Repayment Rates at ALL Colleges are a Problem
For-profit colleges have come under increasing pressure of late in the media and in Washington D.C., as the results their students achieve have come into question and their tactics for attracting students are more closely examined. Indeed, there have been widespread allegations that companies such as Capella Education (CPLA), ITT Educational (ESI), Strayer Education (STRA), Washington Post’s (WPO) Kaplan schools, and Corinthian Colleges (COCO) are abusing government funding options, turning out unprepared students, or providing degrees that, ultimately, turn out to be virtually worthless in attaining new or better jobs.
These criticisms make for juicy news articles and, frankly, show that the for-profit education area deserves greater scrutiny. Part of that scrutiny has come from the U.S. government, which recently released a report outlining the loan repayment rates for colleges. The report was critical, to say the least.
Analysis of the data, which is extensive, by the Institute for College Access & Success highlights the difference between public colleges, private non-profit colleges, and for profit colleges is this way: “One thing that jumped out at us right away was the difference in student loan ‘repayment rates’ by type of college. At public colleges, 54% of borrowers were paying down the principal on their loans, compared to 56% of those from private non-profit colleges. But at for-profit colleges, only 36% were paying down their student loans – which means that almost two-thirds of them couldn’t.”
A 36% loan repayment rate is pretty bad and major media outlets have deservedly made a big fuss over that number. What hasn’t been focused on is the 54% and 56% numbers, which, ostensibly, are considered “good”. But knowing that almost half of all college students aren’t paying back their loans doesn’t sound very good. In fact, it sounds pretty bad and suggests that about half of the college students this country is turning out from its “good” schools are not getting useful educations. The report was, indeed, highly critical—but in a far broader way than the major media outlets are presently relaying.
Add the government’s recent takeover of the student loan business, and it appears that U.S. citizens are going to be paying for useless educations for almost half of the students who take out loans to pay for college. Being that the government has already guaranteed much of the student loan debt out there, government playing the role of direct lender isn’t much of a change, it is just a direct institutionalization of the prior process. This report suggests that it is also a tacit acceptance of loan repayment rates that would put most lenders out of business.
While we should absolutely hold the collective feet of for-profit colleges to the fire, it is hard to accept 54% to 56% repayment rates as good. The current scrutiny of for-profit colleges will be a positive if it improves their performance on this and other metrics, but there is a great risk of seeing just the trees and not recognizing the forest. Indeed, if similar scrutiny is not placed on public colleges and private non-profit colleges, the current uproar will amount to little more than a witch-hunt directed at corporate America. Worse, if the supposedly “good” colleges aren’t pushed to improve their results as well, this nation’s students will be the ultimate victims—and all U.S. taxpayers will be asked to subsidize their failed dreams.