By Kevin Murphy
KANSAS CITY, Missouri (Reuters) - A private, four-year Missouri college is so concerned about mounting debt of college graduates in the United States that it no longer will take students who insist on taking out loans.
The policy on loans set by College of the Ozarks, an evangelical Christian school of 1,400 students located in a rural area near Branson, Missouri, may be a national first, according to Roland King, vice president for public affairs at the National Association of Independent Colleges and Universities.
College of the Ozarks is unusual, however.
All students work on campus, and they do not pay tuition, said Jerry Davis, president of the southwest Missouri four-year school.
Ninety percent of each entering class at the college must demonstrate financial need, according to the school's website, which says that tuition is covered by credits for campus work, along with any federal and state aid and a college scholarship, if necessary.
"We are basically just trying to look out for the students' interests," Davis said. "Kids nowadays are not very sophisticated with money. Debt is a big problem all over the country."
About two-thirds of all undergraduates at four-year colleges in the United States take out loans, finishing with an average debt of $22,656, according to FinAid.org, a widely- cited resource on school financial aid.
Americans now owe more than $1 trillion in student loan debt, and the level of delinquency on the debt is rising.
The rate of defaults on student loans was 4.5 percent in the fourth quarter of 2012, down from 5.2 percent in the year-ago quarter but still nearly twice the level before the 2008-09 Great Recession, according to a report released on Tuesday by credit rating agency Moody's Investor Service.
Some lawmakers in the U.S. Congress are starting to compare the situation with the early days of the housing crisis and are calling for government action.
College of the Ozarks, which was rated the best education value among Midwestern regional colleges by U.S. News and World Report, no longer cooperates with students or banks in covering costs of attending college with a loan, Davis said.
For instance, a bank may contact the school to certify that a student is enrolled there, he said.
School officials said 99 current students would be affected by the change because they received private loans to help offset boarding or other costs.
"This college has a very low percentage of students graduating with debt, but it has come up a little and we just don't think that is a good idea," Davis said. "This a work college, not a debt college." The school years ago stopped taking students who wanted to get public loans.
At College of the Ozarks, nicknamed Hard Work U, students work across campus in cafeteria, housing, maintenance, landscaping, agricultural and other jobs. The school has working hog and cattle farms, gardens, lodging and a restaurant.
Students work part-time during the school year and most hold 40-hour per week jobs during summers to cover the cost of room and board. Some also work in nearby Branson, a major tourism draw that specializes in music and theatrical shows.
Davis said the school will create more work opportunities for students who have depended on loans. They can also get jobs off-campus in summer to save up money, he said. The school will waive its $25 weekly summer dorm fee for students who work in Branson, he said.
Davis said he is confident the college can accommodate all students, but that those who insist on taking out loans will have to find another school. The college has a $355 million endowment and has helped some students with medical, dental and other essential expenses when necessary, he said.
"There isn't anything that really parallels what they are doing," said King of the national college association. "Student debt is such a hot issue and they are looking at any way they can to ease the load."
Krystal Ericson, a junior at College of the Ozarks who works as a server at a campus restaurant, said she has never needed a loan. She said the school's decision on loans will require every student to work and save more.
"I can see it being a problem for some students," Ericson said. "Taking away the student loan may cause them to think more carefully about their options. They will have some choices to make."
(Reporting By Kevin Murphy; Editing by Greg McCune and Leslie Adler)