“A Pulse and a Pell” is the goal of Education Management Corporation (or EDMC) according to attorney Harry Litman. For those of you who don’t know, “a Pell” refers to the Pell Grant scholarship from the federal government given to many citizens to pay for part of college. For-Profit colleges have been experiencing a massive wave of litigation and regulation to “crack down” on practices many citizens and politicians deem unethical, and even illegal. From the closure of Corinthian Colleges to the lawsuit filed against DeVry University, and of course the embattled Trump University, one thing is for certain about for-profit college; their time is limited unless they get with the newly regulated program.
What is a “For-Profit” College
What makes these colleges”For-Profit” lies in how they are structured and managed. There are three different classifications of universities: Public, Private Non-Profit and Private For-Profit. Public universities receive their funding from tuition and endowments. Because most of these universities are state-run, part of their funding comes from state/local taxes, making the schools less expensive for in-state students. Public Universities are accountable to the public, and are overseen by an elected or appointed board of regents. Private Non-Profit universities receive funding mostly from student tuition and endowments. Because they are organized as a non-profit, there is a board of trustees who are in charge of developing the institutional plan, which is not dictated by the state. Private Non-Profit universities can receive support from the government through tax breaks or student loans, but taxes do not directly go to benefit the university. Finally, Private For-Profit universities are run by companies who have duties to investors and stockholders. They are privately run (with no state intervention) and exist in part to generate a return for their owners/shareholders. These colleges can receive up to 90% off their funding from federal student aid.
Why would you go to a For-Profit College?
For-Profit colleges cater to a specific group of people by marketing themselves as educational institutions which are just as good as Public or Non-Profit universities, but cater to the specific needs of their target markets. They have tracks which focus not in an area of study (english, phycology, marketing) but in more job-specific curriculums (business administration, medical billing or web design).
Jeffrey Leeds, whose private-equity firm owns a large portion of EDMC, stated, “Our mission is straightforward, and one we are proud to take on — to help students, typically nontraditional students, successfully complete college programs with workplace skills that enable them to get good jobs in a tough economy.”
Many of these “non-traditional” students who attend For-Profit colleges are first generation college or academically marginal students. One of these groups is military students who want a degree to enhance their future careers to work on while in service. Many For-Profit colleges target and cater to this group of students because it is guaranteed income due to the GI Bill. Another target group is working young people or parents who need a flexible school schedule in order to maintain their full-time work schedules and personal responsibilities. The special needs of these groups are hard for traditional colleges to accomodate due to their traditional structure of daytime classes. For-Profit colleges allow students to go to class after work or take classes online, allowing students to fit classes in when they have time.
The Debt-y Downer
The cost of education is on a steep upwards trajectory. This cost pressure is causing overcrowded conditions at more affordable community colleges as well as increased competition for limited federal and private scholarships. Here is a graph detailing the increase in college tuition over the last twenty years:
Here is a graph of the total amount of outstanding student debt from 2003 to 2013 – it has quadrupled in just ten years.
Here is a graph detailing the amount of student debt by household net worth, showcasing the majority of student debt belongs to lower-income people.
This graphic details how For-Profit colleges’ debt compare to Public colleges.
When college is so expensive and hard to get into, many students are forced to look for alternatives, which is where For-Profit colleges come in. By not “wasting time” on things like the variety of non-career focused classes required for a traditional liberal arts degree, these students save valuable time. For-Profit colleges accept these students’ financial aid and are much easier to gain admittance to (usually just and application and fee) than traditional colleges.
Where’s the Problem?
Back in 2011, the Department of Justice sued EDMC claiming they did not deliver the education they advertised and promised to students. They stated that EDMC had a “ ‘boiler-room’-style sales culture”, meaning its recruiters used “high-pressure sales techniques, and inflated claims about career placement to increase student enrollment, regardless of applicants’ qualifications”. EDMC allegedly paid recruiters bonuses based solely on how many students they enrolled — which is against the law.
Some of these universities only have certain degrees or departments “accredited” and, at times, do not clearly communicate which ones are and are not with students. Accreditation is the process of validation in which colleges, universities and other institutions of higher learning are evaluated. The standards for accreditation are set by a peer review board whose members include faculty from various accredited colleges and universities. Accreditation exists to ensure the education provided meets acceptable levels of quality with a valid, credible reputation for other institutions, students and the public (possible future employers). If a school is not accredited, students can not transfer credits if they want to attend a different university (public or private).
