The for-profit college student loan nightmare
Filed under: College, Debt, Student Loans
Over at Washington Monthly, Stephen Burd takes an extended look at one of the biggest -- and least reported on -- financial crises facing young people: unethical for-profit college foisting massive debt loads on their students. These debt loads often carry exorbitant interest rates and lack any consumer protections whatsoever.The stories Burd tells are egregious: Slick, misleading advertising luring prospective
Then the students get an education that has little if any value in terms of adding to earnings power, and their financial lives are literally ruined by the debt they took on.
One of Burd's solutions to the problem is right on: Give consumers more information:
These proposals are a good start, but more steps will be needed. For starters, the Department of Education should publish the data that it already collects on the number of students at each school who default over the lifetime of their loans. At the moment, it only releases the number who default during the first two years after leaving college, which is of limited value, not only because this is such a short time span, but also because the rates can be easily manipulated by schools. Just publishing lifetime default rates would give prospective students a clearer picture of the risks of enrolling in a particular school.
It's been a source of considerable amazement to me for quite some time that it's impossible to find out what the long-term default rate on student loans is. If I were considering borrowing money to pay for college, I would definitely want to know my chances of earning enough to pay it back.
For parents and prospective students, the best thing to remember about for-profit colleges is this: Don't enroll in them. Even if their intentions were great -- which they usually aren't -- the fact that they don't have endowments, must pay taxes, and don't receive state aid puts them at a huge competitive disadvantage, and you'll be able to find better value at local community colleges or public four-year colleges and universities.
Reader Comments (Page 1 of 1)
10-29-2009 @ 5:18PM
SJH said...
Guess what...the big Private Colleges do the same thing. Oh but the Department of Ed only makes them report Stafford loan debt. So they get to say "our student's average debt is $20,000". When it is $52,000 a year to go to the unsaid school??
There is not such thing as a not-for-profit college...sorry!
Westport, MA
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10-29-2009 @ 10:05PM
Mac Wildstar said...
Stephen Byrd tells a story that is the same story being told over and over again since the 1980's. The private proprietary schools recruitment practices have not changed much, despite new regulations being imposed in the early 1990s.
Most students sign up for loans only after being sold on the schools performance and job placement promises. They are never told that the school contract and their student loan contracts are separate issues. It was the same when the US Senate put out report 102-58 in the early 1990s, when it was investigating the higher default rates of these schools.
And yes, I fully agree, that the US Dept of Ed needs to track defaults for the life of the loan, not just for the first 2 years after a student leave school.
Also, restoration of standard consumer protections that were systematically removed during the later part of the 80's and early 90's would help.
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11-11-2009 @ 12:08PM
Kat said...
A bigger nightmare is law school. At close to $40,000 a year with no job prospects, law school is a bigger debt/lie. Also, my school charged me tuition for summer school at another university because I needed financial aid. They charged me for 4 credits at my home school ($6,000),plus $900 in fees since I was "enrolled" although I also had to pay for my summer law school ($3,000). The year before, I didn't need financial aid so my school didn't charge me anything and just processed my summer credits. So, basically there was a $6,900 financial aid "processing fee" just to get $3,000 in financial aid.
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