Report: Students Attending For-Profit Institutions Struggle to Repay Federal Loans

For-profit
colleges
charge students more and have a higher percentage of students who
receive federal loans than do public or private not-for-profit ones, while
significantly under-investing in the instruction of their students, according
to a new report by the National Center for Education Statistics (NCES).

The
NCES report, “Condition
of Education 2011,” found that private for-profit colleges
spend an average of $3,069 per student on academic
instruction, whereas public institutions spend an average of $7,534 per student
and private not-for-profit schools spend an average of $15,215 per student on
instruction.

Yet, four-year undergraduate for-profit colleges
still charge an average net price of $30,900 per full school year, much
higher than both public and private not-for-profit schools. This is because on
average, for-profit institutions spend
nearly 70 percent of their expenses on student services and administrative
costs like marketing.

For-profit
colleges have come under fire for their recruiting practices – which
often target low-income and minority students, women and veterans – and
failing to educate students for “gainful employment,” leaving
students with a mountain of student-loan debt (while the schools themselves
make millions). According to the NCES report, 10.9 percent of students who
graduate from four-year for-profit institutions default on their loans within
two years of starting repayment, which is more than twice the percentage at
public and private not-for-profit schools.

The
Department of Education has proposed regulations under the Higher Education Act that would
protect students from entering into institutions that do not provide them with
education that will lead to “gainful employment.” These regulations will
also protect taxpayers by prohibiting for-profit institutions from prospering
off of federal grant money. The Leadership Conference on Civil and Human Rights has
strongly urged the Office of Management and Budget to approve these new rules
so that for-profit institutions will be held accountable for providing a
quality education to their students.

“The
real bottom line, however, is students and their future,” said Wade Henderson,
president and CEO of The Leadership Conference, in a May 9 statement on the proposed regulations. “With
millions of students making plans for the upcoming school year, it’s vitally
important that a regulation that protects students and taxpayers and holds
institutions accountable be in place and enforced as soon as possible.”

The final rule is expected to be released soon.