About those Student Loan Default Rates…

The distinction of having the highest student-loan default rate of any higher-education institution in Virginia goes to Everest College in Chesapeake. The default rate at the for-profit college (now doing business as Altierus Career College), which prepares students to be dental assistants, HVAC technicians and the like, is 36%, reports WVTF Radio IQ.

In absolute numbers, non-profit Liberty University took the top spot. A 10% default rate translated into 2,903 students.

The highest default rates tend to be small, for-profit vocational schools. Although the Radio IQ data doesn’t show it, some public colleges have a fairly high default rate as well. Low-income students are disproportionately likely to drop out of college — whatever the institution — and find themselves unable (or unwillling) to repay their loans.

Many progressives purport to be concerned about minorities and the high default rate blame for-profit colleges. The Radio IQ article quotes Diane Standaert with the Center for Responsible Lending (CRL) as noting that many for-profits are converting into non-profits to avoid state and federal regulations aimed at curbing “abusive practices.”

Acccording to CRL’s Virginia state profile, for-profit colleges disproportionately harm: low-income families, communities of color, and women.” Undergraduate enrollment at for-profits is 54% low-income, 45.4% African-American, and 60.9% female. Students at for-profit institutions in Virginia are less likely to graduate, more likely to take out student loans and graduate more indebted, and are more likely to default on their college debt, according to CRL.

What this analysis ignores is that there is considerable variability in the default rate for for-profit, private non-profit, and public non-profit institutions. The best for-profit institutions have lower default rates than the worst non-profits. Public institutions such as Norfolk State and Virginia Union University that cater to lower-income African-Americans have default rates comparable to many for-profits. Conversely, the for-profits cater to adult African-Americans — look at their television ads if you doubt me — who didn’t get a chance to attend college immediately after high school but, as adults, would like to advance their career and obtain a better job.

If mean ol’ fiscal conservatives wanted to shut down for-profit institutions with high default rates on the grounds that they were costing taxpayers, some progressive group would describe the disproportionate impact on upwardly striving African-Americans as racist. But the impetus for shutting down for-profits isn’t coming from the Right. It’s coming from the Left, hostile as always to the idea of someone somewhere making a profit.

The real problem isn’t whether an institution is for-profit or non-profit, it’s the fact that the federal government hands out student loans indiscriminately. Federal loans are not granted on the basis of a student’s likelihood to repay, whether based on SAT scores, class standing, credit score, years in the workforce or any other relevant factor. Why? Because objective lending criteria might impact minorities more than whites, which would constitute a different type of discrimination and invoke the inevitable cries of racism.

So, if you think with a leftist mindset, instead of insisting that the federal government establish standards to reduce the number of students defaulting on their debt, which would be racist, you attack for-profit institutions… even thought, by leftist standards, limiting educational opportunities for minorities by this indirect means also could be construed as racist. But if you think with a leftist mindset, that’s OK because you’re suspicious of for-profit enterprises anyway. Furthermore, you control the commanding heights that shape public opinion formulation — the media, academia, the educational bureaucracy — so you have the power to frame the issue the way you want.

That, folks, is democracy at work in America today.

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18 responses to “About those Student Loan Default Rates…

  1. Interesting the way you put this: “[I]f you think with a leftist mindset, that’s OK because . . . you control the commanding heights that shape public opinion formulation — the media, academia, the educational bureaucracy . . . .”

    Wow, what a chip on the shoulder! It’s a “leftist mindset” that controls Fox News and the Media Research Center. Maybe even the rankings in USN&WR! It’s the evil empire of the NYT and WaPo that is going to shape public opinion formulation so decisively this November!

    • Acbar, c’mon, compare the total viewership of NBC+ABC+CBS+CNN+MSNBC to that of Fox. Then compare the resources available to the mainstream media, including the NYTimes, Washington Post, etc., etc., to underwrite “investigative” reporting (i.e. getting leaks from swamp dwellers) and set the news agenda. Do you seriously question that the mainstream media has an unsurpassed ability to drive the daily news agenda and frame the issues of the day?

