Higher Student Loan Debt, Unemployment Rates for For-Profit College Students

Students who attend for-profit colleges face a much tougher road after leaving school than students at other institutions, according to federal data that was analyzed in a recent report.

The study, conducted by a group of Harvard University researchers for the National Bureau of Economic Research, examined a variety of federal data that tracked student graduation rates, federal student loan repayment rates, student success in securing jobs, and what those jobs paid. The researchers found that students who attend for-profit colleges leave with more debt from student loans, face higher unemployment rates, and earn less compared with similar students at public or private nonprofit schools.

For-profit colleges have come under fire in recent years as enrollment numbers have spiked dramatically. For-profit schools enrolled just 5 percent of all college students in 2001. By 2009, that number had increased to 13 percent. By then, for-profit college students were consuming a quarter of all federal financial aid — which, under U.S. Department of Education rules, is allowed to constitute up to 90 percent of revenue at for-profit institutions — and were responsible for 15 percent of all federal student loan defaults, more than twice the rate of public institutions and more than three times the rate of private institutions.

A federal undercover probe in August 2010 found widespread deception and fraud among recruiters, admissions personnel, and financial aid officers at all 15 for-profit colleges that were investigated. The government cried foul, accusing the schools of enrolling students to get access to student aid dollars, without regard for the ability of students to graduate or earn meaningful degrees and certificates that would help students repay their loans. For-profit colleges said that they often enrolled lower-income or first-time college students that other schools passed on. Such students, the colleges said, were naturally at a higher risk of dropping out and defaulting on student loans.

The undercover investigation of for-profit colleges marked the beginning of unrelenting public scrutiny of for-profit colleges by lawmakers, students, and consumer advocates. But the Harvard researchers wanted to shed new light on the controversy. They asked one central question: are for-profit colleges “nimble critters” responding to a higher demand for college degrees or “agile predators” that target low-income students in order to profit from their taxpayer-funded federal financial aid dollars?


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