“We completely disagree with that idea that students are worse off without [access to] federal loans,” Billy said. “Particularly when you look at the demographics of our students — students who have lived with generational poverty, unemployment, who have no experience with credit — that’s a recipe for disaster when it comes to loans. Tribal colleges will do everything they can to make their students graduate debt-free.

But Billy told BuzzFeed News that most tribal schools also firmly believe their students are better off without federal loans of any kind — so much so that they have decided not even to make them an option.

But the vast majority of tribal colleges have cut off access to the loans. That’s in part because colleges fear the consequences of too many students defaulting on their loans, said Carrie Billy, the president of the American Indian Higher Education Consortium, a lobbying group.

Nationwide, 90% of community colleges offer federal student loans to students. And advocacy groups have decried the other 10% for denying their students the ability to borrow.

But it also meant that of America's 32 tribal colleges — schools controlled by Native American tribes — only three now allow federal loans for their students. It's a particularly striking situation, because tribal colleges, which are funded by the federal government, serve some of the country's neediest students.

By the time United Tribes Technical College was named the fourth-worst school in the country for student loan defaults last week, the tribal school had already made it impossible for students to borrow money from the federal government. For United Tribes Tech, cutting off the student loan spigot was a last resort — the only way to save itself from government penalties that would bring financial ruin.

Tribal colleges, like community colleges, are relatively inexpensive — around $6,000 a year, low enough that a $5,750 annual Pell Grant will cover most of the cost of tuition. But community college students sometimes borrow money to help pay for living costs and expenses like textbooks. That option isn’t available for tribal college students.



Those students often face staggering obstacles that make them more less likely to repay student debt, Billy said. Eighty-three percent of them are reliant on Pell Grants, which are only given to low-income students, compared to just 40% of college students nationally. Many tribal college students have little to no experience with borrowing money or credit. They’re also mostly first-generation college students.



Instead of offering loans, tribal colleges try to fill the gap themselves, by providing tuition waivers and gas and food vouchers, and through scholarships offered by tribes.

Leander “Russ” McDonald, the president of United Tribes Tech, said the school’s loan default rate has been driven up by the fact that so many of its students come from rural areas, especially reservations. They return home after graduation to some of the country’s most economically depressed places, hoping to help their communities but finding that even with their degrees, there aren’t enough jobs to go around.

United Tribes Tech had no choice but to pull out of the loan program, said McDonald. For three years, the tribal college on the fringes of Bismarck, North Dakota, had posted default rates of more than 40%, numbers that made it consistently among the worst in the country.

The federal government can end all federal aid to colleges where large numbers of students are defaulting on their loans. Because tribal schools rely on Pell Grants, Billy said, “They can’t do anything that will jeopardize their participation.”

Losing the ability to receive Pell Grants, McDonald said, “would have certainly shut us down”: Three quarters of the school’s students rely on the grants.

McDonald says the school had spent years trying to repair their default rates in other ways. They had an employee that focused on working with student borrowers, and when default rates kept creeping up they hired an outside company to essentially act as a debt collector, chasing down students and making sure that they were paying. When that didn’t work, they hired another company to be even “more aggressive” in going after students.

But it was still a steep task for students who had taken on loans to pay them back, McDonald said. "Things are more difficult for our students," McDonald said. "Our average student is 27 years of age and has 2.5 kids."

United Tribes' remedy to cutting off access to loans was to begin offering full scholarships to all American Indian students, essentially footing the bill themselves for any students who do not qualify for Pell Grants and, for other students, filling the small gap between the school's tuition and the grants.

It wasn't cheap: The scholarship program has cost the small tribal college $250,000 so far, McDonald said. But it has also caused the school's enrollment to shoot up by 20%. He's hoping that eventually, the costs will be evened out by the enrollment gains.