      That’s not a “chip on the shoulder.” That’s just describing the political terrain.

      • Viewership differences conceded. But Fox would love to be acknowledged as part of the MSM — if not the most important part. Brent Bozell sure would like to “control” public opinion the way you say the media do. My point really is, which media? The Media is not a monolithic block — even though most of the MSM would agree they can’t stand DT, who has declared war on them collectively and on the jornalistic standards for verified facts they all say they still adhere to.

        I agree with the gist of your post BTW; just had to take a swipe at that last penultimate paragraph.

        • You’re right — the media is not monolithic. But there is such a thing as a “mainstream media.” The mainstream media has tremendous influence over the daily news agenda, and it has the power to frame issues in ways that are consistent with the partisan and ideological sympathies of its practitioners. And it is undeniable that the mainstream media has defined racial issues (the point of my post) in a way that is consistent with the left-liberal views of the vast majority of reporters, editors and news producers.

          Perhaps the most important aspect of the power to frame issues is to decide what news is worthy of printing/broadcasting and what is not. The mainstream media routinely cherry picks the facts, incidents, subject-matter experts and storylines that fit its narratives — Trump, race, wealth inequality, whatever — and excludes those that don’t fit.

          The biases have always been there, but at least in the past there was some effort to maintain objectivity and balance. Now most media have abandoned all pretense. As the Instanpundit blog often quips, all becomes understandable if you see mainstream media reporters as Democratic operatives with bylines.

          Once upon a time, the media regarded its job as to hold accountable those in power. Now its job is only to hold accountable Trump/Republicans/conservatives in power. When Democrats are in power, the media function as guardians, apologists, and P.R. agents.

          These truths are self evident to anyone who doesn’t share the media’s frames of reference. Our sensibilities are assaulted every day. We find it astonishing that anyone could fail to see what we see. My only explanation for the myopia of those who defend the objectivity of the media is that if you share the media’s frames of reference, they seem natural, right and normal, so you can’t see how jarring they are to those who don’t share them.

          • There are serious issues here, of course: What does unbiased journalism mean; how is it defined in the better journalism schools today? How much press opinion should be allowed to creep into a “news” article when the freedom, transparency or factual accuracy of the press itself is the subject? Should the highest priority go to fact checking or timeliness of a “news” article? Won’t belabor them here, but these topics would make for a good post someday.

    • Can anyone state with a straight face that the WaPo has any integrity? Many individual staff members do have integrity. But many don’t including the editorial board. They distort the facts, ignore facts that are contrary to the desired result and give special cover to those who support the same policies as the paper.

      Keep in mind that, despite attacking the women who accused Bill Clinton of sexual abuse, including one charge of rape, as being liars and even “trailer trash,” Hillary Clinton as presidential candidate stated that when it came to charges of sexual abuse made by women those women should be believed. So we have two presidential candidates supported by the Post who 1) is guilty of sexual abuse even based on his wife’s standards and a heckuva lot of facts; and 2) who attacked women who made claims of sex abuse by her husband and in a manner that society finds unacceptable, while maintaining that sex abuse and attacks on the accusers by anyone else in America are wrong. The Bottom Line is that the Washington Post finds sex abuse and attacks on the accuser acceptable when the Clintons are involved. They should replace the current banner head with “Sex Abuse Is Wrong Unless the Clintons Are Involved.”

      When you boil down everything to its essence, this is the essence of the Washington Post. Liberal policies are so important that anything that advances them, even if repulsive to liberal principles, is acceptable. You cannot support the Clintons unless you are willing to close your eyes to their behavior. And by closing your eyes to behavior by major public officials who have campaigned against the very conduct they indulged in, you are condoning their behavior.

  2. This is a very fine article, Jim. Your analysis and its import is right on target.

    For example, there are many bad actors in higher education today, for profits among them, but the federal government under the last administration went after the for profits with a pitch-fork while protecting all the non profits, respective of their horrible record.

