For-Profit Colleges Cost $32B In Taxes, Leave Students Heavily In Debt

For-Profit Colleges Cost $32B In Taxes, Leave Students Heavily In Debt

The Senate Committee on Health, Education, Labor and Pensions has released the results from a two-year study on for-profit colleges that have abysmal graduation rates and leave former students struggling with debt, sometimes for life.

For-Profit Colleges Cost $32B In Taxes, Leave Students Heavily In Debt

For-profit colleges explode over student loans

For-profit colleges have been around for a long time, but they have exploded in the last few decades as federal student loans became more readily available. By 2009, publicly traded companies and private equity firms controlled 76 percent of the for-profit college market as measured by student population, and the Senate report notes that while investors closely watch quarterly returns there is no direct incentive for these organizations to deliver a quality education.

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With this intense focus on revenue, admissions are treated as sales and they quickly become the most important part of the business. “The recruiting process at for-profit education companies is essentially a sales process. Investors’ demand for revenue growth is satisfied by enrolling a steady stream of new student enrollees or ‘starts’.” says the report. “At many companies the performance of each person in the admissions chain, from CEO to newly-hired junior recruiters, was rated at least in part based on the number of students enrolled.”

This emphasis on recruiting can be most easily seen in the employment trends. While professors are almost always part-time, recruiters occupy a central role at for-profit colleges, with the ratio of about one recruiter for every 53 students.

for profit college staffing

For-profit colleges role

These colleges ought to be playing an important role in the higher-education ecosystem, reaching out to alternative students for whom a traditional four-year school isn’t an option. While for-profit colleges are targeting this population, they are also saddling them with debt that they are ill-equipped to handle. Almost all students at for-profit colleges take on loans; 96 percent compared to 57 percent at private non-profit colleges and 48 percent at public colleges. At community colleges, which serve a similar demographic, only 13 percent of students take out student loans.

share of students borrowing

Student loans rise

The size of the loans is also quite high. More than half of the students who graduate from for-profit colleges have more than $30,000 in student loans, compared to 25 percent at private four-year colleges and 12 percent at public colleges.

All of this could be seen as a necessary harm if students were getting an education, and the subsequent opportunities, that they wouldn’t otherwise have access to. Unfortunately this isn’t the case. “More than half the students who enrolled in those colleges in 2008-9 left without a degree or diploma within a median of 4 months,” says the report.

Federal taxpayers are spending $32 billion on a system of colleges that graduates less than half of its students, leaves almost all of them in debt, and appears to be focused on profit above all other considerations.

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