The For-Profit College Question

January 02, 2013


For-profit colleges and universities have attracted a sizeable share of the student population in the last decade. But since accusations of predatory recruitment and low graduation rates abound at some for-profit schools, which make most of their money from federally funded grants and loans, Congress and the public are starting to ask pointed questions of the industry. Is profit trumping education at these schools—at taxpayers’ expense?

In July 2012, a Senate committee released the results of a two-year investigation into the for-profit education industry. The scathing report was based on internal documents from 30 of the biggest for-profit schools and an undercover investigation that the Government Accountability Office conducted.

According to Sen. Tom Harkin (D-IA), the Senate report found “overwhelming documentation of exorbitant tuition, aggressive recruiting practices, abysmal student outcomes, taxpayer dollars spent on marketing and profit, and regulatory evasion and manipulation. And these practices are not the exception. They are norm.”

The report’s release comes one year after the Department of Education issued rules for career-training programs, particularly for-profit schools. Known as “gainful employment” rules, they required schools’ student loan repayment rate to be at least 35 percent and the average debt-to-income ratio to be 30 percent or less. But even these modest regulations, which were weaker than groups like AAUW had advocated for, were partially struck down by a federal judge shortly after they were issued.

The increasing scrutiny and the attempts at regulation are a result of the boom that for-profit schools have seen in enrollment, federal grant and loan dollars, and student loan defaults. From 1998 to 2008, enrollment at these schools tripled, and the 1,310 for-profit schools in the United States now make up 28.5 percent of all degree-granting institutions. 1 Thirteen percent of all American college students attend for-profit schools, but for-profit students account for nearly half of all student loan defaults. 2

Women make up the majority of students at these schools—63 percent of for-profit students are women, compared with 57 percent in community colleges and 55 percent in public, four-year schools. 3 And because the industry’s demographic is more likely to qualify for federal grants and loans, the majority of for-profit schools’ profits come from taxpayer dollars, to the tune of $30 billion a year.

According to the Senate report, as many as half the students in the schools that the investigation targeted may not graduate, and the efficacy of some two-year programs’ credentials is also a source of criticism. But the reality of walking away with debt is all but certain for students at for-profit schools. A staggering 95.8 percent of these students take out student loans, 4 compared with 13.2 percent at two-year public schools and 43.4 percent at fouryear public schools.5 To critics, these statistics boil down to recruitment practices that target low-income communities, veterans and active-duty service members, and even the homeless to rake in federal funds without much regard for student success, in school or beyond.

A former University of Phoenix counselor echoes the Senate report’s findings. She said that while her goal was to help students graduate, she was encouraged to get to know them and then use their personal information to convince them to stay enrolled longer, even if it wasn’t in their best interest. “It reminded me of an abusive boyfriend,” said the counselor, who asked that her name not be used in this article.

The counselor also said that, overall, her students were taking on far too much student loan debt. Many students were hitting the $57,500 federal student loan cap and then had as much as $700 a month in loan payments after graduation. The school “definitely pushed for responsible borrowing but also charged a lot of money. … Why would they cater to impoverished areas and charge so much?” In 2011–12, average tuition was $14,737 at for-profits, compared with $8,256 at four-year state schools and $2,959 at two-year public schools. 6

Because students weren’t familiar with the financial aid process, some didn’t even realize that they had signed up for loans. The counselor describes students graduating and being shocked that they had $50,000 in debt. “They said, ‘I never took out student loans!’ They didn’t even know. They thought they were taking out grants. They had no idea what they were signing off on.”

The counselor doesn’t have only bad things to say about the for-profit world. She still works in the industry, and she cites the good the schools do in creating jobs and garnering tax money for their states. But she adds that she has mixed feelings about the ways that schools cater to low-income students. “Everyone deserves an education,” she said. But since many of her students didn’t have any experience with academia and didn’t have access to computers and other college necessities at home, she worries that recruiting students without institutional support is dooming them to fail.

On the other hand, some for-profits are doing things right. And according to nursing student Victoria Robles, Grand Canyon University in Phoenix is one of them. A nontraditional student who has spent time at several community colleges and Arizona State University, Robles considered nursing exam scores, job placement, and graduates’ reputations before deciding on the Christian, for-profit Grand Canyon.

The school’s for-profit status never gave Robles pause. In fact, she sees the business aspect as an advantage. “Since it’s a business, I feel like I get a voice in what I get charged for,” Robles said. Having served on an advisory group for her program, she has had input in things like what scrubs students wear and which textbooks they buy.

And when it came to financial aid, Robles said Grand Canyon went above and beyond to make sure students were educated about what they were getting themselves into. “My adviser was adamant about not taking out loans if you didn’t need it,” said Robles, who was able to avoid taking out loans until the last half of her program, when she stopped working to focus on school full time. She said the school made students take a tutorial and pass a quiz before accessing their loan funds.

Another thing that Robles—and the for-profit schools’ trade association, the Association of Private Sector Colleges— points out is that these schools have led the way in reaching out to nontraditional students with flexible programs that often include online classes and night school. The popularity of these more accessible programs has changed the face of traditional institutions, many of which now offer satellite campuses and online degrees.

“We don’t paint all for-profit schools with the same brush,” said Lisa Maatz, AAUW’s director of public policy and government relations. “But we are interested in making sure that we hold everyone accountable, especially when taxpayer money is involved.”

Since so many state budgets are tightening and since student loans and Pell Grants have been dragged into discussions about the deficit and government spending, it’s more important than ever to spend available education dollars wisely—especially when the recession and high tuition costs have made many people question the value of a college degree. Money that is set aside to train and retrain American workers—and drive our economy— shouldn’t be wasted on programs that take advantage of people’s aspirations for their own American dream.

While not all for-profit schools are using students to bleed taxpayer programs that many Americans need to get an education, AAUW Government Relations Manager Anne Hedgepeth says that “the research shows that there are some bad actors, and we need to have ways to deal with them.”


1. Snyder, Thomas D., and Dillow, Sally A. (2012). Digest of education statistics 2011. National Center for Education Statistics, Institute of Education Sciences, U.S. Department of Education. pdf.
2. Sanchez, Claudio. (2012). Senate report: For-profit colleges exploit senate-report-for-profit-colleges-exploit-students.
3. Snyder, Thomas D., and Dillow, Sally A. (2012). Digest of education statistics 2011. National Center for Education Statistics, Institute of Education Sciences, U.S. Department of Education.
4. Students in both two- and four-year programs at for-profit schools.
5. Wei, Christina Chang et al. (2009). U.S. Department of Education, National Center for Education Statistics, 2007–08 National Postsecondary Student Aid Study. pubs2009/2009166.pdf.
6. Trends in college pricing (2012). The College


This article was originally published in the Winter 2013 issue of AAUW Outlook.

Hannah Moulton Belec By:   |   January 02, 2013