July 10, 2013

Student loan defaults can beat college grad rates

Schools with this issue 'should set off a red flag,' researcher says

Tens of thousands of Oregon students attend colleges where borrowers are more likely to default on a loan than full-time freshmen are to earn a degree, an analysis of federal data shows.

Public community colleges account for nearly all of those schools in Oregon. Nationally, nearly half are for-profit colleges, and about one-third are public community colleges.

“These colleges should set off a red flag in the minds of prospective student borrowers and their parents,” said Andrew Gillen, research director for Education Sector, a nonprofit, non-partisan think-tank on education policy that gathered the federal data. “Many students at these colleges will no doubt take out loans, graduate and get good jobs. But the high default rates and lower graduation rates suggest that many will not.”

Oregon community college leaders say the study isn’t a good measure for two-year institutions because the graduation rate only looks at first-time freshman, which is a small part of the community college population.

The analysis used Education Department data to look at U.S. colleges where at least 100 borrowers started repaying loans in 2009 and the equivalent of at least 250 full-time students were enrolled in the 2009-10 academic year, which is the most up-to-date data.

In a new report, “In Debt and In the Dark,” the Education Sector identified 514 of what it calls “red flag colleges,” where the percentage of borrowers who started repaying loans in 2009 and had defaulted by 2012 was higher than the schools’ graduation rates.

Thirteen of Oregon’s 17 community colleges made the list, including Chemeketa Community College in Salem and Lane Community Collge in Eugene. Two for-profit schools, Heald College and ITT Technical Institute in Portland, were included as well.

The scope of the problem varies depending on how many students take out federal loans at each school. Less than 30 percent of students borrow at Blue Mountain, Chemeketa, Clackamas, Mount Hood and Rogue community colleges.

On the flip side, more than half the students at Lane, Treasure Valley, Umpqua and Klamath community colleges take out federal loans. But the largest impact is at the for-profit schools, ITT Technical Institute and Heald College, where more than 80 percent of students borrow.

www.statesmanjournal.com

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