1 In 4 Students Default On For-Profit Loans, But Do They Even Care?
LOS ANGELES (CBS) — A Congressional panel this week heard testimony about for-profit colleges that promise its graduates high-paying careers while driving students deeper into student loan debt.
But according to one recent survey, most borrowers may not be too concerned over what may become decades of debt servitude.
Tom Harkin of Iowa, who chairs the Senate Health, Education and Labor Committee, told KNX 1070 an estimated 1 in 4 students at a for-profit college or university is defaulting within three years.
“For-profit schools only have 10 percent of all of the higher education students, yet they’re accounting for 47 percent of the defaults,” said Harkin.
The vast majority of students take out loans to help pay their tuition at for-profit schools: an estimated 96 percent, compared to 48 percent at four-year public schools, according to Harkin.
But researchers are finding that young adults between the ages of 18 to 27 actually have higher self-esteem and a stronger self-image the more college loan and credit card debt that they hold.
In fact, the phenomenon actually is most prevalent among the lowest income brackets, with those in the bottom 25 percent in total family income seeing the most positive impact on their self-esteem.
The study, which was supported by the National Science Foundation, showed that regardless of the level of debt held, the oldest people in the study felt the biggest impact of the financial burden beginning at age 28.
“Young people seem to view debt mostly in just positive terms rather than as a potential burden,” said Rachel Dwyer, lead author of the study and assistant professor of sociology at Ohio State University.
While there is a law in place aimed at levying penalties for institutions whose two-year default rate exceeds 25 percent, Harkin contends that some schools have become good at manipulating their default statistics to make it appear that defaults occur in the third year or later.