As college tuition rates have increased, many 2-year college students have been forced to take out loans. Because about 1-quarter of 2-year colleges do not participate in the fed loan program, these students are forced to take out private loans, which are riskier and more costly; work while attending school; use credit cards; or, drop out of school. Of those students who completed a community college degree in 2003-04, 33% had bad credit student loans; the average amount was $9,061, according to an analysis of fed data by the Project on Bad Credit Student Debt.
The American Association of Community Colleges, which represents 1,200 2-year institutions, claims that colleges do not participate in the fed loan program due to concern for the consequences of debt and default for students, particularly those who take remedial classes, for whom dropout and default rates are higher. In addition, colleges participating in the program could be barred from other fed aid programs if too many of their students default. This is particularly concerning for schools with a large number of low-income students.
(Source: http://www.aacrao.org/transcript/index.cfm?fuseaction=show_view&doc_id=3946)
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