More than one in every five borrowers of federal student loans who attend for-profit colleges default within three years of beginning repayment, new figures that were to be made available today by the U.S. Department of Education show.
Historically, the government has reported such figures in terms of how many students default within two years — a figure that stands at 6.7 percent of student borrowers overall and about 11 percent at for-profit schools.
But the new three-year numbers, though preliminary, give a clearer picture of whether a student at a particular school will default, so the government will soon begin using them to help decide which colleges qualify for taxpayer-supported student-aid programs.
Currently, schools with default rates of more than 25 percent for three straight years can be disqualified, but experts argued that schools were gaming the two-year figures. So starting in 2012, colleges will be judged on how many students default within three years of starting repayment, though the new threshold default rate for sanctions will be 30 percent instead of 25 percent.
Nearly 12 percent of borrowers who began repayment in fiscal 2007 defaulted within three years — up from 9.2 percent for 2006.
But at for-profit colleges, the rate was 21.2 percent within three years, The Associated Press calculated from the government’s data.
That was up from 18.8 percent for fiscal 2006. More recent overall figures aren’t available, though experts generally presume default rates increased during the recession.
Harris Miller, president and chief executive of the Career College Association, representing for-profit colleges, said the increase reflects the poor economy. He said high default rates don’t measure a school’s quality and noted that his group’s members enroll large numbers of low-income students.
“If you accept low-income students, you’re going to have high default rates,” he said. “It has nothing to do with whether you’re for-profit or not.”
For-profit colleges are attracting a surging proportion of federal student-aid dollars, AP reported last month, reflecting the rising share of low-income students they educate. But critics say that’s no excuse for higher default data.