    Thus for example the records of default are greatly skewed. I recall executive orders and legislation that skewed these records by forgiving billions in bad loans, or rejiggering repayment requirements to mask near term defaults, pushing them off in the future, while also cutting back on Pell grants by upping poorly underwritten student loans to insure future defaults. I believe the long term objective here was to achieve de jure free higher education by any means necessary, including loan forgiveness being a long term objective of the Federal Government at taxpayer expense to broaden the democratic base of young people.

    So now we got a massive student and graduate debt mess on our hands to go along with our generations of our poorly or ill educated youth problem. These problem range across the entire demographic spectrum but the middle and underclass of all races in non selective colleges have been particularly hard hit, whether they be for profit or non profit.

    To illustrate the problem, back in 2012, I wrote here:

    Many colleges accredited by the Southern Commission graduate fewer than 25% of those who enroll. Many take six years to earn a four-year degree, dramatically increasing their cost and debt — and they’re the lucky ones. At least they get a degree. Others simply get a bill. Dropout rates are scandalous. Many students pay for years before dropping out. Of those who do manage to graduate, some discover that they have earned worthless degrees. Forty-five percent of students learn “nothing” their first two years at college, and 36% have still learned nothing after four years, according to Professors Richard Arum and Josipa Roksa who tested 2,300 students from the Class of 2009 that attended 24 accredited colleges. (See “Academically Adrift: Limited Learning on College Campuses.”)

    Instead of turning its inquisitorial gaze upon UVa, the Southern Commission would do well to examine some of its 800 member institutions with demonstrable problems. Take Texas. Seventy-nine of every 100 public college students in Texas start in junior college. Only two of those 79 earn a 2-year degree on time; only seven graduate in four years. Only 5 of 21 students who begin at a four-year Texas college graduate on time, and only 13 of those 21 earn a degree after studying for eight years. Far too often, college students throughout the other ten southern states accredited by the agencyconfront similar fates. Four-year graduation rates include:

    Florida – 35.6%
    Georgia – 24.3%
    Kentucky – 20%
    Louisiana – 15.8%;
    Mississippi – 22.4%
    North Carolina – 36.5%
    Tennessee – 31.9%
    Virginia – 45%
    West Virginia – 22.2%

    The reasons are many for such drop out rates. Students often are not prepared for college work but are admitted anyway. Many get lost in higher education’s “Bermuda Triangle,” taking so many remedial courses they never get to take a college course for credit. But they get the bill, and oftentimes too so does Uncle Sam.

    Who is supervising this awful state of affairs? The leaders of the Southern Commission include:

    The president of Delta State University, which graduated only 19.9% of its four-year students within four years. Fewer than half (46.6%) matriculate within six years. Its president is chairman of the Commission.

    The president of Huston-Tillotson University, which graduated some 11.5% four-year students in 4 years, while another 12.7% earned a degree after six years.

    Along with the chairman and vice chairman, the presidents of 11 other colleges sit on the Commission’s powerful Executive Council. A sampling of their four-year graduation rates ranges from 13.1% to 22%.

    What are these leaders doing, and why? Who knows? Over its 60-year history of accrediting colleges to qualify for Federal student aid, the Southern Commission, as best we can tell, has never revoked an accreditation unless the member was on the verge of bankruptcy anyway. Nor has it established, published, or enforced clear fact-based performance standards that work to insure that our students in need receive the education they pay for. Why? And why instead is the Commission investigating the University of Virginia?

    See: https://baconsrebellion.com/inquisitor-investigate-thyself/

    • It is important to note here that the Student Retention efforts of the last federal Administration was not only a false solution, it was a solution that made the problems and obstacles profoundly worse for the student, their families and the taxpayer. But at the same time it further enriched the colleges and universities with the proceeds of loans funded by taxpayers or the extra tuition that had to be paid for little or nothing of value by students.

      Only in post modern America could our leaders believe that keeping kids in schools to learn nothing but bad habits while they mortgage their future to the hilt is good for kids, communities or society. These false retention policies deepen the bad habits of students, further enrich and corrupt our educators, and feed the grossly inefficient habits of American higher education along with private interests who feed off of the system, at the expense of our children.

