• Trade & Commerce

For-Profit Education: The High Cost of Withdrawal



The vast majority of students who attend a for-profit take out loans to finance their education. According to the National Postsecondary Student Aid Survey, 95.4 percent of students at two-year for-profit schools, and 93.4 percent at four-year for-profit schools, took out federal student loans in 2007-08. By comparison, only 16.6 percent of students attending community took out loans during the same time period. At four-year public schools the borrowing rate was 44.3 percent, still half the rate of four-year for-profit .

Unlike their peers at non-profit institutions, almost all of the students who withdraw from a for- will leave school with loan debt. Many of those students have low-incomes and will have greater difficulty dealing with the substantial loan debt they have incurred compared with more affluent students. Further, by failing to complete a degree, these students will miss out on most of the financial benefits associated with . According to a 2005 report published by the National Center for Public Policy and , students who drop out without completing their degree were 10 times more likely to default on their student loans.

According to the National Postsecondary Student Aid Survey, 95.4 percent of students at two-year for-profit schools, and 93.4 percent at four-year for-profit schools, took out federal student loans in 2007-08. By comparison, only 16.6 percent of students attending community colleges took out loans during the same time period. At four-year public schools the borrowing rate was 44.3 percent, still half the rate of four-year for-profit colleges.

The harsh reality for students attending for-profit colleges is that even a brief enrollment can result in significant debt. The high rate of borrowing by students attending for-profit schools is due in part to higher tuition rates. According to GAO’s August 4th testimony at a hearing of the HELP Committee, of the 15 schools investigated, 14 had higher tuition than the nearest public college offering a similar program. One particular for-profit college offered a “computer-aided drafting certificate” for $13,945, when the same program at a community college would cost $520. The cost of an offered by the second largest for-profit is over $38,000, and a bachelors degree from the same school can cost up to $96,500. Thus, a student who enrolls in a for-profit school even for a short period of time can amass many thousands of dollars of debt that can take years to repay.

To estimate the student loan burdens of students withdrawing from these institutions this analysis looked at how long they remained enrolled. Among students who withdrew from the 16 schools, median attendance was approximately 20 weeks. If that student attended full-time and took 12 credits per term he or she could still incur a substantial debt. For the five schools in the chart above, a student attending for 15 to 22 weeks could incur a tuition debt from $8,800 and $11,300.

While grant aid would likely offset some of the cost of tuition for some students, others are equally likely to have borrowed above the cost of tuition in order to cover living expenses while going to school. As a result, most still face the likelihood of accumulating considerable debt in just four or five months.

For many students attending a for-profit college, withdrawing does not allow them simply get on with their lives and start over. Their decision to enroll in college has likely left them with a financial burden that could take many years to repay. While federal loans do have flexible repayment options, they are non-dischargeable in . Furthermore, students who are in default on their student loans are not eligible for additional student loans, meaning that many may find the opportunity to try again to attain a degree foreclosed. Given the low rate of borrowing at community colleges, students are risking far less in pursuing higher education at these public institutions.

Tuition  Cost  for  Average  Withdrawing  Bachelors  Student