Skip to main content

3 Facts for Students to Know About For-Profit Colleges and Student Debt

By WTOP Staff

Not all press is good press, especially when it comes to recent headlines about for-profit colleges.

The Consumer Financial Protection Bureau made news when it recently sued for-profit Corinthian Colleges, which operates schools under the Everest name , among others, for predatory lending. And when Occupy Wall Street activists paid off $3.85 million in Corinthian College students’ private student loan debt, it got the media’s attention.

We’re paying greater attention to for-profit colleges because investigations are turning up worrying borrowing levels, debt levels, default levels, and poor outcomes in general, including some cases of fraud, says Pauline Abernathy, vice president of the Institute for College Access & Success.

But bad press aside, for-profit colleges have become increasingly popular. They account for 42 percent of postsecondary enrollment growth in the past decade, according to a study from the National Bureau of Economic Research, offering everything from nursing certificates to bachelor’s degrees to primarily low-income and minority students.

[Discover the best online bachelor’s degree programs.]

One one hand, for-profits appear to provide a chance at college for students who wouldn’t otherwise get a degree. On the other, they can look like predatory debt mills that favor a corporate bottom line over students’ success. Here’s what you should know about for-profit colleges and student debt.

1. For-profits are expensive. Tuition and fees at for-profit colleges averaged $15,130 in the 2013-2014 academic year, according to the College Board’s Trends in College Pricing.

That’s compared with $3,264 at two-year public colleges for in-state students and $8,893 at four-year public colleges for in-staters. Out-of-state public students and private nonprofit students paid more, on average, than students at for-profits.

One reason for-profits charge so much: It’s all in the name. “They are profit-making entities,” says Abernathy.

Higher price tags mean high levels of borrowing. Nearly 90 percent of 2012 for-profit graduates had student loans, with the average debt among for-profit college graduates who borrowed reaching nearly $40,000, according to the Institute for College Access & Success.

Those high costs can skyrocket for students who delay graduation, which just 31.5 percent of for-profit students manage to achieve within six years, according to federal data. That’s compared with about 57 percent at public institutions and about 66 percent at nonprofit private colleges.

2. For-profit graduates struggle to find employment. Studies suggest that applicants who list for-profit college credentials on their resumes don’t ge t call ed back by potential employers as frequently as graduates who hold other kinds of d egrees.

Applicants with business bachelor’s degrees from large online for-profit institutions are about 22 percent less likely to hear back from employers than applicants with similar degrees from nonselective public schools, says the study from the National Bureau of Economic Research.

[Learn why for-profit students may earn less than their peers.]

Another study found that applicants with certificates, associate’s degrees and other credentials from for-profit colleges fared no better in receiving callbacks from employers than those from much-cheaper community colleges.

“Our findings suggest that employers don’t value for-profit credentials any more than public community college credentials,” says Cory Koedel, an associate professor at the University of Missouri and co-author on the study. “But for-profit credentials are quite a bit more expensive.”

3. For-profit borrowers default at higher rates. The likelihood of a student defaulting at a for-profit college is nearly four times higher than at a community college and more than three times higher than at a four-year public or nonprofit college, according to a news release from t he Institute for College Access & Success.

Default rates may stem from the combination of high loan balances and difficulty finding employment, says David Deming, an associate professor of education and economics of Harvard Graduate School of Education and co-author of the NBER study. “To the extent that you have trouble finding a job when you graduate, it affects your ability to pay student loans,” he says.

But despite the worrying debt statistics, succeeding in a for-profit program is largely up to you, say experts.

Approach for-profits as a savvy consumer, experts say. Make sure that you understand which schools offer what kinds of courses and what their prices are. Compare the costs of several schools on online net price calculators.

“Shop around,” says Deming.

[Discover how to vet an online for-profit program.]

Beware if the for-profit college representative you’re speaking with isn’t answering your question or giving you a sense of the cost of the degree. And don’t get rushed into signing up, says Abernathy, citing stories of recruiters hurrying prospective students by telling them that classes were filling up fast when, in reality, they weren’t.

There is a huge range among for-profits, just like there is among any other kind of school, says Abernathy. It’s up to you to choose one that will get you graduated on-time and with a reasonable amount of debt.

Trying to fund your education? Get tips and more in the U.S. News Paying for College center.

More from U.S. News

Decipher the True Cost of Your Online Degree

Avoid Turning Into a Scary Student Loan Stat

3 Money Mistakes for Part-Time Students, Full-Time Workers to Avoid

3 Facts for Students to Know About For-Profit Colleges and Student Debt originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
Read Next Story

Related News

Frustration grows in Venezuela as earthquake death toll reaches 1,430

Israel and Lebanon sign framework agreement with US in ‘first step’ toward peace, Rubio says

Trump-endorsed populist poised to become Colombia’s next president as rival challenges vote