For-profit colleges often leave many with big debts
Some institutions have faced increased federal scrutiny, lawsuits, even shutdowns
Higher education and the profit motive, many argue, do not mix — and students at for-profit colleges often pay the price.
ITT Technical Institute, a for-profit college institution with about 130 campuses in 38 states, shut down in September 2016 after then-President Barack Obama’s administration blocked its students from receiving federal student aid. The institution had 40,000 students enrolled among all its campuses when it closed.
For-profit schools have a history dating to colonial America, according to the book “Higher Ed, Inc.: The Rise of the For-Profit University.” In those days, a scarcity of places for people to receive a formal education resulted in entrepreneurs teaching practical skills and trades, as well as reading and writing.
Steve Gunderson, president and CEO of Career Education Colleges and Universities, a trade organization that represents 1,500 for-profit colleges, praised a judge’s ruling in March that said Obama’s Department of Education failed “to consider various categories of relevant evidence” in reviewing the Accrediting Council for Independent Colleges and Schools, the largest accreditor of for-profit colleges in the U.S.
In September 2016, the Education Department removed the council’s accrediting authority, following a lengthy controversy over its capability to be an effective overseer for students and billions in taxpayer dollars.
“Yes, our sector has had bad schools like every sector of higher education,” Gunderson said in a news release. “But it is time that everyone across the political spectrum stop, step back and look for ways to work together to establish public policies that treat all sectors of higher education on a fair and equal basis.”
Government regulation of for-profit colleges has become less restrictive since President Donald Trump appointed Betsy DeVos as U.S. secretary of education. DeVos froze regulations that protected students from loan defrauding and paused the gainful employment rule, which states: “In order to be eligible for funding under the Higher Education Act Title IV student assistance programs, an educational program must lead to a degree at a non-profit or public institution or it must prepare students for ‘gainful employment in a recognized occupation.’”
According to Inside Higher Ed, Obama’s administration created the gainful employment rule to establish accountability for career education programs when they produce too many graduates with debt they cannot repay. Schools could have their federal funding eliminated if they did not meet requirements.
Democratic attorneys general in 17 states, including Maryland, as well as the District of Columbia, sued DeVos in October, alleging that freezing those regulations violated federal law.
Maryland Attorney General Brian Frosh (D) told Time magazine that “what they’re doing is favoring these predatory for-profit institutions over students — and students who are overall extremely vulnerable.”
The Department of Education said those allegations were “frivolous.”
Sales and recruiting techniques, specifically at ITT Tech, were discussed in a 2012 report by the U.S. Senate Committee on Health, Education, Labor and Pensions. It said that in recruiting students, ITT Tech staff members followed a script called a “Pain Funnel,” asking increasingly uncomfortable questions.
When addressing prospective students who signed an enrollment agreement but indicated they may not want to start school, ITT Tech representatives were instructed to “poke the pain a bit” and “remind them what things will be like if they don’t continue forward and earn their degrees,” the report said.
The script’s questions, designed to elicit emotional pain from prospective students, were intended to persuade vulnerable individuals to apply to the school. The pressure culminated with the question: “Have you given up trying to deal with the problem?”
ITT Tech is not the only for-profit institution to face legal action for allegedly defrauding students. In December 2016, DeVry University — an Illinois-based university with 38 campuses across the nation — settled a lawsuit from the Federal Trade Commission that claimed the school used deceptive advertising to recruit and mislead students.
DeVry paid $100 million to the FTC: $49.4 million for students harmed by the advertisements and $50.6 million for student loan forgiveness. All unpaid private student loans the school issued to undergraduate students between September 2008 and September 2015 were forgiven, as well as more than $20 million that students owed the school in tuition and fees.
An ITT Tech advertisement from 2007, which details the feel-good story of graduate Charlie Graves, promises viewers and prospective students the chance to attain their goals. The website of the Career Education Colleges and Universi- ties touts similar success stories of students from diverse backgrounds who earned degrees and launched careers in fields ranging from advertising and nursing to computer science and audio production.
But critics say “success” is not the outcome for many students at for-profit colleges, particularly when it comes to loan debt.
Time magazine reported in January that more than half of borrowers — 52 percent — who attended a for-profit college in 2003 defaulted on their student loans after 12 years. Borrowers from two-year community colleges defaulted at half that rate: 26 percent.
Judith Scott-Clayton, who wrote a recent report on student borrowing for the Brookings Institution, said the high percentage of for-profit students who default on their loans does not illustrate the full scope of the issue.
For-profit colleges are generally more expensive to attend than community colleges, so more students tend to take out loans, and at higher amounts. The Brookings Institution report said its findings “provide support for robust efforts to regulate the for-profit sector, to improve degree attainment and promote income-contingent loan repayment options for all students.”
The 2012 Senate report on ITT Tech stated: “Compared to public colleges offering the same programs, the price of tuition is higher at ITT Tech. Tuition for an associate’s degree in business administration at ITT Tech’s Indianapolis campus was $44,895. The same program at Ivy Tech Community College in Bloomington, Indiana cost $9,385.”
Tuition for a bachelor’s degree in business administration at ITT Tech’s Indianapolis campus was $93,624. The same program at Indiana University in Bloomington was $43,528.
Tressie McMillan Cottom, a former admissions and financial aid counselor for ITT Tech, said she sold associate degrees for about $30,000 and bachelor’s degrees for about $60,000.
“On average, students enrolled in for-profit colleges take on student loan debt that they cannot manage,” said Cottom, now an assistant professor of sociology at Virginia Commonwealth University and author of “Lower Ed: The Troubling Rise of For-Profit Colleges in the New Economy.”
“Whether that is because these students are more likely to be economically vulnerable or if it is because employers don’t seem to value these degrees very much, we aren’t exactly sure.”
Cottom said her work at for-profit colleges, which she discusses in her book, informed her interest. Later, she decided to do research on for-profit colleges as a sociologist because she thought the expansion of these institutions and their degrees were understudied.
She thinks it is important to keep in mind the circumstances of students who attend for-profit schools. Many individuals enrolled in such programs are people who have been disadvantaged in accessing high-quality, not-for-profit higher education, she said.
“As a sociologist, one of our long-standing disciplinary interests is in how and why inequality happens. I study for-profit colleges as a way to understand contemporary inequality,” Cottom said. “When this [student debt] happens, people can be worse off for having pursued higher education than they would have been had they never gone to school at all.”
The National Center for Education Statistics reports that 23 percent of students at for-profit colleges graduated within six years. The six-year graduation rate for students at public, notfor-profit colleges was 59 percent.