also finds that 11 percent of Hispanic students at community colleges and five percent of Asian American community college students don’t have access to federal student loans.

The report, titled “Denied: Community College Students Lack Access to Affordable Loans,” finds that in 13 states, more than 10 percent of community college students do not have access to federal loans and more than 20 percent of students in Alabama, Georgia, Louisiana, North Carolina, Tennessee and Utah cannot get a federal loan.

When queried by Project on Student Debt researchers as to why their institutions do not participate in federal students loan programs, many financial aid administrators say they fear high default rates could threaten their school’s ability to distribute any federal aid. Nevertheless, the report finds that this fear is unwarranted, as sanctions for high default rates are rare and can be prevented by financial counseling and other resources like deferrals and affordable repayment options.

According to Shireman, many community college officials also believe students at their schools have less of a need to borrow than students at four-year colleges, due to lower tuition and fees at two-year schools. Though Shireman concedes that this is “probably true on average,” there “are plenty of students who do need help and need to take out loans.

“In the current credit climate, access to federal student loans is more important than ever. It makes no sense for a community college to force low-income students to choose between taking out an expensive private loan or dropping out of school,” Shireman says. He adds that local communities “should demand that their students have access to the same safe and affordable borrowing options as students at other colleges.”

The Project on Student Debt is managed by the Institute for College Access & Success, a nonprofit, nonpartisan organization that advocates for making higher education more available and affordable for people of all backgrounds. For more information, visit www.projectonstudentdebt.org and www.ticas.org.

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