Nonprofit Newswire | Higher Rate of Student Loan Default at For-Profit Schools

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September 14, 2010; Source: NPR | There are often differences between nonprofits and for profits working in the same field. Some of them have been catalogued already. Just this week, we noted the higher rate of Caesarian section births at for-profit hospitals.

But this story is very different and worth thinking about. This story from NPR’s Morning Edition says recent data show an increase in the default rate for federal student loans. The default rate for 2007-2009 is 7 percent, which according to NPR, is the highest rate in 10 years. For-profit schools make up half of all loan defaults while only one in four students taking out loans attend a for-profit institution.

James Kvaal, a deputy undersecretary at the Department of Education says, “there is reason for concern.” An industry lobbyist attributes the high rate of default to the type of students the for-profit schools tend to take and labels them as riskier. “For-profit colleges tend to enroll a higher-risk demographic, low-income students, independent students, single parents — all of which are predictors to some extent of default.”

Some of the schools with the worst default rates are trade schools. But Judy Hall, owner of the Charleston School of Beauty Culture in Charleston, W.Va., says her barber and cosmetology school is helping poor students, who may come with tougher economic challenges, find jobs. She told NPR, “[The] job market is very good for students both in barbering and cosmetology . . . Our placement rate is great,” she said. “It’s like 95 percent.”

We would love to hear your thoughts on this story.—Kristin Barrali