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Community colleges may opt out of federal loan program

Federal funding for student loans may not be guaranteed for the thousands of community college students in North Carolina, after the state Senate ratified House Bill 7 Monday.

Under the new bill, community colleges are allowed to opt out of the William D. Ford Federal Direct Loan Program, which assures student access to low-cost federal loans. This means colleges will not be required to provide students with the resources to obtain federal loans, which reverses a 2010 Senate decision that mandated that all 58 of the state’s community colleges offer the program by July 1, 2011.

The state House of Representatives passed the new bill in March and after Monday’s Senate vote, it awaits the signature of Gov. Bev Perdue.

Rep. Glen Bradley, R-Franklin, Halifax and Nash—a co-sponsor of the bill—said that with its ratification, North Carolina is able to offer “more education to more people” in a manner that will work better for the economy and North Carolina schools.

“When community colleges participate in this federal loan program, it places a lot of strings on what they cannot do,” Bradley said. “Colleges are then having to go after people to pay back loans who will have no hope of paying them back whether or not they have a successful education.”

Senate Minority Leader Martin Nesbitt, D-Buncombe, however, called the bill a “step in completely the wrong direction” in supporting education.

Nesbitt said all North Carolina Democrats in the Senate voted strongly against the bill, indicating the vote was along party lines. He also said Democrats proposed amendments such as conducting a survey to more effectively assess student needs before passing the bill and prohibiting community colleges from offering student loans at a higher interest rate than that of the previously required program. All of the proposed amendments were ultimately rejected.

“The answer [the Republicans] were giving me was that they don’t really know what is going on out there, they don’t care what is going on out there and they don’t want to know what is going out there,” Nesbitt said.

According to a North Carolina Senate Democrats news release, more than 850,000 students were enrolled in community college classes in the 2008-2009 school year, making North Carolina’s community college system the third largest in the country.

Rep. W.A. Wilkins, D-Durham, Person, who opposed the bill, said it is unclear how many students will lose access to federal loans—and subsequently, an education—due to the ratification of the bill.

Bradley said the government is obligated to help the poor gain an education but noted that the current framework is doing more harm than good, putting students “in debt for the rest of their lives.” Using the 2006-2007 U.S. housing crisis as an example, he noted that education subsidies—like housing—can often raise consumer costs, as the required program was doing for North Carolina students.

Nesbitt agreed that statistics show an increasing number of students are going into debt after graduating from college, but added that community colleges that opt out of the program will force students to pay even higher interest rates. According to the release, the current program allows students wanting to enroll next Fall to pay a 3.4 percent interest rate on federal loans. The current interest rate on most private student loans is approximately 7 percent.

“[The Republicans] don’t want to prohibit loans,” he said. “They want to prohibit federal loans to drive people into the private market so they can make money off of these students.”

Nesbitt also said if the state wants to continue working to give all North Carolina residents equal access to education, the state must be proactive.

“Ignorance is a terrible thing,” he said. “But I think some people think education will happen without even trying. But it wont—not in this world.”


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