Report: Many students at for-profit colleges are more likely to take out student loans than other students, even in similar circumstances

CHICAGO—Students from two-year for profit colleges are more likely to borrow and often borrow more than similar students at two-year public colleges, new research from Woodstock Institute shows. Latino and white students at four-year for-profit colleges were more likely to borrow than Latino and white students of similar backgrounds at public and nonprofit schools.

“It’s well known that for-profit college students borrow—and default—more than students at public and nonprofit schools,” said Katie Buitrago, senior policy and communications associate at Woodstock Institute. “This research shows that even when for-profit students have socioeconomic backgrounds similar to students at other schools and attend schools with similar costs, many students are still more likely to borrow at for-profits than at other schools. Something is happening at for-profit schools that is driving students into debt.”
 
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Watch Sen. Dick Durbin (D-IL) speak at Woodstock Institute’s office about relief for former Corinthian College students
 
The report, “Starting out Behind: Trends in Student Loan Burdens at For-Profit Colleges”, analyzed data from the 2011-2012 National Postsecondary Student Aid Study in a two-stage regression model and found that:
 
Students at two-year for-profit colleges were nearly 50 percent more likely to borrow than students at public colleges, all other factors being equal.

  • Latino two-year college students were more than three times as likely to borrow at for-profit colleges as at public colleges.
  • African-American two-year college students were more than twice as likely to borrow at for-profit colleges as at public colleges.
  • White two-year college students were 75 percent more likely to borrow at for-profit colleges as at public schools.

 
Latino and white students at four-year for-profit colleges were significantly more likely to borrow than Latino and white students at public or nonprofit schools.

  • Latino four-year college students were 37 percent more likely to borrow at for-profit schools than public schools, and 25 percent more likely to borrow at for-profit schools than at nonprofit schools.
  • White four-year college students at for-profit schools were 20 percent more likely to borrow at for-profit colleges than at public colleges, and 18 percent more likely to borrow at for-profit colleges than at nonprofit colleges.
  • There was no statistically significant difference in the likelihood of borrowing for African-American students at for-profit, public, or nonprofit schools, although African American students consistently had a high likelihood of borrowing at all schools and were substantially more likely to borrow than white and Latino students at public and nonprofit schools.

 Students who took out debt borrowed over $1,300 more on average to attend two-year for-profit colleges than to attend two-year public colleges.

  • Latino two-year college students borrowed 34 percent, or $1,580, more on average at for-profit colleges than at public colleges.
  • White students borrowed 14 percent, or $707, more on average at for-profit colleges than at public colleges.
  • There was no statistically significant difference in the amount borrowed for African American students at for-profit and public colleges.

 There were few significant differences in predicted amount borrowed among students who borrow at four-year colleges.

  • African American four-year college students who took on debt borrowed 12 percent, or $951, less at for-profit colleges than at public colleges, and there was no statistically significant difference between the amount borrowed at for-profit and nonprofit schools.
  • White four-year college students who took on debt borrowed 7 percent, or $526, less at for-profit schools than at public schools, and 6 percent, or $430, less at for-profit schools than at nonprofit schools.
  • There were no statistically significant differences in the predicted amount borrowed for Latino four-year college students at for-profit, public, or nonprofit schools.

 “New revelations are appearing every day about deceptive and abuses practices at some for-profit colleges, including recent bankruptcy and enforcement actions against the Corinthian Colleges chain,” said Buitrago. “Regulators and law enforcement should continue to investigate the for-profit college practices that are generating higher debt loads—and poorer educational outcomes.”
 
Based on these findings, Woodstock Institute recommends:

  • The Department of Education should strongly enforce the gainful employment rule to limit federal loans and aid to poorly performing for-profit colleges.
  • The Department of Education should discharge the federal student debt of for-profit college students harmed by deceptive college practices.
  • Regulators should continue to investigate and publicly report on the incentives and lending practices of for-profit colleges.
  • The Consumer Financial Protection Bureau should enact student loan servicing standards that encourage affordable repayment options.

For more information, please contact Katie Buitrago atkbuitrago@woodstockinst.org or 312-368-0310.