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For-Profit Colleges Rebound by Karl F. Cohen
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The first college graduate in a family is important celebration. image: unknown
FOR-PROFIT-COLLEGES ARE SLOWLY
gaining in enrollment again.
Their enrollment surged in the first decade of this century due to major advertising and marketing campaigns that promoted deceptive claims, enrollment policies that accepted anybody who could pay or get a government loan, plus there was lax federal oversight. Indeed, between 2006 and 2010, enrollment shot up by 76%.
Then government hearings and the media exposed the rip-offs that were occurring. That resulted in lawsuits by former students, employees and the government, most of which were won. Schools paid out millions and several educational chains went bankrupt, forcing them to close, notably the many “Art Institutes.”
Some of the investors in such schools turned out to be some of our finest Republican leaders, including Senator Susan Collins from Maine and Mitt Romney, now of Utah. He even praised Full Sail University in Florida, which teaches game animation, in two speeches when he was running for president in 2012 (no wonder, they donated over half a million dollars to his campaign).
And don’t forget that our not-so-brilliant outgoing president, who had to close his Trump University. (A judge ordered him to pay $25 million to settle lawsuits against him—whether he ever will is another question.)
Now the Brookings Institute reports that the National Student Clearinghouse has published financial details from for-profit colleges. Enrollment figures show that they have gone up by 13% among first-time students, aged 21-24, during the pandemic. And they rose even more, 15%, among those aged 25-29.
Meanwhile community college enrollment has declined by 9%.
In light of extensive evidence that for-profit institutions yield both lower earnings and higher debt for students than other institutions, policymakers, students, taxpayers, and voters should be very concerned about this trend.
Beginning in 2010, there were investigations by the Government Accountability Office and the Senate, followed by regulations and sanctions by the Obama Administration, which led to school closures and enrollment declines in the for-profit sector.
That included several for-profit schools that had well-advertised computer animation and game courses and majors.
In addition to individual lawsuits against specific colleges, the Obama Administration put into place restrictions on aggressive recruiting, streamlined the Borrower Defense process for loan forgiveness (when colleges defraud students), created the College Scorecard to disseminate information on student outcomes, and established the Gainful Employment rule to hold colleges accountable for the debt and earnings of their graduates.
These improved student protections led to a decline in for-profit enrollment and the closure of several large for-profit chains between 2010 and 2016.
Of course, this was all reversed by the Trump Administration. It weakened the Borrower Defense rule, completely rescinded the Gainful Employment regulation, and has done little to enforce restrictions on predatory recruitment practices.
Despite adding some data to the College Scorecard, this administration has also reorganized and deleted key pieces of information in ways that seem to favor for-profit institutions. Even before the current recession and pandemic, for-profits were making a comeback.
Data from the National Student Clearinghouse shows this recession has been markedly different. Most campus-based institutions are seeing enrollment decline and only the for-profit sector has managed to attract more students. Why?
Without having to close campuses, budgets have remained relatively stable, allowing them to continue to out-spend public institutions on advertising. Pre-pandemic, for-profits spent about $400 per student on advertising, compared to a mere $14 by public institutions. Why should a respectable college have to advertise for students?
Students PAY MORE and BENEFIT LESS from for-profit education than education in other sectors. Over the last two decades, a number of economists have analyzed student outcomes in the for-profit sector: their results are remarkably consistent. The majority of studies on employment and earning gains find worse outcomes for for-profit students relative to similar students in other sectors.
A major concern is the amount of student debt students who attend for-profit schools rack up. About 74% of students attending for-profit colleges take out student loans compared to just 21% at community colleges and 47% in four-year public schools. Among those who borrow, for-profit students also take on more debt.
And to make matters worse, if you get a government loan it must be paid back, even if you declare yourself bankrupt. Some think the student debt crisis may end up worse than the toxic housing mortgage crisis of 2008.
A study shows that 12 years after entering college, nearly half of for-profit students have defaulted on their student loans, compared to just 13% for students at a community college. Defaults are higher for students of color and those who leave for-profits before completing degrees or certificates.
As it happens, more than two-thirds of Black students who attended a for-profit college without graduating defaulted on their student loans within 12 years.
The ugliest part of the growing student loan crisis is that some people are asking if it is worth going to college. Yes, go, by all means. But, considering the current labor market, AVOID for-profit colleges no matter what Betsy de Vos, Trump and other Republicans say. (Remember, several of them have invested heavily in such institutions a few years ago, and Trump even owned one that went bankrupt.)
As for Betsy de Vos, The Washington Post reported suspicions that she had a financial stake in a company that until recently, held a lucrative contract from the U.S. Department of Education to pursue the loans of defaulted student borrowers.
“Some may argue that a for-profit college education may be better than no college at all,” the Brookings article said, “but research calls this into question. Several comparisons of the labor market outcomes of for-profit students to those of individuals with only a high school diploma find no differences in outcomes. Students may even incur net loss from for-profit attendance when debt is factored in.”
In the current climate of regulatory rollbacks, a recession, and a pandemic that’s driving students online, the increase in for-profit enrollment is perhaps not surprising. Add to this the disproportionate share of stimulus funding granted to for-profit colleges in the CARES Act, and it is no wonder that for-profit enrollment is surging, while enrollment in other sectors contracts.
We have been down this road before. We have seen a massive expansion in for-profit college enrollment, and we have seen the subsequent harm it caused. The difference this time is that we have the evidence to predict what will happen.
Wondering who makes the most income after graduating from college? The Brookings article tells us that The Department of Education’s College Scorecard is a unique source of data from institutions. It indicates which programs Americans have borrowed to attend and how borrowers from those programs fare in the workforce after graduation.
The Scorecard shows in general figures which student loans are a good investment and for whom they are not. This evidence is important as policymakers examine ways to reduce the burden of student debt on those who struggle.
The list suggests the high-paying professions today includes nurses, lawyers, pharmacists, dentists and diagnostic health professionals who like MDs earn modest salaries when they are in residency, but whose incomes rise rapidly once they are fully certified. https://www.nytimes.com/2020/06/17/business/coronavirus-for-profit-colleges.html for more information.
Karl F. Cohen—who decided to add his middle initial to distinguish himself from the Russian Karl Cohen, who tried to assassinate the Czar in the mid-19th century—is an animator, educator and director of the local chapter of the International Animation Society and can be reached .