No quick fix
Why would a potential student enroll in a relatively expensive for-profit college or university and go heavily into debt to pay the whopping tuition bill when a public institution is cheaper?
The National Center for Educational Statistics reports that the average yearly cost of tuition and fees at for-profit colleges in 2009 was $15,300, while at public institutions students paid an average of $6,400.
The lure of for-profits can be found in their pitch: Earn a degree quickly, get a good job and pay for tuition with easy-to-get government loans.
But the reality for many students is much different: Earning the degree takes longer than they expected, the job market is weak and loans may be easy to get but hard to get rid of. The NCES reports that 25 percent of students at for-profit colleges and universities defaulted on their loans within three years of leaving school, a figure nearly double the national average for all college students.
Later, if a graduate or former student declares bankruptcy, that rarely eliminates or reduces student-loan debt. The government can garnishee wages or act in other ways until it is repaid.
For-profit institutions do not receive state subsidies as do public colleges. They pay their bills largely with tuition from federal student loans and grants, so they often don't discourage potential students from taking out loans. That's irresponsible, because many nontraditional students who are attracted to such schools have lost jobs in the recession and are training for a new career.
Some for-profit institutions educate students on how much debt they should consider taking on, according to the Association of Private Sector Colleges and Universities. If the for-profits want to maintain a reputation for quality education, they should avoid high-pressure sales tactics that don't consider the financial realities their students are facing.
President Barack Obama and some in Congress are working to pass legislation to keep the interest on federally subsidized Stafford loans from doubling in July. If they cannot agree, 7.4 million former students would see their loan payments rise sharply and many would join the 37 million who are already in the red.
Student loan defaults are a drag on the fragile economic recovery. Congress should act to stabilize the loan interest rate, and school administrators should counsel students to avoid getting trapped by loans they can't afford to repay.
The trend toward ever-heavier debt must be arrested.