Nearly a third of students who borrowed money to attend the for-profit Everest College in San Bernardino defaulted on their federal student loans in 2008, according to data recently released by the U.S. Department of Education. That gives Everest's San Bernardino campus the highest default rate of any school in the state.
The figures (see below) are part of newly released data that shows more people are defaulting on their federal student loans, and students at for-profit colleges are the most likely to default.
The increase in part reflects the difficulty people faced in paying back student loans amid a national recession. The figures include borrowers whose first loan payments came due between October 2007 and September 2008 and who defaulted before September 2009.
Still, the Department of Education's press release on the figures took pains to point out the discrepancies between rates at for-profit schools and other institutions. The national default rate is 7 percent, up from the 2007 rate of 6.7 percent. The rates increased from 5.9 to 6 percent for public institutions, from 3.7 to 4 percent for private institutions, and from 11 to 11.6 percent for for-profit schools.
"While for-profit schools have profited and prospered thanks to federal dollars, some of their students have not. Far too many for-profit schools are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use. This is a disservice to students and taxpayers, and undermines the valuable work being done by the for-profit education industry as a whole," U.S. Secretary of Education Arne Duncan stated in the release.
The new data comes as the department increased its scrutiny of the for-profit education sector. One set of proposed regulations aims to protect students from debt they cannot repay by requiring for-profit institutions to better prepare students for "gainful employment" or risk losing access to federal student aid.
In California, 6.7 percent of borrowers defaulted within two years of beginning loan repayment. A look at the rates here shows that nine of the 10 schools with the highest default rates in the state are for-profit institutions. After Everest College-San Bernardino, the list includes National Polytechnic College in Commerce, the Academy of Radio & TV Broadcasting in Huntington Beach, and the Palladium Technical Academy in El Monte. One public school made the list: West Hills Community College in Coalinga.
Kent Jenkins Jr., a spokesman for Corinthian Colleges Inc. – parent company of Everest Colleges – had not yet looked closely at the specifics behind the San Bernardino campus' 31.1 percent default rate.
Still, he said, Corinthian has invested $10 million into additional programs and resources aimed at helping students at its 110 campuses nationwide avoid default.
"We have said there is no question that this is an issue for a number of our campuses," Jenkins said. "We understand very clearly we have an obligation to our students and graduates that their education is a good investment to them, because much of this is funded by taxpayers."
Speaking generally, Jenkins said the default rates have much more to do with student demographics than they do with the institutions themselves. In other words, the more low-income students a campus has, the higher the default rate.
But a closer look at the default rates at other colleges in San Bernardino shows that concept doesn't always hold true. About a mile away from Everest College, on the other side of Interstate 10, sits another for-profit school, Concorde Career College-San Bernardino.
Both colleges enroll a significant chunk of low-income students. About 53 percent of Everest undergraduates received Pell grants in the 2008-09 academic year, compared to 66 percent of undergrads at Concorde. At both Everest and Concorde, the medical assistant program is the most popular offering, according to data from the National Center for Education Statistics.
But the loan default rate for borrowers at Concorde was roughly 9 percent in 2008 – higher than the national rate but much lower than the 31.1 percent rate at nearby Everest.
Everest College's parent company, Corinthian Colleges Inc., agreed to pay $6.5 million in 2007 to settle a lawsuit that accused the chain of exaggerating its record of placing students in well-paying jobs, the Los Angeles Times reported. As part of the court-approved settlement, Corinthian was prohibited from offering certain courses at nine of its campuses for 18 months. The specific programs included the medical lab assistant program and the homeland security program in San Bernardino.
Corinthian earlier this month launched a major campaign to fight against the federal government's proposed regulations on gainful employment, running full-page ads [PDF] in papers such as the San Francisco Chronicle and the Los Angeles Times.
"The 'gainful employment' regulation is supposed to protect students, but in reality it would cut off hundreds of thousands of students from promising careers that make America work," Corinthian CEO Peter Waller stated in a press release.
Here's the list of the schools with top 10 highest default rates in California, out of 516 schools in the Department of Education's database.