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For-Profit Colleges: Preying On Hope and Vulnerable Populations

Over at Alternet, Sarah Jaffe recently covered the looming student loan crisis; with youth unemployment soaring even as the costs of college rise while available grants drop, many of the people who graduated this May and June have no jobs, and no prospects of work. Within months, their student lenders are going to come knocking to demand money. Student loan debt is mounting higher than ever before and it’s forcing many young adults back home, to live with their parents while they try to figure out what to do with their lives, and their loans. Loan debt has gotten so bad that Congress is considering debt relief to address the issue.

Some of us in the United States are raised with the expectation that we will go to college, supported as we pursue college applications and encouraged to go even though the promissory notes we sign may look scary. When I was preparing to go to college and blanched at the first one, my father assured me that the money would seem like ‘nothing’ after I graduated with a college degree, found good work in my field, and paid my loan back at generous terms over an extended period of time. Students in positions to be encouraged to go to college are told that it will build them a better future; disadvantaged students are often not encouraged to go to college, let alone presented with college as an option, but when they are, they get the same line: You have to go to college, because it will create opportunities, open doors, and offer a chance out of alternatives like the poverty draft.

College is ‘winning the future.’ For-profit colleges are well aware of this, and this year, they’ve come under increasing scrutiny for their dubious enrollment practices, abuse of government funds, and predatory attitudes toward their students. Frontline’s ‘College, Inc.‘ was an excellent and eye-opening documentary on the subject, if you’re inclined to spend an hour learning about the for-profit college industry in the United States. Highlighting the problem with for-profit colleges is the debt differential:

Bachelor’s degree recipients at for-profits have median debt of $31,190 compared with $17,040 at private, nonprofit institutions and $7,960 at public colleges, according to Education Trust, a Washington-based nonprofit research and student-advocacy organization. (Business Week)

That is a significant disparity. For-profit colleges have been singled out for attention because of the alarmingly large debt their students tend to accumulate, combined with poor graduation rates. Students may get tens of thousands of dollars in debt and still not receive any certification or degree that they could use in an attempt to repay their debt. They end up defaulting, and are penalised, because you cannot discharge student loans through bankruptcy, and you cannot get more loans once you default, which means that students who want to return to school may not be able to afford it. Investigative reports have revealed horrific practices at for-profit colleges, which essentially exploit people for the federal aid monies they can bring in.

Congress promised to put a check on things, and failed. An initially aggressive set of new regulations to rein in the for-profit college industry were watered down by the time the Department of Education released them in early June. Under the new regulations, to be eligible to receive federal funds for student aid, for-profit colleges must have a 35% repayment rate, and graduates cannot spend more than 12% of total earnings (or 30% of discretionary income) on their student loan payments.

Meanwhile, aggressive and abusive practices will continue. Starting with recruitment practices, where personnel are trained to use a hard sell, and many are compensated by signup, creating an incentive to force as many people as possible to enroll so they get more pay, and are eligible for bonuses. For-profits also engage in highly predatory marketing practices; they are extremely active in minority and low-income communities, selling a dream of hope and change in the form of technical training and a chance at a better career. Traveling in low-income communities in various regions of the United States, I’ve seen scores of billboards and other advertisements promising a career at a set annual salary to graduates, something that turns out to be a pipe dream, as many people learn after they graduate deep in debt with no realistic way of repaying it.

For-profit colleges create a debt trap for their students; even for those who graduate, the debt is substantial, and they may not make enough to remain current on their student loan payments. This closes numerous avenues to graduates. You cannot get a mortgage or a car loan if you’ve defaulted on student loans. You may have difficulty getting a rental. You do not qualify for some social services. You certainly can’t get more student loans. You exist in a cash-only bubble inside a credit world, and you may work endlessly at the treadmill without getting ahead.

Good luck on walking away from your student loans; not only are they not dischargeable through bankruptcy, but the Department of Education can garnish your wages if you go into default. And this is just for the federal loans. Students at for-profit colleges may be encouraged to take on private loans, which come with much higher rates of interest and much less forgiving repayment terms. My federal lender is fine with waiving payments for a month or two on the grounds of financial hardship without penalties. Private lenders are not nearly so relaxed. Thus, students may be struggling to repay both private and public loans, which can eat up a substantial amount of monthly income, making it impossible to set funds aside to save for, well, anything. Not just to save up for a down payment on a home or car, but to save enough money to cover unexpected medical expenses, the deposit on a new home if you need to move. For-profit graduates forced to work in service, or entry level positions, or seasonal positions, don’t exactly have access to health care and retirement benefits.