  3. Veterans with GI benefits are also being preyed upon by for-profit and non-profit educational institutions and it has virtually nothing to do with race and a lot more to do with the educational and economic backgrounds of people of all colors.

    People from economically and educationally modest backgrounds have always been preyed upon by scam artists selling everything from snake oil, payday loans to “education”.

    Many from modest economic circumstances and minimal education joined the Armed Services to get the GI benefits so they too could go to College, get a good job and join the Middle Class.

    It’s the quintessential American Dream for all who live in America.

    It has nothing to do with race… and trying to make it about race diminishes those that do…..

    We DO need a better way to help those who want more education get pointed to a more realistic goal that helps them and helps taxpayers.

    But the idea that we’d just deny them loans if they don’t “qualify” is exceedingly repugnant.

  4. Remember the rule people, Econ 101, my U. Chicago-educated prof: Whenever the government subsidizes something you get (blank) of it. The word in the blank is MORE. Why the federal government subsidizes failure rather than success is the question. And now that we have decades of proof that is happening, why it continues is the bigger question. Imagine if like that apprenticeship program Jim mentioned the other day, these schools only got paid if their graduates got related jobs.

    And didn’t Reed tease me about my spelling the other day, because it’s pretty amazing to think it take students six years to matriculate…

    Larry has a point. This is just one example of the many ways people seeking to improve their lot in life must battle a horde of locusts seeking to profit. This is really pernicious, because they are fleecing people trying to do something noble.

    If somebody cons me out of $1,000 bucks, or I get a bit behind on the credit card and interest starts to build, shame on me, but I won’t be missing any rent payment. Not so for them. I don’t know about your credit card statement, but mine always says in bold print “Minimum Payment $25” and the credit card company is quite happy with the suckers who pay that way.

  5. the idea of what we “subsidize” is an interesting – and correct idea but it applies to a whole lot more than the student loans – though I will readily admit the loan situation is out of hand now and must be changed.

    as far as “other” subsidies – take higher ed in Virginia – heavily subsidized – right?

    Medicare ? $134 a month for most who have less than 85K a year in retirement income. Medicare Advantage which pays the 20% co-pay for Medicare – so heavily subsidized that many companies offer it for “free”… just sign up and 100% of your health care costs are paid including a plethora of discretionary procedures many who had to pay the 20% would not have.

    Medicare will bankrupt the country LONG BEFORE the student loans will but that’s no excuse for not fixing the student loan issue.

    But I’d make the providers responsible for achieving benchmark outcomes. In other words – they lose reimbursement if a certain percentage of their students – not only do not graduate – they have to graduate and get jobs with industry-standard pay for their degree.

    And here’s a thought. Give incentives to the institutions that produce a higher number of employed grads… etc..

    but stop looking at this through the lens of race or class or economic status for individuals.. that’s just plain wrong. That undercuts one of the fundamental premises of this country – equal opportunity to succeed and it starts with education and equal access to education.

    • Larry – I think one needs to look at the social contracts underlying the various programs. Both FDR and LBJ set up programs (Social Security and Medicare respectively) where the working public was told if you pay new taxes for your working career, when you retire you will get access to certain financial benefits. They and many others created an expectation of an “earned entitlement” and not a “welfare program.” Now I’d be the first to agree with you that there are details with both programs that are problematic. But the essence of the social contract is pay the taxes while you work and you have a right to benefits when you retire.

      To a degree there is a social contract with public education, albeit somewhat different. We all pay taxes and, if and when, we have children, they can attend tuition-free public schools K-12. I had no guilt when my two children attended Fairfax County Public Schools for 13 years each.

      One of the key factors as to why most Americans support Social Security, Medicare and, to a somewhat lesser degree, public schools is their universality. All pay and all can use.

      Most other social welfare programs (including education) lack the universality of these three programs. All pay, but relatively few benefit from programs like TANF and SNAP, Medicaid and, in a slightly different context, higher education. The social contracts are different, and the latter have less support. Toss in people involved in illegal immigration and support drops even more.

      A more granular approach is needed to understand the issues, IMO.