Many of the students in For-Profit colleges are lower income, working-class students who must supplement their tuition with federal financial aid. So much so that some of these For-Profit colleges received up to 90% of their funding from the federal government (i.e., Pell Grants). In 2011, For-Profit colleges only enrolled 12% of the nation’s students, they received 25% of the federal funding. People who support For-Profit colleges state that of course default rates will be higher for these “higher-risk” populations, so the increased amount of debt national student debt as a result of these students defaulting on loans is not necessarily on the shoulders of the institution.
Another issue is there doesn’t need to be a test to be admitted to a For-Profit college. Some students lack the skills needed to succeed in college so this inherently sets them up at a deficit. Lack of testing for these skills is a main factor in programs not being accredited, and also lack of necessary skills is a leading factor to students dropping out and ultimately defaulting on tax payer financed loans. Although For-Profit colleges are a higher education system that allows people who may not otherwise be able to attend college the opportunity to attend, legislators are realizing that college may not be meant for everyone and these for-profit education institutions can take advantage of of vulnerable students.
Most of the bills throughout the US focus on two principle ideas: protect students from being misled into thinking their degree is worth more than it is and showcase that these degrees can result in (gainful) employment. There are, however, bills being introduced to help further For-Profit universities operations and give them breaks.
The Students Before Profit Act (US S 2098) introduced in 2015 called for enhanced civil penalties against the executive officers of colleges that misrepresent information, such as job placement rates, to students. It essentially stops For-Profit colleges before they can get off the ground. The Consumer Protection and Choice Act (HR 4018), which followed, is designed to severely limit the Consumer Financial Protection Bureau’s (CFPB) ability to rein in predatory lending like car-title, payday and high-cost installment loans (common for many students). Maryland introduced HB 741 which would address Consumer Protection provisions and the guarantee fund issues as well as require schools to state upfront whether students would qualify to receive a license upon completion (along with strengthening accreditation of the licensing entity).
Many acts work to ensure “gainful employment”, most often associated with college graduates who become employed after they graduate, as a way to measure or rank the college or university where they received their education and training. US HR 970 works on supporting Academic Freedom through Regulatory Relief Act by repealing certain Department of Education regulations to determine whether a school is eligible to participate in programs under the Higher Education Act of 1965. For example, defining “gainful employment” along with imposing standards and disclosing requirements on programs that prepare students for “gainful employment” in a recognized occupation making regulated and understood. Nearly all states concern themselves with issues around gainful employment, including issues around education:
The Protecting Students from Worthless Degrees Act (US S 1165) would require programs offered by institutions to meet any state or federal licensing requirements and programmatic accreditation that is necessary for entering an occupation in order for the institution to receive taxpayer-funded tuition such as Pell Grants, Stafford Loans, G.I. Bill benefits, or Department of Defense Tuition Assistance funds. This works to ensure students and taxpayers are not left footing the bill for predatory and valueless programs.
Washington introduced HB 1949 which protects students of For-Profit colleges from deceptive claims and outrageous student loan debts. It works to put an end to false claims by For-Profit colleges and vocational schools about post- graduation employment rates and pay expectations, creates a new Ombudsman for students to take complaints to and violations would allow the Attorney General to take action under the Consumer Protection Act.
Arizona recently introduced SB 1402 which would lower the state property tax on the state’s accredited for-profit colleges from 18.5 percent to 5 percent, thus enabling their expansion.
Issues with For-Profit colleges are a key focus in our current political campaigns (Trump, Clinton, Rubio). All of these candidates have have some type of reported interaction with these colleges. Obama took initiative with the Education Department to cancel over $27.8 million of federal student loans from students at Heald College. Even though Obama took this action, he is not safe from association and criticism with For-Profit schemes. It is now an issue that is associated with deep corruption and deceptiveness, at a very high level.
The pressure and demand in society to have a college degree, in my opinion, is way to high compared to the actual necessity of a college degree for many different jobs throughout the United States. Do you really need to have a degree from a liberal arts school and heaping mounds of debt to be trained in carpentry, retail, day care, hospitality, or the plethora of other jobs that make up our society? By that same token, we need to have better access to education for people who cannot attend a “traditional” higher education institution. For white collar jobs, applicants aren’t given a second look if they don’t have a college degree. How can we cater to these special groups, who need to get college degrees but are different than the college students of the past? I think the steps of proving resulting gainful employment and having more oversight are important first moves to help for-profit colleges actually be beneficial and fair to society.