The analysis gives fuel to for-profit critics who have lobbied for the Obama Administration to institute “gainful employment” rules that would limit or deny federal aid to colleges and universities where the three-year default rate is 30 percent.
The Association of Private Sector Colleges and Universities released a statement in response to the federal report that said the organization was “disappointed” by the increase in three-year default rates, but said the analysis was based on “speculative numbers, not actual rates.”
“At the same time, we must remember that cohort default rates tend to rise and fall with the economy and the ability of borrowers to get and keep good jobs and incomes,” the organization said in its statement, adding that its student population often consists of the “economically disadvantaged, and unfortunately this fact becomes most pronounced in difficult economic times.”
APSCU criticized ED officials for releasing three-year loan default rates without “an analysis of default rates based on schools’ student population demographics.”
For-profit college advocates said the latest loan default numbers are a dishonest attempt by the federal government to discredit successful schools and implement “gainful employment” regulations.
Michael Platt, CEO of Kansas-based PlattForm Advertising and a consultant to several for-profit colleges, said that middle and low income students who attend for-profit schools “will probably suffer a little more [during difficult economic times] than the person born with the silver spoon in their mouth. What [ED] wants to do is ignore the data showing that everyone is having a harder time repaying their loans.”
Platt called the push for “gainful employment” rules “insidious,” and said the regulations would likely be challenged in court. He said that would be “great news” for for-profit schools, believing the regulations would be struck down by a judge.
Sen. Tom Harkin, D-Iowa, chairman of the Senate Committee on Health, Education, Labor, and Pensions, and a longtime advocate of the federal “gainful employment” rules, said the latest three-year default rates “paint a troubling picture of life for students after they leave a for-profit college.”
Harkin added that “students who attend for-profit colleges are dramatically worse off after they leave than students at private or public nonprofit schools.”
The climbing default rates, he said, make it “clear that many of these education companies and their Wall Street owners are ripping off students and taxpayers to pad their own pockets.”