For-Profit Colleges Offer More Loans
Posted 15 Sep, 2009
You’ve probably experienced sticker shock if you’ve ever taken a peek at the cost of a for-profit college. (These are the schools you see advertised on television that are typically focused on teaching students a single trade or career path.)
If you’ve researched the post-graduate debt for these schools, you were probably even more aghast. In fact, just this past May I reported on FinAid.org’s findings that 30% of senior students of for-profit colleges have $40,000 worth of debt!
New Source, More Debt?
As many non-profit schools are making budget cuts in an effort to stay afloat, for-profit schools seem to be doing just fine. In fact, according to a recent Associated Press article, business is booming.
Wondering why?
As students are struggling with the tough economy (which has also made it more difficult for many students to get the loans they need), for-profit schools have stepped up to offer their students institutional loans–funding that comes not from the bank, but from the school itself.
Schools such as ITT Tech and Westwood College recently began upping their offerings to students to help them foot the bill, but in the form of loans, not grants.
Unlike the standard federal loans, loans from these private for-profit institutions are not structured to help keep student loan costs at a minimum (in fact, an AP report on the subject compared these schools to used-car dealers), so while the schools keep their attendance up and raise their profit margins, students are getting deeper into debt.
Borrower Beware
Though for-profit schools are touting their new loans as a lifeline to needy students, this particular type of borrowing can be very risky. Some experts are concerned that students in this situation are borrowing more than they need to–this leads to graduating with extra debt, which they have a high likelihood of struggling to pay off.
Another big concern is the type of loan these schools are giving out. Unlike traditional federal student loans, which have several important consumer protections as well as low interest rates, loans of this type are often considered consumer loans, much like the money you would borrow to buy a new piece of furniture. Westwood College, of Colorado, is currently undergoing a class-action fraud lawsuit pertaining to loans made to their students. They charge an 18% interest rate, and do not refer to their loan offerings as “student loans” at all.
As with any borrowing, I urge anyone considering loans from the for-profit colleges to be extremely cautious. Make sure you fully understand the rate and terms of any loan you are considering. Remember to borrow federal loans first, and carefully calculate your actual needs before signing on the dotted line. Remember, the less debt your student takes on now, the easier his or her burden will be upon graduation!
All the best,
Deborah Fox
Deborah Fox is the founder of Fox College Funding®, a nationwide company that helps families find creative ways to reduce their college costs.
Subscribe in a reader
Subscribe by Email
Related Posts
You’ve probably experienced sticker shock if you’ve ever taken a peek at the cost of a for-profit college. (These are the schools you see advertised on television that are typically focused on teaching students a single trade or career path.)
If you’ve researched the post-graduate debt for these schools, you were probably even more aghast. In fact, just this past May I reported on FinAid.org’s findings that 30% of senior students of for-profit colleges have $40,000 worth of debt!
New Source, More Debt?
As many non-profit schools are making budget cuts in an effort to stay afloat, for-profit schools seem to be doing just fine. In fact, according to a recent Associated Press article, business is booming.
Wondering why?
As students are struggling with the tough economy (which has also made it more difficult for many students to get the loans they need), for-profit schools have stepped up to offer their students institutional loans–funding that comes not from the bank, but from the school itself.
Schools such as ITT Tech and Westwood College recently began upping their offerings to students to help them foot the bill, but in the form of loans, not grants.
Unlike the standard federal loans, loans from these private for-profit institutions are not structured to help keep student loan costs at a minimum (in fact, an AP report on the subject compared these schools to used-car dealers), so while the schools keep their attendance up and raise their profit margins, students are getting deeper into debt.
Borrower Beware
Though for-profit schools are touting their new loans as a lifeline to needy students, this particular type of borrowing can be very risky. Some experts are concerned that students in this situation are borrowing more than they need to–this leads to graduating with extra debt, which they have a high likelihood of struggling to pay off.
Another big concern is the type of loan these schools are giving out. Unlike traditional federal student loans, which have several important consumer protections as well as low interest rates, loans of this type are often considered consumer loans, much like the money you would borrow to buy a new piece of furniture. Westwood College, of Colorado, is currently undergoing a class-action fraud lawsuit pertaining to loans made to their students. They charge an 18% interest rate, and do not refer to their loan offerings as “student loans” at all.
As with any borrowing, I urge anyone considering loans from the for-profit colleges to be extremely cautious. Make sure you fully understand the rate and terms of any loan you are considering. Remember to borrow federal loans first, and carefully calculate your actual needs before signing on the dotted line. Remember, the less debt your student takes on now, the easier his or her burden will be upon graduation!
All the best,
Deborah Fox
Deborah Fox is the founder of Fox College Funding®, a nationwide company that helps families find creative ways to reduce their college costs.
Subscribe in a reader
Subscribe by Email
Leave a Reply