February 25, 2011 / 11:09 PM / 8 years ago

California headed for cuts for for-profit students

* Aid to for-profit students low priority

* Schools’ students average 25 percent default rate

WASHINGTON, Feb 25 (Reuters) - California’s student aid commission said on Friday that aid funds going to students at for-profit schools should be slashed first when the state cuts its education budget.

The U.S. Education Department has criticized some for-profit schools, which range from universities offering PhD’s to trade schools offering car-repair training, for low graduation rates and high loan default rates.

The California Student Aid Commission, which administers financial aid programs, voted unanimously on Friday to put Cal Grant aid to for-profit schools’ students at the bottom of its priority list when the state is forced to make budget cuts relating to education financing.

“The governor and the legislature need a communication from us,” said Commission Chair Barry Keene. “This is not a position we want to be in, but we have to set priorities and this painful priority setting has to take place today.”

Participating Cal Grant schools can have a default rate of no more than 20 percent for former students.

Nationally, fully 25 percent of students who either graduated or left for-profit schools in 2008 defaulted on their loans compared with 10.8 percent of students at nonprofit schools, which include public and private schools, according to Education Department data.

Commissioner Lawrence Hershman noted that there had been cuts at many schools. “The public universities have taken on drastic cuts. It’s time for the for-profit colleges to share in some of the pain,” he said in a press statement.

The Golden State is one of the worst hit by the housing bust, financial crisis and economic recession, becoming the most indebted state in the country. To shrink its budget gap of $24.5 billion it has had to squeeze dollars out of nearly every program, freezing hiring and banning giving out promotional knickknacks such as free key chains.

Its public university system, once a point of pride for the state has had to make drastic spending cuts over the last three years and turn to the private sector for help.

For-profit schools in California include Heald College, the Everest brand of schools and WyoTech, all owned by Corinthian Colleges COCO.O and Kaplan College, owned by the Washington Post WPO.N, among others. (Additional reporting by Lisa Lambert; Editing by Gary Hill)

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