For-profit college default rate spikes; industry hits back

“We believe that the default rates will go down when the economy improves and the unemployment rate drops,” Moran said, adding that many for-profit college students have “fewer economic and social advantages” than students at public and nonprofit schools.

Some of the most high-profile for-profit colleges experienced the largest student loan default rate increases. The default rate at ITT Technical Institute, which serves more than 80,000 students nationwide, more than doubled, going from 10.9 percent to 22.6 percent, according to the ED statistics.

The University of Phoenix now has a loan default rate of 18.8 percent, up from 12.8 percent when compared to students who began repaying loans in 2008.

The for-profit industry is suing the federal government after ED officials announced in June new regulations meant to ensure that students aren’t graduating from for-profit colleges unqualified for the professional world and burdened with excessive student loan debt.

A college must fail all three of the government’s “performance requirements” in three out of four years before the institution can no longer receive federal loans, according to ED’s new regulations, which take effect in 2015.

Five colleges are in danger of losing eligibility for federal student aid problems after three consecutive years of recording student default rates of 25 percent or more, or 40 percent in the past year. Schools in danger of losing federal aid include Missouri School of Barbering & Hairstyling in St. Louis, Tidewater Technical in Norfolk, Va., and Sebring Career School in Houston.

Allies of for-profit colleges have jumped to the industry’s defense as the Obama administration implements its new “gainful employment rules.”