Central Piedmont Community College students will no longer have access to direct federal loans next school year. CPCC’s board made the decision because of worries high default rates could force the federal government to pull grants. Many community colleges have made the same decision.
Tuition and materials for classes can come to a few thousand dollars a year at CPCC. Most students get federal Pell grants to help defer the cost. But that often doesn’t cover the full expense. So many students also take out loans with low interest rates from the federal government.
But there’s a risk. If more than 30 percent of students fail to repay these loans within three years, the federal government could kick the school out of the Pell grant program.
CPCC spokesman Jeff Lowrance says the college is in a tough bind.
“We felt like we really need to protect our ability to offer Pell grants and also protect our ability to get other types of federal funding such as Department of Labor grants to provide specific type of job training programs,” says Lowrance.
Community college students tend to have a higher default rate since they’re often on a tight income and are more likely to cycle in and out of school. CPCC doesn’t yet know what the default rate is for its students.
The college only started offering the loans after the General Assembly required community colleges to do so in 2011. But that mandate was lifted shortly afterward. According to CPCC, only 24 of 58 community colleges in North Carolina now offer the loans.
That fear of losing Pell grants has prompted many community colleges across the country to withdraw from the direct loan program. It’s a troubling trend and unnecessary says Debbie Cochrane with the Institute for College Access and Success.
“Many schools have very low borrowing rates, which means they wouldn’t be sanctioned based on their default rate because federal law takes low borrowing rates into account,” says Cochrane.
CPCC has other reasons to end the loan program. It costs the college $300,000 each year to administer and the college can’t screen applicants. Last year, CPCC had to repay about $250,000 to the federal government for loans taken out by students who then dropped out of school.
