The Bay Area's for-profit colleges soak up millions of dollars in taxpayer-funded student grants and loans and charge students high tuition, yet many have low graduation rates or high rates of student loan defaults, an analysis of U.S. Department of Education data reveals.

High loan defaults are a growing concern -- not only because they ruin the borrower's credit, but because they are seen as an indication that the schools do not set students on a course toward jobs with high enough pay to handle their levels of debt.

According to the Bay Area News Group analysis of 2010-11 academic year data for more than 100 schools in the region:

  • Bay Area for-profit schools enrolled roughly 10 percent of all college students in the area, and their students received more than $378 million in federal loans and Pell grants, 29 percent of the total amount.

  • Two-thirds of the students attending a for-profit school took out federal loans that year, compared with just 3 percent of community college students. Borrowers from both of those sectors were at the greatest risk of defaulting on their loans in the first three years -- about 19 percent did, by the latest count.

  • By contrast, students at private nonprofit colleges and at public universities were less likely to borrow federal loans and had default rates of 5.4 and 4.7 percent, respectively.


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  • Former students at for-profit schools accounted for nearly half of all federal loan defaults here, according to the latest count, though they make up one tenth of the area's college students.

  • At Everest College in Hayward, which cost more than $25,000 a year on average after subtracting grants and scholarships, one in three former students could not repay their student loans.

  • The University of Phoenix in San Jose reported $17 million in federal student aid, a graduation rate of 19 percent and a student loan default rate of 26 percent.

  • Twelve for-profit trade schools were among the Bay Area's 25 most expensive colleges, as measured by the average annual cost after subtracting tuition grants, and they had that group's highest rates of student loan defaults.

  • Last year, California cut from its tuition aid program more than 130 private colleges with low graduation rates and too many student loan defaults. Most of them were in the for-profit, or "proprietary," sector.

  • Today, only 50 for-profit schools in California remain eligible for state-subsidized tuition; 115 do not.

  • The U.S. Department of Education late last month proposed standards for vocational programs to qualify for student aid shortly after President Barack Obama criticized the for-profit sector and called for congressional action on broad reforms for all colleges in the U.S.

    In his remarks on Aug. 23 at Binghamton University in New York, Obama answered a question about taxpayer money for students at for-profit colleges:

    "So I'm not against for-profit institutions, generally. But ... there have been some schools that are notorious for getting students in, getting a bunch of grant money, having those students take out a lot of loans, making big profits, but having really low graduation rates. Students aren't getting what they need to be prepared for a particular field. They get out of these for-profit schools loaded down with enormous debt. They can't find a job. They default. The taxpayer ends up holding the bag. Their credit is ruined, and the for-profit institution is making out like a bandit. That's a problem.

    "... Soldiers and sailors and Marines and Coast Guardsmen, they've been preyed upon very badly by some of these for-profit institutions. ... Because what happened was these for-profit schools saw this Post-9/11 GI Bill, that there was a whole bunch of money that the federal government was committed to making sure that our veterans got a good education, and they started advertising to these young people, signing them up, getting them to take a bunch of loans, but they weren't delivering a good product.

    "... If we can define some basic parameters of what's a good value, then it will allow us more effectively to police schools whether they're for-profit or non-for-profit -- because there are some non-for-profit schools, traditional schools that have higher default rates among their graduates than graduation rates -- and be able to say to them, look, either you guys step up and improve, or you're not going to benefit from federal dollars.

    "... We don't want money being funneled to schools that aren't doing a good job. We want to encourage students to be smart shoppers, to be good consumers."

    Online
    To see which California colleges are eligible for Cal Grants -- and which are ineligible -- visit http://sandbox.csac.ca.gov/CalGrant_Inst/CalGrantInstSearch.aspx
    Vocational program graduates' average earnings and debt can be downloaded from the office of Federal Student Aid at http://studentaid.ed.gov/node/275
    Find more information about loan defaults and college-level data at The Project on Student Debt, a program of The Institute for College Access & Success at http://projectonstudentdebt.org/CDR_resources.vp.html