Threat to Halt Loans to Fullerton College Called ‘Unfair’

A Fullerton College official said Thursday that a federal threat to cut off student loans by 1990 to that community college is “unfair” and “would hurt the college.”

Robert Miranda, director of financial aid at Fullerton College, responded to the institution’s being among 21 in Southern California under criticism from the U.S. Department of Education.

Education Secretary William J. Bennett on Wednesday released a list of colleges and universities that the department says has 20% or more of its students not paying back federally guaranteed loans. The department said it will halt federal loans to such institutions if their default rate still exceeds 20% by 1990.

Fullerton College was the only one on the list from Orange County.

Miranda acknowledged in an interview that the federal list correctly shows that Fullerton College in the last two years has a default rate 25.7%. That means more than a quarter of the college’s students taking out federally insured loans have failed to repay them in time.

Miranda said that a cutoff of federal loans to the college would be unfair because the college is not responsible for collection. He said the federal government sets the criteria for issuing loans to students, and banks issue the loans and are responsible for collecting repayment.

“Colleges are just processors of the applications for loans by the students,” Miranda said. “We verify that students are enrolled, are making progress toward graduation and are taking a certain amount of college courses.”

He said if the federal government were to cut off loans in 1990, “we would probably lose some students . . . they’d go to other colleges.”

Fullerton College does not have large percentages of students getting federally insured loans, Miranda said. In the 1985-86 school year, he said, there were 638 federally insured student loans, and 478 in 1986-87, years when the college had an enrollment of about 15,000.

“We always counsel students before they take out loans,” he said. “We don’t want students to become too much in debt with loans.”

But Miranda said federal guidelines until last year were very lenient for such loans. If a student’s family didn’t make more than $30,000 a year, the student could qualify. Now the guidelines are somewhat more strict, Miranda said, with family income limited to around $19,000.

The college had no choice but to certify students if they had qualified for loans in the past, according to Miranda: “We’re just the middle person in the (loan) process. We’ve followed the same guidelines in certifying student loans as everyone else.”

Bennett noted at a press conference Wednesday that although the individual borrower “bears the major responsibility” for repaying the loans, the colleges are also responsible.