Enrollment at online programs jumped from 229,363 to 2,139,714—an 832 percent increase—from 2001 to 2009 according to higher education consultancy Eduventures.
An explosion of that magnitude has not only caught the eye of potential students, but of Congress and regulators, who in recent months have been critical of for-profit online programs' recruiting practices, transparency, and ability to provide their students an education that will enable them to find adequate employment once their degree is in hand. "Far too many for-profit schools are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use," U.S. Secretary of Education Arne Duncan said in a recent press release. "This is a disservice to students."
[Learn more about online education.]
The for-profit education industry is also under fire from the Senate Health, Education, Labor and Pensions Committee, which is demanding for-profit schools be less opaque regarding their graduation rates, retention rates, and other metrics that are indicative of a school's quality. Loan repayment rates at for-profit schools are lower on average than traditional schools, and some programs hover near a threshold that, without correction, would deny them the ability to secure federal loan money for students. Loan default rates, too, are above normal; 11.6 percent of for-profit students defaulted on their loans in fiscal year 2008 compared to 7 percent nationally.
[Review loan repayment rate data at prominent online schools.]
But for-profit schools argue that their rates are comparable to schools with similar types of students. Several historically black colleges and universities, for instance, have default and repayment rates akin to those of for-profit schools. "Student demographics are the primary reason for higher default rates," says Sharon Thomas Parrott, senior vice president and chief compliance officer of DeVry Inc., the parent company of DeVry University. "Schools across all sectors that serve non-traditional student populations—first in family to go to college, recent immigrants, ethnic minorities—have similar rates. These students typically have fewer financial resources or family financial support and often work full time while studying."
[Review loan default rates at prominent online schools.]
Given the regulatory unrest, if you're considering enrolling in an online program it's important to understand that the online landscape is rapidly changing. Trace Urdan, managing director and senior research analyst at investment bank Signal Hill Capital, says schools are gradually becoming more selective in their admissions process in hopes of remedying their dismal loan statistics. And it is likely that new data will be available soon, both as a result of regulatory scrutiny and the schools' attempts to quell the growing public relations storm that has battered the industry. "We already know a lot of students drop out. Why don't you show us what that looks like each quarter?" Urdan says. "The longer you wait, the more confusion and misunderstanding develops."
The coming increase in transparency, forced or not, will enhance students' ability to ask pertinent questions about online programs before enrolling, experts say. Rather than jumping in blindly as many millions may have during the past decade, potential students should use the forthcoming data to analyze online programs before enrolling, says Steve Isaac, CEO of EducationDynamics, a higher-education marketing firm. Beyond examining loan repayment and default data available via the Department of Education—both solid indicators of students' ability to find the jobs they sought—he suggests examining the school's accreditation, how graduates have fared in the job market and qualifications of the faculty. "Higher education is one of the most significant investments a person will make in their lifetime and just like with any major purchase, prospective students need to do their homework to make sure they're making the best possible decision," he says.
[Use these six tips to find the right online instructors.]