Too Many Community College Students Blocked From Access To Federal Student Loans, Study Finds
Posted By Eliana Osborn on June 30, 2016 at 1:39 pm
While two dozen states work toward free community college, 9% of community college students can’t take out federal student loans. That’s according to a new report from The Institute for College Access and Success. For the nearly one million students affected, the lowest-priced version of higher education comes with significant barriers.
According to State of Denial, 82% of full-time community college students need aid to pay for their studies. And it isn’t just tuition; transportation, books, lab expenses and more become burdens for low-income students, who disproportionately attend two-year schools. Pell Grants are available, but after paying tuition, there often is little left over for other financial needs.
Most American college students in this situation turn to federal student loans, which have lower interest rates and do not require credit information. These loans come with their share of problems, but they are imminently accessible—as long as a student attends a school participating in the program. Not all do, the institute’s report states: “Nearly one million community college students in 32 states—9.0 percent of community college students nationally—are enrolled in schools that block all of their students’ access to federal student loans.” In eight states, more than 20% can’t get these loans.
Students blocked from the federal student loan program often must turn to private loans. Much has been made recently about problems associated with this kind of borrowing: higher interest rates, cosigner requirements and undue burdens for those most in need. Combined with low community college graduation rates, the additional money required to pay back private loans makes school more expensive for many who won’t increase their earning potential.
Just 18 states have federal student loans available at all of their community colleges. There are racial differences in loan access, as many more non-white students attend schools where they cannot use federal aid dollars. The report says 21% of community college students attend non-urban schools, which are twice as likely to not be part of the federal loan program. Most students simply attend the school nearest to their home or work, regardless of aid policy.
Another problem with private loans has to do with school closures. When a college ceases operations, pathways for redress are available for federal loan holders. Recent changes in the wake of for-profit closings have streamlined this process. But private loans follow policies created by banks or companies, not the Department of Education. This means they likely won’t vacate loan balances.
Many students combine scholarships and grants with federally backed and private student loans to create a clear financial path to their college degree.With a million community college students unable to take advantage of federal programs to protect them in educational borrowing, some of the most vulnerable are most affected. Community colleges opt out of federal loan program participation for a variety of reasons. In the institute’s report, some cited worries about how much students borrow and whether they will repay it. This is a valid concern, as schools are rated and penalized based on repayment rates. But community colleges that opt out of federal student loan programs to protect themselves do so at a high cost to students.