Student Loans And For Profit Schools

Jay Bookman takes our discussion yesterday regarding student loans and extends it into the area of subsidies for for-profit institutions:

In 2009, just 5.2 percent of students who had attended four-year public schools such as Georgia State or the University of Georgia defaulted on their loans. Just 4.5 percent of those who had attended non-profit private colleges defaulted.

However, the default rate among those attending four-year for-profit proprietary schools was 15.4 percent. Between 2007 and 2009, the number of students from for-profit proprietary schools who defaulted on their loans increased by 65 percent. (It’s important to note that some for-profit schools do a good job for their students and have a relatively low default rate. If you have questions, the U.S. Department of Education maintains a database that allows you to check the default rate for each institution.)

Why are the default rates among for-profit schools generally so high? As the schools point out, part of it can be explained by the fact they serve non-traditional students. That’s a valid point. But in far too many cases, those students don’t get the education or the degree that they pay for and end up tens of thousands of dollars in debt to the taxpayer without the means to repay it.

Yesterday I asked why we subsidize all degrees the same way. Given the difference in default rates, the question must be asked why universities – who have a vested interest in accepting all students and seeing that all can borrow money if required – should also be subsidized in the same way, whether or not their students can demonstrate an aggregate track record of being prepared for the job market – and the related ability to repay government guaranteed loans.


  1. Max Power says:

    Why are the default rates among for-profit schools generally so high?

    Because their mission isn’t to educate, it’s to make a profit.

    • saltycracker says:

      The higher default in the non-public schools was brought up yesterday.

      The public schools don’t have a primary objective to educate either, it is empire building.
      The for-profit schools find a gold mine leveraging the students less likely to manage the loans or pay them back.

      The last time GA deadbeat Docs were in the news by degree, the runaway leaders were chiropractors and the bulk of them were from Life Chiro.

    • Doug Deal says:

      If it was about education for state schools, they would find ways to make it affordable instead of overloading on administrative staff and plush amenities.

  2. slyram says:

    In 1992, I was working for Rep. Charles Hatcher and the Department of Education decided to cut hundreds of schools (including a few in the Albany area) because of high default rates. Between the University System and the fine quality technical colleges, Georgians have public school education covered. Some of the for-profit schools are a little too slick for me.

    At one point, there were bartending and other vocation schools in Atlanta that signed up homeless people. School officials told the students that they would be getting a check for a couple thousand dollars without telling them that the money was part of a student loan.

  3. saltycracker says:

    In the easy money of sutdent loans one of the interesting contro]laqble expenses is books. They are expensive and very well connected & lobbyed to protect a very lucrative industry. (discloser, havea relative making big bucks in school books).

    The question is asked why electronic book providers are not used more widely. Below is an interesting discussion of the pros and cons of Amazon’s kindle textbook rental program. It appears some areas have a lot of potential and others less so.

    Millions of savings are available but possibly politically withheld.

  4. John Konop says:

    The sad part is many of the degrees from the for profit schools could be part of high school if we embraced Vo-tech education in High School. The most successful school system have an academy style approach for high school in partnership with local JC, colleges…….. If we adopted this approach over the one size fit all 4 year college or you are out failed No Child Left Behind system it would substantially fix the problem. Why not let kids track via the best track for the individual via aptitude over a one size fit all approach?

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