Step up regulation of for-profit colleges

By Jose Cruz and Kate Tromble

Sen. Jim Risch, R-Idaho, recently introduced the Education for All Act, which would bar the U.S. Department of Education from enacting any regulations or guidance on the term “gainful employment.”

The bill protects for-profit colleges that lure students with the promise that they will be able to turn their expensive degree into a good job.

It opens up the students of these for-profit colleges to potential exploitation and abuse. The U.S. DOE is trying to enact rules that would hold schools accountable for ensuring their students not only graduate, but also obtain jobs that enable them to repay the hefty loans they take out. This added accountability will also hopefully keep schools from overselling their abilities, protect students from aggressive and misleading recruiting practices, and help ensure equitable access to high-quality higher education for all students.

Low-income and minority students are increasingly concentrated in for-profit institutions. The for-profits represent about 9 percent of all student enrollments, but 16 percent of black students and 24 percent of Pell recipients attend these schools.

In the 2008-09 school year, the federal government invested $4.31 billion in grant aid at for-profit institutions, quadruple what it had invested just a decade earlier.

This past academic year, one for-profit school — the University of Phoenix — became the first institution to receive $1 billion in federal Pell Grant funds.

Despite this increased federal assistance, tuition at for-profit institutions continues to far outpace other schools. Attendance at a two-year for-profit costs more than five times as much as a community college, forcing students to take out more loans, including risky private loans.

The percent of bachelor’s degree recipients from for-profits who carry debt in excess of $30,000 is more than four times that of their peers at public institutions.

Not surprisingly, nearly one in five students who attend for-profits default on their loans within three years.

Meanwhile, the owners of these institutions are recording profits at the level of such corporate giants as Apple, and Procter and Gamble.

Record profit levels might be acceptable if students were succeeding at record rates. But they are not. Four-year, for-profit institutions have an average graduation rate of 22 percent while public institutions have a rate of 55 percent and private institutions 65 percent.

For black and Hispanic students, the graduation rates are similarly low at for-profits —16 percent and 28 percent, respectively — far below the rates for such students at public and nonprofit colleges.

Two-year for-profits report higher graduation rates than community colleges (60 percent versus 22 percent). But less-than-two-year certificate programs largely account for those higher rates, some of which have questionable market value.

Given this, is the for-profit story really a story about choice, access and corporate efficiency as the industry would have us believe?

Or is the sector marketing a false sense of opportunity to the traditionally underserved for the benefit of their stockholders — on the false premise that higher education is a cost to taxpayers, rather than an investment in democracy.

Not only are the actions of many for-profit institutions reproducing social class and wealth disparities, they are also accelerating the rate at which the socioeconomic divide widens.

Underserved students who enroll in many of these schools are statistically more likely to end up with no degree, loans they cannot repay, or both.

Pell Grants and subsidized student loans are keys to our national strategy for providing people with a route to the middle class.

They should be a bridge to a better economic future, but in the hands of for-profit colleges they have been deepening the socioeconomic chasm. Regulation is needed. Is Phoenix really too big to fail?

Jose Cruz is Education Trust vice president for higher education policy and practice, and Kate Tromble is director of legislative affairs.