There are at least 500 colleges and universities across the country where at least 40% of students fail to pay their federal student loans, according to a new report — sticking US taxpayers with the bill while the schools cash out.
Some schools — like Construction Training Center in South Carolina, Legends Barber College in Texas — have nonpayment rates of 70-80%, a new analysis from NPR found.
And the taxpayer-backed cash is keeping the small schools afloat, accounting for more than two-thirds of the institutions’ entire revenue streams.
At Diversified Vocational College in Los Angeles, for example, 73% of students taking federal loans defaulted on payments for the 2024-2025 school year — while students’ $3.5 million in federal loans that year accounted for nearly 90% of the school’s revenue.
That means nearly three-quarters of Diversified Vocational College students paid tuition with federal money, who then went more than three months without paying the government back.
And the overwhelming majority of the schools with the worst nonpayment rates were similar to Diversified Vocational College — private, for-profit schools specializing in vocational training.
They accounted for 424 of the 500 schools with nonpayment rates over 40%, data from the US Education Department showed.
Public schools accounted for just 15 on the list, while 61 were private non-profits. The average federal loan non-repayment rate at all schools nationwide, meanwhile, was only about 15%.
Those shocking numbers mean many of the 500 schools on the list are depending on federal loans to keep the lights on — which has left education experts scratching their heads at why the government keeps handing out loans to students who say they’re headed for these schools.
“If a private lender were looking at a school that has a 40%, 50% delinquency rate on past loans, they would probably say, ‘We’re not going to lend to that school,’” said the American Enterprise Institute’s Preston Cooper, who studies the finances of higher education.
“Why does it make sense for the federal government and for taxpayers?” he added.
Part of what is driving the problem appeared to be what the schools teach — the vast majority of the 500 schools specialized in trades that tend to pull on lower-wealth demographics, and train them for industries that don’t often lead to high-paying jobs.
Barber and hairstylist schools dominated the list, as did trade schools for construction and healthcare aid jobs.
Confusion over the loan process — deepened during pandemic-era suspensions, and President Biden’s mass loan forgiveness promises — have also complicated the situation in recent years, according to NPR.
But the accountability largely lies on the federal government to not only enforce repayments from students — but also to be more strict with the schools they’re attending, according to experts.
“If the federal student loan program did not exist, these schools would not exist,” the Project on Predatory Student Lending’s executive director Eileen Connor told NPR. “Why would any bank give or lend money to someone to go to these schools when it’s a near certainty that they’re not going to be able to repay it?”
Connor called giving such student loans was “is the definition of predatory lending.”
The federal government has moved to crackdown on the situation, with President Trump’s One Big Beautiful Bill introducing measures to restrict federal funding from schools which can’t demonstrate that its students earn more than people in their industry without degrees.
“Institutions cannot benefit from taxpayer dollars while ignoring the fact that a significant share of their students are not well-prepared to repay their loans,” the Department of Education said in a statement. “It’s time for institutions to step up or risk losing access to federal student aid.”
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