Adding weight to the mounting pile of evidence against for-profit institutions, a new report from the National Bureau of Economic Research finds a grim future for students who attend for-profit schools.
The study, written by a trio of Harvard researchers, asked a fundamental question about the nature of the for-profit sector: Are these institutions “nimble critters” smartly capitalizing on the increased demand for college degrees by providing educational opportunities to students who would normally be shut out of higher education, or are they “agile predators” who target low-income and disadvantaged students in order to line their pockets with government money?
To find the answer, researchers compared the experiences of students who attend for-profit schools with peers of similar socioeconomic and demographic backgrounds who attend community colleges or other public or private non-profit institutions. What they found wasn’t pretty: Today, for-profit students account for 47% of all loan defaults. Indeed, one in four for-profit students will default on their loans within three years—as opposed to 8.7% of students at non-profit four-year institutions.
Why do so many for-profit students default on their loans? Well, to start, studies have shown low-income students enroll in for-profits at four times the rate of other students. Add to that the fact that they are charged more tuition than students at other comparable non-profit institutions—on average, $13,000 to $16,000 per year, nearly double the $8,000 charged by the average public, in-state four-year undergraduate institution—and it’s easy to see why they take on more student loans to begin with.
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