Right on the heels of the Stafford Subsidized Loan rate increase comes more distressing news from student education finance. Mary Beth Marklein, Jodi Upton and Sandhya Kambhampati report in USA Today that in 265 colleges disseminate over 40 US states, the District of Columbia and Puerto Rico, more students default on their own student loans than actually graduate with a degree.
Nearly 1 / 2 of the schools are operated by for-profit companies, long derided by a few legislators and education critics as being beholden to their shareholders rather than their students. Vocational schools, frequently the first choice of low-income and minority students, constitute about one-third from the list. The findings are based on analysis of school student data collected through the US Department of Education.
“These colleges should trigger a red flag in the minds of prospective student borrowers – as well as their parents,” says Andrew Gillen, research director for Education Sector, a non-profit, non-partisan think-tank on education policy that gathered the government data. “Many students at these colleges will no doubt take out loans, graduate and get good jobs. But the high default rates and lower graduation rates suggest that many will not.”
The analysis covers data only from schools where a minimum of 100 students began loan repayments in 2009 which enrolled a minimum of 250 students within the 2009-10 academic year. As the Education Sector report, titled “Indebted and in the Dark,” included a summary of 514 schools with problematic default-to-graduation ratios, USA Today narrowed their email list down to 256, choosing only to focus on schools where a minimum of a third of the students come with an outstanding student loan.
Leaders of community and for-profit colleges long have argued that graduation and default rates convey more to do with the challenges faced by their students, who are among the neediest and many likely to struggle academically, compared to the quality of their institutions. Also, each number counts different populations and applies simply to subsets of students – those who borrow and people who began at the college as first-time, full-time students. Nevertheless, the 2 data sets would be the federal government’s “best estimate” for identifying, and holding accountable, schools that are eligible to receive federal student aid, Gillen says.
After last summer’s Senate investigation from the for-profit education industry found that for-profit schools typically had lower graduation rates than not-for-profit schools, the Federal government sought to restrict federal education funding likely to schools within the sector. However, a few of the provisions, which were set to go into effect last July, were trashed after a federal judge found these to be illegal.
The regulations, that have been scheduled to go into effect this Sunday, asserted job training programs needed to meet 1 of 3 standards in order to continue qualifying for government funds: 35% education loan repayment rate, loan payments not to exceed 12% of yearly earnings, or 30% of discretionary income, whichever is gloomier.
In his decision, Judge Rudolph Contreras of Federal District Court in Washington known as the rules discriminatory, arbitrary and punitive.