Lashing out in response to a series of investigations, for-profit colleges trot out their success stories, or claim that it’s unfair to lump them all together. They argue that it’s a ‘a few bad apples’ that are causing the problem, and that most for-profit colleges really are committed to education and opportunities and have excellent graduation rates and low debt. I’m reminded of the financial industry and its insistence that it was those banks over there that were to blame, not the industry as a whole. For-profit education is rotten from the bottom up, it needs to be regulated, and the resistance to regulation makes the industry look churlish.

For-profit graduates are a significant component of the youth underclass in the United States. These graduates are disproportionately people of colour, people from a low-income background, people who are already marginalised minorities. They’re doing what they are told to do and attempting to bootstrap themselves, and they’re being punished for it. They’re being told that this is their fault, and the sky-high debts they graduate with are totally reasonable:

“There are first-year residents from Harvard Medical School whose student loan payments eat up 20 or 25 percent of their income. Is Harvard Medical School a bad medical school? I sure don’t think so,” Rob Andrews, a Democratic Congressman from New Jersey, told Fox. (Wall Street Journal)

Because graduating with an MD is totally equivalent to dropping out after two years of an electronics programme with $45,000 in debt.


  1. N wrote:

    s. e. smith, your posts are always so informative and insightful. I’m so glad you’re posting on tiger beatdown! I was an avid reader of FWD, especially the dear imprudence posts.

    I don’t have anything to add to the discussion, I’m afraid, just wanted to say, thanks for another great post!

    Thursday, June 23, 2011 at 1:18 pm | Permalink
  2. scrumby wrote:

    Because an advanced degree in a medical field from an accredited institution should cost just as much as one from an unaccredited program. Hospitals certainly think they’re the same. Oh wait! Not even close. You’re better off going to med or nursing school in a third world country because at least you’d have some clinic hours under your belt while you worked toward a medical license.

    Thursday, June 23, 2011 at 8:01 pm | Permalink
  3. Raemon wrote:

    Disclaimer: I’m reciting from memory, some of this may be inaccurate, or may have changed in the past two years.

    I went to Full Sail University, a for-profit college for entertainment media. It was definitely the right choice for me: I did well, got a job that pays well and I expect to pay my loans back in two years.

    But I was extremely wary of their recruiting practices – they definitely have a policy of ‘get as many students in as possible, then let them flunk out, leaving them in debt’. They are extremely good at recruiting. (They weren’t so much targeting poor people as ‘people who play video games all day’, who generally don’t have a great work ethic. I went to the school specifically because its program forced you to develop a work ethic or fail, and I wanted the incentive).

    What’s particularly clever is the way they pitch the school. They pay for your trip down to an open house presentation. At the presentation, they tell you “this is going to be so hard. This is an accelerated program. You’re going to have countless sleepless nights and you’ll be constantly learning new things and it’s going to be hell. But if you have the passion, then you’ll have the drive to do this. If you have the passion, you can make your dreams work.

    This is all true. But what happens is that the message is surrounded with flashing lights and awesome media presentations and a bunch of kids who aren’t ready say “hey, I have passion! I can do this!”

    At every step of the way, you have people saying “our program is very specialized and its not for everyone,” so you feel like you can’t blame them. But at every step you also want to feel like you can be the sort of person who can make it work.

    The fundamental issue is that they have basically no admissions requirements. Since it’s profit-driven, their incentive is to let in anyone. If they just had a screening process to make sure that only students who were actually ready to do the work go in, I wouldn’t have a problem with the program. Instead, I had a starting class of 70 people. 18 graduated with me. Some of the others stuck with the program, retaking several courses and squeaking by with a C average.

    The thing is, you cannot get a job with a C average. They’re up front about this as well: constantly telling you that you need to be pushing yourself to succeed. But a class of gaming nerds who learned CGI because it sounded cool just don’t really comprehend this.

