LANDER, Wyo. — Wyoming Catholic College has decided to become the second Catholic liberal arts college in the United States to decline federal student loans and grants, citing the current political climate as one of the motivating factors for the move.
“It’s a decision for us, not for anyone else,” said Kevin Roberts, president of Wyoming Catholic, noting that other faithful Catholic colleges have come to different prudential judgments based on their own circumstances.
Wyoming Catholic, however, is a newcomer on the Catholic liberal arts scene compared to the others. Founded in 2007, it has now reached that stage in its accreditation process where it is eligible to accept federal student loans for the first time.
“For us, the risk of our participating in these programs right now is too great,” Roberts said.
The board of directors made its unanimous decision — announced in February — on the findings of a task force, which investigated for months the potential benefits of Title IV against the potential risks to the college mission and viable alternatives.
“We’ve not precluded the possibility of participating in Title IV down the road,” he said.
Title IV of the Higher Education Act is the major source of federal student aid in the United States.
But conversations with the Becket Fund for Religious Liberty and Alliance Defending Freedom attorneys were key in concluding that, for Wyoming Catholic, participating in student loan and grant programs — at this time — could invite “some trouble from a federal bureaucrat regarding our admissions policies or our employment policies,” such as the college’s requirement for students and employees to adhere to the Church’s teaching on sexual behavior.
Two Roads Diverged
For now, Wyoming Catholic is traveling down the path Christendom College chose in the 1980s.
According to Thomas McFadden, Christendom’s vice president for enrollment and marketing, founding president Warren Carroll wanted to preclude any scenario where the federal government could try to use student loans as leverage on the college.
“We wanted to be free from any entanglement from the federal government, so we could be free to be Catholic fully, to teach as the Catholic Church teaches,” he said.
Christendom seeks to make up for the lack of federal student loans by providing students its own package of scholarships, grant money and college-based student loans.
Students in Christendom’s loan program have a one-year grace period after graduating to pay back the college without interest. After that, interest accrues at 10%, but the college is much more flexible than banks if graduates run into economic hardship and need to defer payments.
As a result, McFadden said the college’s default rate is very low. Christendom’s average student loan debt for the Class of 2013 was in the range of $26,000, according to McFadden.
That average student-loan debt burden is slightly lower than the national average, reported by the Institute for College Access and Success’ Project on Student Debt to be $28,400 in 2013.
“We would not be able to operate this way without the generous donor pool that like what we do and the fact that we don’t take money from the federal government,” he said, noting that the college was given $300,000 by one donor specifically on that basis.
Faithful, With an Exit Plan
Like Christendom, Thomas Aquinas College (TAC) in Santa Paula, Calif., is one of many small Catholic liberal arts colleges well known for faithfulness to the magisterium. But while Christendom decided to opt out of federal funds in the 1980s, TAC concluded it had the institutional structure and legal guarantees to accept Title IV funds.
“We’ve been doing this for 30 years,” said Gregory Becher, TAC’s director of financial aid. “We haven’t had any problems, it has worked well for us, but we do monitor it continually because we would do nothing to jeopardize our Catholic mission.”
Becher explained that the college gained the confidence to use Title IV funds after the U.S. Supreme Court case Grove City College v. Bell, which drew a distinction between an institution receiving Title IV funds for its programs and federal loans made directly to students who apply it to an educational institution.
“It drew a clear line that [a student’s] participation in a student-loan program did not subject a college to certain federal laws,” he said.
However, Becher said that TAC already has an exit strategy developed, where it would “immediately” enter into an agreement with a private bank to provide students with loans in the event any government regulations jeopardize the college’s ability to receive Title IV student loans and be faithful to its mission.
Key to making this possible is how TAC structures student financial assistance. The college has formulas for determining the “maximum effort” to ask from students and parents for their financial contribution. It then asks students to borrow a “fixed amount” each year: $3,250 freshman year, $4,250 sophomore year, $5,250 junior year and $5,250 senior year. This caps a TAC graduate’s debt at $18,000.
The college leaves it up to the student where he obtains the necessary loans.
“He can borrow it from a bank; he can borrow it from his uncle; he can borrow it through the federal student-loan program,” Becher said.
Whatever difference remains between the student loans and the student and parents’ contribution is made up by TAC’s institutional grants.
Becher added that TAC does not foresee any need to change the fixed loan amounts should its ability to accept federal student loans disappear overnight.
“We would just seek to do that through a private bank arrangement.”
Blazing a Trail
Wyoming Catholic’s decision on Title IV student loans comes at a much different time for the Catholic Church than the years of the Reagan administration. The college is already a partner to the Church’s religious-liberty battle with the Department of Health and Human Services’ mandate that employers provide contraception in their health plans.
Wyoming Catholic is a co-plaintiff with the Diocese of Cheyenne and three other local Catholic organizations in a lawsuit against the mandate.
Roberts said the college believes that it has a viable alternative to the federal student-loan program that makes it worth not taking the Title IV route.
“From the students’ perspective, nothing really changes,” Roberts said. The college already funds student loans at 5.5%, a rate identical to federal student loans. It plans to continue the program and has partnered with a couple of private banks that are willing to offer loans to students.
“From the college’s perspective … the ability of a couple of private banks to offer loans to our students actually benefits the college in the way that the federal money flowing in would benefit the college: that is, we get the tuition money right away.”
Wyoming Catholic’s own loans to students are deferred until six months after graduation, at which time interest begins to accrue. However, the bank loan’s interest begins to accrue from day one. Roberts said the college is looking at ways to subsidize the cost of the private loan’s deferral so that students “don’t see that interest rate pile up.”
Wyoming Catholic caps a graduate’s total debt accumulation at $19,000. However, Roberts said that the average student debt is $14,500, with a default rate of less than 1%, which gives the banks confidence in underwriting the loans.
The plan is to create a million-dollar “St. Thomas More fund” within the next few years, which will fuel the college’s ability to give need-based grants and merit-based scholarships to students.
But the key to this decision has been the support of parents, students, alumni and benefactors, Roberts said. Approximately 80% of respondents told the college in a survey they supported the decision not to accept federal student loans, and their financial generosity has been the vote of confidence.
Roberts said, “If we didn’t have particularly those merit scholarships and increase in the grants, I’m not sure we could have made this decision with respect to the marketplace.”
Peter Jesserer Smith is the Register's Washington correspondent.