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Todd Coffman thinks he’s a good credit risk — but because he’s studying at a community college, the banks suddenly seem to think otherwise.
Coffman, 28, is halfway through a two-year X-ray-technology degree at Bellevue Community College. In the past year, he took out about $4,500 in federally subsidized student loans through Citibank.
But turbulent credit markets prompted Citibank and other banks in recent weeks to stop offering student loans at many community colleges across the country, including BCC. When Coffman recently put in his paperwork to get next year’s loans, the college told him Citibank was no longer an option. The same thing happened with a second lender. Finally, he obtained a student loan through Wachovia.
But his headaches didn’t stop there. He needed to supplement his living expenses with private loans. He applied to lender after lender, about eight in all, many of whom listed BCC as an approved campus. But he was rejected time after time, even when his dad offered to cosign the loans. He finally landed a loan through a Bellingham credit union.
“I don’t see why any bank wouldn’t want me,” said Coffman, adding that he’s got a good credit history. “It’s been a hassle.”
Students at community colleges across Washington are finding themselves in similar situations. And many will face more difficulties — and costs — when it comes time to consolidate loans from multiple lenders.
“The last couple of weeks have really been something,” said Kim Matison, the director of financial aid services at Tacoma Community College, where Citibank and KeyBank have just pulled out. “It’s one thing to read about it happening. It’s another to have it happen to you and your students directly.”
Matison said TCC had 10 lenders offering student loans last fall. That list is now down to six, and could soon be at five. Changes at Bank of America are forcing the college to consider dropping that lender.
Some fear the market could collapse further.
“If something does happen, it’s likely to happen all at once,” said Matison, who said she is monitoring developments closely.
Students in Washington take out about $900 million in student loans each year, said John Klacik, the director of student financial assistance for the state Higher Education Coordinating Board.
About 40 percent of the loans are made directly through the federal government and aren’t affected by the market turmoil, he said. That means students at the University of Washington, Western Washington University, Seattle University and Shoreline Community College — among others — have nothing to worry about.The remaining 60 percent of federally subsidized student loans are made through private banks and lenders.
The current situation has prompted a little-known Seattle nonprofit to apply for federal status as a “lender of last resort” for Washington and Idaho.
That entity, the Northwest Education Loan Association — which is sponsored by the U.S. Department of Education — would step in and ensure students could still access loans in the “unlikely event” that private lenders dry up altogether, said executive director Karen deVilla.
What has angered many people is that banks appear to be withdrawing services from community colleges — where students often come from low-income backgrounds — while continuing to offer loans at four-year institutions.
“I think it stinks. It bothers me,” said Sherri Ballantyne, the assistant dean of financial aid at Bellevue Community College. “It doesn’t seem fair that because [the banks] are making more profit at a four-year, they would be excluding students who are less prepared to attend college.”
But Mark Rodgers, a spokesman for Citibank, said the bank is not singling out community colleges, but rather has suspended loans at all colleges with small loan volumes and short repayment terms.
“The combination of a significant increase in our funding costs, as well as the expense of originating and servicing these loans, has made loans to borrowers at these schools economically unworkable at this time,” he said in an e-mail.
The Seattle Community College system won’t be affected by the changes. That’s because the system took the unusual step a decade ago of pulling out of the student-loan network altogether, due to high default rates among its students.
2008 The Seattle Times Company
Nick Perry
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