Network News

X My Profile
View More Activity


Posted at 1:37 PM ET, 09/13/2010

Student loan default rates increase -- especially at for-profit schools

By Valerie Strauss

The national student loan default rate is rising, according to new statistics released today, and students who obtain loans to attend for-profit schools are more likely to default than those in nonprofit institutions.

Education Secretary Arne Duncan announced today that the national “cohort default rate” for fiscal year 2008, the latest available data, is 7 percent, up from 6.7 percent from fiscal year 2007. Here are the breakdowns:

Public institutions -- Increased from 5.9 to 6 percent
Private nonprofit institutions -- Increased from 3.7 to 4 percent
For-profit institutions -- Increased from 11 to 11.6 percent for for-profit schools.

Though for-profit schools have the highest default rates, they get a disproportionate share of federal aid dollars.

According to a July article in The Chronicle of Higher Education, which has the headline “Government Vastly Undercounts Defaults,” for-profits educate less than 10 percent of students but received close to a quarter of Pell Grant and federal student loan dollars in 2008-09.

The Education Department reported that in 2008-09, students at for-profit schools represented 26 percent of the borrower population and 43 percent of all defaulters.

"While for-profit schools have profited and prospered, thanks to federal dollars, some of their students have not,” Duncan said in a statement. “Far too many for-profit schools are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use. This is a disservice to students and taxpayers and undermines the valuable work being done by the for-profit education industry as a whole."

The default rate released today, the Education Department said, represents the cohort of borrowers whose first loan repayments came due between October 1, 2007, and September 30, 2008, and who defaulted before September 30, 2009.

During this time, almost 3.4 million borrowers entered repayment, and more than 238,000 defaulted on their loans, the department said. They attended 5,860 participating institutions. Borrowers who default after their first two years of repayment are not measured as defaulters in today’s data.

The Obama administration pushed through a major overhaul of the student loan program this year in an effort to reduce the burden on students. It is also proposing new regulations -- which are needed -- to more closely monitor federal aid that goes to for-profit colleges.

Follow my blog every day by bookmarking washingtonpost.com/answersheet. And for admissions advice, college news and links to campus papers, please check out our Higher Education page at washingtonpost.com/higher-ed Bookmark it!

By Valerie Strauss  | September 13, 2010; 1:37 PM ET
Categories:  College Costs  | Tags:  college costs, for-profits and students loans, loan default rate increases, student loans, students and loan student rate  
Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati   Google Buzz   Previous: Class size DOES matter after all
Next: Obama ed policy lacks scientific support -- Willingham

Comments

The first step in making a wise decision about how to pay for college is fully understanding what your cost at a particular institution would be.

Sophisticated net price calculators will provide prospective students insight into their aid eligibility and help them avoid debt.

More than 70 colleges are using the advanced ThinkAhead Net Price Calculator to help students avoid unnecessary debt including the University of Arkansas of Fayetteville, AR; Albright College of Reading, PA; West Virginia University of Morgantown, WV; Ohio Christian University of Circleville, OH; Ohio Northern University of Ada, OH; Baldwin-Wallace College of Berea, OH; Newman University of Wichita, KS; the University of Tampa of Tampa, FL; Dean College of Franklin, MA; and Franklin Pierce University of Rindge, New Hampshire.

Offered in English and Spanish, this technology from Student Aid Services is the only NPC that calculates all federal, more than 90% of state, and all institutional merit and need-based aid along with Post 9/11 GI Bill benefits, work-study programs, and government education loans.

All post-secondary institutions that offer students federal aid have until October 2011 to meet the mandate to post an NPC online. The federal requirement means students will be able to get personalized estimates of aid eligibility and net cost at institutions across the nation. Depending on the type of NPC an institution uses, the ability to accurately and completely inform prospective students about their aid eligibility and costs may vary widely.

Colleges using Student Aid Services' NPC have a very effective means of arming students with personalized, detailed net price assessments, and that knowledge gives those students, and often parents, an invaluable start on planning. These institutions are ahead of the curve when it comes helping families afford colleges and avoid unnecessary student loan debt.

Posted by: MFallon1 | September 13, 2010 3:41 PM | Report abuse

Anyone with a brain can see where this is going.

