Home > 2014 > Students

Most For-Profit College Grads Earn Less Than High School Dropouts

Advertiser Disclosure Comments 0 Comments

There’s a big push behind making higher education more accessible. “Earning a post-secondary degree or credential is no longer just a pathway to opportunity for a talented few; rather, it is a prerequisite for the growing jobs of the new economy,” says the education page of the White House website.

For most graduates of for-profit colleges, that’s not working out. Even with their associate’s or bachelor’s degrees, 72% of for-profit programs studied by the U.S. Department of Education produced graduates who earned less on average than high school dropouts.

Since the value of higher education is to improve your career prospects and earning potential, students of for-profit colleges paid a lot of money for a potentially worthless degree.

Look at the numbers: Students at for-profit colleges make up 13% of college students, but they account for 31% of student loans and nearly half of student loan defaults.

Cutting Off Under-Performers

This month, the Department of Education proposed regulations that would give for-profit colleges a chance to improve their students’ ability to achieve gainful employment. Programs that fail to do so will see their federal funding cut off.

The regulations would require these institutions to show their programs meet accreditation and licensure requirements for the careers they market, keep students’ debt-to-earnings and default rates below certain thresholds and disclose to prospective students the costs, earnings, debt, default rates and completion rates associated with their programs.

This isn’t the first regulatory effort made against a for-profit college this year. In February, the Consumer Financial Protection Bureau filed a lawsuit against ITT Educational Services, the parent company of ITT Tech, for predatory student lending.

The Bigger Problem

Consider this: The majority of community college students don’t borrow student loans, but students who graduated from for-profit colleges with an associate’s degree averaged $23,590 in federal student loan debt, according to the Education Department.

But it’s not just for-profit colleges that churn out students with loads of debt. There’s $1.3 trillion of outstanding student loan debt in the U.S., and the default rates at nonprofit colleges, public and private, have continued to rise over the last decade.

Nearly 4.1 million borrowers started repaying their loans between Oct. 1, 2009, and Sept. 30, 2010 (fiscal 2010), and 14.7% defaulted by Sept. 30, 2012 — the previous fiscal year, the three-year default rate was 13.4%.

Breaking it down by institution type: 21.8% of for-profit students defaulted within 3 years, as did 13% of public school and 8.2% of private school borrowers.

Student loans can only very rarely be discharged in bankruptcy, and defaulting on your debt obligations will wreak havoc on your credit scores. It’s best to manage student loan debt from the beginning by not borrowing more than you can afford. If you’re already past that point and struggling with debt, look into an income-based repayment plan, loan consolidation or refinancing, if it’s available. If you want to see how your student loan debt is impacting your credit scores, you can use free tools on Credit.com to check two of your scores for free and see the biggest factors impacting your scores.

More on Student Loans:

Image: luanateutzi

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Certain credit cards and other financial products mentioned in this and other articles on Credit.com News & Advice may also be offered through Credit.com product pages, and Credit.com will be compensated if our users apply for and ultimately sign up for any of these cards or products. However, this relationship does not result in any preferential editorial treatment.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Our Owners

Credit.com is owned by Progrexion Holdings Inc. which is the owner and administrator of a number of business related to credit and credit repair, including CreditRepair.com, and eFolks. In addition, Progrexion also provides services to Lexington Law Firm as a third party provider. Despite being owned by Progrexion, it is not the role of the Credit.com editorial team to advocate the use of the company’s other services. In articles, reporters may mention credit repair as an option, for example, but we’ll also be sure to note the various alternatives to that service. Furthermore, you may see ads for credit repair services on Credit.com, but the editorial team isn’t responsible for the creation or implementation of those ads, anymore than reporters for the New York Times or Washington Post are responsible for the ads on their sites.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team