Nearly three of every four CitiCollege alumni who owed their first payments on student loans in 1989 defaulted.
The horrible 72 percent default rate for the private college in Salt Lake City likely would have disqualified it from participation in federally guaranteed student-loan programs this year except for one thing: The school went out of business three years ago.The defunct school was the only post-secondary institution in Utah with a default rate poor enough to have faced punishment from the U.S. Department of Education, according to data the department released Wednesday as it began a nationwide crackdown on schools with poor rates.
But other Utah schools are nearing the threshold to possibly lose student loans, too - especially because those thresholds will become more strict in coming years.
For example, three Utah beauty colleges, a private technical training center and the state's College of Eastern Utah in Price all had 1989 default rates greater than 30 percent.
That 30 percent default rate in fiscal 1993 will disqualify schools and their students from student-loan programs.
To be disqualified from student loan programs this year, schools had to have a default rate greater than 35 percent or higher for three straight years. Schools with a 1989 default rate greater than 60 percent also faced losing all forms of federal student aid, including non-repayable Pell grants.
Two Utah beauty colleges had default rates of more than 35 percent for two of the past three years, barely escaping potential problems.
Painter's College of Beauty in Roy had a 1989 default rate of 40.4 percent, 25.9 percent in 1988 and 54.5 percent in 1987. Hollywood Beauty Colleges of Salt Lake City had a 1989 default rate of 39.8 percent, 14 percent in 1988 and 35 percent in 1987.
Such defaults nationwide cost taxpayers $3 billion a year as they are stuck with the tab for student loans that the government guaranteed. The Education Department said 254 schools faced possible disciplinary action for bad default rates, unless they could show mitigating factors.
"There are some schools that really haven't got education on their minds," said Michael Farrell, acting assistant secretary for postsecondary education. He complained they don't help students obtain jobs, which leads to defaults.
An example was the defunct CitiCollege in Utah.
C. Gail Norris, Utah associate higher-education commissioner for student loans, said the for-profit CitiCollege came under fire for questionable recruitment practices. Recruiters would go to unemployment lines and blood banks, seeking potential students who were often ill-prepared and were unable to repay the government loans.
Norris said the real victims are the students. Some would sign up for training as a security guard, for example, but then would be flunked out after several weeks because of poor academic skills. The school would keep the tuition, but the student was stuck with a loan to repay, Norris said.
Now, the federal government forgives a portion of the loan if the student doesn't receive the promised education. But that safeguard wasn't in place when CitiCollege closed.
He also noted that the College of Eastern Utah's default rate - which was a high 30.2 percent in 1989 - is dropping.
That 2-year-old default rate occurred when unemployment was high in eastern Utah after mining jobs were lost.
Utah officials have kept a cumulative default rate for student loans. Since the current program began in 1977, 92 percent of Utah students have repaid their loans.
The gross default rate for Utah students is 12 percent, but it drops to 8 percent after Utah's aggressive collection efforts, he said.
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Loan defaults
Default rates of students from Utah colleges:
College of Eastern Utah 30.2%
Dixie College 19.2%
SLCC 16.4%
Southern Utah University 12.9%
UVCC 11.1%
Weber State University 10.6%
University of Utah 7.1%
Utah State University 5.5%
Brigham Young University 3.6%
Student-loan default rates, complete list
Default rates - from worst to best - of all Utah post-secondary schools with more than 30 students who owed their first student loan payments in 1989:
CitiCollege Salt Lake City 72.0%
American Technical Center Salt Lake City 47.1%
Painter's College of Beauty P.O.Box 203, Roy 40.4%
Hollywood Beauty Colleges Salt Lake City 39.8%
Painter's College of Beauty 5523 S. 1900 W., Roy 31.5%
College of Eastern Utah Price 30.2%
Continental College of Beauty Salt Lake City 28.0%
International Institute of Hair Design Midvale 27.6%
Bryman School Salt Lake City 24.8%
Davis Applied Technology Center Kaysville 22.2%
Sevier Valley Technical Association Richfield 22.2%
Von Curtis Academy of Hair Design Salt Lake City 20.4%
Dixie College St. George 19.2%
Salt Lake Community College Taylorsville 16.4%
Von Curtis Academy of Hair Design Provo 16.1%
Snow College Ephraim 15.3%
ITT Technical Institute Salt Lake City 13.7%
Southern Utah University Cedar City 12.9%
Stacey's Hands of Champions Beauty Col. Ogden 12.8%
Stevens-Henager College of Business Provo, Ogden 12.7%
American Inst. of Medical & Dental Tech. Provo 11.7%
Utah Valley Community College Orem 11.1%
Weber State University Ogden 10.6%
Phillips Junior College S.L. campus 7.9%
Westminster College Salt Lake City 7.4%
University of Utah Salt Lake City 7.1%
Utah State University Logan 5.5%
LDS Business College Salt Lake City 5.1%
Certified Careers Institute Salt Lake City 4.2%
Provo College Provo 3.7%
Brigham Young University Provo 3.6%