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Tuesday, August 17, 2010

The Heat on For Profit Colleges Increases

The facts just get uglier, and uglier.

For-profit colleges slammed by student loan repayment data
Investors react to a Department of Education report that shows nearly two-thirds of the schools' students aren't repaying their federal loans.
For-profit colleges

Francis Didier of Miami, right, stands in line to see representatives from Kaplan University at a job fair in Dania Beach, Fla. Education Department data showed that Kaplan students had one of the lowest repayment rates for their federal loans. (Lynne Sladky, Associated Press / August 2, 2010)

By Julia Love, Los Angeles Times

August 16, 2010|7:52 p.m.

Reporting from Washington —

Stock prices of for-profit colleges plummeted and calls for stronger government regulations mounted as investors and consumer advocate groups alike reacted Monday to an Education Department report that showed nearly two-thirds of the schools' students weren't repaying their federal loans.

The government data, released after the market closed Friday, focused on the 2009 loan repayment rates for more than 8,000 colleges and universities in the U.S. Such rates are used to gauge the potential effect of the department's proposed "gainful employment" rules, which would cut off federal aid to programs in which less than 45% of students are able to repay their loans.

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Overall, the repayment rates at these for-profit schools was only 36% in fiscal 2009, according to an analysis of the data conducted by the Institute for College Access and Success, a student-advocacy group.

By comparison, the repayment rate at private nonprofit schools was 56%, the group found. At public state colleges and universities, the rate was 54%.

Losing federal aid would effectively put many programs out of business: Some for-profit colleges rely on such funding for nearly 90% of their revenue — the maximum percentage allowed by the federal government.

Although just 10% of college students attend for-profit schools, the schools collect nearly 25% of the $24 billion the government allocates each year to fund Pell grants and Stafford loans.

Students' failure to repay federally backed loans has brought new scrutiny of the for-profit education world. The Obama administration last month proposed new rules that could cut off federal loan eligibility for for-profit degree programs that fail to adequately prepare students for "gainful employment."

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