Three-Year Default Rates at Publicly Traded Companies

The U.S. Department of Education released the latest set of three-year cohort default rates today and as Erin noted earlier, the results aren’t pretty.

But these numbers show significant variation among the large publicly traded higher education companies. The chart below shows the two- and three-year cohort default rates over the previous four years for 14 of these companies. At the bottom of the post I’ve put notes on how I put together the numbers.

One thing jumps out (especially because I highlighted it)–Corinthian Colleges posted an overall three-year default rate of 40 percent in the 2008 cohort. In other words, two out of every five students who take on debt at the various campuses owned by Corinthian will end up in default within just three years of leaving school. In fact, of the 49 different Corinthian-owned schools listed in the database, none had a three-year default rate of under 20 percent. One campus–the branch of the Everest Institute in San Antonio–produced a three-year cohort default rate of 58 percent. Students at that school have equivalent odds of graduating and defaulting.

Several of the other large companies also did not fare well. Kaplan Higher Education and Lincoln Education Services both cracked 30 percent, while ITT Educational Services just barely came in under that threshold. And the University of Phoenix, which traditionally does pretty well on this measure, saw its three-year figure edge up by 6 percentage points.

Fortunately, not all the news is so dismal. Capella, American Public Education, and Grand Canyon all kept their rates just over or below 10 percent. Strayer and Universal Technical Institute weren’t great, but at around 15 percent they still had marks half that of other companies.

There’s a certain scripted dance that occurs every time numbers like this come out. One group releases reports talking about crippling debt. Industry representatives cite demographics and income as the main cause for the results, not institutional effects. Do some defaults occur because its an individual’s fault? Undoubtedly. Do some occur because the quality of education wasn’t good enough? Most certainly. Can schools do things to lower their default rates? Absolutely. Instead of a back and forth blame game it would be nice to see a greater discussion about just what the schools with a good default rate do or don’t do. I’d like to know what Capella and Grand Canyon do differently from Corinthian and Kaplan. What have these various schools learned about helping students avoid default? Those lessons might be invaluable in preventing future defaults.

These numbers represent the cohort default rates for all domestic campuses and brands owned by each publicly traded company. Because the denominator of the three-year rate is often smaller than the two-year one, I used the three-year denominator to calculate the two-year figure as well. This way the two year number did not look better solely because it had students in it who ended up getting their loans discharged due to total and permanent disability or some other reason.

The brands considered for each company are as follows. In some cases the chain owns other campuses but that brand did not report any data. Those instances are not mentioned here.

American Public Education: American Public University System

Apollo Group: University of Phoenix and Western International University

Bridgepoint Education: Ashford University and University of the Rockies

Capella Education Company: Capella University

Career Education Corporation: American InterContinental University, Briarcliffe College, Brooks Institute, Brown College (Minn.), California Culinary Academy, Collins College, Colorado Technical University, Gibbs College, Harrington College of Design, International Academy of Design and Technology, Le Cordon Bleu (no data), Sanford-Brown (all types), Lehigh Valley College, SBI Campus of Sanford-Brown

Corinthian Colleges: Everest (all types), Heald College, Wyo-Tech, Las Vegas College, National Institute of Technology

DeVry: Chamberlain College of Nursing, DeVry, Western Career College, Keller Graduate School of Management (Ross University was excluded because it is located in the Caribbean)

Education Management Corporation: Argosy University, Art Institutes (all branches plus the Illinois and New England Institutes of Art), Brown-Mackie (all types), South University, Western State University College of Law

Grand Canyon: Grand Canyon University

ITT Educational Services: ITT Institute (and all other types), Daniel Webster College

Kaplan Higher Education: Bauder College, CHI Institute, Hesser College, Kaplan (all types), TESST College of Technology, Texas School of Business, Andover College

Lincoln Educational Services: Lincoln (all types), Nashville Auto Diesel College, Southwestern College, Baran Institute of Technology, Briarwood College

Strayer: Strayer University

Universal Technical Institute: Universal Technical Institute (all types)