ForProfit Colleges Under Fire
Congress examines student loan practices.
For-profit colleges that offer both on-campus and online secondary education have become a multi-billion dollar industry.
At a Senate hearing Tuesday critics charged that a big chunk of those billions actually came from U.S. taxpayers.
With charts showing a degree from a for-profit college costing up to four times more than a public college as they charging double-digit interest rates to students with government-backed loans, the committee's chairman compared it to the predatory lending of the housing crisis.
"These are essentially subprime loans, carrying high interest rates and even higher estimated levels of default," said Iowa Senator Tom Harkin.
Former student Eric Schmitt is one those in default.
He said he feels betrayed by recruiters at Kaplan University who urged him to take out the loans to pay their tuition.
"Now I owe $45,000 in student loans without a permanent job to pay those bills," he said.
"This sector has the highest share of students with debt, the highest debt loads for degrees and the highest student loan default rates," pointed out Pauline Abernathy, vice president of the Institute for College Access.
A default rate that approaches 80-percent at some for-profit schools that are also accused of recruiting only underprivileged students who qualify for federal loans.
No one testified at the hearing in defense of the industry, but Kaplan University issued a statement saying its tuition is comparable to other higher education intuitions that are heavily subsidized by taxpayers.
The most recent U.S. Department of Education stats show 92 percent of students at for-profit institutions borrowed to finance their tuition while 59-percent did that at four-year, private non-profit schools and 46-percent borrowed for their education at four year public institutions.