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Career college students default on loans more often
DAYTON — Miami Valley career colleges have students defaulting on education loans at rates nearly twice the national average and five times that of traditional four-year universities, a Dayton Daily News analysis shows.
Default rates at local career colleges such as Miami-Jacobs, ITT Tech, Southwestern College, the International College of Broadcasting and the Ohio Institute of Photography are in double digits, according to 2007 data from the U.S. Department of Education, the most recent available. At some schools, a fifth of the students are failing to repay.
Experts say the combination of high-cost programs and low-income students leave many people with debt inescapable by even bankruptcy. More than 1,500 local students defaulted in 2007 alone.
Community colleges offer similar programs but create much less debt, said Kevin Kinser, for-profit college expert at the State University of New York at Albany. Although community colleges don’t offer the same fast-degree time frame, students can often go there without taking out loans, Kinser said.
Only 4 percent of students earn a bachelor’s degree from a for-profit school without loan debt, said Patricia Steele of the College Board Advocacy & Policy Center. “If you attend a for-profit institution,” she said, “you are much more likely to borrow.”
Miami-Jacobs, where accreditation problems sparked a lawsuit recently, had a default rate of 20.3 percent in 2007, one of the highest in the area. However, President Darlene Waite said the school instituted measures that included counseling and an “aggressive default prevention plan.” She said she expects to see its default rate nearly cut in half to 11.8 percent in the report for the 2008 school year.
Nationally, student loan default rates are again rising, from 4.6 percent to 6.7 percent between 2005 and 2007, after plummeting from 22 percent in 1990. For-profits lead the pack with 11 percent in default, compared to 3.7 percent at private and 5.9 percent at public schools.
For-profit colleges and universities must have 30 percent of their student loans in default for three consecutive years before the federal government will cut off the tap of federally backed loans flowing into their coffers.
“It costs the government a ton of money when a student defaults,” said Steele, who recently co-authored the study “Who Borrows Most?”
And student loans are nearly impossible to escape. The government can seize tax returns, garnish wages and even take Social Security benefits to recover losses from taxpayer-funded student loans that are in default, according to industry experts.
For-profit schools often offer a quicker route to a degree that comes at a price. Most students at for-profit institutions take out loans — 96 percent at for-profit four-year schools borrowed compared to 64 percent at public and 72 percent at private schools, according to Steele’s study. Of those who borrow to attend a for-profit school, 53 percent are left with more than $30,000 of debt.
The high cost comes from the for-profit business model that is often unwilling to discount tuition with grants and other subsidies, said Kinser. “A private nonprofit school usually has a discount from the expensive sticker price,” Kinser said. “Rarely do for-profit institutions, the students there are paying the full price of tuition.”
Students also can take out loans above the cost of tuition for books, living expenses, even child care, said R. David Rankin, executive director of the Ohio Association of Career Colleges, an advocacy group. “Typically, the students we serve, a number of them are in the lower economic strata,” Rankin said. Those students are more likely to default on loans, especially in tough economic times. “The economy right now is really in the tank, particularly in the Dayton area.”
For-profit schools also have more students repaying loans than graduating compared to traditional community colleges, which suggests a lower overall completion rates, Kinser said. Quality of education is also inconsistent, Kinser said. Some schools do a great job of using experts to develop quality curriculum for their programs, but that’s not always the case.
Kinser says for-profit schools sometimes have business models that can conflict with their educational mission and distinguishes” them from traditional colleges. “It’s an enrollment driven exercise. One of their main goals is enrollment,” he said. At the center are student loans that the schools profit from, what Kinser calls, “government subsidies” that are the only way for-profits to flourish in the current market.
It is becoming big business in Ohio and across the nation. Ohio has doubled the number of students attending career colleges in the last eight years, according to data from the State Board of Career Colleges and Schools. They employ more than 7,000 people with total wages of $160 million and earnings of half a billion dollars in 2008.
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