Repaying student loans was difficult for the 25 percent of students who defaulted within three years of beginning repayment. According to the Department of Education, the one thing these students had in common is that they had all attended for-profit colleges.
For-Profit Students Twice as Likely to Default on Loans
New data released on Friday by the Department of Education revealed that not only have one quarter of all borrowers with federal student loans at for-profit colleges defaulted, but these students will be twice as likely to default as their counterparts at non-profit institutions.
Further, those who took out student loans at for-profit schools were responsible for nearly half of all federal student loan defaults over the three-year period. This occurred even with students enrolled at these institutions making up less than 15 percent of college students nationwide.
For-Profit Schools Receive More Unwanted Attention
For-profit schools have already faced great scrutiny for encouraging students to default on loans. The recent news will undoubtedly draw more unwanted attention to the way they handle their financial aid.
But financial aid isn’t the only thing for-profits have been criticized for. According to a Senate report released last year, the average tuition at for-profit schools is nearly twice that of in-state tuition at four-year public colleges. Also, it’s more than five times the average tuition at community colleges.
Because of their high tuition costs, students who otherwise could not afford to attend are forced to take out student loans, even if it means they are to default on them after graduating.
Slowing Financial Aid to For-Profit Schools a Possibility
In order to stop for-profit schools from their activity, the government has threatened to stop issuing them federal financial aid. But the argument against this strategy is that students will suffer for what the schools have done.
As a result, the government has decided to take a closer look at what students are eligible by considering the “gainful employment rule,” which would analyze students’ debt-to-income ratio and determine whether students could pay down the principal on their loans. To date, the rule has yet to take effect.
This means it will be up to you as a student to decide whether you will be able to repay the loans you take on. A good way to do so is to ensure the loans sought actually match your earning potential. If not, you could find yourself pulling money out of your savings accounts, or worse, defaulting, because you didn’t earn enough to cover your debt.
[...] this approach to distributing loans, it has managed to maintain low default rates. In a time where 25 percent of students at for-profit schools are defaulting, Tidewater only had 7.6 percent of its students default on loans in [...]
[...] this approach to distributing loans, it has managed to maintain low default rates. In a time where 25 percent of students at for-profit schools are defaulting, Tidewater only had 7.6 percent of its students default on loans in [...]