For-Profit College Rip-Offs

Posted by Judy Anne Cavey on May 25, 2011 in , , | 2 Comments

Lawmakers are finally cracking down on for-profit colleges accused of preying on students.

I’ve written a few blogs on this particular subject. Each time, I find the information about this subject more and more disturbing, since these colleges seem to go after the most vulnerable people. Their recruiters make promises they can’t keep, blatantly lie about being accredited, and falsify student loan information. Don’t become one of their victims!

Big Profits Made

A friend recently gave me a publication from her high-ranking university on the East Coast, which sung the praises of for-profit colleges. I was surprised, since they have such a great reputation. In the lengthy article, it was revealed that former Hedge Fund managers on Wall Street were all over this–because it’s a huge money-making business. One person in the article was quoted as smugly saying, “…we don’t need to be educators to be in education…”, and later recanted this ridiculous declaration.

When you have people involved in education whose primary interest is money–not students–someone is going to suffer and it won’t be the money-makers.

Preying on the Less Fortunate

In Time magazines May 2011 issue, Andrea Ford wrote a telling article regarding how these for-profits are descending on their prey–students. It’s a clear case of reverse Robin Hood; robbing the poor and giving to the rich. Ford documents students who have learned the hard way about some of these for-profit colleges. One student, Melissa, who was ill informed by the recruiter representing the for-profit college stating, “The recruiter convinced me that I couldn’t afford not to do this.”

The federal government awarded Melissa with $12K in student loans and more than $5K in Pell Grant money. In the beginning, she didn’t have to pay for tuition from her own pocket. But with four children and an impending family move, she decided (with the help of her adviser) to return back to school at a later date. Unfortunately, when she was ready to return, she was told that the school was ordered to stop enrolling students because it was not certified to operate in the state.

Sadly, Melissa’s story is not an isolated case and more students who have been taken are complaining loudly to their representatives.

Those who criticize for-profit colleges believe they go after federal dollars with a vengeance by targeting people who have fallen through the cracks in traditional higher education. Often those are “…older students, parents, career switchers, high school dropouts, veterans, learning disabled and the homeless,” according to Ford.

Government Accountability Office Report

Last summer, a scathing Government Accountability Office (GAO) report was released that showed an industry out of control. The report questioned higher tuition fees the for-profit colleges charged compared with the traditional schools. Not only that, undercover videos documented “…recruiters appearing to encourage students to omit required financial information or claim nonexistent dependents on the Free Application for Federal Student Aid,” Ford recounts.

For-profit colleges receive nearly a quarter of all federal aid–$23.6 billion–and $7.5 billion in Pell Grants, while enrolling 11% of higher education students. Basically, “…many lawmakers see the situation as tantamount to massive fraud at the expense of taxpayers,” Ford reports. Iowa Democratic Senator Tom Harkin, chairman of the Health, Education, Labor and Pensions Committee stated, “The more I’ve looked into this in the past year, the more it’s become clear that this is an open spigot of taxpayers’ money into private pockets. It’s got to be slowed down, and in some cases, turned off.” Senator Harkin is leading the Senate inquiry into the for-profit’s fraudulent behavior.

Ford’s article points out that there were no less than 13 new regulations issued by the Department of Education to take effect. “They will prevent for-profits from compensating recruiters on the basis of their enrollment numbers and will require states to monitor schools more closely.” Unfortunately, these regulations come too late for many students, including Melissa.

Supporters Say Otherwise

But the for-profit schools have their supporters who say that they have a place in our society, “providing opportunities where there were none”. My question is: opportunities for whom? The for-profits? Certainly not for 40% of students who drop out, or students like Melissa.

I hope they are speaking of for-profits of years past, those started after World War II, which enrolled veterans on the GI Bill. Those institutions were operating on a much different level than the for-profits in question today. Or perhaps they are speaking of the few for-profits which are in fact nationally or regionally accredited and have been in good standing for many years.

Highest Default and Lowest Grad Rates

There are some schools which produce good results, but there are some which have horrible graduation and default rates for loans. For example, Ford’s article points out “Graduation rates are poor: only 27% of first-time, full-time bachelor’s degree seekers at for-profits finish within six years on average, compared with…55% at public schools and 65% at private nonprofit schools.” Not only that, for-profits have an insane student loan default rate of more than 40%!

The U.S. Department of Education supplied the following, which are the nonprofit college percentages based on the number of borrowers who began repaying in 2008 and defaulted within three years: Harvard 1%, Ohio State University 5%, and Houston Community College 20%. Now, compare these figures to the average for-profits default rate of 40% and you should have more people asking “what’s going on here?”

There are for-profit supporters who say it’s all about the demographics enrolled in for-profit colleges. But that may be more of an excuse than a valid reason for such high default rates. Instead, it could have a great deal to do with being lied to by the colleges. The GAO report found for-profit colleges were, “…overstating future earnings potential or job placement rates.” Basically, telling students they would be easily placed once they graduated and make a great income (able to pay back loans) in a short period of time. Neither of which is true in the vast majority of cases.

What’s Next?

As community colleges cut budgets, limiting more students from entering, it will make it more difficult for students, (once for-profit bound), to find alternatives. Senator Harkin states, “I think we have missed the boat in terms of providing adequate funds to community colleges.” I’ll second that thought and add if funds are not adequately funneled into community colleges soon, especially in States like California, we will have thousands of people falling through the education cracks once again, which will severely limit their future.

Senator Harkin concludes, “…the primary purpose of the for-profit schools is to make a profit, not to educate people to get them a job.” And that’s a very sad statement for any institution calling itself a “school”.