Low-income students and students of color may have a harder time getting some college loans because of an ongoing credit crunch and tighter underwriting rules in the industry.
While the trend may not affect federally guaranteed loans, usually the first line of credit for college students, it likely will have an impact on the fast-growing private loan market that serves low-income students once they reach federal lending limits, analysts say.
The trend became clearer in mid-January when loan giant Sallie Mae announced plans to cut back on private loans to students attending postsecondary institutions with low rates of student success.
“We’re not going to lend at schools with poor graduation rates,” Tom Joyce, a Sallie Mae spokesman, tells Diverse. “We will do less private lending at these schools.”
Joyce says this move is most likely to affect proprietary schools and not institutions like historically Black and Hispanic-serving institutions that enroll a large number of low-income students.
“We are the leading lender there, and we’re looking to grow in those spaces,” he said of HBCUs and HSIs. Yet Joyce did not say what graduation cutoff rates Sallie Mae would use in making lending decisions. The company is reviewing that issue and should develop guidelines soon, he adds.
Nationwide, data show Blacks and Hispanics trailing Whites in graduation rates. While National Center for Education Statistics data show an average graduation rate of 56 percent, rates for Hispanics and African-Americans are 46 percent and 40 percent, respectively. The rate for White students is 59 percent.
