Debt-Reduction Bill Could Cost Community Colleges : Education: Provision in federal legislation to curb loan defaults could block enrollment of 100,000 students and reduce aid, chancellor warns.

Federal legislation aimed at reducing the national debt also threatens to block the enrollment of 100,000 new students in California community colleges and could cost the institutions $200 million in lost federal aid, a top state educator said Thursday.

Although the state’s 107 community colleges have traditionally maintained open enrollment policies, new students without high school diplomas could be barred from entering the colleges under provisions of new federal legislation to curb defaults on student loans.

Unless new legislation or some other remedial action is taken swiftly, state Community Colleges Chancellor David Mertes warned, “I view it as a major disaster for California community colleges.”

In Washington, a U.S. Department of Education official agreed that the federal action could deal a major blow to the state’s community college system but pledged to “work with California to ensure that this will not happen.”

“We are committed to helping the post-secondary education community implement this new law as smoothly and less disruptively as possible,” said Bill Moran, director of the department’s student assistance programs.

The dispute between the community college chief and the U.S. Department of Education broke out Thursday, a day after publication of what Moran termed an explanation of the new legislation to curb mounting defaults on guaranteed student loan programs.

As part of the budget deficit reduction package enacted Nov. 5, President Bush and Congress devised steps to try to prevent defaults on loans by former students, a major problem in some parts of the country.

One controversial provision of the legislation requires prospective college students without a high school diploma or its equivalent to take and pass an admissions examination called an “ability-to-benefit” test. Mertes said the federal action violates a California law that prohibits use of a standardized examination as a condition of enrollment at community colleges.

The federal law takes effect Jan. 1 and Mertes said community colleges that admitted students who did not pass the tests would be liable, under the federal law, to lose $35 million in federal support for vocational education programs. Students stand to lose an additional $164 million in federal assistance. Traditionally, under the state’s policy of “open” admissions at community colleges, anyone 18 or older is admitted, regardless of whether the student is a high school graduate. Tuition for each student is $50 per semester.

At a news conference, Mertes said projections show that about 100,000 new students a year could be affected. The state’s total community college population is 1.5 million. Students already enrolled would not be affected.

Mertes said he is exploring possible legal action to prevent the loss of funds, but he is counting on sympathetic Californians in Congress to introduce legislation next month to protect the community colleges.

Mertes said he officially learned of the admissions test requirement on Wednesday and said that even if there were no conflict with California law it would be impossible to comply by Jan. 1 because a federally approved test could not be developed, administered and scored by then.

The new term starts Jan. 1 for two-year colleges on the quarter system and Feb. 1 for those on the semester system. Mertes estimated that most of the students affected by the federal action are in Los Angeles, Orange and San Diego counties. He said campuses probably would risk admitting the students for now.

Mertes said the education department’s publication of a notice in the Federal Register of the testing requirement constituted a binding regulation affecting only community colleges in California because this is the one state with a “pure” open admissions policy.

But Moran said federal action “is not a regulation drafted by the Department of Education. This is a law enacted by Congress. This is not something we just ginned up out of whole cloth.”

Moran said final regulations will be adopted after hearings are held and that the published “notice” was intended to alert states that the federally required tests were about to be implemented.

In the case of California, Moran said, a “placement” test now given to students to determine their abilities in reading, writing and mathematics might be adjusted to include “some kind of a pass or fail test score for purposes of the law.”

But Mertes said California officials repeatedly tried to discuss the situation with the Department of Education but were shunted aside. “It was done in tight secrecy,” he said.

Moran, however, said that in drafting the explanation of the new law, officials “got as much input from the post-secondary education community as we could, given the amount of time we had to put it out.”

Times staff writer Oswald Johnston contributed to this story.