![]() So, when the loans go bad not only do the borrows lose, you do too. ![]() Given the disproportionate impact of student loan debt and default on Black borrowers, addressing the needs of defaulted borrowers and those most at risk of default can help narrow the racial wealth gap. And remember, you’re probably paying for those defaults since the loans are direct from taxpayers. benefits, student loan default can also hinder access to that additional source of income (Geiman and Taylor 2022). But it’s bad news that federal regulators and lawmakers continue to let for-profits schools and their investors soak up student loans and grant funding when the return simply is not there. It’s good news that default rates are down. It’s almost certainly related too that, according to ED, two-thirds of all students at for-profit colleges “study” exclusively, entirely online, where costs are cheap and the quality is suspect or unproven. One of the reasons that default rates among for-profits are so high is that so few of their students graduate and even when they do, the financial rewards related to the quality of education simply are not enough to pay back the loans. That practice is, over time, sure to distort and drive up the default rates among the schools counted as non-profits, making the for-profits look better by comparison. Loan default rates at for-profits may be even higher than reported because they have actively engaged in practices to sidestep defaults and trigger scrutiny and penalties.Īt the same time, more and more for-profit schools are changing their tax status, sneaking into being “non-profit” schools by selling the school to a non-profit entity they own then hiring the for-profit company to run the school, diverting 80% or more of tuition money back to their former, for-profit owners. Of the 15 schools singled out for potential sanctions due to high default rates this year, 13 were for-profits.īut not even those numbers tell the whole story. ![]() Moreover, the Department does have a rule cutting off access to federal student aid and loans if a particular school’s loan default rate is too high. A 2018 report by a private think tank found that more than half of all borrowers at for-profit colleges (52%) default on their loans within 12 years – half. In other words, for-profit schools serve just 5% of students but account for 22% of all student borrowing and about one-third of all loan defaults.Īnd if you’re inclined to think a 15% default rate does not sound too terrible overall, keep in mind that’s over just three years. ![]()
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