Colleges Continually on the Line for Defaulted Loans and Grants

Student loan debt isn’t just the responsibility of the recently graduated high-school senior hoping to earn that degree in comparative woodworking — as more colleges are discovering.

This story from WFMZ.com specifically deals with a Pennsylvanian community college — but we can extrapolate a wider scope from what at first blush seems a local issue.

Lehigh Carbon Community College is anticipating a bad-debt line-item on its budget of $300,000. (p.s.: It anticipated $275,000 in bad debt last year, but had to revise that amount to $300,000 — so in actuality that $300,000 for this year could simply be a placeholder for a bigger number.)
It also believes that it will have $350,000 in bad debt on the books for 2013. (Though, refer back to that p.s. above.)

Part of the explanation? Students. (Isn’t it always?)

LCCC believes that a significant portion of that bad debt is from students who receive federal grants and loans — but then drop out. And then don’t re-pay.

According to LCCC president Donald Snyder, about half of LCCC’s 8,000 students get federal grants or loans, totaling about $21 million a year. But the kicker? If those students who applied for and are receiving federal aid stop attending classes (for whatever reason: maybe tuition costs that are still too expensive; maybe the band is totally getting back together), LCCC is required to repay that money –- usually grants — to the government “even though we have nothing to do with how much money they got.”

LCCC does attempt to recover that money from the student, first internally through letters; then, by turning the debts over to a collection agency. But still: at the end of each year LCCC is left with over a quarter of a million in bad debt on its books.

And that number, as we saw earlier, isn’t getting smaller.