For-Profit or For-Loss?

It’s time for the federal government to take action regarding for-profit colleges

The evidence against for-profit colleges has been piling up for months, and it is disheartening that all the federal government has offered in response is pontification and paper. The schools have seen a surge in popularity, and the General Accounting Office estimates their enrollment rose from 365,000 to 1.8 million in the last several years. Unfortunately, these colleges promise their students outsize returns but instead deliver them mounds of debt. As such, it is high time for the government and accreditation boards to regulate the practices of these institutions more strictly.

A November report by the Education Trust found that for-profit colleges offer “little more than crippling debt” to their students. Only 22 percent of students at for-profit colleges graduate in six years, as opposed to 55 percent of students at public institutions and 65 percent at private, nonprofit colleges. Moreover, from 2007-2008, the median debt of those who did receive bachelor’s degrees at these colleges was $31,190, nearly double the median debt of similar students at non-profit private colleges—$17,040—and three-and-a-half times that of similar students at public institutions—$7,960.

Even more gallingly, those whom for-profit colleges enroll and sink into debt are often already the least well off in our society. Low-income students make up 50 percent of the population at for-profits; while for-profit colleges account for 12 percent of all college students, they account for 24 percent of Pell Grant recipients. The debt accrued by students at for-profit colleges, many of whom are not even graduating, is simply unacceptable.

Additionally, for-profit colleges often misstate their benefits and manipulate students into enrolling. A 2010 GAO report documented meetings between representatives of 15 for-profit colleges and undercover applicants. All 15 “made deceptive or otherwise questionable statements to GAO's undercover applicants,” and four engaged in actual fraudulent practices. For example, at a Washington certificate program, an applicant was told that barbers make from $150,000 to $250,000 a year, when most receive salaries of less than $50,000 annually. One fictitious student who registered interest in several colleges received more than 180 phone calls in one month, encouraging him/her to apply. At special risk from these colleges are our nation’s servicemen and servicewomen, who are the targets of special advertising campaigns by for-profit colleges; 36 percent of tuition payments under the 2008 G.I. Bill for veterans returning from Iraq and Afghanistan went to for-profit colleges in the program’s first year.

For their services, for-profit colleges receive considerable amounts of federal government support. A September report by the Senate Committee on Health, Education, Labor and Pensions stated that 85 percent of the revenue of for-profit colleges comes from federal student aid, and taxpayers provide the schools $24 billion per year.

In response, we suggest that for-profit colleges with graduation rates below a certain percentage be put on accreditation probation and federal financial aid be unavailable to students. Federal aid should not go to an endeavor that will put students in a worse financial situation than when they started without receiving a diploma.

Until this happens, students should be cautious regarding advertising that emanates from these colleges. The schools are interested in sustaining their business and not necessarily in providing the best education to their clients. Given these colleges’ special targeting of vulnerable groups such as low-income students and returning soldiers, there should be a follow-up investigation to the GAO report, surveying a range of for-profit colleges across the nation to see how truthful the advertisements' claims are.

Potential students should also consider attending community colleges in lieu of for-profit institutions. Although they may not offer the same prestige as four-year degrees, many community colleges offer the same skills for better prices. The GAO report noted that one fictitious student interested in massage therapy was encouraged to take a $14,000 certificate course, even though the same course cost $520 at the local community college. Because of community colleges’ value, we applaud Obama's focus on bolstering them with more funds and governmental support. In 2009, Obama announced a $12 billion community-college initiative, and this October, Obama held a Community College Summit bringing together major donors to think about this cause—two worthy attempts to increase awareness and quality of community colleges.

Regardless of all the problems with the current system, in theory, for-profit colleges provide a valuable service. For people serving abroad in the armed forces, or for those who are stuck at home for another reason, for-profit colleges’ flexibility in course timing and type make them viable in a way that community colleges often are not. However, at present, for-profit colleges are performing far below this ideal, and the government has a responsibility to make sure it is not funding institutions that seem to be manifestly harming their students.

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