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Who Are For-Profit Colleges Serving, And at What Cost?

Who Are For-Profit Colleges Serving, And at What Cost?
By David Hawkins

In August 2007, Diverse: Issues in Higher Education published a story by Paul Ruffins entitled, “The Secrets Behind Their Success,” about ways in which for-profit colleges serve minority, low-income and other traditionally underserved populations. As a participant in the public policy debate over the Higher Education Act (HEA) and aggressive proposals by the for-profit colleges to roll back anti-fraud protections in the federal student aid programs, I have to pose the question: For-profit colleges offer convenience and service to the low-income community, but at what cost?

Consider loan debt incurred by students who have attended different types of institutions. According to the College Board, students who attended a for-profit college for an associate degree incurred, on average, two-and-a-half times more debt than students who attended a public community college. Moreover, students who attended a for-profit college for a bachelor’s incurred 58 percent more debt than students who attended a public four-year institution, and 26 percent more than students who attended a private four-year institution. Ninety-one percent of all students who attend for-profit colleges for associate degrees borrowed money to attend, while 88 percent of students who attended for-profit colleges for baccalaureate degrees borrowed.

One might logically wonder whether these debt statistics are a sign that for-profit colleges serve more low-income students than not-for-profit colleges, but that is not the case. According to the most recent U.S. Department of Education report on the Pell Grant program, fewer than 20 percent of all Pell recipients are enrolled in proprietary institutions. Public two- and four-year institutions enroll more than 65 percent of all Pell Grant recipients, without high costs, the profit motive, or the recruiting and retention scandals that have plagued the for-profit sector for years.

During the long-running debate over the current reauthorization of the Higher Education Act, lobbyists for the for-profit institutions would have you believe that “traditional” colleges and universities are fighting against the for-profit colleges in a spiteful legislative contest. In reality, the “contest” in Washington is one to preserve the integrity of student-aid programs in an environment characterized by increasingly aggressive recruiting, indiscriminate admissions and loan financing — often with little to no regard for the student’s ability to benefit or repay — and questionable ‘return on investment’ for many students lured in by the publicly traded for-profit colleges’ massive advertisement complex.

The National Association for College Admission Counseling (NACAC), founded in 1937 to protect against unethical practices in the transition from secondary to postsecondary education, is concerned that efforts to eliminate HEA safeguards against fraud are being touted as ways to better serve low-income students. For example, lobbyists for the for-profit colleges have proposed eliminating the 90/10 rule (which stipulates that for-profit institutions must derive at least 10 percent of their total revenue from non-Title IV sources) and the distinctive definition that separates nonprofit and for-profit institutions of higher education.

Rolling back fraud protections in this HEA reauthorization would continue a move that began in 2002 with the Department of Education’s dilution of the ban on commission payments for admission and financial aid officers, another important HEA anti-fraud measure. The department created regulatory loopholes that effectively gutted the statutory ban on “commissioned sales” in admission. As evidenced by federal and state regulatory activity, lawsuits, and media reports from across the country, unethical and illegal recruiting practices thrive in this environment, placing an already at-risk population of students in further jeopardy of massive debt and default. By using high pressure sales tactics to recruit students, many institutions are setting up a situation in which students may receive little to no academic benefit as a result of their enrollment. This results in a substantial cost to the student, who may end up with thousands of dollars in student loan debt, and to the taxpayer.

Our concern, therefore, is that for-profit colleges acknowledge their role as responsible players in the taxpayer-funded student aid system that is the lifeblood of their institutional existence. While Wall Street may herald the rise of the for-profit colleges as the dawn of a new day in educational service, it would be well advised to understand the implications of the industry’s attempts to shed regulations that are critical to ensuring that its customers actually gain from their enrollment. If we’re truly concerned about serving the most disadvantaged populations, let’s welcome the for-profits, but ask them to play by the rules.

— David Hawkins is the director of public policy and research at the National Association for College Admission Counseling.

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