36% of for-profit grads repay loans

Only 36 percent of for-profit college students repay their loans, compared to 54 percent of public college students and 56 percent who attended private non-profits, according to advocacy groups cited in the New York Times. A new Education Department report lists “startlingly low” repayment rates at for-profit colleges.

. . . 33 of the 86 Corinthian Colleges’ Everest locations had repayment rates of less than 20 percent — and at several, the rates were less than 10 percent.

At the headquarters of the University of Phoenix, the nation’s largest for-profit education company, the repayment rate was 44 percent, compared with 38 percent at DeVry and 27 percent at Kaplan University, a unit of the Washington Post Company.

Proposed new regulations limit enrollment at for-profit programs with loan repayment rates under 45 percent and cut loan eligibility if the repayment rate falls under 35 percent. Only 5 percent of for-profit programs, accounting for 8 percent of students, would lose federal student aid, the department estimates.

I’m surprised that repayment rates are so low in non-profit higher education.

For-profits are only part of the problem, write Daniel L Bennett and Zac Bissonnette in Forbes. “Colleges of every stripe are soaking up societal resources and saddling students with debt.”

In their thirst for the blood of the institutions that are preying on less than 10% of all students, Congress and other critics are often ignoring similar exploitation by nonprofit institutions that enroll more than 90% of postsecondary students.

For-profits disproportionately enroll high-risk students — low-income, black and Hispanic, older — who are less likely to complete a degree, get a decent job and pay back their loans. But public and nonprofit higher education also enrolls lots of these students, Bennett and Bissonnette write.

Less than 35 percent of students at “noncompetitive” colleges earn a degree in six years; the rate is 40 percent for students at “less competitive” colleges. Edward Waters College and Southern University at New Orleans have “single-digit graduation rates,” they write.

Loan repayment rates would soar if would-be students had to demonstrate college readiness to qualify for aid. But there is no political will to cut off the academically unprepared, who are likely to be low-income, black or Hispanic and products of inferior K-12 schools.

Also on Community College Spotlight.

Update:  Students who’ve asked for more time to repay loans are counted as not repaying at all, notes Inside Higher Education.

But what disturbed officials at several for-profit colleges was that the department’s proposed method of calculating repayment rates also seemed to penalize institutions if their borrowers had taken advantage of two other programs that the Education Department has aggressively promoted as legitimate alternatives: income-based repayment and loan consolidation.

These students are considered non-payers, unless they’re paying down the principal of their loans.

If loan repayment is used to judge a college’s value, some non-profits will be in trouble, Inside Higher Ed points out.

For the 89 historically black colleges in the department’s Excel spreadsheet, according to one estimate, the mean loan repayment rate was 20 percent, and a full 93 percent fell below the 35 percent threshold that would make for-profit colleges ineligible for aid under the department’s scheme.

Devry Inc.’s Ross University School of Medicine has a 16 percent repayment rate, according to the report. That’s not much worse than Harvard Medical School and Tulane University’s medical school both at 24 percent, and the University of Chicago’s Pritzker School of Medicine at 22 percent.

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Comments

  1. “While reliable data is not publicly available, nonprofit colleges also spend large sums of money on marketing. This often includes billboard advertisements, direct mail, recruiting trips and building fancy dorms and recreation centers”….Also, colleges often justify money-losing sports teams on marketing grounds.

  2. “I’m surprised that repayment rates are so low in non-profit higher education.”

    Why would you be surprised? These repayment rates at both for profits and nonprofits are shameful, but they are consistent with the type of society that we have become. There is no shame or guilt in nonpayment of debts.

  3. I’m surprised that repayment rates are so low in non-profit higher education.

    I’m not, although I am surprised that we aren’t using this opportunity to slam down on both non-profits and for-profits.

    It’s pretty clear that holding demographics constant leads to equivalent default rates.

  4. Is the repayment rate consistent with employment rates for recent graduates of the various types of schools?

  5. I’d like to see the data further broken down by majors… I’d wager that the numbers for liberal arts majors in non-profits are close to the overall numbers of for-profits. I’d also guess that the low repayment rate from for-profits is largely due to the higher percentage of useless liberal arts degrees… and not due to their for-profit status.

  6. I’d also guess that the low repayment rate from for-profits is largely due to the higher percentage of useless liberal arts degrees… and not due to their for-profit status.

    Are you kidding or is there something I don’t know about for-profit colleges? I’d be very surprised to learn they churn out even the tinest number of liberal arts degrees. For profits focus on certificates and associate arts degrees, I thought, focusing on people who aren’t interested in academics but in jobs.

  7. What does “repayment” mean, anyhow? Is the person who winds up paying back 80% of the loan lumped together with the person who winds up paying back 0% of the loan?

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  2. […] balances that will never be paid, and training whose value is highly questionable. A study cited in this post indicates that only 36% of the for-profit graduates actually repay their loans. (What does […]