Education, News

The Problem with For-Profit Colleges

One common option for many students looking to further their education is attending a for-profit college. These are institutions that are run by the private sector with the intention of providing an education for students. Yet, these institutions are different than other schools when it comes to finances. For-profit colleges are businesses, and provide their educational services so long as they make a profit.

Money /401(K) 2012

Who attends for-profit colleges?

Students who attend this type of college are those looking to be trained in a variety of vocational occupations, according to the Associated Press. Among them are:

  • Nursing
  • Truck driving
  • Culinary arts
  • Auto repair
  • Clerical studies
  • Dental clinics
  • Medical field – secretarial, receptionist, record keepers, etc.

Many of these fields are attractive to workers who have been laid off from their jobs, as well as to veterans. Many students attending these colleges continue to work full-time while enrolled, and most tend to be over the age of 24. They also tend to receive aid including food stamps.

This latter point is significant because, while community colleges are less expensive, many still opt for for-profit colleges. This may be the result of their offering of both 4 and 2 year degrees, but some critics and supporters believe it is because of their very savvy advertising campaign. In fact, these colleges have retained students while other community colleges have failed. They continue to well in spite of serious concerns about what they do and how they do it.

Financial concerns

In 2012, for-profit colleges came heavily under fire for several reasons. According to a U.S. Senate committee report performed over two years these colleges:

  • Have the highest number of student loan defaulters
  • Have the lowest rates of graduation
  • Target veterans in order to obtain money from the GI Bill as well as other federal and state loan programs
  • Have exorbitant tuition costs
  • Spend significantly less money on instruction than other institutions
  • Devote excessive amounts of money and other resources to various non-education related spending such as marketing
  • Investors in larger corporate-owned chains colleges often seek quick returns, and therefore influence the constant rise in tuition
  • Exploit vulnerable, low-income students
  • Push students into taking student loans they will not be able to handle
  • Often promise highly inflated and even unrealistic employment opportunities and potential salaries

The future of for-profit colleges

President Obama is working on a measure to control the flow of federal money to for-profit colleges. The plan is called the “90-10 Rule” and will forbid any institution to obtain more than 90 percent of its revenues through federal student aid (loans and grants), including the GI Bill.

Additionally, an institution will not be recognized as leading to “gainful employment” if estimated annual student loan payments exceed 8% of his or her total earnings or 20% of his or her discretionary income. Together, these and other measures are intended to ensure everyone can receive an education without going into crushing debt before or after graduation.

Photo credit: 401K(2) 2012 / Flickr

Previous post

The Case For Free Community College

Next post

Federal vs. Private Student Loans: What to Know

The Author

Mary Brown

Mary Brown

Mary Brown has enjoyed writing about education and finance related topics, such as scholarships, student loans, college, vocational degree choices, and adult education since the early 2000's. She also writes about school budgets, accreditation and fundraising.