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Some for-profit colleges may lose federal funding

The good news is the number of people who can’t make payments on their student loans is falling for the first time in several years.

The better news is that the U.S. Department of Education is threatening to pull funding from schools where it’s not. The twenty for-profit schools with the worst default rates may soon lose the ability to receive federal student grants and loans, which is “considered a death sentence for almost any postsecondary school,” news site Collections and Credit Risk says.

Even though students at for-profit colleges make up only 12 percent of students nationwide, they make up almost half (44 percent) of federal student loan defaults. The likelihood of students at a for-profit college defaulting on their loans is more than three times higher than students at a public or nonprofit college, says MarketWatch.

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Additionally, students at for-profit schools have a much lower graduation rate than those at public schools, making it harder for them to pay back the debt that they take on. That’s scary, especially when you consider the demographics at these colleges.

Nearly all of the schools on the list are small trade schools, and several of them are cosmetology schools. Most of the students are older, possibly married, and want to get back into the workforce.

It’s just the latest bad news for the for-profit colleges. Earlier this month, the federal government announced it was suing the parent company of Everest University for predatory lending. The Education Department suggested it isn’t done cracking down, either.

“The number of students who default on their federal student loans is still too high,” Education Secretary Arne Duncan said. “We remain committed to working with post secondary education institutions and borrowers to ensure that student debt is manageable.”

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