A spreadsheet published late Friday by the federal Education Department answers a much-debated question in the federal effort to regulate for-profit colleges: Can students at for-profit schools repay their loans?
The department released loan repayment rates for individual colleges. The data show a remarkable range from school to school in the ability of students to pay down their college loans. A quick analysis by the Institute for College Access & Success found that overall repayment rates were around 55 percent for non-profit colleges, compared with 36 percent at for-profit schools.
For-profit stock plunged at the news.
At issue is a proposed federal rule that would potentially restrict a school's access to federal aid funds if its programs do not yield "gainful employment."
The department wants to measure this two ways. One is a graduate's debt burden -- what share of his or her salary must go to loan payments. The other is repayment rates -- what share of students are paying down the principal in their loans.
A for-profit college that scores poorly on both counts becomes ineligible for funds. A much larger group -- perhaps half of the industry -- would fall into a nebulous "yellow" zone, facing some restrictions but still entitled to federal aid.
Why does half the for-profit industry fall in the mildly restrictive "yellow" zone and only 5 percent in the more dire "red" zone? Largely because a college must fail both tests to become ineligible for federal dollars.
Colleges with student loan repayment rates below 35 percent face the stiffest penalties under the proposed rule: if they fail that test and the student-debt-burden test, they could become ineligible for aid. Schools with repayment rates from 35 percent to 45 percent could face restrictions -- they fall into the yellow zone. Anything over 45 percent is considered acceptable and frees the institution from any further federal scrutiny.
The federal data reveal sub-par repayment rates at some major for-profit colleges. It's important to note, though, that the for-profit companies are disputing the federal data and contend the percentages in the spreadsheet are too low. More on that below.
Let's start with Kaplan University, owned by the Washington Post Co. The institution's overall repayment rate is 28 percent, meaning that nearly three-quarters of students aren't paying down their student loans.
The University of Phoenix, the industry's largest player, fares better, with a 44-percent repayment rate.
Strayer University, based in Arlington, has a 24-percent repayment rate.
Let me pause here for an important disclaimer:
It's hard to tell if the figures stated above are for the universities as a whole, or merely for some of their holdings. The spreadsheet lists several campuses for each for-profit holding company. It's a confusing document, and it appears that a reader might have to carefully combine many rows of data to come up with an accurate repayment rate for an entire institution.
Kaplan officials told my colleague Nick Anderson that the government's definition of repayment was overly narrow and said the education department's spreadsheet did not count many borrowers who had consolidated loans or participated in federal income-based repayment plans.
Strayer said the figures in the spreadsheet were well below their own estimates of loan repayment rates.
No overall repayment rate is stated for the massive Corinthian Colleges corporation. Instead, several dozen of its Everest schools are listed individually, with repayment rates ranging from 4 percent at one campus to better than 50 percent at another.
Likewise, numerous campuses of DeVry University are cited, with repayment rates from the teens to higher than 60 percent, but no overall repayment rate for the holding company. But DeVry fares better in the analysis than Corinthian and some of the other for-profit entities.
For some points of comparison, here are the student loan repayment rates at some non-profit universities in the area:
American University: 69 percent
Georgetown University: 79 percent
George Mason University: 69 percent
University of Maryland: 73 percent
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