PHOENIX, AZ -- 06/12/08 --
As more than 6.2 million of the nation's
community college students weigh their financial aid options this fall,
some of the country's largest student loan lenders, including Citibank and
JPMorgan Chase, announced that they will no longer be offering federal
student loans to many community colleges, for-profit institutions, or other
less competitive two- and four-year schools.
This news, combined with the recent finding by the Project on Student Debt
that 25 percent of all community colleges in the United States do not offer
federal student loans, points to
trouble that may lie ahead as community college students encounter multiple
roadblocks in trying to obtain the money they need to pay for school this
fall.
When asked by The New York Times why they are no longer extending federal
student loans to community colleges and other two-year schools, lenders
cited a high risk of student loan default rates, along with fewer borrowers
and small loan amounts at these schools that make the student loans there
less profitable.
The lenders dispute accusations that the recent move discriminates against
any specific type of institution, with SunTrust maintaining that its
decision was "not based on any particular type of school" and Chase arguing
that it isn't "cutting off any category of school" but simply tightening
student loan credit standards in response to conditions in the current
credit market.
Financial aid administrators at affected schools, however, are having a
hard time seeing it that way. "There's been a certain amount of market
segmentation going on, but this is the first time we have seen a lender,
especially as large as Citibank, saying, 'We don't want to do business with
you,'" said Samuel F. Collie, director of financial aid at Eastern Oregon
University in La Grande, Ore.
With a lower cost of tuition than four-year universities and an
accompanying typically smaller student debt load -- the average community
college student carries $3,200 in student
loans each year, according to the College Board, compared to an average
of $5,400 for students at four-year public universities -- community
colleges tend to attract lower-income and working students. The students
most affected by lenders' decisions to no longer extend federal college
loans to two-year schools, say critics, will be many of these disadvantaged
students who demonstrate the most financial need.
Lenders are "staying in the program, but they are now determining which
students they will and which students they will not lend to. And in my
view, with a federally subsidized program, that's not OK," said Scott
Roelke, president of the Minnesota Association of Financial Aid
Administrators and the financial aid director for Dakota County Technical
College, in an interview on Minnesota Public Radio.
According to California financial aid officials who spoke with The Times,
Citibank had stopped issuing federal college loans at all community
colleges in the state, citing low loan volume. Citibank's explanation is
one that Korey Compaan, financial aid director for William Jessup
University, fails to understand. "The logic is so flawed, that for us to
have volume with them in the future, we have to have had volume with them
in the past," Compaan said.
At Dutchess Community College in New York, which has been dropped by at
least six lenders so far -- Chase, Citibank, Citizens Bank, M&T Bank, and
Student Loan Xpress --
students now have even fewer options for federal college loans than
students in the California community college system. "This is one of those
perfect storm situations," said Susan L. Mead, director of financial aid.
Without ready access to low-cost, low-interest federal student loans to pay
for school, lower-income students at affected two-year institutions may be
forced to turn to high-interest credit cards, rely on more costly private student loans, or opt out of
college altogether.
"We have our public two-year open enrollment institutions that are supposed
to be serving the public and many times lower-income students," said
Roelke. But now those very students "could effectively be frozen out of
higher education."
About NextStudent
NextStudent, Federal Lender Code 834051, is dedicated to helping students
and their families find affordable ways to pay for college. NextStudent
offers one-on-one education finance counseling and has a portfolio of
highly competitive education finance products and services, including a
free online scholarship search engine, parent and student loans, private
student loans, and information on student loan consolidation programs
and college savings plans.
For more information about NextStudent and its student loan programs,
please visit our website at www.nextstudent.com.
Contact:
Philip J. Tannenbaum
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