College and University Blog
Student Loan Default Rates Sky-High Among For-Profit Colleges
For-profit colleges have been under scrutiny for their aggressive recruiting tactics and alleged violations of federal financial aid regulations, but new data shows that student loan default rates among students who attended for-profits are higher than ever.
On Thursday, February 3, 2011, the United States Department of Education released new data showing that many for-profit colleges leave large numbers of their graduates unable to repay their student loans.
25% of For-Profit College Students Default on Loans within 3 Years
The data, which covers all higher education institutions, found that 25% of for-profit college students whose loans came due in 2008 defaulted within three years. Comparatively, 10.8% of students who attended public colleges and 7.6% of students who attended private nonprofit colleges defaulted in the same timeframe, reports the New York Times.
Because current student loan default measurement standards only track borrowers during a two-year window, the official student loan default rate for students of for-profit colleges who entered repayment in 2008 was 11.6%. Congress has changed the measurement period in response to concerns that the two-year rate was not sufficiently capturing the depth of the loan-default crisis.
Colleges and loan companies were using “default management” techniques that pushed many borrowers with repayment problems beyond the two-year window to improve their default rates, the Chronicle of Higher Education explains.
“You would expect the three-year default rates to be somewhat higher because students have a longer period of time in which to default,” said a Department of Education official who discussed the default data with reporters before it was officially released. "But if the three-year rate seems disproportionately high compared to other sectors, then that may be a sign that institutions in that sector or a particular institution is managing its default rate aggressively.
Melissa Rhone+
Melissa Rhone earned her Bachelor of Music in Education from the University of Tampa. She resides in the Tampa Bay area and enjoys writing about college, pop culture, and epilepsy awareness.