Ben Miller over at Education Sector has posted some insightful graphs, including this one which illustrate the percentage of students, borrowers and 3-year defaulters by sector. His graphical analysis indicates that "for-profit schools enroll substantially more borrowers and defaulters than their share of enrollment would suggest."
However, Miller doesn't mention the most important cause of this -- that the market-funded sector (aka for-profit) enrolls a disproportionate share of disadvantaged (low-income and minority) students, as the below table that I developed for an article in Career College Central illustrates.
So what are the implications of this evidence? Many of these disadvantaged students come from less affluent families in which financial responsibility is likely not stressed from one generation to the next. They also are much less likely to have parents or peers who have direct knowledge of or experience with the college process, making it harder to navigate the complex world of applying to and funding higher ed. Such students are not likely to fully comprehend the consequences of failing to complete school or not paying their bills. These factors make disadvantaged students more susceptible to dropping out and defaulting on their loans.
Now, critics of the for-profit sector will likely suggest that these students should attend lower cost public schools where they are likely to have a lower chance of default, without considering the possibility that perhaps these disadvantaged students chose to attend a market-funded institution because it offered services better attuned to their needs, such as flexible scheduling, distance learning or personalized customer service. Or perhaps these students had poor academic credentials and were unable to gain admission to a public 4-year college. Whatever the case may be, the market-funded sector is serving a segment of the population that has been historically under served, but is increasingly demanding postsecondary education. Given the socioeconomic backgrounds of such students, they may not fare any better (and may in fact fare worse) in the public sector. Further research that investigates the outcomes of socioeconomically similar students at various types of institutions is needed to provide a correct diagnosis.
These factors, however, do not provide market-funded providers (or non-profit for that matter) with a free pass to gain access to taxpayer-funded student aid without accountability. I agree with Miller's suggestion that
it would be nice to see that sector (for-profit) become a leader in taking proactive measures to get their rates lower—an outcome that would have substantial benefits for students and the taxpayers that subsidize their loans.The market-funded sector will continue to be scrutinized and deemed illegitimate unless it takes the lead in reshaping its practices and ridding itself of the few bad apples stinking up the entire orchard.