By Michael A. MacDowell
The DeVry Education Group is the target of an investigation by the New York Attorney General’s Office for alleged false advertising practices. The U.S. Department of Justice suspended Corinthian College’s access to federal funds because its marketing techniques were called into question after touting the success of its graduate-job placement program. Apollo Education Group’s University of Phoenix is having its federal financial aid programs reviewed by the U.S. Department of Education, while California has banned seven of its San Diego campuses programs from enrolling additional veterans.
All of these actions have been taken within the last two months. By themselves, these institutions have little in common other than they are each for-profit colleges or universities and an inordinate portion of their income is derived from student loans.
Some of this news should not come as a surprise for those of you who have been following the vagaries of the aggressive for-profit, college-degree programs. The Obama administration has noted on several occasions that the for-profit sector of higher education produces a very high proportional share of graduates and undergraduates with excessive student loan debt.
There are about 41 million borrowers holding more than $1.2 trillion in outstanding student loans. About 4.7 million of those who began making payments on their student loans between September 2010 and September 2011 have already defaulted on their loans. The issue of student loan defaults is serious. Some economists have even equated the problem to the housing bubble that led to the Great Recession.
For-profit colleges and universities enroll less than 10 percent of all college students in our nation, but secure more than 25 percent of student loans and account for a much larger share of defaults on student loans, according to The New York Times. The article also stated that for-profits yield more than twice the proportionate share of federal student aid, and are eight times more likely to graduate with significant debt.
The U.S. Department of Education is focusing its attention on for-profits in several ways. The federal government is stepping up wage garnishment of student-loan borrowers. Most student loans are exempt from bankruptcy judgments. The Obama administration is singling out the for-profit sector as a “driver in rising student debt and defaults, accusing many of the schools of providing subpar service after aggressive recruiting,’’ according to a July article in the Wall Street Journal.
It is somewhat understandable that in a time of relatively high unemployment recent college graduates would have trouble finding employment or good paying jobs, and therefore would have difficulty making payments on their student loans. Lobbyists for for-profit colleges emphasize that these institutions enroll a high percentage of low-income students. These students bring to their college experience fewer attributes that lead to college and future employment success. But the fact remains that researchers, such as Raphael Pardo of the Seattle University School of Law and others, have documented the inordinate high costs and minimal returns among for-profit students and graduates.
Popular national media sources have documented recruiting violations among for-profit admissions personnel that make aggressive used car salesmen look benign. In one case, admissions counselors have even recruited returning veterans eligible for GI Bill college benefits, but are suffering from traumatic brain injuries. Some of these veterans cannot even remember registering for classes, according to the CBS news magazine show, “60 Minutes.”
Don’t get me wrong, profit is not a dirty word. There are clearly solid for-profit colleges, but less-than-forthright-business practices on the part of some of them should not be tolerated – especially in higher education where scarce tax dollars are being used to subsidize these institutions.
College students and the country will be better off the sooner the “bad eggs’’ in higher education are separated from the others.