Why the Federal Government Needs to Stop Funding For-Profit Colleges

By Gabriella Bishop

Catlin Gabel School, Catlin Speak

Today, the value of a college education is continually rising, as are the opportunities to receive one. However, the most rapidly growing sector of higher education is for-profit institutions.

According to the National Conference of State Legislatures, in the past two decades the enrollment in for-profit colleges has increased by 225 percent. The appeal is clear – just look at one of the many ads for these institutions that bombard us every day. The ads highlight benefits like nine-month degree programs, flexible class schedules, and fast results. But the darker side of for-profits, perhaps just as common in the media as the ads, heavily outweighs the potential upsides.

Ninety-six percent of for-profit college students are on federal aid. (Graphic: Senate HELP Committee)

In 2011, the Senate Committee on Health, Education, Labor, and Pensions (HELP) conducted a comprehensive study on how for-profit institutions compare with other forms of higher education. One of the most astonishing findings was that 96 percent of students at for-profits take out student loans, a substantially greater fraction than those at community colleges, public universities, and private nonprofits. In 2009, for-profit federal student loans totaled $32 billion, 25 percent of the aid funds allotted by the U.S. Department of Education, despite the fact that students at for-profit colleges only make up about 12 percent of the post-secondary education population.

Yet the sad fact is that students at for-profit institutions don’t put federal aid and loans to good use. According to the HELP study, more than half of students enrolled in for-profits leave without a degree in four months or less. For-profit college students account for 47 percent of federal student loan defaults, and over one in five students default on their loans within three years.

Even worse, the students don’t even understand the institutions that are preying on them. According to a 2014 study by Public Agenda, 65 percent of current for-profit college students don’t know what a for-profit institution is, along with 63 percent of for-profit college alumni.

Additionally, the programs offered at for-profits are more expensive and less beneficial to students. The HELP study indicated that bachelor’s degree programs at for-profits cost 20 percent more than comparable degrees at public universities, and associate degree programs cost four times as much as those offered at public universities. Despite the large investment, one for-profit college graduate noted in an interview with NBC that he couldn’t get more than a minimum-wage paying job after graduation.

Since these institutions are for-profit, a significant chunk of their budget is spent on recruiting and advertising, as expected. However, according to the HELP study, for-profits spend over 5 percent more on marketing than they do on actual instruction. Clearly, these institutions value their money more than helping students earn a college degree.

The average tuition at for-profit colleges is much greater than that of other institutions. (Graphic: Senate HELP Committee)

Recruiters for for-profits are often under pressure to meet enrollment quotas and resort to twisting the truth about their school’s programs to make unknowing students sign on. A U.S. Government Accountability Office (GAO) study in 2010 found that recruiters encouraged potential students to falsify their federal aid applications, exaggerated potential post-graduate salaries, and failed to provide information regarding cost, duration, and graduation rate of the programs at their schools, despite being required to by federal regulation.

In a video recorded by a hidden camera during the study, one recruiter even advised an applicant to not worry about student loan debt: “It’s not like a car note – if you don’t pay it, they won’t come after you.”

For-profit institutions have even been sued for their false advertising. In 2013, California Attorney General Kamala Harris sued Corinthian College and its subsidiaries for misrepresenting job placement numbers in their ads. To NBC, she called the ads “predatory” and said they “targeted some of our state’s most particularly vulnerable people – including low-income, single mothers, and veterans returning from combat.”

So if for-profits are so bad, why are they still around? And growing?

The majority of funding for for-profit institutions comes from federal aid. (Graphic: Senate HELP Committee)

The short answer is government funding. On Oregon Congressman Earl Blumenauer’s website, he states that “In recent years, the number of private, for-profit colleges has exploded across the country, fueled almost entirely by federal grants, veterans’ educational benefits, and student loans.”

According to the HELP study, 86 percent of for-profit institutions’ profits come directly from the federal government in the form of student aid. This means that in the 2009-10 school year, for-profits took $7.5 billion in Pell grants, 50 percent of the aid allotted by the U.S. Department of Defense, and 37 percent of GI Bill aid.

Admittedly, there has been some federal regulation of for-profits, but clearly not enough.

The radical, yet needed solution here is the ousting of for-profits from federal aid eligibility. This would not only lower the national student debt, but also support better-quality higher education and efficiently redirect hard-earned taxpayers’ dollars.

About Grace Masback

Grace Masback, 17, aspires to give voice to the voiceless and holds the modest ambition of becoming the voice of Gen Z. Frustrated by the dearth of impactful platforms for teen journalists, she founded WANT, a news, sports, and entertainment website that aggregates the best in high school journalism from school newspapers and teen bloggers around the world (www.wantnewsforteens.com).

Leave a Reply