For-profit college default rate spikes; industry hits back

Some for-profit colleges have default rates of more than 25 percent.

Colleges and universities of every kind have seen student loan default rates jump this year, with for-profit schools that have recently come under government scrutiny recording the sharpest increase in defaults.

For-profit colleges and the industry’s lobbyist groups criticized a new report from the U.S. Department of Education (ED), released Sept. 12, that showed 15 percent of for-profit college students have defaulted on their school loans, marking a four-percent increase.

The report focuses on students who should have begun repaying their academic loans in 2009. Overall, the national student loan default rate rose from 7 percent to 8.8 percent.

Officials at for-profit college have long said that their schools – many of them with large online programs – serve low-income groups hoping to earn a degree while working and raising a family. During bad economic times, officials said, high default rates should be expected among those students.

But with for-profit default rates doubling that of public colleges and tripling the rate of nonprofit institutions, industry critics said the government data is more proof that for-profits are expensive and appeal to students who can’t afford the hefty payments.

“The weak economy does not explain the tremendous variation in default rates by type of school,” said Debbie Cochrane, program director at the Institute for College Access & Success (TICAS), a group that operates the Project on Student Debt, which aims to raise awareness of excessive college debt. “These data make clear that students who attend for-profit colleges are at much greater risk of defaulting than students who attend other colleges.”

Brian Moran, interim president and CEO of the Association of Private Sector Colleges and University (APSCU), said that by focusing on student default rates, ED officials are “moving forward by looking in the rear view mirror.”