The government is going to declare a "crisis", and allow people to, without getting a 1099-C, walk away from their student loans.

Just like they did for all the fools who bought houses they could not afford.

Guess who gets to pay for this? That's right! The hard working, responsible people who did not take out student loans, or only took small ones, and went to a college that they could afford.

Just like the hardworking, responsible people who did not take on unrealistic mortgage obligations are getting to bail out the under water homeowners.

Ain't Obama's America great???????

Posted by: JERRYB1 | September 13, 2010 5:19 PM | Report abuse

Ok, what's wrong with this picture? First, it is all about jobs. In its inimitable fashion our government is making a statement about what's happening but, using data that is already two year's old. Why do budget crises and fiscal surprises occur in Washington? Because no one does anything on time in federal, state OR local government. Government has become so adept at misusing statistics and not having anyone call them out on it (you listening press?) that they actually believe their own nonsense.

Want some currency on your news? If you want a bigger surprise poll the graduated recipients of student loans how the employment picture is going and how many have filed for a redo or extension and you’ll get the picture that as usual, the government doesn't realize that there is about a 30% delinquency rate on student loans and the amount of defaults will soon double when the kids can't make ANY payments of any size.

Posted by: walkerrussellc | September 13, 2010 5:25 PM | Report abuse

Ok, what's wrong with this picture? First, it is all about jobs. In its inimitable fashion our government is making a statement about what's happening but, using data that is already two year's old. Why do budget crises and fiscal surprises occur in Washington? Because no one does anything on time in federal, state OR local government. Government has become so adept at misusing statistics and not having anyone call them out on it (you listening press?) that they actually believe their own nonsense.

Want some currency on your news? If you want a bigger surprise poll the graduated recipients of student loans how the employment picture is going and how many have filed for a redo or extension and you’ll get the picture that as usual, the government doesn't realize that there is about a 30% delinquency rate on student loans and the amount of defaults will soon double when the kids can't make ANY payments of any size.

Posted by: walkerrussellc | September 13, 2010 5:26 PM | Report abuse

Mr. Duncan said, "While for-profit schools have profited and prospered, thanks to federal dollars, some of their students have not,” Duncan said in a statement. “Far too many for-profit schools are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use...."

This is not news. I have first-hand knowledge that it's been happening since the for-profits were allowed into the student financial aid game. I haven't read the proposed new guidelines but I'll bet USED still has not set a minimum job placement rate for these schools. There should be a minimum for placing students in jobs for which they trained.

Posted by: cfin1946 | September 14, 2010 10:26 AM | Report abuse

There are many ways federal student loan brrowers can postpone or lower their monthly payments to avoid default but sadly, too many borrowers just don't know about these options because they don't receive any proactive payment advice. Unfortunately, at the same time that more and more borrowers are struggling, there's been a loss of federal investment in proactive communications to borrowers that were proven to be effective. Read more at http://www.asa.org/pdfs/corporate/approaching_the_tipping_point.pdf

Posted by: ALanza | September 14, 2010 11:33 AM | Report abuse

I am a Human Resources professional, and I manage my company's tuition reimbursement plan. We have an extremely generous program. We reimburse 100% for an A or B and 70% for a C, and we have no annual maximum. We actively encourage our employees to further their education either in a traditional setting or in a "virtual campus" online, but we won't reimburse for-profit tuition.Our experience has been that for-profit institutions like Phoenix aren't a very good investment. Having not attended one personally, I can't comment on their quality of education, but I can tell you that fair or unfair their degrees are not respected in the business community. A survey of several thousand HR people found that only 22% said it would make no difference to them or that they would prefer a candidate from a for-profit online school over an identical candidate with an online degree from a program operated by a traditional school.Basically the return on investment isn't there. Why would we put up money for a de-valued degree when there are online programs for similiar amounts of money that are more respected? We provide our employees with the resources to find programs that work for them, and we don't require that the schools be public, but they HAVE to be not-for-profit.

Posted by: diesel1975 | September 14, 2010 10:30 PM | Report abuse

The comments to this entry are closed.

 
 
RSS Feed
Subscribe to The Post

© 2010 The Washington Post Company