DECISION ON LOANS APPEALED\College of the Canyons challenging default rate.

Byline: James J. Rodriguez Daily News Staff Writer

College of the Canyons will appeal a recent federal decision to bar the campus from a loan program that could effect an estimated 400 needy students over the next three years.

The U.S. Department of Education alerted the Valencia community college last week that it is ineligible for the Federal Family Educational Loan program because the campus' student default rate was above 25 percent for the past three years.

For years, the funding has been used by students who normally can't afford tuition and other costs, said Beth Asmus, COC director of financial aid. She said many of the recipients have been single parents or those who don't qualify for the federal grants.

"It is scary," Asmus said Wednesday. "These loans would typically make or break a student from staying in school. This (loan) is kind of like their last ditch effort."

Nine out of 36 students reportedly defaulted on their loans that came due during the 1993 federal fiscal year, according to the latest data from the U.S. Department of Education.

Under current federal regulations, colleges with default rates greater than 25 percent for three consecutive years are banned from the loan program.

COC officials are formally appealing the Department of Education's decision, saying the information the federal agency is basing its decision on is incorrect.

COC is hoping to get a ruling on the appeal by April. If the appeal is denied, COC would be banned from the loan program until September 1997.

"One of the nine students whose loan is shown in default died while still attending the college," Asmus said, adding that COC notified the student's lender at the time and the loan should have been canceled.

Officials with the Department of Education did not return calls Wednesday seeking comment.

The dispute goes beyond COC and is only one of several criticisms of the way the default rates were calculated, according to the California Community College Chancellor's Office. The chancellor's office said 36 out of 98 colleges in the state have default rates of 20 percent or higher.

"College of the Canyons is just one example of the typical pattern of our colleges," Chancellor David Mertes said. "The community colleges are deeply committed to minimizing student loan defaults, and this commitment is reflected in the small number of students who receive loans at our 106 colleges.

"However, the way the default rates are calculated does not accurately reflect the facts and presents a distorted view of the actions of our colleges and students."

Other community colleges with default rates greater than 20 percent include Antelope Valley, Barstow, Cerritos, Compton, Los Angeles City, Los Angeles Southwest, Pasadena City and West Los Angeles colleges.

Nonetheless, through its appeal, COC has taken a lead to reform federal student loan default regulations.

Default rates are calculated based on the number of students who must begin repaying their loans. For example, when students drop below six units of classes, graduate, or drop out of classes at the college, they have six months to begin making repayment on their loans.

In some cases, when a student goes on to another college or university, he or she can defer repayment. The loan, in that case, might not be due while students are in attendance at their new college and their repayment period may start several years after they have left COC.

Asmus said COC's future students shouldn't be deprived access to loans because past students defaulted on their responsibilities.

She added that the government looks at the number of students entering the repayment period and the number of those who default to find the percentage of default for a college.

COC officials also said they don't believe it's fair that the campus is penalized for circumstances beyond its control. Asmus said colleges don't have the ability to control which students get the loans. In addition, once students move away, she said the colleges have no way to enforce loan repayments.

Said Mertes with the state chancellor's office, "Our colleges can't afford to continue to waste the amount of time and energy it takes to go back and forth with the U.S. Department of Education to prove whether a correct default number is seven or nine out of thousands of students, and still do what we're here to do, which is to provide high quality education and job training."

Meanwhile, Rep. Howard "Buck" McKeon's, R-Santa Clarita, office has agreed to review the calculation guidelines as part of the review of the High Education Reauthorization Act which is pending before Congress this year.