At which colleges are the largest share of students taking out non-federal private student loans? That’s a question that we at Ed Money Watch set out to determine using Department of Education data now available on the Federal Education Budget Project (FEBP) website (www.EdBudgetProject.org). The FEBP website now includes a host of higher education data on every state and institution including information on federal financing, demographics, outcomes, and financial aid use, making it easy to compare the proportion of students taking out private loans at different colleges and universities.
Understanding the extent to which students at individual schools are taking out private loans is important because of concerns that some institutions might be steering students to take out private loans before exhausting their lower cost federal student aid options. Private loans are almost always more costly for students than federal loans, and they offer fewer consumer protections.
For our analysis, we used the FEBP database to examine the top 100 colleges in terms of non-federal loan borrowing in 2009. At each of these schools, more than half of first-year students received such a loan. We found that 82 of the institutions were in the for-profit college sector. Of the remaining 18 non-profit colleges, 17 were private colleges, and one was a historically black public university.
Some of the for-profit colleges were relatively small trade schools, like the Diesel Driving Academy in Shreveport, LA, at which 99 percent of its first-time students received non-federal loans. But the majority of the institutions are part of larger for-profit higher education companies that have dozens of campuses.
In fact, nearly a third of the top 100 schools belonged to Corinthian Colleges, one of the largest for-profit higher education companies in the country. Thirty of the publicly-traded company’s 91 Everest and Wyotech schools in the U.S. showed up on the list. At five of those schools, more than three-quarters of first-time students had non-federal private loans. At the Everest College branch in Chesapeake, VA, for instance, nine out of 10 of these students received a private loan. Overall, the median rate for these institutions was 66 percent.
Also showing up prominently on the list were the Westwood College campuses of the for-profit school chain Alta Colleges. At 11 of the company’s 17 campuses, more than half of first-time students took out non-federal private loans. The median rate for these institutions was 58 percent.
Other large for-profit college companies, like Career Education Corporation, Education Management Corporation, and ITT Educational Services, each had one or two campuses with similarly high rates. Notably absent from the list was the Apollo Group’s University of Phoenix, which for the most part does not encourage its students to borrow private loans.
Of the 18 non-profit colleges in the top 100, seven were so small that they had fewer than 15 freshmen borrowing non-federal loans. The other private colleges tended to be career specific schools such as the Massachusetts College of Pharmacy & Health Sciences, at which 69 percent of freshmen took out non-federal loans, or small liberal arts colleges with relatively meager endowments. At Austin College in Texas, for example, 53 percent of freshmen took out non-federal loans. According to National Association of College and University Business Officers data available on the Chronicle of Higher Education website, the small Presbyterian school had an endowment of $109 million in 2009, which is a pittance compared to the University of Texas system, for example, whose endowment totaled more than $12 billion. Of course, there are many colleges with smaller endowments that don’t exhibit this level of non-federal loan borrowing.
Perhaps the most surprising school on this list was Delaware State University, a historically black public university. According to data that the university provided, 82 percent of the school’s freshmen took out non-federal loans. Public colleges and universities tend to have much lower private loan borrowing rates because they are heavily subsidized by state governments. In 2008, the school reported that only 19 percent of its first-year students took out non-federal loans, so it is very possible the school has shown up on the list as the result of a data reporting error. Ed Money Watch contacted the university to find out, but did not receive a response to our inquiry.
The non-federal borrowing data is not perfect, as it doesn’t give a complete picture of the level of private loan borrowing occurring at individual schools. It looks, for example, only at full-time, first year students and therefore doesn’t fully capture the level of borrowing going on at these institutions. It also doesn’t distinguish private loans from state and lower-cost institutional loans. In addition, colleges can only report on private student loans they know about. Many students bypass the financial aid office and obtain loans directly from lenders, making it difficult for schools to keep track of this borrowing.
Despite these flaws, this data should be helpful in identifying colleges that could potentially be pushing their students to borrow private loans before they exhaust all of their federal aid options first. Check back with Ed Money Watch as we continue to explore the higher education data now available on the Federal Education Budget Project (FEBP) website.
Click here to download data on the 100 institutions with the highest non-federal loan borrowing rates in 2009.