Unintended consequences

Regulations that go after the for-profits hurts community colleges as well.   From Jennifer Brooks, writing in the Tennessean.

Nashville State Community College is considering getting out of the student loan business.
Too many of its students are defaulting on their loans, putting the school at risk of federal sanctions. Rather than risk losing access to federal Pell grants and work-study funds, Nashville State might cut its losses — by cutting its ties to the federal student loan program.
 "The train wreck is coming, so why don't you get off the train?" said Nashville State President George Van Allen, who will make his decision sometime in the coming year.

Critics say Nashville State would be joining a growing list of schools that panicked and cut its students off from a resource many of them need to get through school. Southwest Tennessee Community College in Memphis and most of the state's technology centers already have cut ties with the federal loan program.
As a result, 22 percent of Tennessee community college and technology center students had no access to federal student loans as of 2008, according to the Project on Student Debt. The nonprofit opposes the idea of public community colleges cutting ties to the federal Stafford loan program.. . .
 The entire state of Tennessee has one of the highest student default rates in the nation — 8.8 percent in 2008. That figure is expected to increase significantly as schools move to a new system that calculates loan debt over a three-year period, rather than the old two-year system.
 
About a quarter of Nashville State's students take out federal student loans — and about a quarter of that number fail to make their loan payments and go into default within three years of graduation.
In 2008, Nashville State's student loan default rate topped 13 percent. Under a new U.S. Department of Education calculation that considers a school's default rate for three years instead of the current two, Nashville State's will be almost 25 percent. If a school's default rate tops 30 percent for three years, the department starts cutting off its access to other federal student aid programs.

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