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Originally published: 2013-04-20 19:47:04
Last modified: 2013-04-20 19:47:03

CCC&TI will no longer accept fed loans

Caldwell Community College and Technical Institute will join a number of North Carolina colleges in no longer accepting federal student loans starting this fall, the school's board of trustees decided this week.

The board members voted unanimously Wednesday to stop processing the loans because high loan default levels have threatened the college's ability to offer federal aid, said public information officer Edward Terry.

That aid could include Pell grants, which are used by more Caldwell students than loans and do not have to be repaid.

"The question is, what is most difficult for the college?" Trustee Ron Beane said in Wednesday's meeting. "Both would be disastrous, but the worst thing would be to lose Pell."

Students still may seek private loans, which are generally less flexible and with higher interest rates.

According to federal guidelines, schools can face sanctions when their cohort default rates exceed 25 percent for the two-year calculation, or 30 percent for the three-year calculation. The sanctions prevent the college from accepting federal loans or Pell grants for the remainder of the fiscal year and the following two fiscal years, according to the U.S. Department of Education.

Terry did not confirm Caldwell Community College's most recent default rate by presstime Saturday, but the Lenoir News-Topic reported that the two-year default rate was 20.3 percent in 2011.

U.S. Department of Education records show that Caldwell's default rates for previous years were far from the levels that lead to sanctions.

According to the department's data released in fall 2012, CCC&Tl's official three-year default rate was 11.7 percent for fiscal year 2009. According to those figures, 30 students were in default on their loans, while 256 were actively repaying their debts.

CCC&TI's calculation fell below the national average of 13.4 percent.

Its two-year default rates were 10.6 percent for fiscal year 2010, 10.1 percent for fiscal year 2009 and 6.7 percent for fiscal year 2008, according to departmental figures.

Debbie Cochrane, research director for The Institute for College Access and Success, said the default rate is the most common reason colleges cite for opting out of the federal loan program. The institute is a national research and policy organization that works to identify ways to make college more affordable and accessible for all.

She said the alternatives to federal student loans aren't as favorable. Federal student loans typically offer fixed interest rates, more affordable payment plans, options for deferment or even discharge in some cases.

Alternatives such as private loans or credit card debt lack those consumer protections, she said. A student without access to federal loans also may choose to attend part time instead of full time, reducing the likelihood of completing his or her studies, she said.

"Most students at community colleges don't need to borrow, so a lot of students won't notice the difference," Cochrane said. "The issue is for the students that can't afford to pay for their whole college out of pocket. ... The choices for those students are about to get a lot worse."

The decision by CCC&TI mirrors what has occurred statewide.

The Institute for College Access and Success determined in 2010-11 that North Carolina led the nation in percentage of community college students without access to federal student loans. It found that only 20 of the state's 58 community colleges participated in the federal loan program.

North Carolina also is unique because of the legislative battle that has occurred around the topic in recent years, Cochrane said.

"We haven't seen anything like that at all in any other states," Cochrane said.

In 2010, Democrats in the N.C. General Assembly passed a law requiring community colleges to participate in the federal student loan program. The following year, legislators reversed, passing a law that allowed colleges to opt out of the program.

Former Gov. Beverly Perdue vetoed that bill in 2011, but legislators passed a number of local bills giving dozens of individual colleges the ability to decline the federal student loans.

In June 2012, both houses overrode Perdue's veto, again allowing all North Carolina colleges to decide whether to accept federal loans.

Perdue then accused the General Assembly of being "the most anti-public education legislature in North Carolina history," while House Speaker Thom Tillis called it a "good day for community colleges."