CPCC opts out of federal direct loan program

last modified Mar 07, 2014 11:31 AM

In a move approved by its Board of Trustees on March 5, Central Piedmont Community College will opt out of the federal direct student loan program at the end of the 2013-14 academic year.

CPCC made the decision to opt out of the program based on concerns for students’ financial well-being and the need to protect other types of federal aid the college receives and can provide.

Since CPCC re-entered the federal direct student loan program under state legislative mandate in August 2011, 6,882 of its students have received loans directly from the federal government. These loans have totaled $53.8 million, with an average loan amount of almost $3,280.

After tuition and fees are deducted, students can use these loans for anything they want, but CPCC has no authority to prescreen or evaluate the credit-worthiness of loan applicants. However, if students fail to repay the loans once they leave CPCC, and their overall default rate reaches 30 percent for three consecutive years or 40 percent in a single year, CPCC could lose all other types of federal assistance, including Pell grants for students. Currently, 57 percent of CPCC students receive Pell grants, which are designated for school expenses and some living costs.

Of the 6,882 CPCC students who have received federal direct loans, 69 percent also have received Pell grants, which provide enough money to pay for tuition, books and fees. In addition, CPCC offers more than $1 million in need-based and merit scholarships annually. The college also is wrapping up a $30-million fundraising campaign, with much of the money raised going toward more scholarships.

"For decades, Pell grants have helped financially challenged students attend college. CPCC, like many other colleges, simply cannot risk the availability of Pell grants to our students. The college also is working hard to provide scholarships for students. It’s CPCC’s desire that our students complete their studies without taking on enormous debt,” said Jeff Lowrance, CPCC public information officer and assistant to the president.

Of the 58 community colleges in North Carolina, only 24 still participate in the federal direct loan program – the state no longer requires participation. Catawba Valley Community College in Hickory and CPCC are the only North Carolina community colleges in the greater Charlotte region still participating in the program.

“Most of the community colleges in North Carolina have reached the same conclusion as CPCC; the federal direct loan program puts students and institutions at great risk,” Lowrance said. “These are loans that must be paid back. Many students will find themselves unable to manage such debt in addition to their everyday living expenses. At the same time, colleges simply cannot risk losing the ability to offer Pell grants. At CPCC, we prefer our students attend with the assistance of grants and scholarships rather than costly loans.”

It costs CPCC approximately $300,000 a year to administer the federal direct loan program. In addition, in 2012-13, the college had to repay about $253,000 to the federal government for loans taken out by students who subsequently dropped out of school.

CPCC will start informing students immediately that the college is opting out of the federal direct loan program.