For-profit schools are playing a significant role in the higher ed bubble.

Michael Stratford reports at Inside Higher Ed.

Pointing a Finger at For-Profits

The spike in student loan defaults over the last decade has been fueled by students attending for-profit colleges and, to a lesser degree, community colleges, according to a new analysis of millions of federal student loan records.

The paper, released Thursday as part of the Brookings Papers on Economic Activity, argues that the student loan crisis, to the extent there is one, is concentrated only among these “nontraditional” borrowers at for-profit and community colleges.

As students flocked to those institutions during the recession, they accounted for a huge surge in loan borrowing and the subsequent defaults on the loans as they faced poor job prospects and low earnings, the report says.

In 2011, the study found, borrowers at for-profit institutions and community colleges represented almost half of all federal loan borrowers leaving school and starting to repay their loans, but they accounted for 70 percent of defaults.

Meanwhile, their counterparts who attended four-year public and private colleges fared comparatively well during the recession. Such “traditional” borrowers, the report says, tended to come from wealthier families and ended up doing far better in the job market, even though they took on the largest amount of loan debt.

“Our work suggests that weak economic outcomes and poor loan performance are concentrated in certain sectors where institutions have not been held accountable for the outcomes of their programs either through market mechanisms or regulatory oversight,” write the two researchers, Adam Looney of the U.S. Department of Treasury and Constantine Yannelis of Stanford University.

The study is an unusually sweeping analysis of the federal government’s student loan portfolio going back several decades.