Lowering Default Rates

Despite the overtly negative tone of The Chronicle of Higher Education’s story, “Business Is Up in Keeping Default Rates Down,” two things are clear:

  • For-profits are committed to lowering default rates: “Default management has become a flourishing practice and business in its own right, and colleges are seeking help on that front with increasing urgency.”
  • For-profit colleges serve a large majority of at-risk students: “Most for-profit colleges enroll more low-income and working-adult students than higher education does as a whole, and college leaders in that sector say that is a major reason for their high default rates.”

While the story seems to advocate a “misalignment in interests” between the students and the school in managing loan defaults, the article misses the point by targeting assumed motivation rather than positive outcome. Truly, default management is in the same interest as the students, the school, and the government.

“Mr. Hawn, of ECMC, says the practical realities of default-management protect against abuse, as does the ethos of the industry …Colleges aren’t looking to cut corners either, Mr. Hawn ads.  “So far I’ve not run into any school that’s saying, ‘Dave, just focus on the easiest thing,’ he says.”

 

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