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With Default Rates Increasing, CCC&TI No Longer To Accept Federal Student Loans, National Trend Alarming

By Jesse Wood

April 18, 2013. Because loans of students at Caldwell Community College and Technical Institute are increasingly defaulting, the college’s board of trustees unanimously voted to stop processing federal student loans at a CCC&TI Board of Trustees meeting on Wednesday in Hudson. This is effective this fall, the 2013-2014 academic year.

Caldwell Community“Caldwell students’ default rate on the loans has been climbing — it was 20.3 percent in 2011, up from 10.6 in 2010 – and getting closer to the level that would trigger the college losing eligibility for Pell Grants, need-based federal grants that students don’t have to repay. Pell Grants are used by more CCC&TI students than are federal loans,” the Lenoir News-Topic reported yesterday.

The trustees pondered what would be worse – the loss of federal loans or the loss of Pell Grants.

“The question is, what is most difficult for the college? Both would be disastrous, but the worst thing would be to lose Pell,” said Ron Beane, CCC&TI Board of Trustees member.  

Edward Terry, spokesman for CCC&TI, said – that in accordance to federal guidelines – default rates in excess of 25 percent for three years, or 30 percent for two years, would make the college ineligible to offer federal student loans, as well as federal Pell Grant financial aid for students. He added that CCC&TI students still will be able to use private loans.
This trend is national with students defaulting at an alarming rate, according to a TransUnion study released at the end of January.

As of March 2012 – when the study concluded, the 90+ day delinquency rate for federal loans was 12.31 percent.

The study also noted that from 2007 to 2012 deferred loans represented more than 43 percent of all student-loan balances, and that federal loan balances jumped 97 percent during that same time frame. 

“With the economy either in recession or slowly coming out of it during the study period, we had expected that student loan balances might increase as consumers frustrated with the job market went back to school to work toward a different career path,” said Ezra Becker, vice president of research and consulting in TransUnion’s financial services business unit. “However, the rate of growth we observed was truly eye opening.”