For-Profit Colleges Must Crack Down on Predatory Practices

Taxpayers spend billions of dollars on what has been shown too often to be fraudulent and totally ineffective education programs.

By SHARE

Former Rep. Steve Gunderson, president and CEO of the Association of Private Sector Colleges and Universities, recently wrote a letter to U.S. News to rebut my previous posts about for-profit colleges.

This was on the heels of President Obama's call for a crackdown on predatory  practices on military families by the for-profits—his "know before you owe" plan.

I would like to make one thing very clear: My columns and my statements are not a wholesale condemnation of all these schools or all these programs. Long-distance learning and online courses are here to stay. This is not, as Mr. Gunderson characterized it, a "witch hunt."

[See the U.S. News rankins of the best colleges.]

This is about the facts accompanying a remarkable growth in these for-profits and the remarkable cost to the taxpayers that they represent. I find it odd that a strong fiscal conservative Republican such as Mr. Gunderson and his party's presumed presidential nominee, former Gov. Mitt Romney, would be advocating that billions be spent on what has been shown too often to be fraudulent and totally ineffective education programs.

Here are the facts that Mr. Gunderson did not refute:

FACT: This has become a $30 billion industry, virtually all of the money coming from federal loans and grants. A few years ago, the numbers were $4 billion in Pell grants and $20 billion in loans plus the G.I. Bill. Student numbers have grown from 365,000 to 1.8 million in just a few years.

FACT:  According to the Department of Education, (as reported in The Washington Times), 26 percent of all student loan money and 46 percent of all student loan dollars in default come from for-profit programs, despite the fact they account for just 12 percent of college students.

FACT:  These schools aren't cheap—despite the lack of campuses or classrooms or counseling or even much personal interaction with faculty members. Again, according to the Education Department, (as reported in USA Today), for-profits cost on average $30,900 per year compared to public colleges at $15,600 and private, non-profits at $26,600.

FACT: According to a U.S. Senate report, 2 million students withdrew from the large for-profits in a three-year period, and of those who enrolled in the 10 largest chains in 2008-2009, 54 percent had withdrawn by the summer of 2010.

FACT:  Slick TV ads and bounty-paid marketers swallowed up $3.7 billion last year. It is taxpayer money—you're paying for it!  The Apollo group, which runs the University of Phoenix, spent $377 million on advertising, more that Apple. (The 15 largest for-profits spent 23 percent of their operating costs on marketing according to a Senate report.)

[Students at For-Profit Colleges Earn Less, Study Says]

FACT: Not enough of this taxpayer money is going to educate students—for-profits devote less than one third of the money that public institutions do to instruction. It is even less than one fifth of what private non-profit institutions provide (Department of Education). Those are huge and disturbing gaps.

FACT: This has become big business. Taxpayer money has lined the pockets of millionaires—the top executives of the top 15 for-profit colleges pulled in $2 billion last year. The president of Strayer University was awarded a package of $41.9 million!

FACT:  As the New York Times reported last December, these for-profits spent $16 million dollars on lobbyists to confront the Obama administration, members of Congress like Sens. Tom Harkin and Dick Durbin, and many others, to prevent any legislation.  Instead of "cleaning house" the for-profits sought to "clean up" by keeping those federal dollars rolling in. Courageous members Harkin and Durbin have stood their ground against the onslaught.

Finally, there is the issue that President Obama and Holly Petraeus and many others have highlighted: the predatory approach these for-profits have utilized when dealing with our veterans. We are talking about 700,000 veterans with education benefits, according to the Chronicle of Higher Education.

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Recruiters have entered hospitals signing up vets with severe brain injuries, as PBS and Holly Petraeus documented at Camp Lejeune, N.C.--no counseling, no explanation of what is involved, just sign here, it is free money.

The incentive for these for-profits is not just to sign up more students but it is to use the loophole in the 90-10 rule which requires these schools to at least have 10 percent of their funds not from the taxpayers, not from Title IV education funds. The G.I. Bill, even though it is government money, is not technically Title IV, so it counts toward the for-profits 10 percent requirement. 

To quote Holly Petraeus: "This gives for-profit colleges an incentive to see service members as nothing more that dollar signs in uniform, and to use aggressive marketing to draw them in."

This has gotten seriously out of control and President Obama was right to put the brakes on these practices.

[Read the U.S. News debate: Should the Lower Interest Rate on Stafford Loans Be Extended?]

We are wasting taxpayer dollars, short changing those who desperately need training and college, and putting money in the pockets of those who believe there is a quick buck to be made.

It is time for groups like Mr. Gunderson's to get a handle on his own industry and crack down, and not to deny the disturbing trend or sweep it under the rug as only "a few bad apples." It isn't about the lobbyists and the big profits, it is about the students and their futures.

When state and community colleges are facing devastating cut backs, private colleges are feeling the squeeze, and fewer and fewer families believe they can afford college, isn't it better to ensure that for-profits are part of the solution, not part of the problem?

  • Read: Obama, Romney Agree on Extending Student Loan Interest Rate Cut
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  • Corrected on : Corrected on 05/07/2012: An earlier version of this blog post misstated the amount of money spent last year under the G.I. bill. Last year, $4.65 billion was spent.