For-Profit Colleges Face Risk Under New Rule

July 11, 2010

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.

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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 institutions		All 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