Our story on new San Diego for-profit education powerhouse Bridgepoint Education focused primarily on a consumer protection angle. Policymakers and regulators are concerned that if the school has such a high dropout rate and high profits, the federal financial aid debt Bridgepoint’s students are taking on is going to investors rather than providing a good education.

But there’s another concern, too. If Bridgepoint students are unable to repay their federal loans, it leaves the government on the hook.

And Bridgepoint students aren’t keeping up with their loans as well as students at other schools, U.S. Department of Education data shows.

At Ashford University, Bridgepoint’s primary college, 21.7 percent of students defaulted on their loans within three years, according to the department’s most recent statistics. The national average is 13.7 percent.

“Those numbers are definitely high,” said José Cruz, vice president for higher education policy at Washington D.C.-based nonprofit Education Trust. Cruz testified on the impact of for-profit education on low-income and minority students at a U.S. Senate committee hearing held earlier this month by Iowa Democrat Tom Harkin about Bridgepoint.

Federal loan defaults don’t just hurt the government. They have a devastating effect on students because they’re not dischargeable through bankruptcy.

Further, students who drop out don’t even have a degree to show for their debts.

Bridgepoint has responded to concerns about its default rates by saying that the company targets large segments of the population that wouldn’t otherwise go to college. Those groups demographically overlap with those that are at a higher risk for default, Bridgepoint adds, and accounting for those differences puts the school in line with more traditional colleges. Further, the company argues, it has created new initiatives to improve student payment percentages.

Also, Bridgepoint’s student default rates are below the average for for-profit schools, according to the most recent Department of Education data. And, under current regulations, the rates aren’t anywhere near levels that could result in the department pulling Bridgepoint’s access to federal loans.

But what’s drawn the attention of policymakers to Bridgepoint, Cruz said, is how these numbers look against the backdrop of the company’s booming student population. As we noted in our story, enrollment has spiked 517 percent since 2007 to almost 78,000 students.

That means that even if the school’s student default rates hold steady, more people are failing to pay.

Student loans aren’t the only federal support that contributes to Bridgepoint’s bottom line. The government provides grants targeted to low- and middle-income students, called Pell Grants. According to Department of Education statistics, students studying at Ashford received $172 million in federal grants in 2010 compared to $3.8 million four years prior.

Please contact Liam Dillon directly at liam.dillon@voiceofsandiego.org or 619.550.5663 and follow him on Twitter: twitter.com/dillonliam.

Liam Dillon

Liam Dillon was formerly a senior reporter and assistant editor for Voice of San Diego. He led VOSD’s investigations and wrote about how regular people...

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