Participating in Student Loan Program Can Cost Community Colleges Pell Grants

August 7, 2014

North Carolina's community colleges are being criticized for their refusal to participate in the federal student loan program. But these schools have good reason not to join the program, explains Harry Painter of the Pope Center for Higher Education Policy.

North Carolina has 58 community colleges. Only 18 of them have elected to participate in the federal loan program for the 2014-2015 school year. Why? Colleges are punished by the federal government when students default on their federal loans. Schools whose students default at a rate of 30 percent or above for three years in a row, explains Painter, lose access to Pell grants.

The loss of Pell grants would be a significant blow to the students who attend these colleges. Painter identifies two North Carolina community colleges that recently dropped out of the federal loan program due to the policy:

  • At Central Piedmont Community College in Charlotte, North Carolina, 60 percent of students receive Pell grants, while just 11 percent take out federal loans.
  • At Johnston Community College in Smithfield, North Carolina, 60 percent of students receive Pell grants, and just 22 percent take out federal loans.

If these schools were to join the federal loan program and see high default rates, the rest of their students -- the majority who are receiving Pell grants -- would lose access to those funds.

Many who oppose the student loan position of these community colleges fail to recognize, writes Painter, that participation in the loan program threatens to hurt many more students than it would purportedly help.

Source: Harry Painter, "Should colleges keep students from taking federal loans?" Pope Center for Higher Education Policy, August 4, 2014.

 

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