Berkshire Community College is among a growing group of colleges—mainly community and junior colleges—to whom major lenders have cut loans. The lenders, including such heavyweights as Citibank, JPMorgan Chase and Citizens Bank, have in some cases categorically dropped students at "less competitive" colleges. Banks say those students are "high risk"—they have higher default rates and take out smaller loans that are less profitable for lenders.
The trend is a disturbing ripple effect of the credit crunch, one that some say hurts the students who need financial backing the most. "People who really have their lives changed for the better as a result of higher education are being cut off from support," said Greenfield Community College president Robert Pura. "The strongest need seems to be in the area where they are closing doors."
Many are stung by the fact that the same lenders have not curtailed loans to students at top-tier colleges and universities—that banks would prune this branch of lending that supports needier students. "Isn't that discriminatory?" asks Chris Weingartner, coordinator of financial aid and student loan programs at Berkshire Community College.
The uncertainty of future student loans has caught the attention of U.S. Senators Chris Dodd (D-Conn.) and Patty Murray (D-Wash.), who introduced the Preventing Student Loan Discrimination Act last month. "Lenders offering loans backed by taxpayer dollars shouldn't be able to discriminate against certain schools or students," Murray said in a press release.
The loan cuts have put higher education farther out of reach for many students at a time when credit is already pinched. Rising tuition and fees have added to the burden of attaining a bachelor's degree for community college students in Massachusetts—the state with the fifth most expensive community colleges nationwide. But it is probably the price tag that sheltered some institutions in the Bay State from getting the chop. Student loans for those schools are high enough to boost the lenders' bottom lines.
Replacement lenders have stepped up to fill the void left by JPMorgan Chase and Citizens Bank at BCC, and school officials say enrollment will not be affected, but the withdrawal was not without cost.
The switchover to Department of Education-backed Direct Loans status (from federally-backed, privately serviced FFELP loans) the school made earlier this spring was resource-intensive. Computer software had to be adapted to the new program and it came at a time when financial aid awards were being processed. "The timing could not have been worse," said school officials.
The GCC financial aid office is currently working to shield its students from the same blow delivered to BCC—something that Springfield Technical Community College and Holyoke Community College managed. STCC and HCC students were beyond the reach of this jab thanks to their status as Direct Loans participants.
Good governance—measures like that proposed by Dodd and Murray—could keep the aid flowing. And within a decade, the issue of loans for Massachusetts community college students could become a moot point: Governor Deval Patrick's Readiness Project is aimed at making community college free to the state's high school graduates by 2015.
