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High Rates of Student Loan Defaults at For-Profit Colleges

Wednesday, September 24, 2014

This week, the Department of Education released new data about student loan default rates – indicating that for-profit college students continue to experience disproportionately high levels of default.

Maura Dundon, senior policy counsel at CRL, issued the following statement:

New data released yesterday by the Department of Education show that for-profit colleges, once again, account for a disproportionate share of the nation's student loan defaults. This poor performance further justifies the need for a strong "gainful employment" rule, which is currently being drafted by the Department.

For-profit colleges are responsible for 44% of all student loan defaults, even though only 12% of students in the country attend for-profit schools. Almost 20% of for-profit college students defaulted during the time period examined by the Department.

For-profit colleges create such a high level of defaults because they mislead students into enrolling in expensive programs that do not prepare them for better jobs. They engage in predatory lending practices and aggressive, deceptive marketing designed to get students to take out student loans that they cannot afford. In return, the schools spend very little on actual instruction compared to their marketing budgets.

Although student loan default rates at for-profit colleges and overall decreased slightly, the total number of defaulting borrowers increased, and default rates still show a long-term upward trend. The for-profit college default rates likely understate the extent of the problem since the schools may manipulate their outcomes.

The default rate data are part of a trend of bad news for for-profit colleges this month. The Consumer Financial Protection Bureau filed a lawsuit against Corinthian College for predatory lending practices. ITT Tech, Inc. announced it may face sanctions from the Department of Education and the Securities and Exchange Commission.

For more information, contact Catherine An at or 202-349-1878.