Will the Department of Education Crack Down on For-Profit Colleges?
On every TV channel, commercials for schools like DeVry and the University of Phoenix blare promises of better-paying jobs. Every year over a million Americans respond to these sales pitches. All too often these students receive tens of thousands of dollars in debt and very little else. TheDepartment of Education was expected last week to release new “gainful employment” regulations that would limit the ability of such for-profit colleges to charge exorbitant prices for illusory job gains. Now it seems that the Obama administration is wavering in the face of aggressive industry lobbying. For-profit education is big business in America, and big business means political clout.How For-Profit Colleges Work (Or Don't Work)
As the resources of public four-year and community colleges have been pushed to their limits by state budget cuts and rising demand, for-profit career colleges have taken up much of the slack. Yet the performance of some of these institutions is shady given their high costs. According to the College Entrance Examination Board, graduates of for-profit colleges leave school with an average of $29,500 in debt, almost three times as much as graduates of four-year public colleges. According to a recent New York Times article, for-profit college graduates account for 44% of student loan defaults, despite constituting only seven percent of the overall student population.
For-profit colleges earn money not on tuition paid directly by students, but through federal grants and federal student loan programs. Last year 86% of the revenue of the Apollo Group, the parent company of the University of Phoenix, came from federal sources. In February of this year, the Department of Education proposed surprisingly stringent regulations cracking down on schools that leave students with a lot of debt and only a little employability. Under the “gainful employment” regulations, colleges would be ineligible for federal student aid if the debt load of graduates could not be repaid with eight percent
