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The truth about those student loans

The issues of financing at for-profit schools affect you as a taxpayer, not just the students.


The issues of financing at for-profit schools affect you as a taxpayer, not just the students.

Colleges follow the 90-10 rule: 90 percent of a student’s expenses can come from federal grants and loans. The other 10 percent is from the student, scholarships, state money or third-party loans. And most for-profit schools rely more on federal money than traditional colleges do.

“It’s a business model to die for,” says Terry Connelly, a dean at Golden Gate University. “They get 90 percent of their income from federal [money] whether the student pays the money back or not. When it comes time to collect, it’s entirely the taxpayers’ risk.”

That risk is huge. The schools set their own loan terms, mostly loan to high-risk borrowers and charge higher interest rates with payments due while the student is still in school.

Naturally, the proprietaries don’t see a problem. “We serve a sector that would otherwise be unable to attend school,” says Kent Jenkins Jr., spokesperson for Corinthian Colleges Inc., a for-profit group. “The default rate results from who the borrowers are, not the kind of schools they go to.”


To read more, go to www.educationoption.com/forprofit.

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