    A lot of Full Sail’s income is not from receiving tuition, but simply from processing the student loans. They actually have a policy of “you can decide this program isn’t for you and leave” up for 5 months-ish into the program, and get most of your money back. This is still profitable to them because while you ARE in the program, they are using your money to invest and make interest, which is profitable even if you leave and get your money back.

    (Most people end up sticking around past the 5 month mark, due to other policies such as “you can retake up to three classes for free” which encourages you to keep trying even if you really shouldn’t.)

    The thing with the recruiting practices is… honestly, none of the other schools I looked at even tried. I called up Parsons and was like “hey, I might wanna go here” and they were like “….uh, oh, okay. I guess.”

    I e-mailed Full Sail and immediately was contacted by excited sounding people who seemed passionate about what they do and about me. It’s effective even when I know they’re paid to sound that way. And I don’t think I can blame them for that either. The only part I can point to and really say “bad” is the non-existent admission requirements, and I don’t know how I’d even attempt to regulate that.

    Friday, June 24, 2011 at 1:25 am | Permalink
  4. aravind wrote:

    I have thoughts sometimes that the fundamental structure of our education system is part of the problem. Even in American High Schools and to some extent Middle Schools // Junior Highs, there’s an attitude that a student that fails is individually flawed, and should be abandoned. Lower-performing students are pushed into less-funded and less-attentive programs, where, unsurprisingly, less attention and fewer resources often result in even poorer marks.

    In short, education isn’t really about a process of giving knowledge to students or endowing in them a capacity to learn or even a will to learn. It’s not a transformation anymore (if it ever was). It’s a kyriarchic sorting. If your parents have the funds to get you a tutor early, to buy you a kaplan class for the SAT and GRE, and to make sure they can pull the strings and get you into the accelerated programs, you will probably get into at least a middle range college (one of the nicer state ones) and probably have a nice job waiting for you after you get your degree.

    Sure, there’s individual variables too, but one thing I’ve always noticed in the accelerated and the normal classes I’d taken is that people who weren’t succeeding, sometimes overtly because of racist responses from teachers, were left by the wayside. In practice at least, the education system has a lot less to do with bettering people and a whole lot more to do with judging people. It’s fundamentally punitive, instead of progressive.

    Friday, June 24, 2011 at 5:25 am | Permalink
  5. The nature of profit-seeking companies is that they sometimes convince people to buy things they dont need..But there is a secular trend afoot too America is a country that increasingly understands the value and importance of post-secondary education. There are a lot of people out there primed for those marketing campaigns when they hit..Yet traditional colleges both public and not-for-profit private arent keeping pace.

    Saturday, June 25, 2011 at 5:38 am | Permalink
  6. Katie wrote:

    I echo N’s comment: thanks for this post. To your powerful distillation of the problem, I connect this Atlantic mini-article:

    All the anxiety about college education being a poor value and a trap will probably burst the for-profit bubble and not damage public and liberal-arts institutions in the long run.

    I do think that for-profits serve underserved populations, to an extent. It’s absolutely predatory, as you say. But after the bubble bursts, the legitimate universities and colleges that remain will have learned much from for-profits’ ability to reach prospective students. I sincerely hope that the bursting for-profit bubble will give prominence to community colleges, which can serve those underserved populations more responsibly than the for-profits ever could.

    Of course, that doesn’t solve a major issue that you raise: the fates of those folks who’ve been snared by the for-profits. It’s a vexing problem.

    Not only does this site have the greatest name ever; you also dish out the content. Thanks again.

    Saturday, June 25, 2011 at 7:53 pm | Permalink
  7. Victoria wrote:

    There’s another, really sinister facet here: The predatory “adult programs” at established nonprofit universities. One in my town recruits with these same methods, charging outrageous tuition and trading on the institution’s name to build credibility. But the program, as these often do, functions and performs like a for-profit, because it more or less is: It’s generating loads of income to support the traditional programs of the university, a university that has just built a massive new athletic complex while generating no funds through athletics, among other developments.

    A few of my friends have taught in this particular program. The students match the population you find at for-profit programs. The charges are all-inclusive, including ridiculously inflated textbook prices (students can’t be exempted from that portion of the fees and just buy their own, and they’re charged a flat $100 replacement fee if they lose ONE textbook, even if the cover price is $14.95). Occasionally, students’ employers pay for the program–the university recruits very heavily on site at corporations with this policy. But usually, students are duped into believing an associate’s degree in medical assisting, or whatever, is going to pay off their tens of thousands of dollars in loans and improve their lives, too.

