College Students Still Denied Federal Funding: Report

Published May 05, 2011

| Reuters

As more American students turn to community colleges in order to avoid steep tuition costs, students are still facing a lack of funding through the federal loans program.

Still denied: How community colleges shortchange students by not offering federal loans, a study released last week by the Institute for College Access & Success, finds that more than one million students across 31 states do not have access to student loans from the federal government, a low-interest lender.

“Federal student loans should always be considered before relying on credit cards to get by or taking out a private student loan or resorting to payday lenders,” said Debbie Cochrane, program director at the Institute for College Access & Success, which is an independent, nonprofit group. Cochrane is primary author of the report.

The Institute found that about 9% of students enrolled in community colleges don’t have access to federal student loans, and in some states, the majority of students enrolled in community college do not have access.

“Federal financial aid programs, both grants and loans, are there to make sure that students from all backgrounds can afford to cover college costs,” she continued. “When colleges opt out of the loan program and don’t make that option available to students, it undermines the goal of the program: making college affordable.”

As of July 2010, all federal student loans must be administered through the Federal Direct Loan Program. Although only 13% of community college students borrowed money under the federal student loans program through their college in 2007-08, the national default rate over three years is 25% or higher — making some schools a little apprehensive to offer federal aid.

“25% is a very high default rate but because many of the community colleges serve low-income students, they are much more likely to have students who default on loans if they borrow,” said Mark Kantrowitz, financial expert and publisher of FinAid and Fastweb student scholarship sites. Kantrowitz suggests saving for college instead, “given that the community colleges are among the lowest-cost institutions.”

Attending community college for two or three years to finish required courses before applying to a four-year degree granting institution is also ill-advised.

In the 2008 study, Do community colleges provide a viable pathway to a baccalaureate degree?, authors Bridget Long and Michal Kurlaender found that students are 14.5% less likely to complete a bachelor’s degree within nine years if they begin their studies at a community college.
“The average debt at graduation for someone who starts out at a two-year school and gets their degree is about $6,500 less than if you start at a four-year institution,” Kantrowitz notes. “However, you’re much less likely to obtain your degree.”

Other highlights from the Institute for College Access & Success report include the following:

- At 57%, North Carolina currently has the largest share of community college students without access to federal student loans.

- Although 9.2% of students lack federal student loans nationally, African-American and Native-American students lack 16.4 and 18.5% respectively.

- The national default rate has been at least 25% in three consecutive years. It is expected to reach at least 30% by 2014.

URL

http://www.foxbusiness.com/personal-finance/2011/05/04/college-students-denied-federal-funding-report/