Report: Graduates of for-profits have more debt

Students who graduate from Minnesota for-profit colleges are saddled with more debt than those who attended public or nonprofit schools.

Nine of 10 students who earned a four-year degree in 2010 from a for-profit school left with student loan debt, according to a state report released Friday. Their average debt load: $45,100.

That compares with an average debt of about $23,900 for graduates of the seven state universities and $26,700 for the University of Minnesota campuses. About 73 percent of those who graduated from the state's nonprofit private colleges took on debt. Their average: $29,100.

But the first-of-its-kind report from the Minnesota Office of Higher Education also found that for-profit graduates had high rates of employment within the state and were less likely to default on their student loans than those who attended public two-year colleges.

Nationally, for-profit schools have been under scrutiny for their recruiting practices and graduation rates. The Minnesota report wasn't prompted by "an ax to grind," said Larry Pogemiller, director of the state Office of Higher Education. "It was meant to be just a beginning point for a much broader policy discussion."

The report also could flag areas for "further inquiry," Pogemiller said. "Obviously the debt levels are of concern."

The report compares Minnesota for-profit schools with national averages. Nationally, about 23 percent of for-profit students defaulted on their federal student loans within three years of beginning repayment. But in Minnesota, 10 percent did. That's lower than the 15 percent default rate for Minnesota's public two-year colleges.

Students who graduated in 2009-10 from for-profit schools "have some of the highest rates of employment in Minnesota across all sectors," data from the Minnesota Department of Employment and Economic Development shows. About 79 percent were employed in Minnesota a year after graduation. The only sector showing higher employment rates than the for-profit schools were the two-year public colleges, where 80 percent of those who graduated were employed.

But those numbers are incomplete: They count only the graduates who end up working in Minnesota and not those who might nab jobs in other states.

The school with the most indebted graduates was the Arts Institutes International Minnesota. About 92 percent of students who graduated with bachelor's degrees in 2010 had debt. Their average debt load: $55,200.

A spokeswoman reached after the report was released Friday afternoon declined to comment, saying she was "unable to respond on such short notice."

Graduation rates at the for-profits ranged widely. Only 7 percent of Minnesota students at the University of Phoenix graduated within 150 percent of "normal time," such as six years for a four-year degree. About 17 percent of ITT Technical Institute students did. But 89 percent of those at the Minneapolis Business College graduated within that time frame.

The Office of Higher Education requested the new data from the for-profits, and they were "pretty cooperative," Pogemiller said.

While a federal investigation by the Government Accountability Office exposed aggressive and deceptive recruiting practices by having investigators pose as prospective students, the Minnesota office simply asked institutions about their recruiting actions.

"We haven't really had the capacity to do" a deeper investigation, Pogemiller said. "Based on what we know, they seem to be doing what they're supposed to be doing."

The report finds that "based on information provided by institutions, for-profit institutions are in compliance with Minnesota statutes in terms of recruitment practices."

Pogemiller pointed out that his office doesn't receive many complaints. In 2011, the Office of Higher Education got 14 written complaints about for-profit colleges and universities. Five were resolved without the office's involvement, the report said. "There were no findings of noncompliance with the regulatory statutes in the other nine complaints and the files were closed."