Students, lawmakers question value of for-profit colleges

McClatchy NewspapersJune 15, 2011 

WASHINGTON — Taryn Zychal thought she'd be working as an industrial designer after graduating from the Art Institute of Philadelphia. Instead, it's the debt collection agencies that are working overtime, calling her nearly 30 times a day from 8:30 in the morning to 9:30 at night.

The 27-year-old says she has around $150,000 due in loan payments from attending the private, for-profit university, but Zychal said she couldn't get a job in her chosen field, and not one of her credits would transfer when she tried to switch to another school.

With what she says is a useless degree, she can't pay her loans, which cost $1,500 a month.

"I don't think I learned anything at the Art Institute other than how to get scammed by somebody. I don't think I learned anything to go into an entry-level job in my field," Zychal said.

The Art Institute's parent company, Education Management Corp., declined to comment.

There are about 2,000 colleges operating in the U.S. as profit-seeking businesses eligible for federal student aid. They offer various degrees, both online and on campus, from certificates and two-year associates degrees to MBAs. Some for-profits, such as Kaplan, owned by The Washington Post Co.; Bridgepoint Education; and the Apollo Group, which owns the University of Phoenix, are publicly traded corporations.

Because Zychal's story is similar to thousands of other students who've attended certain for-profit colleges, the Obama administration in early June approved new regulations requiring for-profit schools to make sure their students are able to pay back federal loans, and a Senate committee is poised to begin drafting legislation. In addition, 17 state attorneys general are reviewing the industry for possible violations of consumer protection statutes. The aim is to protect both students and taxpayers.

But for-profit college officials say that the problems with their industry have been blown out of proportion. They argue that for-profit schools provide a valuable service to the millions of students who have enrolled in them in recent years. They also say that many of their graduates find good jobs in the fields that they major in.

In January, the industry sued the Department of Education to stop the Obama administration regulations, which they consider unlawful and unfair.

Harris Miller, the chief executive officer and president of the Association of Private Sector Colleges and Universities, said traditional four-year residential colleges have not kept up with modern times and aren't convenient for working adults looking to advance their careers.

"We accept and try to educate students that the traditional higher education system is not interested in educating or is not willing to educate," he said in an interview.

Most for-profit schools aren't implicated in wrongdoing, but various investigations have found problems, particularly with those that derive most of their revenues from federal student aid.

A government investigation from last year found practices such as overly aggressive recruiting, where school representatives barraged potential students with phone calls, gave false information about a college's accreditation, potential salary and job opportunities after graduation, and doctored federal aid forms. Investigations have also noted that tuition at for-profits can cost thousands of dollars more, even as much as 30 times the price of comparable programs at community colleges.

Other investigations found that for-profit recruiters heavily target low-income and minority students, veterans and people whose parents have never gone to college. Enrollment at for-profits has increased fivefold in the past decade to nearly 2 million.

Students often choose to attend these colleges for a variety of reasons, including the hope of getting a degree faster, a perception that the classes may be easier, and the availability of night and weekend classes.

However, degrees from for-profit institutions don't always lead to good careers. Data from several investigations at the federal and state level suggest that the public investment in educating students at some for-profits isn't a good deal for taxpayers, or for many students. Thousands of students have taken out federal loans to attend a for-profit college, only to default on them.

According to the U.S. Department of Education, for-profit colleges educated around one in 10 students in 2008, but these students took out nearly a fourth of all federal student financial aid dollars — around $24 billion of taxpayer money. They also account for almost half of loan defaulters. In many of the larger for-profit schools, federal dollars account for around 90 percent of revenues.

Miller, of the for-profit college trade association, defended the industry's track record on student loans.

"The default rate among students is not based on whether a school is profit or not-for-profit. It's based on the demographics of the student population," he said.

An investigation by the Senate Committee on Health, Education, Labor and Pensions Committee found that one for-profit college, Bridgepoint, enrolled about 8,000 students in associate degree programs for the 2008 school year. By 2010, 85 percent had withdrawn, and only about 1 percent had received a degree. Dropout rates at most of the other schools investigated hover around two-thirds.

If the numbers are right, however, they clearly show that taxpayers aren't getting a good return on their investment.

The new regulations include a three-strikes-and-you're-out rule. Schools must demonstrate that their educational services lead to "gainful employment" and show that 35 percent of their students are paying down their loans by at least $1 a year. If schools don't meet the requirements three years in a row, they'll lose eligibility for federal funding.

Many lawmakers oppose the regulations.

On Wednesday, the House Education Committee approved a measure, sponsored by Rep. Virginia Foxx, R-N.C., the chairman of the committee's Higher Education panel, aimed at weakening certain aspects of the new regulations.

Other Republicans, including Sen. Richard Burr of North Carolina, boycotted Senate hearings and called them partisan shows.

"The fact is that more employment is achieved through for-profit institutions than not-for-profit institutions," Burr said in an interview. "For-profit institutions are providing a great service, or they wouldn't have a clientele."

The new regulations also went up against a multimillion-dollar lobbying campaign by the industry, according to OpenSecrets.org, a respected website maintained by the Center for Responsive Politics.

The Senate education committee hopes to add legislation, which is generally stronger and longer-lasting than regulatory protections. At its fifth hearing on the subject last week, Sen. Tom Harkin, D-Iowa, said the regulations were "modest" and "better than nothing," adding that for-profit college companies' stocks boomed when the regulations came out.

However, any bill that passed the Democratic-controlled Senate increasing regulation of the for-profit college sector is unlikely to advance in the GOP-controlled House of Representatives, whose Education Committee has shown little interest in toughening laws governing the sector.

Education Department spokesman Justin Hamilton called the regulations a commonsense approach to give career colleges the opportunity to improve, but not let them off the hook, as students are being hurt. The proposal already has led to voluntary efforts by the industry to improve practices, and parts of the regulations will increase transparency about graduation rates, job placement and student debt levels.

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