For-Profit Schools’ Students Often Default on Loans

December 2, 2013

By William Lineberry, Ashley Apodaca and Mike Waldron

Each year in Virginia, thousands of students default on their loans. However, defaults are especially prevalent in one sector of post-secondary education: proprietary, or for-profit, schools.

In 2011 in Virginia, more than one of every 10 proprietary-school students who were scheduled to start repaying their student loans defaulted.

Of the 11 Virginia schools with the highest student loan default rates, 10 were proprietary schools, according to an analysis of data released recently by the U.S. Department of Education. They included Centura College in Manassas (a default rate of 33 percent), the Aviation Institute of Maintenance in Chesapeake (30 percent), Tidewater Tech in Norfolk (28 percent) and the Virginia School of Massage (26 percent).

Overall, Virginia’s proprietary schools had a combined student loan default rate of more than 11 percent in 2011. In contrast, the combined rate for public colleges and universities (including community colleges) was 6.3 percent; it was 5.3 percent for private, nonprofit institutions.

Nationally, default rates have been rising since 2006, according to the Chronicle of Higher Education. Eight institutions nationwide face sanctions for having too high of a default rate; they include Tidewater Tech, according to the Chronicle.

The National Conference of State Legislatures says enrollment in proprietary schools more than tripled over the past decade. CNN Money reported that for-profit schools had an average default rate of more than 22 percent over the past three years; moreover, such programs charge 20 percent more than their public counterparts for bachelor’s degrees and four times more for associate’s degrees.

Community colleges and other schools offering associate’s degrees tended to have higher default rates than institutions offering bachelor’s and master’s degrees. This was true of proprietary schools (such as Sanford-Brown College in McLean, with a default rate of 18 percent) as well as of public schools. The default rate was more than 15 percent at Danville Community College, for example, and more than 14 percent for J Sargeant Reynolds Community College in Richmond.

A recent report from Inside Higher Ed noted the differences in default rates between public, private and proprietary institutions. In “Default Rates Rise Again,” reporter Michael Stratford makes special mention of the default rates for community colleges, saying that they appear to have the highest rates of any type of institution.

College default rates higher than grad rates,” a report by USA Today on the same subject, found “88 community colleges where default rates were higher than graduation rates,” during an independent analysis of the data. USA Today’s analysis was in response to a Senate investigation completed in the summer of 2012.

Student Loan Default Rates for All Virginia Schools

This article is a “Data Drop brief” — a quick-hit posting based on analysis by students in MASC 644 Computer-Assisted Reporting. This exercise focused on using Microsoft Access, a database manager, to select records from a large data set and sort them.