05/01/14 — Wayne Community College discontinues student loans

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Wayne Community College discontinues student loans

By Phyllis Moore
Published in News on May 1, 2014 1:46 PM

Wayne Community College will no longer offer direct student loans and is introducing a deferred tuition payment option in time for the fall semester.

At a special called meeting Wednesday, the college board of trustees voted to discontinue participation in the William D. Ford Federal Direct Loan Program. The college began offering the low-interest loans to students in 2009.

Direct student loans are considered financial aid, but are repaid to the federal government rather than to the school. There are also penalties attached when the borrower defaults on payments.

"Since 2011, there have been growing concerns that we have had many students taking on so much loan debt that they will be unable to repay their loans," said Gene Smith, vice president for academic and student services.

He said that this is also an issue for the college, which faces sanctions and places all federal financial aid to students in jeopardy if the default rate goes above 30 percent.

In 2010, the three-year default rate was 5.9 percent, Smith said. The rate in 2011 was 15 percent. And while the official numbers are not in, it has been projected that for 2013 the rate could be as high as 38 percent, he said.

For the fall of 2013, Smith said enrollment at the college was 4,031. Of those, 238 students, or 5.9 percent, received loans only, while 1,339 also received additional forms of financial aid.

Board member Keith Stewart asked what caused the loan default rate to increase so dramatically.

"We had an aggressive campaign to help students be aware of the risks," Smith said. "I think we promoted it so much that folks found out that we had the loans. When we were most aggressive in letting people be aware, borrowing increased."

Smith said his staff has been actively pursuing other options, most notably a tuition payment plan. Nelnet was chosen as a reputable company already being used by 28 colleges in the state community college system and more than 800 other educational institutions nationwide.

Joanna Morrisette, associate vice president for academic and student services, presented an overview of the payment plan option. She said it did not require board approval as the college is already moving forward with it, whether or not the student loan program continues.

Termed an "active management payment plan," she explained that students sign up and pay $25 per semester and payments are automatically drafted. There is no interest charged by the company and no financial obligation for the college.

"It's an optional payment plan," said Dr. Kay Albertson, WCC president. "Whether we have student loans or don't have student loans, we believe that as an institution that we ought to institute this tuition payment plan.

"If they choose to borrow money for tuition, this group manages that payment plan in a very regulatory way so it's good for the students in how it's orchestrated and it doesn't put the college in any jeopardy."

"It's not a loan," Smith added, describing it as "deferred payments. The students are still obligated to pay tuition, but can break it into four payments."

He added that the new option will provide an answer to the oft-asked question at registration time --"Do you have a payment plan?"

"Our system is not set up to offer a payment plan, so this particular company has worked well with our other schools and schools in other states to actually offer students the ability to sign up," Smith said. "The $1,000 tuition is divided up into four payments if they register in July. The sooner they register they have more segment plans that they can pay.

"We're not extending credit. We're extending their payment."

Smith said that regardless of whether the student loan program continues, Nelnet provides an "added piece" for students beyond borrowing money and incurring interest.

"I think it would be beneficial for the students to have another option," Mrs. Albertson said. "They don't have to go to a bank to do it, borrow from another source."

The board voted to discontinue the direct loan program, with board member Tommy Cox being the only dissenting vote.

Even though the move takes effect immediately, the college is still liable for the existing direct loans for the next three years.

Smith said the college has established a default task management team and will be working to avoid sanctions and loss of other financial aid. He added that there are also many other opportunities for student financial aid, including grants, scholarships and work study.