225 Schools Face Cutoff From Student Loans : Education: Eight community colleges and 12 vocational institutions in California are included because of high default rates.

Because of high default rates on student loans, 225 post-secondary institutions, including eight community colleges and 12 vocational schools in California, may be cut off from the federal Guaranteed Student Loan Program, the U.S. Department of Education announced Wednesday.

Among those possibly affected are Los Angeles Southwest College, Barstow College, vocational centers of the San Francisco Community College District as well as privately owned beautician and computer schools that had default rates higher than 35% in recent years.

Three California trade schools--International Academy in Sacramento, Kenneth’s College of Hairstyling in Vallejo and MTD College in Oakland--face immediate expulsion from the subsidized loan program because students have defaulted on more than 60% of their loans, the department reported. They and 73 other institutions across the country with very high rates may no longer be eligible for other types of federal aid.

This year, defaults on student loans are expected to cost taxpayers at least $3 billion. Michael J. Farrell, acting assistant secretary for post-secondary education, blamed schools for not preparing graduates to earn enough to handle educational debts.

“They aren’t doing a great job helping students complete their program or get jobs, which is the point of the whole thing,” Farrell said. He suggested that students at schools ruled ineligible for the aid transfer to an unaffected institution.

A 1989 study found that trade and beauty schools often enroll students who lack basic skills, graduate only 35% of students and place just 22% in jobs. Some trade schools cited Wednesday may face closure because tuition payments from federal loans are their lifeblood. While schools are supposed to only administer the loans, critics allege that some trade schools aggressively encourage students to seek the help.

Institutions have 30 days to appeal by showing that the department’s data is inaccurate, that repayments have improved, that students face severe economic disadvantage or that graduation and employment rates are high. The 178 schools with default rates between 35% and 60% will keep loan eligibility during the appeal process. Any institution eventually expelled must show more than two years of improved graduation and job placement rates for reconsideration.

David Mertes, chancellor of the California Community Colleges, said he expected the eight schools cited in his system to appeal because federal statistics appear inaccurate. It is unfair, Mertes added, to penalize entire colleges when the federal government establishes loan rules and colleges have little control over students’ lives.

Unlike proprietary trade schools, where annual tuition can be several thousand dollars, publicly funded community colleges in California charge only $120 a year and do not count on loan money for much income. Of the 1.5 million students at California’s 107 community colleges, 18,000 have federally backed loans, which average $2,625 a year and are spent mainly on off-campus living expenses, according to Alfonso Wilson, state dean of student services.

Of the nine campuses in the Los Angeles Community College District, only Los Angeles Southwest College was threatened with loan cutoff. The school, located at 1600 W. Imperial Highway, has about 6,000 students during the regular school year and about 75% of them are African-American and about 15% are Latino, according to District Chancellor Donald G. Phelps.

“Southwest is located in an area of high numbers of low income and unemployed and minorities,” said Phelps, adding that those factors contribute to defaults. According to the Education Department, Southwest students defaulted on 116 of 405 loans between 1987 and 1989, and annual default rates ranged from 37% to 45.8%. Phelps said Southwest was reviewing its statistics and would appeal.

In California, other community colleges cited Wednesday include: Canada College, Redwood City; Lassen College, Susanville; Los Medanos College, Pittsburg; Merritt College, Oakland; Porterville College. Other trade schools were Associated Technical College, Los Angeles; Barclay College, Fresno; Bay Vista College of Beauty, National City; Federico’s Kern County College of Beauty, Bakersfield; Federico’s Tulare College of Beauty, Visalia; Lancaster Beauty School, Lancaster; Lawton School for Medical and Dental Assistants, San Jose; North Adrian’s Beauty College, Modesto; Western Technical College, Van Nuys.

Stephen Blair, president of the National Assn. of Trade and Technical Schools, criticized the Education Department’s action, saying that trade schools have taken steps to improve loan repayments since 1989, the most recent year used in the federal report.