Federal Student Loan Defaults Up, Especially at For-Profit Schools

New data from the Department of Education shows that the rate of federal student loan defaults has increased more sharply at for-profit institutions – which have come under fire in recent years for this very issue – than at other institutions of higher learning.

Student default rates increased slightly at public institutions (from 6 percent to 7.2 percent) and private institutions (from 4 percent to 4.6 percent), but more steeply at for-profit schools (from 11.6 percent to 15 percent).

During the past few years, for-profit colleges have faced significant scrutiny by the federal government and civil rights groups for their recruiting practices – which often target low-income and minority students, women and veterans – and for failing to educate students for “gainful employment,” leaving students with a mountain of student-loan debt while the schools themselves make millions.

Civil and human rights groups have been particularly concerned that some for-profit institutions might be taking advantage of low-income, women, and minority students who often do not have other options for post-secondary education.

“[T]he civil and human rights community supports policies that maximize meaningful post-secondary educational and equitable employment opportunities. Unfortunately, too many for-profit college recruitment practices targeted at vulnerable students appear to sacrifice ‘quality’ college opportunities in favor of ‘quantity’ profits for the institutions,” said The Leadership Conference on Civil and Human Rights, in a February letter to the Department of Education.

In June, the Department of Education released its final rule intended to hold for-profit schools and career training programs accountable for educating their students and preparing them for employment. Under the rule, career training programs or for-profit schools that fail to demonstrate that their programs are preparing students for “gainful employment” would risk losing their eligibility to participate in federal education grant and loan programs.