College loans, student debt and for-profit colleges

by David Safier

It hasn't gotten much press here, but there are moves at the federal level to put more rules and regulations on for-profit colleges like, for instance, University of Phoenix.

It's not that the feds want to tell these colleges how and what to teach. It's that they want to make sure the colleges aren't luring students in under false pretenses and loading them down with federally insured loans. Too often, people are convinced to enroll in programs they're not suited for or which don't give them marketable skills, and they end up taking out massive loans. If the student leaves without finishing or gets a degree which is useless in the real world, the student is still burdened with onerous debt payments for years. And the college has absolutely no financial exposure. If the student defaults on the loan, the Fed pays it off. The college gets its money, no matter what.

It's illegal for for-profit colleges to give commissions to their recruiters for each student they lure in, since that encourages the hard sell rather than considering the needs of students, but colleges often pay the commissions anyway. Students are customers, and the more customers, the more profit.

Maybe I've missed it, but I haven't heard the Goldwater Institute complaining about the waste of government money at for-profit colleges, only at our public universities and community colleges.

The US Department of Education put out a report on student loan defaults. Arizona is number one, with 10.9%. But if you take out the loans from for-profit colleges, the Arizona number goes down to 8%. The default rate at ASU is an incredibly low 3%.

Here's a statement from US Dept of Ed Head Arne Duncan:

"While for-profit schools have profited and prospered thanks to federal dollars, some of their students have not," Duncan said in a press release. "Far too many for-profit schools are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use."