PD Editorial: Caveat emptor: For-profit college risks

  • This artwork by Paul Tong relates to the large student-loan debt college graduates face in a shaky job market.

We've devoted a good deal of space on these pages venting about the escalating costs of attending public universities and community colleges. California students are not only finding the financial hurdles getting higher, but they're also finding it more challenging to get the classes they need to graduate.

But beware the for-profit private school alternatives. While many for-profit institutions, particularly those that offer online degrees, market themselves as offering complication-free enrollments and flexible scheduling, relatively few degrees are ever issued. And it comes at a high price.

A scathing report issued by a U.S. Senate committee this week concludes that for-profit colleges are failing their students and sticking taxpayers with the tab for most of those uncompleted educations.

The report, prepared by the Democratic staff of the Senate Health, Education, Labor and Pensions Committee, found that more than 80 percent of the revenue at for-profit colleges came from federal financial aid. During the 2009-10 year, the most recent statistics were available, $32 billion in federal funds were spent at for-profit colleges, but a significant majority of students never received a degree. More than half dropped out after about four months.

The report found that students at for-profit colleges make up 13 percent of total college enrollment in the United States. But they account for roughly 47 percent of the defaults on student loans.

"In this report, you will find overwhelming documentation of exorbitant tuition, aggressive recruiting practices, abysmal student outcomes, taxpayer dollars spent on marketing and pocketed as profit, and regulatory evasion and manipulation," the committee chairman Sen. Tom Harkin, D-Iowa, said in releasing the report.

Republicans on the committee and trade groups representing private colleges such as the University of Phoenix and DeVry University quickly criticized the report, contending its numbers were skewed to paint for-profits in a bad light.

But the numbers are difficult to refute. And the conclusions are similar to the findings of other studies on a segment of secondary education that has ballooned in recent years. According to the report, enrollment in for-profit colleges have more than tripled, to about 2.4 million students, from 1998 to 2008.

But it's become increasingly clear that many of these institutions are more interested in getting students enrolled — and getting them to pay with federal financial aid — than making sure they get a quality education.

The report looked closely at 30 for-profit colleges, half of which are part of publicly traded companies. Of those, 22.4 percent of their revenue was spent on marketing, while just 17.7 percent was spent on instruction. Among the publicly traded companies, 19.4 percent of revenue went to profit.

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