The battle over for-profit colleges, explained

In recent years, a number of for-profit colleges have closed across the US. “For-profit college closed its remaining 28 campuses affecting 16,000 students.” “Their campuses were closed. And we’re talking all of them for good.” “Some of the nation’s largest for profit colleges are seeing steep declines in enrollment.” The Obama administration led a crackdown after years of shady recruiting tactics, predatory lending, and sub-par academics. But in days after the 2016 election, the stock prices of for-profit education companies spiked. Donald Trump hasn’t laid out his policies on for-profit colleges, “I’m a tremendous believer in education.” but he previously owned a for-profit school, Trump University. And with a Republican Congress that also opposes strict government regulations, these companies may see their fortunes changing. For-profit colleges have been around since 1854. They mostly provided short-term certificate programs for specific occupations. But their growth accelerated sharply in the last 2 decades. The federal government was expanding student aid and the poor job market during the Great Recession pushed more people into college. For-profit schools added more and more 2-year and 4-year degree programs. Compared to other colleges, for-profit institutions attract more low-income people, veterans, and other non traditional students. Also known as proprietary colleges, for-profit institutions are operated by private, profit-seeking businesses — which means earnings get passed on to owners or shareholders. That sets them apart from most universities and colleges, which are non-profits. Those state schools, community colleges, and private nonprofits are funded by a bunch of different sources in addition to tuition, like donations, investment income, or government subsidies. But for-profit schools rely almost entirely on tuition and fees paid with federal student aid money. So they have a strong incentive to recruit more students and set them up with large financial aid packages, or tap into veterans’ military benefits. That means they spend a lot of money on marketing and recruiting, promoting convenient locations, specialized courses, and flexible class scheduling. You’ve probably seen their ads on TV or heard them on the radio. “You’re ready for Strayer University.” “Build your personal education plan at You can see how aggressive their recruiters are–
I recently filled out a request for information through the University of Phoenix’s website. And within 48 hours I received 1 email, 2 texts, and 8 phone calls. An undercover investigation of 15 for-profit colleges in 2010, found that all of them made deceptive statements while recruiting. They exaggerated their employment and graduation outcomes, misrepresented their costs, and in some cases, actually encouraged students to lie on their financial aid forms. “You’re not supporting anyone else? Or anything?” “No I’m not.” “So now if we go back and say ok you make $30,000 and you’re claiming a couple of people…I’ll make the corrections according to what you’re telling me.” “Is there a reason why you put this amount in for cash?” “I got an inheritance last year…” “They don’t need to know how much cash you have, that’s why you do the tax return…just to fyi they don’t need to know your cash.” When students finally enroll, they’re presented with loan packages to cover tuition costs. But they’re often not set up to succeed and pay back those loans. The combination of higher tuition, a poorer student population, and a lack of counseling on financial aid and career goals has meant that many students end up worse off than if they hadn’t enrolled at all. By 2014 for-profit colleges accounted for just 11% of the higher education population, but 44% of federal student loan defaults. Back in 2000, only one for-profit college was among the 25 colleges with the most student debt. In 2014, more than half of that list was for-profit schools. And many of the students saddled with debt didn’t even graduate. Of the students who began a 4-year degree program in 2008 — only 27% of those in for-profit schools had graduated 6 years later…. Compared to 65% at private nonprofit colleges and 58 percent at public colleges. The Obama administration responded with several new regulations on the industry. If you look through for-profit college web sites today, there’s a section labeled disclosures that helps students compare schools. The “gainful employment” regulation also says some programs can be disqualified from federal student aid if their students end up with a debt-to-earnings ratio that’s too high. With tighter regulations and lower enrollments due to the improving economy, many for-profit campuses closed. Now the future of those regulations is uncertain. For-profit colleges continue to have a role to play in higher education. They’re often more accessible to students who have families or have to work full-time. Many of them enroll students who couldn’t get into traditional schools. And they provide an alternative to crowded and underfunded community colleges. But their incentives can cut against the well-being of their own students, who know that college doesn’t last forever and hope that their student debt won’t either. If you defaulted on your federal student loans or need help with repayment, visit Links to repayment plans, what to do if you defaulted, and eligibility for student loan discharge are in the description box below.

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