Beyond the fact that they’re almost all open-admission institutions, there are more differences than similarities between community colleges and for-profit colleges, including when it comes to student debt. New data released by the U.S. Department of Education in conjunction with the updated College Scorecard show just how different. Three comparisons are below.
- The vast majority of schools where debt problems are most severe are for-profit colleges. Inside Higher Ed’s recent analysis looked at schools where the majority of students borrows, and a minority of students is paying down their debt seven years into repayment. Our additional analysis found that, of the 257 schools that meet those criteria, 227 (88%) are for-profit colleges. Only two schools (fewer than 1%) are community colleges.
- Community college borrowers are much more likely to be paying down their debt. Three years after entering repayment, federal loan borrowers who attended community colleges were much more likely than for-profit college borrowers to have begun paying down their balance. Most strikingly, the available data on repayment rates by completion status show that borrowers who completed their studies at a for-profit college were about as likely to be paying down their loans as students who withdrew from a community college (53 and 51 percent, respectively).
- Many more students at for-profit colleges are neither paying down their loans nor in default. While available default and repayment rates have some differences (most notably, default rates include graduate students and repayment rates do not), they are comparable enough to identify trends and outliers. Comparing default rates and repayment rates tells you how many students have avoided default but still aren’t faring well: perhaps they’re delinquent, in forbearance or deferment, or in a repayment plan where their balance is growing rather than shrinking. Some for-profit colleges have admitted to what the Department, in its documentation of the Scorecard data, described as “gaming behavior that may push students toward forbearance and deferments, meaning they stay out of default but don’t make progress on repaying their loans and may continue to accrue interest.”
Across all schools, this missing middle group – those neither in default nor paying down their loans – composes on average about 21 percent of borrowers three years into repayment. But at 483 schools, 40 percent or more of borrowers are neither in default nor paying down principal. The vast majority of these schools (79%) is for-profit colleges, including Kaplan University and several Kaplan Colleges and Kaplan Career Institutes, which previously shared a parent company that hired private investigators to track down former students to put them in forbearance. It includes several campuses of Education Management Corporation-owned schools Argosy, Brown Mackie, and the Art Institutes. It includes Harris School of Business, Drake College of Business, and Westwood College. This missing middle group also makes up more than half of all borrowers at several Everest College campuses that remain open for business. While Everest schools are now under new corporate management, the former CEO had this to say about managing cohort default rates during a 2011 investor call: “Forbearance, as you well know, is a pretty easy, just a question you have to agree to it and you’re on your way [sic].”
Forbearance abuse for the purpose of evading accountability is well documented in the for-profit college sector, but has not been documented at other types of institutions. Just 6% of the schools where 40 percent or more of borrowers are neither in default nor paying down their loans three years into repayment are community colleges.
Any college with default and repayment problems of any scale should be focused on better enabling their students to repay their loans. But as the newly available data continue to underscore, for-profit colleges have by far the farthest to go.