Personal Finance: Getting an education that pays the loans

Students can spend thousands of dollars on college after doing less comparison shopping than they would choosing a cell phone.

They go on a campus tour and like the guide. Or the clothes students are wearing send a certain signal.

But what most students are ultimately after when finishing college is a job, especially with the unemployment rate for college graduates soaring and the average student with education loans leaving school with more than $20,000 of debt. So one cannot ignore that college must lead to a job and a salary large enough to cover loans and living expenses.

That is why a recent report by the U.S. Department of Education could be a valuable starting point for students trying to figure out if a college might get them to where they need to end up.

That report, which focuses on "gainful employment," shows that almost half of students that have finished college or quit over the last four years have not been making monthly payments on their federal student loans as required. And the findings hint at why: Students often have not found jobs that pay enough to cover their loans and living expenses.

Ironically, the worst results are for the for-profit schools that advertise on billboards and TV specifically to people who might be looking for a job that will finally give them a chance at a better life. These schools offer short-term programs such as cosmetology or various types of technicians, and among the for-profits are DeVry, Strayer, Phoenix, and Capella. While some of the schools dispute the findings, the government found that only 36.4 percent of people who attended the for-profit schools are repaying their loans in full each month. Some payment rates are 20 percent.

But public universities and private colleges, in general, have not had an admirable record either. Mark Kantrowitz, publisher of Finaid.com and Fastweb.com, notes that only 53.7 percent of people who have graduated or left public colleges and universities are paying as expected. The record of community colleges is almost as bad as the for-profit degree programs, he said. And 56 percent of the people that attended private colleges are paying as required.

The results are here: http://go.philly.com/repay1 - with more detail here: http://go.philly.com/repay2

Students can go through the list to find the repayment rate at colleges of interest. Also consider loan-default rates using this tool: http://go.philly.com/repay3

That shows you what percentage of former students are not paying loans.

While the lists are valuable for eyeballing prospects at certain schools, the method is not perfect, Kantrowitz said. For-profit schools, he said, often attract students struggling financially, so the high level of loan-payment troubles might be a result of financial issues apart from their education. Also, because some schools do not have rigorous requirements for admission, students might lack the background to succeed. Kantrowitz said the same issues might be a drag on students at community colleges and other less selective public and private institutions.

Still, students need to be aware of quirks related to specific degrees. Kantrowitz noted that only 24.4 percent of Harvard Medical School graduates are repaying their loans. But that is because they defer payments during internships and residency and will likely pay in full once they complete those requirements.

As a tool, the list provides a relative look at institutions, Kantrowitz said. "If you are looking at two schools, and one has a good repayment rate and one not, consider the one with a good repayment rate. And be skeptical of any under 25 percent."