The number of for-profit college students who default on their student loans may increase by more than twofold next year when a new rule takes effect, dwarfing default rates for public and private non-profits.
A report issued by the Department of Education last week indicates 11.6 percent of for-profit university students who started repaying their loans in 2008 have defaulted on their loans.
That’s almost twice as much as the 6-percent default rate for public institutions and the 4-percent default rate for private non-profits.
Public four-year institutions and greater, a category that includes LSU, had a default rate of 4.4 percent.
Currently, colleges track borrowers over a period of two years when determining their default rates. In 2008, however, Congress voted to increase the tracking period to three years, according to the Chronicle of Higher Education.
The move came after some higher education advocates complained the two-year measuring system didn’t adequately capture the depth of the loan-default problem.
Next year’s numbers will mark the first time the new measuring system will be in place, and for-profit colleges may stand to lose greatly. The Department of Education report projects for-profit default rates to balloon to as much as 25 percent next year.
Private non-profit default rates are projected to grow to 7.6 percent, almost doubling.
Public default rates are projected to grow to 10.8 percent. Public four-year institutions are projected to grow to 7.9 percent.
For-profit college students accounted for 43 percent of all defaults in the two-year measure. That is expected to grow to 47 percent in the three-year measure.
At stake in these figures is schools’ eligibility for federal student loan money. Under the new rules, any institution with a three-year default rate of at least 30 percent for three consecutive years would lose federal funds.
 
 
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Matthew Albright at [email protected]