WASHINGTON — As many as 1,200 trade schools and colleges nationwide--including 148 in California--are in danger of losing federal aid or being dropped from student loan programs because too many of their graduates have defaulted on government-backed loans, the Department of Education warned Friday.
"These are tough measures, but they are necessary and appropriate steps to reduce the unacceptably high cost of loan defaults," said Carolynn Reid-Wallace, assistant secretary for post-secondary education.
Two of the schools are in Orange County: Associated Technical College in Anaheim and Career Academy of Beauty in Seal Beach.
The department released a stream of statistics to underscore the problem. Nationwide, 22% of students receiving federal aid defaulted on their loans in fiscal 1990, up from 17.2% in 1988. Student loan default rates began rising sharply in the mid-1980s, after hovering for two decades at about 10%.
More than three-quarters of the schools on the Education Department's list are so-called "proprietary schools," or for-profit trade schools. Forty-one percent of the students at those schools defaulted on their loans.
Officials at the Department of Education emphasized that these warnings are an effort to crack down on schools rather than students.
"Schools need to ensure that borrowers fulfill their responsibility to pay back loans to the government," William Hansen, acting assistant secretary for management and budget, said at a news conference. "If students get a shoddy education, it's going to be difficult for them to pay their loans back."
But the president of an association that represents trade schools took exception to the department's conclusions about the cause of the problem. "The student loan default rate is only one small piece of this larger economic downturn," Stephen J. Blair, president of the Career College Assn., said in a statement.
"These are people who entered the job market at a time of shrinking opportunities," Blair said. "They did what was asked of them: They went to school, learned a skill. . . . They fulfilled their end of the bargain. Our economy hasn't reciprocated." Education officials, however, said the figures released Friday date back to before the recession and were not affected by a shortage of jobs for recent graduates.
Officials at Associated Technical College in Anaheim declined to comment on its situation. At Career Academy of Beauty in Seal Beach, financial aid counselor Dayna Pattison said Friday that the school plans to challenge the Department of Education's default figures.
The cosmetology school, which has waged an uphill battle with delinquent student loans since 1987, stopped offering aid and grants to students in 1991, Pattison said. That same year, its counselors also implemented default-prevention programs, which she said, met the federal mandate that vocational schools attempt to stop student loan defaults.
"We're doing everything we can. We've cut student loans. We've counseled students on the importance of paying back their loans. We're looking to track down those students who borrowed money" Pattison said. "It's just really hard because many of these students just up and disappear; they just don't want to be found."
The department divided schools into categories based on their default rates.
The worst offenders are 85 schools that stand to lose eligibility for student loans, including Stafford loans for students and Parent Loans to Undergraduate Students, for three years and would be denied access to student grants, including Pell Grants, as a punitive measure for an indefinite period.
Students at another 473 schools would not be eligible for federal grants for indefinite periods, while loans would be denied to students at 36 other schools.
The remaining 606 schools would lose one category of loans, Federal Supplemental Loans, for one year.
Schools have been told they can remain eligible for some federal programs if they meet certain guidelines, including counseling their students to repay loans and reducing their default rates.
In California, 23% of schools receiving federal student aid have unacceptably high default rates, compared with a nationwide figure of 17%.
Of the 148 California schools, 10 would be dropped from all loan and grant programs, 46 would lose grants and six would be denied access to student loans. Eighty-six schools are at risk of losing Federal Supplemental Loans.
None of the California schools are four-year institutions. Thirty are one- or two-year colleges and the other 118 are trade schools.
One institution sure to appeal is the state's largest community college, Long Beach Community College. The Department of Education placed the school's fiscal 1990 default rate at 44.8%, but Toni Du Bois, the school's director of financial aid, insisted Friday that the figure is wrong.