Dive Brief:
- The Obama administration has proposed an expanded appeal option for colleges whose students have high loan default rates that threaten the school’s eligibility for federal loans altogether.
- Inside Higher Ed reports the proposal would largely help community colleges, where not many students take out loans and those who default heavily impact the school’s rate.
- Currently, colleges can appeal impending sanctions after the third year with a default rate of at least 30%; the proposal would allow them to appeal under these limited circumstances in any year with a default rate that high, granting more certainty to the colleges’ financial aid plans.
Dive Insight:
The Obama administration’s latest proposal comes after years of criticism based on the uncertainty of the sanctions process. Some community colleges have stopped offering federal student loans in their aid packages to avoid potential defaults prematurely, Inside Higher Ed reports. That pushes students into the private loan market but keeps colleges away from official sanctions, which are triggered when a college’s overall loan default rate is 30% or higher for three years in a row or 40% in a single year. When colleges couldn’t appeal until the final year before sanctions, they often were stuck waiting for a decision. If this proposal holds, they’ll be able to find out if they qualify for an exception with plenty of time to address potential sanctions.