• October 2, 2014

For-Profit Colleges Face Risk Under New Rule

These 20 institutions could be found in violation of a new federal rule on student-loan defaults if it took full effect today instead of in 2014, as planned. The colleges could escape risk by lowering their default rates before then. Colleges in violation can lose eligibility for federal student aid. For-profit institutions appear disproportionately affected by the new rule. Only three colleges named below are not for-profit: Benedict, Jarvis Christian, and Texas Colleges. An institution would violate the rule if for three consecutive years, 30 percent or more of its borrowers defaulted within three years of their scheduled start of repayment, or if the institution's default rate exceeded 40 percent in the most recent three-year period.

Institution* Location Number of borrowers starting repayment in 2007 Number of borrowers who defaulted within three years Default rate, 2007 Default rate, 2006 Default rate, 2005
Three years with default rate of 30 percent or more:
Arizona Automotive Institute Phoenix, Ariz. 552 214 39% 36% 33%
Aviation Institute of Maintenance Kansas City, Mo. 124 46 37% 47% 31%
Benedict College Columbia, S.C. 1,103 374 34% 33% 34%
Camelot College Baton Rouge, La. 249 84 34% 51% 35%
Centura College-Richmond Richmond, Va. 345 112 32% 33% 33%
College of Office Technology Chicago, Ill. 644 305 47% 39% 38%
Everest College at San Bernardino San Bernardino, Calif. 765 284 37% 33% 32%
Everest Institute at Rochester Rochester, N.Y. 1,638 610 37% 35% 34%
Huntington Junior College Huntington, W.V. 483 199 41% 38% 33%
Jarvis Christian College Hawkins, Tex. 224 89 40% 40% 37%
Tesst College of Technology Baltimore, Md. 1,098 462 42% 42% 34%
Texas College Tyler, Tex. 365 149 41% 41% 36%
Westwood College-DuPage Woodridge, Ill. 885 269 30% 31% 34%
WyoTech at Long Beach Long Beach, Calif. 2,224 719 32% 35% 31%
Default rate of more than 40 percent in most recent year:
Advanced College South Gate, Calif. 92 37 40%    
Angley College Deland, Fla. 115 51 44%    
Centura Institute Orlando, Fla. 57 23 40%    
College America at Flagstaff Flagstaff, Ariz. 240 111 46%    
Lamson College Tempe, Ariz. 330 145 44%    
Lincoln Technical Institute Philadelphia, Pa. 544 230 42%    
Additional colleges have recorded high rates for two consecutive years and so may be at risk of violating the rule if they cannot lower their default rates.
 Degree-granting institutionsAll postsecondary institutions
Number of institutions with a default rate of 30% or more in 2007 and 2006 41 100
Number that are for-profit 34 93
* Degree-granting institutions only
Note: The federal rule allows for appeals on various grounds, allowing some colleges with high rates to avoid losing eligibility for federal dollars. Colleges with fewer than 30 borrowers in one year are subject to separate provisions under the rule and so are not included in this analysis.
Source: U.S. Education Department data
Chronicle analysis by Jeffrey Brainard

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