Smart Borrower Blog

For Profit College Student Loan Defaults Projected to Approach Fifty Percent


Dec 27th, 2010 @ 5:32 AM by Debbie Dragon


New data released by the Education Department this week shockingly shows projected student loan defaults from for profit colleges is approaching 50%. 46.3% of federal loans that were taken out by students attending for profit colleges and universities in 2008 are expected to go into default. This number is well above the national average of all colleges which is 15.8% for loans originating in 2008. Some are now paralleling this crisis to that of the mortgage market. Just as home loan lenders lured home buyers into risky mortgages they could not afford, higher educational institutions have been doing the same to unsuspecting college students. Some argue that these universities are well aware that the amount being borrowed is far above what these students can pay back.

The Department of Education has been working to regulate how loans are distributed to students who attend for profit universities and they are hoping that this new data will help. Proposed legislation would make for profit colleges and universities live up to certain standards in order for them to receive funding for federally-backed student loans. They would need to show “gainful employment” as well as stats for debt-to-income ratios for student loan holders.

Meanwhile for profit institutions are fighting back and campaigning to block such legislation. They are lobbying hard and using as their defense that this would limit minorities from receiving loans. They just may have a leg to stand on as there are many for profit schools that have close ties with the government and currently students attending these schools receive 75% of all federal student aid.

While the fight seems to be on, few will argue that something needs to be done. While other areas of the economic collapse in the country have been in the forefront, student loan debt and defaults almost seems to be hiding in a closet. The truth of the matter is this is serious and the longer it is ignored, the worse it is going to get. Student loan debt is growing by the day and recently surpassed credit card debt. Addressing student loan debt and defaults has the writing of being the next part of the equation in protecting our country’s economic stability.

About Debbie Dragon
Debbie Dragon is a full time freelance writer and the co-owner of ReliableWriters.com.

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