      • @TMT – Medicare Part A ..IS taxes collected to provide a retirement entitlement.

        But Medicare Part B is not.

        no one paid a penny towards Medicare Part B and it’s totally voluntary.

        It’s TRULY an subsidized “entitlement”.

        yes… everyone is “entitled” to buy Medicare Part B at $134 a month no matter your health or how much you paid in FICA taxes or anything else. The sole criteria to be “entitled” is a US citizen.

        Steve thinks because it has benefited a bunch of folks .. it’s a good thing.. justified. I could make the same argument with respect to ANY class or group of people – regardless of their age!

        the more germane question is – what “entitles” – ANYONE to a subsidized entitlement?

        I’m sure Jim B will chew on that idea… ;-)..

        Va subsidies for UVA are small potatoes compared to the Federal entitlements.. for Medicare and MedicAid – which comprise about half the total US budget …

  6. Don’t want to start a string of 50 comments, but….wouldn’t it at least be arguable that Medicare in general has subsidized a healthier retirement with more financial stability for millions? Many families do end up with some inheritance now. Has it not been a subsidy for success?

  7. “The real problem isn’t whether an institution is for-profit or non-profit, it’s the fact that the federal government hands out student loans indiscriminately.”

    In 1991, 43 year old Knox Singleton (long time CEO of Inova Health System) was criticized for making just under $400,000 per year. Adjusting for inflation that’s about $750,000 today. In retrospect, he was a piker. “About 2,700 employees of 501(c)(3) nonprofits received annual compensation of more than $1 million in 2014, according to a study of IRS Form 990 returns performed by the Wall Street Journal. This is about one-third more than received $1 million or more in 2011.”

    “Five nonprofits paid $10 million or more to their CEOs; …”

    Only a liberal could believe that “for profit” = bad while “non-profit” = good.

    You want to make some real money Jimmy, under the radar and all? Start a non-profit institution, solicit money from your rich Monument Avenue friends and pay yourself one whale of a salary. Start by putting me and TMT on the board of directors. We’ll find some other people who know how to look the other way without ending up in orange jumpsuits and we’re off to the races. In fact, speaking of board members who know how to look the other way without ending up in orange jumpsuits, what is Hillary up to now that her book tour is over?

    https://nonprofitquarterly.org/2017/03/08/million-dollar-compensation-nonprofit-ceos/

  8. I don’t pay as much attention to the “profit” status as I do to what their business is and whether or not their income comes entirely from non-govt sources or does come from govt sources.

    Whether it’s Medicare, FEMA flood insurance, GI benefits, or Student Loans – there is a connection.

    With ALL of these things – no matter whether the business is a “for-profit” or “non-profit” or some other flavor – their goal is always to get as much of the govt money as they can and the job of the govt is to make sure that the money achieves the desired purpose – efficiently.

    Medicare establishes reimbursement rates. FEMA tries to use actuarials in setting insurance premiums. The Armed Services try to insure that money given to retiring veterans actually ends up getting them the education they need to find a civilian job.

    None of it is without problems.. it is the nature of the govt providing money for “good” or “necessary” purposes – it happens with entitlements and it happens with government contractors for DOD and every other Govt agency.

    Are there folks who find ways to make themselves tidy little well-paid “nests”? of course… since the beginning of time with all organizations public and private. Not germane to the specific issue of how the govt can provide money for “stuff” and insure that it gets a reasonable bang-for-the-buck .. and do something about it when not.

    the long and short is that the student loan issue is a big problem but it’s not alone.. there are lots… still , it needs to be addressed.

    But we don’t address ANY of these problems by looking at classes or races or other categories of people as “the” thing that, if done, will fix it. These problems have nothing to do with classes of people and everything to do with human nature – regardless of class.

  9. What would happen if the educational institution who “taught” a defaulting student had to pay the government back half of any loan that goes into default?

    That one idea would end this mess.

    The core problem is that our government is grossly incompetent and culpably negligent with a wide streak of dishonesty thrown in for good measure. Who the hell loans money to people with no idea as to whether they will be able to pay you back?

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