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Congressional Report Questions For-Profit College Performance

Congressional Report Questions For-Profit College Performance

Senate committee suggests for-profit schools are too focused on profit

August 2nd, 2012 by Mark Huffman of ConsumerAffairs in News

Through federal education aid, taxpayers invest billions of dollars in college students' education. A Congressional report says a lot of that money is going to for-profit institutions without much for students -- or taxpayers -- to show for it.

A two-year probe by the Senate Committee on Health, Education, Labor, and Pensions shows $32 billion in the most recent year went to companies that operate for-profit colleges. Yet, more than half of the students who enrolled in those colleges in 2008-9 left without a degree or diploma within a median of four months.

"My experience at this school has been a nightmare," Shannon, of Chicago, wrote in a ConsumerAffairs post about University of Phoenix.

"I feel lied to and used. I specifically chose this school as I was told most of my previous human service credits would be transferred, which they have not. I could accept retaking some classes if I felt I was learning anything useful. Instead, I have had professors who barely understand the material. My biggest complaint however is their heavy reliance on group work, a practice which greatly benefits them by increasing their graduation rate."

Profit pressures

In its report, the committee suggests the corporate structure of the for-profit institutions creates pressure to produce ever-larger returns for shareholders. While small independent for-profit colleges have a long history, by 2009 the committee found at least 76 percent of students attending for-profit colleges were enrolled in a college owned by either a company traded on a major stock exchange or a college owned by a private equity firm. The financial performance of these companies is closely tracked by analysts and by investors.

"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," the committee found. "Federal law and regulations currently do not align the incentives of for-profit colleges so that the colleges succeed financially when students succeed."

Carlos, of North Hollywood, CA, chose Westwood College after being contacted by a recruiter. He was he was taken aback initially when he saw that the cost of a degree would be more than $72,000. He said he was told not to worry, that student loans and grants would cover most of that.

28 percent graduation rate

"The faculty helped me fill out the FAFSA and I couldn't help but notice that the graduation rate was 28 percent in 2009, updated for 2012 to 21 percent, according to," Carlos posted. "I was concerned and brought it to the attention of the staff. They told me not to mind that and it just hasn't been updated."

Carlos said he attended for one year before getting discouraged and going to another school. The committee said many for-profit colleges fail to make the necessary investments in student support services that have been shown to help students succeed in school and afterwards, a deficiency that it suggests contributes to high withdrawal rates.

In 2010, the for-profit colleges examined employed 35,202 recruiters compared with 3,512 career services staff and 12,452 support services staff -- more than two and a half recruiters for each support services employee.

High drop-out rate

"This may help to explain why more than half a million students who enrolled in 2008-9 left without a degree or Certificate by mid-2010," the committee said in its report. Among two-year Associate degree-seekers, 63 percent of students departed without a degree."

The lawmakers also voiced concern about the amount of public money flowing to for-profit colleges. The report notes that in 2009-10, 25 percent of the total Department of Education student aid program funds went to for-profit schools.

Pell grants flowing to for-profit colleges increased at twice the rate of the program as a whole, increasing from $1.1 billion in the 2000-1 school year to $7.5 billion in the 2009-10 school year.

For-profit colleges also receive the largest share of military educational benefit programs: 37 percent of post-9/11 GI bill benefits and 50 percent of Department of Defense Tuition Assistance benefits flowed to for-profit colleges in the most recent period. Because of the cost of the programs however, they trained far fewer students than public colleges.