Student loan default data highlights for-profits p1 - Military - College News and Information - Military Times EDGE

More than one in five borrowers of federal student loans who attend for-profit colleges default within three years of beginning repayment, according to new figures made available by the Department of Education on Dec. 14.

Historically, the government has reported such figures in terms of how many students default within two years — a figure that stands at 6.7 percent of student borrowers over all and about 11 percent at for-profit colleges.

But the new three-year numbers, though preliminary, give a clearer picture of whether a student at a particular college will default, and the government will soon begin using them to help decide which colleges qualify for taxpayer-supported student-aid programs.

Currently, colleges with default rates over 25 percent for three straight years can be disqualified, but experts argued that colleges were manipulating the two-year figures.

So, starting in 2012, colleges will be judged on how many students default within three years of starting repayment, though the new threshold default rate for penalties will be 30 percent instead of 25 percent.

Nearly 12 percent of borrowers who began repayment in the 2007 fiscal year defaulted within three years — up from 9.2 percent for 2006. But at for-profit colleges, the rate was 21.2 percent within three years, The Associated Press calculated from the government’s data. That was up from 18.8 percent for the 2006 fiscal year.

Harris Miller, president of the Career College Association, which represents for-profit colleges, said the increase reflected the poor economy. He also said that high default rates did not measure an institution’s quality, and that his group’s members enrolled large numbers of low-income students.

“If you accept low-income students, you’re going to have high default rates,” Miller said.

In recent years, only a handful of institutions have lost eligibility for federal aid because of high default rates.

The new data, however, show that more than 300 colleges — more than 85 percent of them commercial — had three-year default rates higher than 30 percent. Those colleges will have to improve when the rules take effect or risk losing federal aid.

Most of those colleges, however, are smaller, local institutions and not the giant national chains. Among the better-known institutions, the data indicate a three-year default rate of 15.9 percent at the University of Phoenix, 23.2 percent at Kaplan University and 17.1 percent at DeVry University.

Still, the three-year rates at those institutions are all rising. The figures do not include private student loans.