    Meanwhile, of course, these programs are exempted from any kind of scrutiny by the umbrella organization whose name they use when they should, in fact, cast doubt on the parent institution’s non-profit status.

    Sunday, June 26, 2011 at 5:56 pm | Permalink
  8. Grace wrote:

    I was a very bright student in high school, and my teachers encouraged me to apply for a private uni. My parents couldn’t afford to send me to college, and were very excited when they found out that I received $100,000+ in scholarships from the private U. I also had to take out $65,000 in loans, but hey! It was a private school with an excellent program, and the $100,000 in scholarships had us blinded. I was naive and stupid, they were hopeful and had pressured me from the first day of middle school to get perfect grades so I could go to college and be a successful adult.

    I’m graduating in two months. I’m currently working two retail jobs while finishing my last two classes, and I barely make enough to pay for tuition and transportation. I can’t find other work. My graduated friends can’t find other work. My high school dream was to be a teacher and a writer, which, yeah? I was fucking stupid. My loan payments will amount to about $1000 a month.

    My friends are divided into two sections: people with parents to pay for their unpaid internships that will get them jobs, and people without money or job prospects who go on t grad school–usually law school–and accrue $100,000 more in debt. I have no idea what I’m going to do. I have no money. My parents have no money.

    I recognize that this whole situation is my fault; I shouldn’t have signed those loans, I should’ve taken out $15,000 less in debt and gone to public school–but I really wish I had been better informed and educated about my options. I wish there were better options out there.

    My siblings are opting to try and work their ways up in retail rather than go to school.

    Monday, June 27, 2011 at 5:45 pm | Permalink
  9. Anon by circumstance wrote:

    I’m a faculty member at University of Phoenix, the BIG for-profit. I was really skeptical when I began working there, but I have to say that I was pleasantly surprised at the school overall. I don’t know much about recruiting practices, but from my end of things I do see attempts to promote learning, retain students, and be an above-board program (or at least, they pay really good lip service to those things). In fact, the university just rolled out a new program designed to retain students. After its inception, I’ve witnessed a notable uptick in student ability, as well as student retention in each class.

    I’m not trying to be an apologist. I’ve always approached Phoenix with the same caution I’d aim at any large corporation. At all costs, they will attempt to maximize their profit. And, to be honest, I see students coming in who are vastly underprepared for any kind of post-high school education – we’re talking writing and reading at a 5th grade level. This is where I see predatory behavior on the school’s part. On the other hand, I have fantastic students, more advanced than those I taught at a Big 10 University.

    At least at the faculty level, we really do care and we really do want to see students succeed. I hope that these new laws can enforce a decrease in predatory behavior. Phoenix is making a lot of money, it’s in their best interest to graduate students with worthwhile degrees.

    Saturday, July 2, 2011 at 7:35 pm | Permalink
  10. Anon by circumstance wrote:

    And just as a post script, I have a master’s degree from a Big 10 University. I also have $50,000 in student loan debt. Right now my husband and I survive on his graduate school pay and my two part time jobs. We STILL need help from my parents to make ends meet.

    My entire generation is sinking in debt that we were urged to take on as necessary for our futures. It’s a shitty, shitty system.

    Saturday, July 2, 2011 at 7:38 pm | Permalink
  11. Just Saying wrote:

    Forest, meet trees.

    Until Reagan destroyed America a college education was a public good. Universities were funded by the national government and by state governments. Under Reagan, education became a “good” that the “consumer” who was a student “purchased” to provide a “signal” to the marketplace. All quotes are from the change in the economic rationale so that the tradition of investing in higher education that went from the establishment of Georgia Tech on the wasted battlefields until 1980 became a marketplace. Also, because students became consumers unpopular classes were cut out. You can obtain a university masters and speak one language, never touch algebra, and not understand the percentages or budget numbers discussed in politics and policy.

    Lay blame at the Reagan Revolution. Boomers won. They climbed the ladder and pulled it up. Everyone else lost.

    Wednesday, July 6, 2011 at 12:50 am | Permalink