Understanding default rates in student loans

The feds have suggested that accounting for student loans now be based on a three year rather than a two year average. While the better count would be for the life of the loan - the longer standard makes sense. All of the rates of default, among the sectors of higher education increased. In the traditional four year institutions (public and private) the new data raises defaults to around 7%. But for the for profit sector the increase is a bit more dramatic. The rate increases from 11% to 21%. Even for some of the flagship proprietaries the rate increases significantly.

The new data made me want to explore one claim which many in the proprietary sector make - that they are the taxpaying sector. Here is the data from the Apollo Corporation - which is Phoenix's parent. The data is from the financial filings of Apollo Corporation and from their federal student aid data. It does not include the amount of money that students took out in federal loans (about $3.8 billion) or the cost to the federal government for defaults on those loans, which in the case of Phoenix amount to 15.9%.

The chart is not meant to pick on one institution. (Indeed, Phoenix's default rate is significantly below the proprietary sector as a whole and less than a third of what many proprietaries have.) But it does point up two issues. First, all of higher education could improve their record on getting students to repay their loans. Second, the claim by the proprietary sector as the "taxpaying" sector is bunk.