A growing number of community colleges are exiting the federal student loan program, leaving nearly a million students without access to low-cost options to pay for school, according to a new study from the Institute for College Access and Success.

The advocacy group found that nearly 1 in 10 community college students in 32 states have no access to federal student loans. Nearly half of these students are in California or North Carolina. In eight states, including Alaska, Alabama and Louisiana, more than 20 percent of students attend schools that have opted out of the federal government’s student loan program.

In the two years since the institute last looked at community college participation trends, 15 schools have left the loan program and seven schools have joined — a net decline of eight; today, nearly a quarter of the nation’s 1,097 community colleges do not offer federal student loans.

Minority students are disproportionately impacted when schools opt out. In Alabama, for example, 61 percent of African-American students lack federal loan access compared to 34 percent of white students. Roughly 86 percent of Native American students in Montana lack access to federal loans, compared to 2 percent of their white peers. Community college students in small towns and rural area are more than twice as likely as their counterparts in cities and suburbs to attend schools that block access to federal loans, according to the report.

“A lot of community colleges think that their relatively low tuition means that students don’t have to borrow, so opting out of the loan program isn’t that big of a deal,” said Debbie Cochrane, research director at the institute and co-author of the report. “But the cost of college isn’t limited to tuition. It also includes textbooks, transportation and living costs. And very few community colleges students get those costs covered by grants.”

One year at a community college, including tuition, fees and living expenses, costs an average of $7,160 for a full-time, in-state student in the 2015-2016 school year, and that’s after taking grants, scholarships and tax credits into account, according to the College Board. While that’s roughly half the amount the same student would pay at the average public four-year university, it is still a lot of money for those with modest means. A vast majority of full-time community college students need financial aid to cover costs, and just 2 percent have their needs fully met by grants, according to the report.

Most community college students do not take out students loans — just 37 percent of people who complete an associate’s degree have borrowed for it — but policy analysts at the institute say students who need the help should have access to the most affordable options. Interest rates on federal loans are the lowest they’ve been in a decade. Federal Stafford loans for undergraduates carry a 3.76 percent interest rate, while the rates on loans offered by banks and other financial firms can climb as high as 10 percent. Private student loans also have inflexible repayment terms and weaker consumer protections than federal loans.

Community colleges often are reluctant to participate in the federal loan program out of concern that students will borrow excessively and fail to repay the money, said James Hermes, associate vice president of government relations at the American Association of Community Colleges. Schools that amass high loan default rates face the threat of losing access to other types of federal financial aid, like Pell grants, upon which so many community college students rely.

“If you have a campus where 10 percent of students are taking out loans, while 70 percent of your students are getting Pell grants, and you have a default rate that’s creeping up … you don’t want the defaults of a small percentage of students to imperil the financial aid eligibility of a substantial portion of the student body,” Hermes said.

Paul D. Camp Community College in Virginia for years shied away from the federal loan program to avoid putting the school’s financial aid status at risk, said Joe Edenfield, the school’s vice president of administration and technology. Administrators had a change of heart last year as they witnessed more students having a difficult time covering costs. The school charges about $144 per credit hour, making it one of the most affordable options in the state. But Edenfield said some middle-income students, who are not poor enough to qualify for the maximum Pell grant award but are not wealthy enough to write a check to cover the entire semester, were stuck.

“Ultimately, it comes down to student needs and trying to meet those needs the best we can,” Edenfield said. “We sat back and started looking at how we do things and decided this is something we have not done, and it’s an opportunity for us.”

Although federal statute prevents colleges and universities from setting limits on how much students can borrow, schools can encourage students to seek more counseling before taking on debt, Cochrane said. Hermes, of the community college association, said institutions would feel more comfortable entering the the federal loan program if Congress were to relax the rules about counseling.

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