Which Colleges Leave Students With the Most Debt?

Students at for-profit colleges tend to have more debt than those at private and public colleges.

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Seniors at for-profit colleges are more than twice as likely to have accumulated dangerous amounts of education loans as seniors at other kinds of four-year colleges, according to a new report.

Almost 30 percent of seniors at for-profit universities in 2008 owed at least $40,000 in college loans, an amount that could be excessive, according to a new analysis of the latest federal data by Mark Kantrowitz, publisher of Finaid.org and Fastweb.com. For comparison, only about 11 percent of seniors at private nonprofit colleges—many of which charge higher sticker prices than typical for-profits—graduate with excessive debt, Kantrowitz found. And excessive debt was a problem for only about 6 percent of seniors at public universities, which are typically comparatively lower priced. That means new graduates of for-profit schools are about five times as likely to have borrowed heavily as new graduates of public universities.

The levels of excessive debt are already overwhelming hundreds of thousands of new graduates. In March, the federal government released a preliminary report showing that almost 200,000 borrowers whose federal student loans came due in 2007 were already in default. The schools with the highest share of defaulters—11.3 percent—were the for-profit colleges. Only 6.8 percent of public university students had defaulted within two years. And just 3.9 percent of students who'd left private, nonprofit schools in 2007 had defaulted on their federal loans.

Robert Cohen, a spokesman for the Career College Association, which represents many for-profit colleges such as DeVry University, ITT Technical Institute, and Kaplan University, said there are several reasons why their students tend to borrow more. Their students tend to be older and thus don't have parents willing to contribute to tuition. And for-profit schools generally serve lower-income students, who are more reliant on federal grants, most of which haven't been keeping pace with inflation. But, Cohen added, "the vast majority of career college students are able to manage their loans and to pursue better, more professionally rewarding careers."

Kantrowitz's analysis did not count the debt that parents take on to pay for their children's educations. And he agreed that the declining purchasing power of federal grants might contribute to the general growth of the number of students with excessive debt. The proportion of all college seniors in 2004 who had the equivalent of $40,000 in debt in 2008 dollars was 6.8 percent. Last year, 7.9 percent of seniors owed that much.

But Kantrowitz and other analysts said that other colleges that serve the same low-income students as for-profit universities generally don't require them to borrow as much. Only about 11 percent of low-income seniors at public universities had excessive debt, compared with 17 percent at private, nonprofit universities and 27 percent at for-profit colleges, Kantrowitz found. That means low-income students at for-profit schools are more than twice as likely to overborrow as low-income students who attend public universities.

Sandy Baum, an economist who researches financial aid for the College Board, said public university students generally don't have to borrow as much because they have lower tuition bills. Students in Atlanta, for example, would pay about $1,000 in tuition for one undergraduate course at the for-profit University of Phoenix. A course at Georgia State University costs less than $700 in tuition and fees, while a class at Atlanta Metropolitan College typically costs less than $500.

In addition, both public and private nonprofit colleges hand out billions of dollars' worth of grants and other aid to students who are especially needy or who have good grades or other talents. For-profit institutions generally just funnel the standard government aid to students and hand out comparatively few of their own scholarships to students, Baum said.

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