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As compared to students who attend universities or colleges that are publicly funded or private, for-profit school students are found to default on their educational loans more. This was revealed recently in a data released by the US Education Department.

This department is all set to reject federal loan applications for programs that see most of the students defaulting and this research is a part of this intention. The rate of default among students from for-profit schools who started their loan repayment in the year 2009 is 15.2 percent according to government sources. This is much higher as compared to 4.7 percent in private schools and 7.3 percent in public schools.

This gives our government enough reasons to do away with loans for students from the for-profit colleges. Students who defaulted on their loans before the 2010 government fiscal year ended on September 30th were tracked by the 2009 draft data.

As compared to the year 2007, there is a significant increase in 2009 on the overall default rate by students taking loans for all types of universities and colleges. This may be an indication of the deteriorating job market. For all institutions, default rate that was at 6.7 percent in the year 2007 rose to 7.0 percent in 2008. The year 2009 saw this rate at 8.9 percent, according to the Education Department.

According to Private Sector Colleges and Universities Association head Harris Miller, the poor rate of loan repayment reflects our bad economy. He said that this is because family support during the tough times is practically nil for the for-profit students.

Economy is not the only factor to be blamed here if you look at the data closely says a for-profit sector critic. Pauline Abernathy, an Institute for College Access and Success official said these students accounted for a default share that is not proportionate.

The last twelve months have seen intense battles between the for-profit education industry and the Obama administration over designing of rules to raise standard of education and curb abuse of student loans.

Our Education Department will shortly be finalizing the “gainful employment” regulation which as we know is the most controversial of rules. According to this rule in its original form, acceptance of federal loans from students by the institutions would be made ineligible if former students who pay back their loans after three years are fewer and if not all standards are met.

Certain schools are responding to the crackdown by the government. They are trying to in turn weeding out students who are likely to default on their loans by dropping out. These schools are also being highly choosy with their enrollments.

Some of the prominent for-profit schools that have cut down on their enrolments recently include the Apollo Group, the leader in this sector, Kaplan Higher Education, a unit of Washington Post and Strayer Education. We just have to wait and see how things turn out for the for-profit schools that have seen a lot of turbulence recently.