For-Profit Colleges: Worth It or Worthless?

Caveat emptor, experts warn.

(Photo: Getty Images)

Jun 9, 2014· 2 MIN READ
A veteran journalist and former White House correspondent for Politico, Joseph Williams is a freelance writer, blogger, and essayist in Washington, D.C.

For single moms, military veterans, or blue-collar workers looking to upgrade their skill set, the growing number of for-profit colleges promising a valuable diploma on a flexible schedule seems like the answer to their hopes for a better life.

Instead of a quality education and a path to a higher tax bracket, though, students who enroll in schools such as DeVry Institute and the University of Phoenix often find themselves with a degree that’s nearly worthless, saddled with student-loan debt as high as six figures, and unable to find a better job to repay it.

“They’re going into debt for an education that’s not giving them what they need,” said Mary Alice McCarthy, a senior policy analyst for higher education at the New America Foundation, a Washington think tank. She warned against painting the category of for-profit schools with a broad brush but added, “There are definitely some bad actors out there.”

Operating at the lucrative intersection of ambition and commerce, for-profit colleges and universities can function more nimbly in a global marketplace than traditional nonprofit institutions granting four-year degrees, according to Steve Burd, a senior analyst with the foundation's Education Policy Program. With more jobs requiring a college degree, the industry has exploded in popularity, enrolling millions of students and raking in several billion dollars in profit each year.

Geared to “nontraditional students”—adults who chose work, the military, or children instead of college after high school—for-profits offer more flexible class schedules, online courses, credit for work experience, and a year-round curriculum. The traditional university is stuck in an old paradigm.

But the Senate Committee on Health, Education, Labor & Pensions found the schools offer a hollow promise: More than half of students who enroll in for-profit colleges drop out without a degree or diploma within four months.

Meanwhile, the for-profits are drinking from the public trough: Of the revenue those schools earned, $32 billion of such schools’ 2012 profits came from U.S. taxpayers in the form of federal student loans. Though the loans aren’t cheap, they formed the biggest portion of the schools’ incomes.

What’s more, the Senate committee’s report found, most programs cost far more than similar courses of study at publicly funded schools, while tuition can be as much as that at Ivy League schools.

The bottom line at many for-profits, then, is this: They’re churning out a lot of dropouts saddled with debt and few new skills. Given that their investors include private equity firms with high expectations for profits, and the schools' CEOs often make seven-figure salaries, according to the Senate committee's report, perhaps that shouldn’t be surprising. Their priorities can be gleaned, perhaps, from their staffing decisions: For-profit colleges employ about one recruiter for every 53 students but only one support staff member or career counselor for every 100 students.

McCarthy said prospective college students can get the most out of a for-profit education if they follow that old Latin chestnut, caveat emptor—let the buyer beware.

That means comparison shopping to determine if the same course of study is available for less cost at a community or state college, McCarthy said. Prospective students should also check out a couple of federal websites; the U.S. Department of Education has a “college navigator,” with useful information on for-profit schools, as well as a Web page tracking whether those schools’ graduates find good jobs.

The federal Consumer Financial Protection Bureau has information on student loans and for-profits, including an office geared exclusively for military veterans.

But the key to finding a good for-profit school is the school itself, McCarthy said. Its website should contain information such as graduation rates and should be easily accessible to the public.

“There’s a lot of information out there—it’s not always easy to sift through,” she said. “The hardest places to get it can be from the colleges themselves. If that’s really hard to do, then that’s telling you something.”

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