Neil Hanshaw for EdSource
Students study at De Anza College.

California’s community college system is taking positive steps to maintain student access to federal loans even though some campuses previously dropped out of the loan program, according to a national report released Wednesday.

Twenty-two of the state’s 113 community colleges do not offer federal loans to students and seven of those left the program between 2010 and 2014, according to the study by the Oakland-based Institute for College Access and Success. In many cases, colleges withdrew from the loan program because they feared federal sanctions over high default rates could cost them access to other federal aid and grants.

But the report by the research and advocacy group noted that no more California schools dropped out in the past two years.

That stabilization is due in part to new statewide efforts by the community college chancellor’s office to lower student default rates by encouraging loan counseling and supporting financial literacy and to steps making it easier and cheaper for colleges to service loans, the new report, titled “States of Denial,” said the report.

“Without access to federal student loans, students who can not afford the cost of college after available grants and scholarships are left between a rock and a hard place,” said the report by the Institute for College Access and Success.

“What California has done in the last couple of years underscores that states can really make a difference in terms of  loan participation,” Debbie Cochrane, the institute’s research director said in a telephone interview. The next step, she said, is to get some of those 22 schools to rejoin the loan program.

Students at colleges not participating in the loan program can be at a disadvantage, the study said.

“Without access to federal student loans, students who can not afford the cost of college after available grants and scholarships are left between a rock and a hard place,” it said. Some may turn to private loans or credit cards, which can charge much higher interest rates and have harsher repayment rules, or they may take fewer classes and work more at outside jobs, making it harder to earn a degree or certificate in a timely manner, it added.

While federal loans can be an important source of help for students at community colleges, they are not as significant in California as in other states, the report found. Only 3 percent of community college students in California use federal loans, much lower than the 17 percent national average. (Students who take at least 6 units a term can get the loans.)

Officials attribute that mainly to California having the lowest community college tuition in the nation and a generous grant and fee waiver program. Cochrane, however, added that some schools think that the tuition waivers for low-income students are enough and don’t understand how students may need the loans for books, transportation and “staying housed and fed” in a state with a high cost of living. 

About 9 percent of community college students nationwide attend schools that do not allow them access to federal education loans, according to the report. That means about 1 million community college students in 32 states have no way to get those loans. The share of students who don’t have access to that borrowing is more than 20% in eight states, including Alaska, Georgia, North Carolina and Utah.

The report said that 12.7 percent – or about 260,000 – of California’s community college students are at campuses without access to federal loans.

Rhonda Mohr, dean of Student Services at the California Community Colleges headquarters, said in an interview that she considered the study “a very good representation of what’s happening in California.”

She said the system is working to get the 22 colleges to return to the loan program. So far, none has done so but she said she is optimistic such efforts as the statewide “Default Prevention Initiative” will have an effect. That initiative helps colleges identify and counsel borrowers who are possibly at risk of default, including those students who are not doing well academically and need tutoring. Prior to two years ago, she said, “there wasn’t a real concerted effort within the system to encourage campuses to stay in the program.” But now that has changed, she said.

Across the nation, 15 more colleges dropped out of the program in the past two years, including eight in North Carolina, which has high loan default rates, the report said. Over the same time period, seven colleges have joined the loan program, including five in Louisiana.

The study also found that students in some minority groups are “disproportionately denied access to federal loans.”  Among all U.S. community college students, 10.5 percent of Latinos and 12.7 percent of African-Americans are at schools that don’t offer loans, compared to 8.3 percent of whites and 4.5 percent of Asian Americans.

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