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April A. Wimberg Discusses Whether For-Profit Universities Can Survive Student Debt Relief

06.05.2015

Bingham Greenebaum Doll LLP attorney April A. Wimberg discussed whether for-profit universities can survive if student debt relief spurs rational lending in an article recently published by the American Bankruptcy Institute.

In her article, Wimberg shares details on the H.R. 449 bill introduced to Congress that proposes to reverse a 2005 law that prevents debtors from discharging private student loans in bankruptcy cases. The goal of the bill is to provide many in need with the intended benefits of bankruptcy: a fresh start.

However, that relief will likely come to the detriment of many for-profit universities.

According to Wimberg, students at for-profit universities hold substantially higher private debt and default rates, but substantially less hope for a brighter future without relief.

  • At the end of 2014, education-related loans amounted to $1.6 trillion, up 60 percent since the outstanding student loans in the U.S. passed the $1 trillion threshold for the first time in 2011.
  • Since 2005, private student loans have tripled.
  • Student borrowing has risen more than six times as fast as average hourly earnings, and almost half of student borrowers at for-profit colleges do not graduate with a degree – only debt.
  • The undergraduate class of 2014 graduated with an average student loan debt of $33,000 and an expected median salary of $46,900. However, almost 100 percent of students at for-profit schools take on educational debt averaging $40,000, half with private loans.
  • Only 34 percent of students attending a for-profit institution graduate in six years and 74 percent default or become delinquent on their loans.

The facts support the need for relief (and H.R. 449), however, the consequences of such a reform could see private lending tighten if consumers can discharge these loans in bankruptcy. Therefore, if rational private lending halts the endless supply of tuition dollars some for-profit institutions have been dependent on, these institutions may soon be faced with their own debt crises.


Read “If Student Debt Relief Spurs Rational Lending, Can For-Profit Universities Survive?” on the American Bankruptcy Institute website.

To learn more about April A. Wimberg and her practice, please visit her profile.

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