For-profit borrowers accounted for nearly half of all student loan defaults
As college attendance has risen and investment in public institutions has flagged, the United States has relied increasingly on for-profit colleges, with disastrous consequences for many students.
For-profit enrollment surged during the weak job market of the last recession, when college was a particularly appealing alternative. Increases in the generosity of the federal Pell Grant and education tax credits helped drive demand, but public colleges were unable to absorb the flood of students. Because their tuition prices do not cover the cost of education, these public schools rely on state funding to defray expenses. Yet state tax revenues plunged and states cut funding, just as millions of additional students were trying to enroll.
Students turned to for-profit colleges, which were happy to take their financial aid dollars. Growth rates in the for-profit industry were staggering, with enrollment jumping 21.5 percent from 2007 to 2008 alone, compared with growth of less than 4 percent for public and private nonprofit colleges. For-profit enrollment peaked at 2.4 million students in 2010 and remains above prerecession levels. While for-profits were traditionally a sidebar in discussions of college policy, they are now central to the narrative.
With growth has come considerable pain.
Graduation rates at for-profits are extremely low. Further, their students borrow heavily and default at high rates. During the recession, for-profit borrowers accounted for nearly half of all student loan defaults…