In my previous position as director of financial aid at Rend Lake College, I administered the student loan program for 32 years. As Rend Lake College will be leaving the federal student loan program, I would like to comment on student loans and cohort default rates.
Graduates of Rend Lake College who have borrowed during their academic careers pay back their student loans at a rate comparable to those students who graduate from four year institutions. The number one common factor in student loan defaulters is their failure to obtain a degree. The vast majority of students who attend Rend Lake College do not have to borrow; those who do are often coming from both economically and educationally disadvantaged family situations. The typical Rend Lake College student borrower is in their mid to late 20s, often single, with one or more dependents.
Illinois Community College default rates are high as a result of a "perfect storm" partnership between the Federal Government, State of Illinois, secondary education and the community colleges themselves. Federal Financial Aid regulations basically force colleges to allow any student who desires to borrow the opportunity to do so, regardless of his or her credit worthiness or past history. The State of Illinois requires all community colleges to be open door institutions. This requirement results in the enrollment each semester of students who are academically challenged and will never graduate.
Secondary schools share some responsibility because of the number of ill-prepared students which community colleges must enroll. Students with high school diplomas often come to community colleges and test into all developmental classes (now named college prep courses). Students without a high school diploma must take a standardized placement test and show they have the ability to benefit from taking college level classes; high school graduates are assumed to have the ability to benefit.
Community college funding is enrollment driven, so policies and procedures are set in place to make it as easy as possible to enroll (even as late as the first week of school). Community colleges hide behind the old adage "everybody has the right to fail." The schools, however, fail to give students a reality check as to just how hard it will be for them to succeed. The only thing the failing student will take from the school is a student loan default.
Because of the institutional "perfect storm," it becomes easy for an individual to enroll and commit fraud by receiving both loans and grants while never planning on getting a degree. If you ask any director of financial aid at a community college, they will have at least one story of mom, dad, grandmother, son and daughter all showing up on the same day to take out loans and enroll in school.
One final thought, as a taxpayer in regards to default rates, we should worry more about the total dollars borrowed versus the number of defaulters. It costs you and me more as a taxpayer if one student at a four year school defaults on $20,000 loan than it does if we have six students at a community college defaulting on $3,000 loans.