Due to possible sanctions, Lane could lose its eligibility to provide its students with some forms of aid from the federal government if too many of its students go into default.
The new threat of sanctions were put in place to help curb student debt nationally as part of the most recent reauthorization of the Higher <br/>Education Opportunity Act, passed by Congress in 2008 and implemented in 2011.
The section of the bill that addresses student debt, Title IV, stipulates that if too many of a school’s former students default on their federal aid repayments, that school could lose its federal assistance eligibility for a period of two fiscal years.
For Lane and many other schools like it, the new redline is what’s known as the cohort default rate, which is the student’s rate of loan and grant default. Institutions could find themselves in hot water if this rate climbs beyond 30 percent per year for a period of three consecutive fiscal years.
Title IV also holds a one-year provision that <br/>requires a college reporting a CDR above 40 percent for a period of a single fiscal year be penalized by sanctions identical to those handed down to colleges with a three-year CDR beyond 30 percent.
With approximately 860 student-borrowers projected to default, Lane has a higher CDR than the entire states of Alaska, Hawaii, North Dakota, Vermont, and Wyoming.
According to Title IV of HEOA, federal student loans are considered to have officially gone into default after a period of 270 consecutive days without the cohort, or student borrower, failing to make repayment or failing to make the proper arrangements with their lender.
The idea of a dedicated student losing their much-needed financial aid just before they’re able to graduate was a proposition that irked some students.
“I think that’d be an unfortunate cause for us students to take, because not everyone can afford college,” second-year energy management student James Mendez said. “Without financial aid, it could be impossible to finish (school) unless you had some other financial add-ins.”
Lane director of financial aid Helen Faith spoke to student leaders about the problem during an Oct. 30 ASLCC meeting. According to Faith’s number’s, Lane’s projected CDR for fiscal year 2010 had since risen seven percentage points, from 30 percent in the Spring draft to 37 percent in autumn — a mere three percentage points away from a default rate that could warrant federal attention.
Right now I’m fairly certain we’re going to be looking at a 37 percent rate, so it’s absolutely critical we avoid that third year,” Faith said.
Lane currently has the third highest default rate in the state, behind Pioneer Pacific and Umpqua Community College.
If Lane were to fail in bringing its student default rates below 30 percent over the next year, the college could lose its ability to provide many forms of federal aid for its students, a possibility Faith told students “would be devastating for Lane.”
The sanctions do not affect students’ eligibility to accept student loans from private lenders, like credit unions
Since the legislation was enacted in 2011, the sanctions have only been handed down to two other institutions in the country — a technical vocational school in Norfolk, Va., and a junior college in San Juan, Puerto Rico.