Students seeking to move up in life by getting a degree from a for-profit college are being trapped in a growing underclass of education debtors. Under U.S. law, their loan obligations can rarely be discharged in bankruptcy, making them more onerous than credit-card debt or subprime mortgages. Defaults can subject students to government confiscation of salaries, tax refunds, and Social Security payments—and disqualify them for aid to get more marketable degrees.
Students at for-profit colleges carry the biggest loans in U.S. higher education. Bachelor's degree recipients at for-profits have median debt of $31,190 compared with $17,040 at private, nonprofit institutions and $7,960 at public colleges, according to Washington-based nonprofit Education Trust.
While currently enrolling one in eight U.S. students, for-profit colleges account for almost one in two federal-loan defaults. The Obama Administration wants to curb rising default rates and the threat of student destitution by cutting off federal funds to for-profit college programs whose students have the worst loan-repayment rates and lowest incomes relative to debt, which suggests their degrees aren't translating into higher salaries. . . .