At 514 colleges, defaults exceed graduation rates

Default rates are higher than graduation rates at 514 colleges and universities nationwide, according to an analysis by Education Sector and USA Today. Nearly half of the “red flag” institutions are operated by for-profit colleges and about one-third are community colleges.

 “These colleges should set off a red flag in the minds of prospective student borrowers — and their parents,” says Andrew Gillen, research director for Education Sector, a non-profit, non-partisan think-tank on education policy that gathered the federal data. “Many students at these colleges will no doubt take out loans, graduate and get good jobs. But the high default rates and lower graduation rates suggest that many will not.”

In Debt and In the Dark, a new Ed Sector report, identified colleges where the percentage of borrowers who started repaying loans in 2009 and had defaulted by 2012 was higher than the schools’ graduation rates. At 256 of these, at least 30 percent of students take out loans.

Some 117 for-profit institutions — most offering four-year degrees — made the list. ITT Educational Services, which has 145 technical institutes nationwide, operated 45 of them. In addition, the analysis found 88 community colleges where default rates were higher than graduation rates, though most students don’t borrow and those who do take out small loans.

At New River Community and Technical College in Beckley, W.Va., administrators attribute the 5% graduation rate and 25.7% default rate to several factors, including high unemployment and the residual effect of a period of years when loan amounts were inflated because an incorrect formula for awarding aid was used. That attracted a number of students who had “no intention of completing their education,” says Barbara Elliott, director of public relations. Even for those who did earn a degree, “the payments were so high that they may have had trouble making them.”

The Education Sector report argues that default data would be more useful if it provided information about defaulters, such as whether they also received federal aid for low-income students and which fields they were studying. That would help students determine the likelihood they would default if they borrowed, Gillen says.

Default data should provide more information, including whether which types of students are prone to default and their field of study, argues In Debt and In the Dark. “Given the importance of defaults, and the recent jump in their numbers, it makes sense for the government to provide more detailed information on defaults, not just as an accountability lever but as a basic consumer right,” writes Gillen.

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