For-profit health schools tap more federal loans

Career colleges specializing in healthcare training rely much more heavily on federal student aid than most other for-profit schools, the Government Accountability Office (GAO) reported Monday.

Roughly 75 percent of total revenues for the average for-profit health school come from federal loans and grants, GAO found. That's well below the 90 percent limit on such federal revenues, but much higher than the average (63 percent) for other career college specialties. 

"A higher education association official we spoke with suggested that some for-profit schools specializing in healthcare tend to attract lower-income students that rely more heavily on federal student aid, leading these schools to have higher 90/10 rates," GAO writes in a summary of the findings.

Those schools specializing in healthcare represent about a third of all for-profits, according to GAO.

Under a 1998 law, for-profit schools are prohibited from receiving more than 90 percent of their revenue from federal student loans. (In other words, at least 10 percent of funding must come from private student loans, state educational grants, the students themselves or some other source.) 

Schools are required to report their 90/10 rate each year, and those that don't comply could lose their eligibility for federal aid. That's a big deal for an industry that tapped roughly $24 billion in federal loans and grants in the 2008/2009 school year — up from $8 billion in 2002/2003. 

In its new report, GAO found that the average 90/10 rate for all for-profit schools rose from 62 percent in 2003 to 66 percent in 2008. 

Aside from health specialty schools, GAO found that schools run by publicly traded companies also depend more heavily on federal aid than the average for-profit. 

The report arrives as the Education Department is drafting new rules designed to reduce the number of loan defaults among for-profit students.