Loan Default Rates at Prominent Online Universities

High rates at some of the best known for-profits could forecast financial woes for future students.

By SHARE

After months of scrutiny from legislators, for-profit schools were dealt another blow when the Department of Education released the most recent federal student loan default rates this week. The national average default rate has risen by a tenth of a percentage point to 7 percent from last year, while the rate at for-profit schools (the largest of which are online-oriented schools like the University of Phoenix) jumped from 11 to 11.6 percent. "While for-profit schools have profited and prospered thanks to federal dollars, some of their students have not," U.S. Secretary of Education Arne 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." 

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These rates were measured using the pool of borrowers whose first loan payments came due during fiscal year 2008 (Oct. 1, 2007 through Sept. 30, 2008) and who defaulted—or missed at least nine consecutive monthly payments—before Sept. 30, 2009. Borrowers who defaulted after that period aren't counted in these rates, which are the most recent available. 

[Learn the 11 Steps to Relief from Federal Student Loans.] 

While those who had attended for-profit schools made up just 26 percent of all borrowers, they accounted for 43 percent of the latest defaults. Such a disparity suggests that those who attend for-profit institutions struggle to secure jobs with salaries high enough to cover the costs of their education. 

[Learn about loan repayment rates for large online universities.] 

However, not all online for-profit schools had rates higher than the national average. In the table below, a few of the most prominent names in online education, including Capella University and Grand Canyon University, actually had rates less than half of the national average. Others, like American Intercontinental University and Kaplan University, are far above the norm. If you're considering an online degree one of the larger for-profit online institutions, use the data below to find which schools' students have trouble digging themselves out of their loan debt. 

Large Online-Oriented For-Profit Schools Loan Default Rate
Kaplan University 17.2%
University of Phoenix 12.9%
American Intercontinental University 12.3%
DeVry University 10.2%
Strayer University 6.7%
American Public University System 5.2%
Grand Canyon University 3.4%
Capella University 3.3%
Walden University 1.5%
     
Average 8.1%
     
For-Profit School Average 11.6%
Public School Average 6%
Private School Average 4%
Average for All Schools 7%

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Source: Department of Education