How for-profit colleges cheat students, taxpayers
The Kansas City Star
A U.S. Senate committee chaired by Iowa Democrat Tom Harkin has released the damning results of a two-year investigation into the for-profit college industry.
A lot of the material highlighted in the executive summary is familiar to anyone who has taken a cursory look at this business. The bottom line is that federal taxpayers subsidize these schools heavily, but they are allowed to get away with abysmal results. As the summary says:
Congress has failed to counterbalance investor demands for increased financial returns with requirements that hold companies accountable to taxpayers for providing quality education, support, and outcomes. Federal law and regulations currently do not align the incentives of for-profit colleges so that the colleges succeed financially when students succeed.
Far too many students do not succeed. The report found that more than half a million students who enrolled in for-profit schools in 2008-09 left by the middle of 2010 without a degree or certificate. More than 60 percent of students seeking associate degrees left before two years. In 2009-10, for-profit colleges received $32 billion in federal money. They accounted for one-fourth of all U.S. Department of Education student aid program funds. The schools almost never set tuition at a rate lower than available student aid, the report says.
I’m planning to dig deeper into the findings over the next couple of days, but here’s a part I find fascinating, because I’ve never seen the numbers broken down this way before:
The 30 companies examined by researchers from the Senate Committee on Health, Education, Labor, and Pensions spent 22.7 percent ($4.2 billion) of their total revenue in fiscal year 2009 on marketing, advertising, recruiting and admissions staffing.
Those same schools spent 19.4 percent ($3.6 billion) of revenues on pre-tax profits.
As for instruction of the students who will most likely spend years paying on debt for their education at a for-profit college? That accounted for 17.2 percent of all revenue, or $3.2 billion. Oh, and the average salary of the CEO of the publicly traded, for-profit companies examined was $7.3 million in 2009.
Despite all this, the Senate committee concluded that there is a place for for-profit colleges, to serve non-traditional students and make up for cutbacks in state funding.
I think one could make a stronger case for restoring cutback in state funding and beefing up four-year public universities and community colleges. At the very least, this report should renew the call for reforms at the for-profits. But these companies and their lobbyists have beaten back reform efforts before, and there’s little reason to think Congress will stand up to them now.