Community college students in NC will soon have a new option in paying for their education. BeginningJuly 1st colleges will be required to offer student loans. Some schools feel that’s risky.
Some community colleges in the east got out of the student loan business because they saw their loan default rates rising. They say that hurts the students and the school. Legislation has gone back and forth on the issue, and a recent veto from democratic Governor Bev Perdue all but seals the deal, forcing community colleges back into the loan business.
Victoria Tyson is a single mom and a first time college student, hoping to make a difference for her and her family.
"I wanted to show my son at any age you can get a degree, you can still be whatever you want to be," said Tyson
It’s not cheap and Tyson needs help. She has Pell grants which are federal funds she won’t have to pay back. She says she’d like to get a student loan to cover some of her living expenses and allow her to remain a full time student. She’s thrilled her school has to start offering loans. Her school, Beaufort County Community College is not.
Dean of Administrative Services Phillip Price said, "Once our default rates get above a certain percentage we stand to lose federal funding."
Price says if 30% of their students defaulted on their loans, the school wouldn’t be able to offer Pell grants anymore. The majority of their students, including Tyson, rely on those grants.
"If we weren’t able to award Pell grants you could almost assume 60% of the people at the college wouldn’t be here. That’s pretty much closing the doors," said Price.
In 2007 their default rate jumped from 0 to 6.4% in just one year. It was down a couple percentage points in 2008 according to the most recent numbers released by the Department of Education. Price says in order to stay competitive, many lenders stopped screening applicants through credit checks, and default rates started rising.
The problems at Beaufort County Community College pale in comparison to the ones at Martin Community College where the default rate is a staggering 20.8 %."
MCC’s President Ann Britt said "We were 12.8 in 2005 and we have not given a loan since then and we’re currently at 20.8."
Again, 2007 numbers, the more recent numbers show them at 23-percent. Britt can only imagine how that number could jump when they’re required to start offering loans again. She says students should think twice before taking out student loans, because the only way out of them is to pay them off. Even bankruptcy doesn’t forgive student loan debt.
"That is the worst loan you can have. It never goes away, they’ll take it out of social security, it will go to your estate," said Britt.
She says she knows some students feel it’s the only way they can afford their education, but says student loans should be a last resort. Victoria Tyson says no matter how she computes it, she’s already trimmed her budget about as far as she can.
"The loan is going to make or break the deal in being a full-time student to a very low end part-time student," said Tyson.
Unless lawmakers override the governor’s veto, community colleges will have to offer loans starting in July. So Ann Britt says her school will go out of their way to counsel students about the risks involved.
Other colleges in the east are working out plans to keep their default rates down. Craven Community College is just 1.7%. Pitt Community College is at 7%, and they never stopped offering loans. Lenoir Community College has a default rate just over 11-percent.