Recently, United Tribes Technical College joined the increasing number of Native American institutes of higher education that do not offer federal student loans to its students. Out of 32 tribal colleges in the United States, only three permit their students to borrow from the federal government. There are many reasons why these schools, which are operated by Native American tribes, would choose to stop the federal student loan program. But the primary reason has to do with a major problem among all Americans: an inability to pay back ever-increasing student loan debt.
Student loan default is a growing problem. As the cost of college continues to rise at a rate that outpaces inflation, many students are simply unable to make payments on their loans. Default is defined as being more than 360 days behind on a payment. In 2015, 3.6 million Americans with student loan debt who are no longer in school were in default on their loans. With a stagnant economy and low starting wages for college grads, the number of people in default is expected to rise.
Nowhere is this more true than in the Native American community. Many students at tribal colleges and schools return home to rural areas or reservations, where there is little opportunity for finding a good job — let alone one that pays enough to meet basic living expenses and pay off student loans. Without a decent salary, many Native American grads have no choice but to go into default on their loans.
When a school has a high rate of students who default on their loans, the federal government can cut off all financial aid — including grants. That is why United Tribes Tech, like other Native American colleges, decided to stop allowing students to seek federal student loans. With default rates of more than 40%, United Tribes Tech had one of the worst records for student loan defaults in the country.
Tribal colleges are funded by the federal government and serve some of the neediest students in the country. Over eighty percent of students qualify for Pell Grants, which are available only to low-income students. In contrast, just 40% of students nationwide qualify for these grants. At 27, the average tribal college student is much older than at non-tribal schools, and will typically have at least 2 children. Tribal college students often come from generational poverty and unemployment, and typically have no experience with credit. Most are the first in their family to attend an institute of higher education.
For these reasons, experts from the American Indian Higher Education Consortium believe that student loans are not beneficial for students at tribal colleges. Tuition is typically low at $6,000 and can be covered almost in full by an annual Pell Grant of $5,750. The remaining tuition can be covered by waivers, and living expenses can be covered by gas and food vouchers and scholarships from the student’s tribe.
Tribal colleges are working towards ensuring that their students are able to graduate without debt. United Tribes Technical College is offering full scholarships to all American Indian students, either paying tuition entirely for students who do not qualify for Pell Grants or covering the difference between the grants and tuition. This program has cost the school $250,000 to date — but it has also increased enrollment by 20 percent.
United Tribes Technical College had attempted to reduce its student loan default rate for years before deciding to stop accepting federal student loans. They counseled student borrowers, and hired outside contractors to work as debt collectors to reduce the default rate and avoid losing federal aid.
Ultimately, the school decided that shutting off access to federal student loans was the best choice, as it preserved students’ ability to receive Pell Grants. More than 75 percent of the school’s students rely on the grants to attend schools. If the college had continued to accept federal student loans, the government would have likely cut off all forms of federal student aid — leaving the vast majority of students without any ability to pay for their education. By offering scholarships and working with tribes to support students, the school believes that students can still benefit from its educational program — even without federal student loans.
In the era of rising tuition costs and ever-increasing student loan debt, defaults are becoming more and more common. While most colleges will not need to take the drastic step of cutting off federal student loans, for some Native American schools, it was a move that made sense to preserve their ability to educate American Indian students.
Author: Jeff Gitlen
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