Private career colleges have high student loan default rates

What many Canadians may not realize is that private career colleges in this country get government funding through provincial and federal student aid programs. And, just as with public institutions, when there are high student loan default rates, it is the taxpayer who ends up paying. In BC, at the moment, the Vancouver Sun recently reported that, the BC government says it intends to crack down on those private colleges with the highest student loan default rates. (Here, for example, is a September 2012 related article.)

Now, while that tough-on-the-private- colleges messaging sounds good, it is, in fact, meaningless. Why? Because the fault can be spread around, including to the very government who wants to crack down.

For instance, staff at career colleges should do extensive labour market research before they submit a program to a provincial government for approval. Then, before that provincial government approves a career program, they should have verified that the market research was accurate.

Then, there is the adult student, who for whatever reason, decides not to pay back his or her student loans.  Is it because they are slackers and irresponsible? Or, is it because the market research done didn’t reflect reality on the ground with the result that because they couldn’t find a job in their chosen field, there is no money available for student loan payments.

Of course, I am not letting students off the hook. They too have a responsibility to do labour market research and therein lies the point of this article. Students should do their own labour market research, particularly if they plan to attend a private career college, although the same principles apply to public institutions as well. Remember, however, when it comes to private colleges, it’s “buyer beware.”

11 thoughts on “Private career colleges have high student loan default rates

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  2. Notwithstanding the high default rates of PCC students, their Grad rates are higher than Comm Coll and Universities. Where’s the outrage about the low grad rates in those other two heavily tax subsidized sectors and the fact that out tax dollars are being torched on those campuses.

    just sayin’


  3. Sorry Mike, while comparing community college programs to private colleges may be fair, comparing them to universities is not. The latter are long-term and apart from co-op accounting and IT, they don’t immediately lead to employment. Apples and oranges. The bottom line is that private colleges are businesses and in it just to make a profit. While I have nothing against making a profit, let’s not ignore that fact. If they are private, then no public money should be used — as is the case with other private schools.

    I did some research only a couple of weeks ago that shows quite a different trend. Some defaults for some private colleges is as high as 60%. That’s ridiculous. However, I tried to find the Ontario gov’t default rates for 2009 to add to today’s post but the file is no longer there. I am assuming the Ontario gov’t is updating those stats with 2010 data. So, I will keep an eye on it and add the link once its back online.

    After I retired from teaching college and university, I was a curriculum consultant for a group of private Ontario career colleges. Part of my job was doing the labour market research and desiging the career programs from scratch, as well as keeping track of default stats. So, I know what I am talking about.

    As I said above, universities are not career colleges. They are places of higher learning where students learn how to think and research. So, the lack of labour market data can’t be blamed.

    Mind you, if a student borrows money from taxpayers, they should pay it back or there be a more effective loan forgiveness program, apart from medical reasons.


  4. Okay Mike. I see where you are coming from. I noted your e-mail address and website. My point was not to condemn private colleges per se, but to make it clear that public money was being used to fund private tuitions and that money that was supposed to be paid back but wasn’t. I won’t name who I worked for because I respected them and what they did. But, something has to be done regarding student loans, whether regarding public or private institutions. Always saying “but they are worse than we are” doesn’t get at the issues.


  5. This is completely off topic but what started my most recent examination of default rates was the fact that my granddaughter is going to study massage therapy. So, I was checking out her choice of private college. What I found was interesting. Massage therapy has a VERY low student loan default rate. Which says to me, that graduates are all getting jobs or else the type of person taking that training is committed to paying off their OSAP debts. It is probably similar in other professions as well. So, where is the problem? Which diploma programs? Not my job to do, but it would make an interesting study.

    That said, if you have such a report for such a study, let me know here and I will e-mail you my e-mail address. I will analyze it, along with the 2010 default rates once they are available and then write on the topic again. I might also look at default rates for popular programs at community colleges. I’ll bet I find a similar pattern — administrative/medical assistant and related jobs are hard to find, yet there are always lots of those study programs available.


  6. I do taxes in season (did you know the election could fall on the last day of filing?!?) and have had a couple of students this year from private institutions, both of whom were in eminently practical courses and were very enthusiastic about same. I don’t think these two will default.

    With respect to community colleges and universities, I suspect default is directly related to courses taken. It’s all very well to go for a BA in English – I’d have loved to do that – but that’s a luxury and not to be undertaken using student loans. When our offsprings were heading to post-secondary education, they were all rather enamoured of acting. My response was to say ‘very nice, but how do you plan to feed yourself?’. They went elsewhere, and are all happy (and competent) in their chosen careers.

    Incidentally, it is my understanding that a person with student loans cannot erase that liability via bankruptcy for 10 years after graduation (or end of classes). Reason for that: too many students graduated, declared bankruptcy, and then – free of their loans – went on to live a good life.


  7. I agree Frances. I do believe it is ten years before someone can declare bankruptcy. There is something else now too which makes the default rates that much more puzzling. There are federal provincial agreements with Revenue Canada Agency. Meaning, that as long as a loan is in default, all income tax refunds are automatically transferred as payments.


  8. Ah, Sandy, that assumes your defaulter has a tax refund coming. One can manipulate the tax deducted from one’s paycheque to ensure that the refund – if any – is minimal. Trust me, the serious defaulter is covering all bases to ensure that we-the-taxpayer end up with the bill.


  9. Frances — Interesting re the tax refunds. However, I am not sure how that can be done retroactively. But, where there is a will, there is a way I guess. 😉


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