A Student Debt Crisis That Can Not Be Denied

For-profit college lobbyists have been flooding Capitol Hill lately trying to persuade lawmakers to ignore the growing student debt crisis at their institutions. But a new report from the College Board is going to make their jobs that much harder.

Using the most recent data available from the U.S. Department of Education’s National Postsecondary Student Aid Study (NPSAS), the authors of the report, “Who Borrows Most? Bachelor’s Degree Recipients with High Levels of Student Debt,” set out to look specifically at the characteristics of borrowers who are going the deepest in hock to pay for college. What they discovered was that “for-profit bachelor’s degree recipients at all income levels” are much more likely than those at other schools to take on extremely high debt loads.

According to the report, more than half (53 percent) of all bachelor’s degree recipients at for-profit colleges left school in 2007-08 with a total student debt loan of $30,500 or more. That’s more than double the proportion of students who graduated with that level of debt at private colleges (24 percent) and more than four times as many who did at public four-year colleges (12 percent). Much of this debt came in the form of high-cost private loans. The report found that nearly two-thirds of bachelor’s degree recipients graduated with private loan debt at proprietary schools that year, compared to 42 percent at private colleges, and 28 percent at public colleges.

Meanwhile, only 4 percent of bachelor’s degree recipients at for-profit colleges left without any debt in 2007-08. In comparison, 28 percent of degree recipients at private colleges and 38 percent at public colleges graduated debt-free that year.

The College Board report comes just as concerns about career college student borrowing are reaching a fever pitch in Washington. The Obama administration is considering cracking down on proprietary schools that load students up with unmanageable levels of debt for programs that fail to prepare students for gainful employment. Under a plan that the Education Department has floated, the amount of debt that for-profit college students could take on would be directly tied to the starting salaries in the field in which they seek training.

Career college lobbyists have been busy working the halls of Congress to try and get friendly lawmakers to pressure the Education Department to back off. Over the last several months, they have particularly appealed -- with some success -- to minority lawmakers by warning that the proposal could force schools to shut down programs that serve their constituencies. Last month, for example, several members of the Congressional Black Caucus sent a letter to Education Secretary Arne Duncan complaining that the changes under consideration would “disproportionately harm nontraditional and lower income students served by these institutions who have no choice but to rely on student loans.”

But if the Members truly care about these students, the College Board report should give them pause -- as it shows the excessive amount of debt that low-income and minority students are being asked to take on to attend these institutions. For example, the report found that students from the lowest-income families (making less than $30,000 a year) were twice as likely to graduate with more than $30,500 in debt at for-profit colleges (52 percent) as they were at private colleges (25 percent), and more than seven times as likely as they were at public colleges (7 percent).

Similarly, more than half of all black bachelor’s degree recipients at for-profit schools left school with more than $30,500 in debt (51 percent), compared to a third who did so at private colleges (33 percent), and nearly a quarter who did so at public colleges (23 percent).

But as disturbing as the report is, it does not provide a complete picture of the damage being done to these particularly vulnerable groups of students -- because it looks only at those who have successfully completed their programs. As we’ve previously reported, many of the largest publicly traded for-profit school chains have an extremely spotty record of graduating students. For example, a study conducted in 2008 by Mark Schneider, the Education Department's former Commissioner of Education Statistics, found that more than 60 percent of black proprietary school students attend institutions that graduate less than one-third of their students.

In addition, the report doesn’t provide any information on how these students are handling their heavy debt burdens. Education Department data, however, shows that proprietary school students default on their federal student loans at rates that are incredibly disproportionate to their numbers. An analysis of the most recent federal data  found that while only 7 percent of students attend for-profit colleges, they make up a whopping 44 percent of all defaulters.

As we’ve said before, for-profit college leaders and lobbyists like to talk about the role they play in helping low-income and working-class students achieve their dreams. But by loading up financially needy students with unmanageable levels of debt, including high-interest private loans, the schools are actually leaving many of their students worse off than if they had never enrolled.

The College Board report is just the latest indication of just how big the student debt crisis at for-profit colleges really is. Thankfully, policymakers are finally beginning to take notice.