For-profit colleges have been in the news in the past few years, as they increased in popularity and critics pointed out high costs, predatory practices, and low job placements for students. Recently, The New York Times reported some for-profit colleges have even been accused of fraud, but are still receiving U.S. funds. This presents a good opportunity to review the facts about for-profit colleges and what can be done to improve the education system.
For-profit colleges have been around for quite some time, and they historically served as local, vocational schools that were ideal for busy, working adults, such as farmers. Strayer University, one of the oldest for-profits, was founded in 1892 and offered training in skills like shorthand, typing and accounting.
Yet as time has passed, many colleges, including Strayer, have shifted away from being local vocational schools and have become nationally-marketed alternatives to four-year public and private universities. Unfortunately, the growth and success these colleges have enjoyed has not been shared with its students. One study by the National Bureau of Economic Research in 2012 found that students who attend for-profit institutions do not receive any benefits in earnings, unlike their non-profit counterparts. Essentially, students who attend for-profit colleges do not earn better wages than those who do not attend college at all.
Perhaps, however, if the education allowed students to find work in their area of interest, the degree-driven programs could still be considered useful. Unfortunately, at least one article from EdCentral in 2014 found that job placement rates are not only far from stellar at for-profit colleges, but many times they are deceptive or inflated. Some colleges count any job a graduate has obtained as successful job placement, regardless of whether or not the job was in their field. As the article notes, “That means that the rate could include graduates who are flipping burgers at McDonalds, working as baristas at Starbucks, or folding t-shirts at the Gap – jobs they could have gotten without obtaining an associate’s degree.”
That’s not to say that someone who has gone to a for-profit institution can’t be successful. The only unfortunate fact is that they are a true minority. In one case, ITT Technical Institute used one of these individuals, an outlier, as the focus of one of their marketing commercials. The man who was featured in the commercial had successfully graduated and obtained work in the field of aerospace. Yet out of 155 students, he was only one of 27 that graduated, and only one of 13 that found work in the field.
Marketing overall appears to be very important to for-profit colleges, as they spend disproportionate amounts of commercials and advertising to attract new students. Generally speaking, for-profit colleges will spend over 20 percent of their revenue on marketing, more than double what is often spent on faculty. The spending distribution may be a large reason the education is largely ineffectual at these institutions compared to their non-profit counterparts. One committee’s research found that nonprofit colleges can spend up to more than 12 times the amount of money on students compared to for-profit colleges.
The lack of spending on students isn’t for lack of money, either, as many of these colleges pay millions more dollars to their CEO’s than nonprofits, and even pocket profits for their shareholders. All the while, the for-profit colleges are two, three or more times as expensive as nonprofits.
Worst of all, many for-profit colleges have targeted vulnerable and poor communities, pressuring them into enrolling, while often presenting only partial truths and using shame and pain tactics to convince them. These students are often unable to pay their tuition and are forced to take out loans, which they are many times unable to pay off.
If someone needed personal reason to care, it is important to remember that many of these tactics will ultimately affect us as taxpayers. For-profit schools are allowed to obtain 90 percent of their revenue from student aid loans, and they account for about 31 percent of all student loans, despite the fact they only represent 13 percent of the education market. The students from these institutions are also more likely to default on their debt, and the tab must then be picked up by taxpayers.
Taxpayers can also be affected in other ways. The Associated Press reported that the government is providing a bailout to students who attended the now-defunct Corinthian Colleges which had engaged in numerous questionable practices and filed for bankruptcy last year. About $3.6 billion in federal loans has been given to students from these institutions since 2010, an amount that taxpayers will be accountable for.
It is important to note, of course, that not all for-profit colleges have engaged in these harmful practices, and there is already legislation in process that focuses on fixing many of these issues. Gainful employment legislation has focused on requiring colleges to ensure their students will be able to pay their loans. If colleges do not comply with the standards, they risk losing access to federal funds. There is also a new federal program that aims to let students enroll in alternative education from accredited schools, such as massive open online courses.
Hopefully these pieces of legislation and other laws can help improve our education system, and again, not all for-profit colleges are necessarily bad. Some, such as Senator Tom Harkin, argue that a driving factor for problems in for-profit colleges is when they are created or become publically traded, because it encourages a focus on earnings and quarterly reports.
Yet, for-profit colleges in general, whether public or private, may simply be problematic. For-profit colleges are different from nonprofits because there is an incentive to cut corners in education and the wellbeing of students in order to maximize profits for shareholders. In many ways, this seems to be able to account for many of the practices the worst of the for-profit colleges have engaged in: aggressive marketing with little care about the financial standing of individuals, overpriced tuition, below-average job placement rates, no increase in graduates’ earnings, and so on.
Nonprofits certainly face challenges as well, as they have interests in attracting new students, being prestigious, and increasing revenues to improve their programs. Yet, there is not nearly so much an incentive to cut corners, because ultimately, any increased revenue will not go in their wallet and will not be scrutinized by demanding shareholders, but rather, it will be put back into the institution to improve upon it.
Sources:
http://www.nytimes.com/...
http://www.nytimes.com/...
http://bigstory.ap.org/...
http://www.businessinsider.com/...
http://www.nber.org/...
http://americanradioworks.publicradio.org/...
https://www.youtube.com/...
http://www.economist.com/...
http://www.nacacnet.org/...
http://www.edcentral.org/...