JAMESTOWN — GTCC is debating the future of the popular Stafford loan program because so many former students are having trouble repaying their college debts.
"We don't want to get out of the loan business," GTCC President Randy Parker said Thursday. "But there is risk, and that's the concern."
GTCC trustees last week tossed around the idea of no longer accepting federal Stafford loans in order to protect federal Pell Grant funding, which more than 60 percent of the college's students use to pay for school.
But trustees and school officials worry that such a move could cripple enrollment. Driving the debate is GTCC's student loan default rate. The U.S. Department of Education's annual report on student loan default rates released in September put GTCC's three-year default rate at 26 percent. That figure is the percentage of graduates and other former students who were scheduled to start paying back loans during the 2009-10 fiscal year but who have fallen behind on their payments by last September.
Starting next year, the Education Department will penalize schools whose student loan default rate tops 40 percent once or 30 percent for three straight years. The penalty is loss of access to federal student aid programs, including the popular Pell Grant.
About 12,000 GTCC students get Pell Grants. Needy students who qualify can get up to $5,500 a year from this federal scholarship program. GTCC handles about $43 million in Pell Grant funds each year.
About 7,100 GTCC students get Stafford loans. This federal program loans up to $10,500 per year, depending on a student's financial need and class year. GTCC handles about $50 million in Stafford loan proceeds each year.
GTCC's advertised cost of attendance — a figure that includes college tuition, fees, books and such basic living expenses as rent, food and transportation — is about $14,600 a year.
GTCC officials said their students lean heavily on Pell Grants and Stafford loans because most don't make much money and usually aren't eligible for private student loans.
To try to lower its default rate, GTCC has put a $2,000 limit on Stafford loans to first-year students. And the money will be given out in three payments during the semester, instead of a lump sum at the start.
GTCC officials said such efforts will have a limited effect because the bulk of loan defaults comes from students who dropped out of GTCC before getting a degree. Parker said he will lobby federal officials to change the penalty, which originally was aimed at for-profit colleges suspected of inflating their rates and urging students to take out crippling levels of debt.
GTCC leaders predict that dropping the Stafford loan program would sharply lower enrollment because many students could no longer afford to attend. Tuition revenue and state aid would decline along with enrollment.
But if GTCC stayed in the program and default rates continue to climb, GTCC could lose access to Pell Grants, and thousands more students might not be able to attend.
"Right now we don't have a crisis, but we're not far off," said trustee Jim Bryant, a retired Greensboro businessman and former president of the GTCC Foundation board of directors. "It's a serious decision to drop out (of the Stafford loan program). I don't want to do it."
GTCC's debate is not without precedent. Parker said about half the state's community colleges don't accept Stafford loans, including the community colleges in Alamance, Randolph and Rockingham counties.
Contact John Newsom at 373-7312, and follow @JohnFNewsom on Twitter.
BY THE NUMBERS Three-year student loan default rates for types of U.S. colleges as of October: All schools: 14.7% Public 4-year universities: 9.3% Private 4-year universities: 8.2% Proprietary (for-profit) schools: 21.8% Public 2-3 year colleges: 20.9% Note: The three-year default rate measures the percentage of borrowers who started to repay their loans between Oct. 1, 2009, and Sept. 30, 2010, but had failed to make on-time payments for nine straight months by Sept. 30, 2012. Public 2-3 year colleges includes N.C. community colleges. Source: U.S. Department of Education
