The Department of Education’s (ED) release of illustrative trial three-year cohort default rates (CDR) generated news stories about the for-profit career college sector, often emphasizing the high trial three-year CDR’s for the sector.  However, it is important to note, that the news coverage also indicated that there was wide recognition amongst government officials, for-profit college officials and higher education experts that the CDR data is not a measure of institutional quality.

Please find below a sample of excerpts from the press:

USA Today:
Terry Hartle, a lobbyist with the American Council on Education, cautions that default rates "are not good indicators of institutional quality." But, he says, "As students accumulate ever higher levels of debt, it is important that they have access to this information."

A number of studies show that low-income students and those from families who lack higher education are more likely to default on their loans. Student-loan defaulters "can tarnish their credit reports, make it difficult for them to obtain employment, and jeopardize their long-term financial well-being," says an August report by the U.S. Government Accountability Office, the investigative arm of Congress.

Debbie Cochrane, program director of the non-profit Project on Student Debt, urges consumers to consider the data in context. "A 30% cohort default rate (has a) very different (meaning) at a school where 90% of students borrow compared with a school where 5% borrow." (“For-profit colleges have higher rate of student loan defaults”, Mary Beth Marklein, USA Today, December 14, 2009) 

Chronicle of Higher Education:
"The only thing that explains default rate is the socioeconomic background" of the student, said Harris N. Miller, president of the Career College Association, which represents for-profit institutions. "By using that as the metric of quality, you will always be discriminating against low-income students."

Still, it's not a fair gauge, said Mr. Benjamin, who serves on the Board of Directors of the Career College Association. Congress should at least consider local economic conditions when basing education policy on default rates, he said. The government otherwise might "depress a region's potential for future economic development," he said.

Central State University, a public four-year institution in southwestern Ohio, has similar concerns. Central State, with about 2,000 students, saw its default rate grow from 22 percent under the two-year measure to 33 percent under the three-year window, according to the Education Department data.

The university has many graduates, including grade-school teachers, whose jobs simply don't pay enough to cover the cost of attending college, said Phyllis Jeffers-Coly, dean of enrollment services. Sanctioning universities based on default rates, she said, is "not dealing with the fundamental question of, how are we going to make college affordable?"    (“New Measure of Student-Loan Defaults Could Threaten Hundreds of Colleges” Paul Basken, Chronicle of Higher Education, Dec. 14, 2009) 

Inside Higher Ed:
Officials at for-profit colleges and some other institutions that serve large numbers of students from low-income backgrounds have argued that it is a skewed indicator of institutional quality, disproportionately punishing institutions that enroll more needy students.” (“Defaults Nearly Double”, Doug Lederman, Inside Higher Ed, Dec. 14, 2009) 

Associated Press:
Harris Miller, president and CEO of the Career College Association, which represents for-profit colleges, said the increase reflects the poor economy. He also said high default rates don't measure a school's quality, and noted that his group's members enroll large numbers of low-income students.

"If you accept low-income students you're going to have high default rates," he said. "It has nothing to do with whether you're for-profit or not."

Dan Madzelan, acting assistant secretary for postsecondary education, noted that while some for-profit colleges have high default rates, others are in line with traditional colleges. He also cautioned that for some schools with high rates but a low number of borrowers, the default rate numbers could be misleading. (“Student loan default data highlights for-profits”, Justin Pope, Associated Press, Dec. 14, 2009)  

Wall Street Journal:
Dan Madzelan, acting assistant secretary for postsecondary education, said the data are unofficial and won't result in sanctions. The information covers borrowers who entered repayment in the 2007 fiscal year and defaulted by the end of fiscal 2009. Mr. Madzelan said schools would have time to get their default rates down, and the government "isn't interested in shutting down schools."

For-profit schools said the higher default rates reflect the lower-income students and working adults who attend. They note that community colleges, with a similar clientele, have above-average defaults. By the Journal's calculation, community colleges had a 16% default rate.

Officials at the for-profits also said a new government program that lets student repay based on their income should lower defaults.

Corinthian says it is in compliance with the two-year rates and that it has instituted new efforts to reduce defaults. It said the default rates "are not necessarily indicative of what its three-year [default rate will] be once its default-management program is expanded to accommodate the new rule."

Kaplan made a similar statement, adding that a technical problem hurt its default-management efforts and a new pilot program, including student counseling, had cut two-year defaults 25% in some schools. "We are confident that these changes will significantly improve our default rates," the company said. ITT declined to comment.  (“For-Profit Schools See More Defaults”, John Hechinger and Tom McGinty, Wall Street Journal, Dec. 14, 2009) 

Star-Ledger:
College officials said they weren't surprised by the increase, given the deteriorating economy.

"When you're faced with a situation of paying your rent and buying food, or making a $150 student loan payment, you're going to make sure you have your home covered," said Tom Eastwick, owner of five for-profit schools around the state. "It's just common sense you would do that.

For-profit schools argue their relatively high default rates naturally result from serving low-income populations. Eastwick said the HoHoKus School of Trade in Paterson, where figures show 19 of the 41 students defaulted, offers a telling example.

He said the school had just five students when he took it over, with other companies hesitant to do business in one of the state's poorest areas. Students routinely fill middle-class jobs as welders and electricians, he said, predicting that increased interventions would soon push the default rate to about 20 percent. ("Defaults on federal student loans spike in Jersey”, Brian Whitley, Star Ledger, Dec. 14, 2009) 

Citytowninfo.com:
Experts were quick to point out that the new information was unfairly biased against colleges which serve lower-income populations. "The only thing that explains default rate is the socioeconomic background" of the student, noted Harris N. Miller, president of the Career College Association, who was quoted in the Chronicle. "By using that as the metric of quality, you will always be discriminating against low-income students."

And Debbie Cochrane, program director of the Project on Student Debt, cautioned that it's important to see the whole picture of what the numbers represent. "A 30 percent cohort default rate [has a ] very different [meaning] at a school where 90 percent of students borrow," she told USA Today, "compared with a school where 5 percent borrow." ("New Data On Student Loan Defaults”, Yaffa Klugerman, Citytowninfo.com, December 14, 2009)