High default rates
According to formulas established by the Department of Education, students at for-profits default on their loans three times as often as students in private universities and twice as often as those in public institutions. Their ranks constitute 43 percent of all of those who default. More than one in five students who took out loans upon entering a for-profit school in 2009 had defaulted by 2012. In 2010, each of the seven institutions with the most students in default was a for-profit.
Nearly 40 percent of Corinthian Colleges’ students who should have begun to repay their federal student loans in 2008 had defaulted by the end of 2010, the highest rate of any publicly traded company in the sector. Kent Jenkins, a spokesman for Corinthian Colleges, said that Everest has focused on lowering the default rates of their students since then. He says recent cohorts have been doing better.
When challenged to explain their methods, many for-profit schools often say that their results are a product of the compositions of their student populations. Although there are certainly exceptions, often in their healthcare or doctoral programs, for-profits still tend to serve a higher-risk student body that is more likely to be poor, of color and from the first generation in their families to attend a post-secondary institution. More than one-third are at or below the official federal poverty level.
To their credit, for-profit schools have expanded the level of access to higher education in our country. For-profit schools are the fastest growing segment within higher education. As recently as in 2010, they taught 11 percent of undergraduates. Ten years ago, their share amounted to just 4 percent.
They are part of slow but sure trend that has shifted the responsibility for training workers from employers over to post-secondary schools. Individuals who might once have received on-the-job training now borrow to get the same training at a for-profit college.