Mar 8 2014

The Pitfalls of For-Profits


The Pitfalls of For-Profit Higher Education

Susan Mettler of Cornell University provocatively asserts that higher education in the United States now resembles “a caste system, separate and unequal for students with different family incomes. Where students attend college affects their chances of graduating and how indebted they will become in the process.”

At the top of this caste system are elite colleges, whose high tuition rate is discounted by half for most students. At the bottom are for-profits that market themselves to “low-income students and veterans,” and the like, who aspire to better their lot, yet might be vulnerable to deceptive marketing practices that lure in underprepared students with promises of gainful employment and a prosperous future.

In February 2014, the Consumer Financial Protection Bureau (CFPB) filed a lawsuit against ITT Educational Services for allegedly encouraging students to borrow beyond their capacity, usually with high-interest loans. Announcing this unprecedented legal action, the director of CFPB, Richard Cordray, stressed that it “should serve as a warning to the for-profit college industry that we will be vigilant about protecting students against predatory lending tactics.”

According to the CFPB complaint, an associate’s degree at one of ITT’s 150 for-profit institutions “can cost more than $44,000,” while their bachelor’s degree programs “can cost $88,000.” In both cases, that sum “is significantly higher than the cost of similar degrees at a community college or a public four-year institution.”

The Chronicle of Higher Education reports that 40% of approximately 3,000 of the nation’s for-profit institutions are owned by publicly traded companies. For example, Education Management Corporation enrolls almost 114,000 students, while DeVry Inc. has nearly 102,000. For-profits also spend a lot of money to attract and retain students. The Apollo group, which includes University of Phoenix, expends roughly 20% of its total net revenue per quarter on advertising.

Writing for Forbes magazine, Dr. Steven Salzberg concludes: “I’ve been following the growth of these companies, and here’s this professor’s blunt conclusion: they offer low-quality, almost worthless degrees. They have virtually no academic standards. They will accept anyone who can pay, and they seem to care primarily about the bottom line.”

Salzberg believes that the degrees from for-profit colleges “are not highly regarded by employers, who are right to view them with suspicion.” He compares these degrees to the Yugo, a famously inferior automobile made by the Yugoslav/Serbian Zastava corporation.

In a similar vein, Anurag Behar concludes: “high quality higher education is not and cannot be a for-profit enterprise. This is not an ideological issue; it is merely an economic implication of what is required to have high-quality higher education.” Beyond significant and broad research, Behar notes students need a “multidisciplinary faculty” who can cover fields of inquiry ranging from the humanities to applied sciences.

Unfortunately, at for-profit colleges, meaningful faculty oversight of the curriculum cannot exist because of over reliance on contingent labor. The Council for Higher Education Accreditation reports that just 0.2% of the faculty at for-profit colleges are tenured or tenure-track, 11.7% are full-time non-tenure-track, and a whopping 88.1% are part-timers.

In sum, students who attend for-profit institutions pay more tuition, leave with more debt, face higher scrutiny regarding the quality of their degrees, and are taught by more part-time instructors than those attending comparable non-profit institutions of higher education. Some for-profit colleges are even being accused of inflating the credit value of their courses in order to “increase their profit margins.”

Those who attend for-profit colleges must borrow heavily to pay higher tuitions, and so upon graduation they often “have trouble finding jobs that pay enough to afford their debts.” As a result, 23% of borrowers at for-profit colleges default within three years–compared with just 7% at non-profit colleges and 8% at public ones.

Even worse, individuals who drop out of for-profit colleges without completing a degree find themselves loaded down with student loan debt and with less income potential than their peers who finish. They also suffer “higher unemployment rates, lower median incomes, and higher loan default rates than those who graduated.”

Therefore, anyone considering enrolling in a for-profit college should really look elsewhere first, such as the local community college or public university. Students currently attending for-profit institutions should insist on full-time faculty members to teach all of their courses.

The “bottom line” is that students at for-profit colleges pay more for their educations, but get less value for their money. Caveat emptor!

Demand more tenure-track appointments at your college or university! Make the choice to attend an institution that invests in you by investing in the faculty!