For-Profit College Collapse Could Cost Taxpayers Big Time

Photo (cc) by Jason Bache

Taxpayers could be left holding a bill for billions of dollars if tens of thousands of college students are allowed to walk away from federal student loans.

According to Federal Student Aid, an office of the U.S. Department of Education, there are certain circumstances that could qualify a student for federal student loan forgiveness, including employment in specific jobs, disability or the closure of a student’s school.

It’s that last example that has some people worried.

The for-profit college industry is in the midst of a collapse. Massive for-profit chains like Corinthian Colleges, Education Management Corp., and Career Education Corp. have significantly downsized or, in Corinthian’s case, completely shuttered its campuses, leaving thousands of displaced students who could potentially be eligible for student loan forgiveness by the federal government.

Students may be eligible for relief under federal law if they can show schools deceived them into enrolling, as well as when schools shut down and they can’t complete their studies, Bloomberg reported.

Although for-profit college students represent just 11 percent of all college students, they have more than $230 billion in federal student loans – a fifth of the total student loan debt in the United States. What’s worse, for-profit college students account for nearly half of all defaults on higher-education loans, according to Bloomberg.

If the thousands of displaced for-profit college students are excused from paying off their student loans, the unwinding may cost taxpayers billions, touching off debate in Washington about fairness and personal responsibility, Bloomberg reported.

In June, Education Secretary Arne Duncan announced that his agency would make it easier for for-profit college students to apply for loan forgiveness while still protecting taxpayers.

If all student borrowers from Corinthian, which closed its campuses and filed for bankruptcy earlier this year, were granted loan forgiveness by the federal government, the bill could top $3.5 billion, Bloomberg said.

Ouch.

Check out “Ask Stacy: Can I Have My Student Loans Forgiven?

Need some advice on paying your student loans? Try “13 Ways to Pay Off Student Loans Faster.”

What do you think about student loan forgiveness? Should eligible students’ loans be terminated, or should those students have to pay off their debts? Share your comments below or on our Facebook page.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Read Next
7 Effortless Ways to Make Extra Money
7 Effortless Ways to Make Extra Money

In the digital age, new ways of earning cash crop up all the time — and some require next to no effort on your part.

7 Reasons You Should Not Claim Social Security Early
7 Reasons You Should Not Claim Social Security Early

The sooner you claim your Social Security retirement benefits, the more you — and perhaps also your spouse — stand to lose. Here are the stakes.

Never Buy These 12 Things at a Thrift Store
Never Buy These 12 Things at a Thrift Store

Sometimes a great deal is not worth it — or, even worse, is dangerous.

8 Key Steps to Planning for Retirement as a Couple
8 Key Steps to Planning for Retirement as a Couple

Ready for retirement? Not so fast. You might be surprised at some of the issues that come up for couples when they plan.

7 Reasons You Should Consider a Career Change at 50
7 Reasons You Should Consider a Career Change at 50

Wondering how to change careers at 50, or if it’s possible at all? The good news is that many older workers have the energy and experience to pull it off.

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Most Popular
17 Everyday Products Now Facing Shortages
17 Everyday Products Now Facing Shortages

Many goods we take for granted have become tough to find in 2021.

If You Find This Thrift Shopping, Buy It
If You Find This Thrift Shopping, Buy It

This iconic dinnerware is prized for everyday use as well as reselling for profit.

20 Things That Are Actually Worth Stockpiling
20 Things That Are Actually Worth Stockpiling

You don’t need a year’s supply of toilet paper to survive an outbreak, but consider stocking up on these items.

9 of the Best Things to Do When You Retire
9 of the Best Things to Do When You Retire

You’ve waited all your life for this moment. Make the most of your retirement.

Medicare Will Not Cover These 6 Medical Costs
Medicare Will Not Cover These 6 Medical Costs

Don’t let these health care expenses catch you off guard in retirement.

Beware This Hidden Ingredient in Rotisserie Chicken
Beware This Hidden Ingredient in Rotisserie Chicken

Something foul may lurk in those delicious, ready-to-eat birds.

7 Kirkland Signature Items to Avoid at Costco
7 Kirkland Signature Items to Avoid at Costco

Even if it seems you save a bundle buying Costco’s Kirkland Signature brand products, they may not be the bargain they appear to be.

3 Colors That Can Ruin Your Car’s Resale Value
3 Colors That Can Ruin Your Car’s Resale Value

Select the wrong color for your next car, and it could depreciate twice as fast as others.

9 Groups Who Should Brace for Higher Income Taxes
9 Groups Who Should Brace for Higher Income Taxes

Recent proposals would hike taxes for people with a wide range of incomes.

Never Buy These 10 Things on Amazon
Never Buy These 10 Things on Amazon

Just because you can purchase something on Amazon doesn’t mean that you should.

7 Big Purchases You Should Never Make
7 Big Purchases You Should Never Make

Sometimes a big-ticket purchase is nothing more than a big waste of money.

12 Deep Discounts Available on Amazon This Friday
12 Deep Discounts Available on Amazon This Friday

These items are steeply discounted — but the deals won’t last long.

8 of the Worst Things to Buy at Target
8 of the Worst Things to Buy at Target

No store can specialize in everything. For some purchases, it’s smart to shop elsewhere.

5 States With the Worst Health Care for Retirees
5 States With the Worst Health Care for Retirees

All of these states are located in the same region of the nation.

8 Things You Should Be Buying at Thrift Stores
8 Things You Should Be Buying at Thrift Stores

For one expert, these secondhand bargains stand out from the rest.

20 Great Part-Time Jobs for Retirees
20 Great Part-Time Jobs for Retirees

Retirees can dial back the intensity of work while continuing to bring in a paycheck.

3 Ways to Get Microsoft Office for Free
3 Ways to Get Microsoft Office for Free

With a little ingenuity, you can cut Office costs to zero.

11 Foods That Can Keep for Years
11 Foods That Can Keep for Years

These are some of the longest-lasting groceries you can buy.

5 Ways to Get Amazon Prime for Free
5 Ways to Get Amazon Prime for Free

Hesitant to drop $119 a year on an Amazon Prime membership? Here’s how to get it for free.

View More Articles

View this page without ads

Help us produce more money-saving articles and videos by subscribing to a membership.

Get Started

Add a Comment

Our Policy: We welcome relevant and respectful comments in order to foster healthy and informative discussions. All other comments may be removed. Comments with links are automatically held for moderation.