The for-profit college industry would barely exist without federal tuition aid, but a new report by U.S. Senate Democrats says that taxpayers are getting a raw deal. The real beneficiaries of the for-profit college sector are not students seeking to brighten their futures with more education. They are the executives and shareholders who have built a "profits over academic progress" model.
The study released by Sen. Tom Harkin, D-Iowa, is the culmination of a two-year investigation into the unsavory practices of for-profit colleges. This industry receives more than $30 billion a year in taxpayer funds. Yet more than half of students withdraw from for-profit schools by the end of two years. For associate degree students, the statistics are more abysmal, with 64 percent of students leaving before completing their degree. Students leave mired in debt without the academic credentials to help them pay it off. For-profit students account for about 13 percent of college enrollment yet constitute 47 percent of loan defaults. More than one in five students in for-profit colleges will default within three years of entering the start of repayment.
These default rates are due in part to the high tuition charged. Students in for-profit bachelor's programs were charged an average of 20 percent more than a similar program at large public universities. And for those seeking an associate degree, it cost four times what community colleges would charge.
Meanwhile, top executives and shareholders are well-rewarded even if their students fail. Publicly traded for-profit college companies had an average profit margin of 19.7 percent and paid their top executives an average of $7.3 million, compared with an average $3 million for the highest paid nonprofit colleges and $1 million for top leaders at public universities.
For-profit schools say they fill a need by serving populations of nontraditional students who may be working while going to school or are the first in their family to attend college. But the Senate findings reveal that schools pour far more money into hiring recruiters and marketing to get students — prepared or not — through the door than providing services to those who founder. The ratio of recruiters to student services staffing overall is about three to one.
Recruitment is everything at for-profit colleges, and internal documents from the industry and interviews with former employees found a culture of predatory methods. Military veterans are a particular target of high-pressure tactics. Some schools have gone so far as recruiting at wounded warrior centers and veterans hospitals.
The study by Senate Democrats shines a light on unethical practices of an industry that may have some good actors but too few overall. Students as well as taxpayers should be demanding tighter controls and a better deal.