From the Daily: Profiting off students

BY THE MICHIGAN DAILY

Published October 29, 2014

In the past decade student debt has nearly tripled, rising to an alarming $1.2 trillion. A disproportionately high percentage of this debt is owed by students at for-profit universities, which specifically market their education as a product to targeted students while also often charging more in tuition fees than comparable community college programs. It is imperative that Gov. Rick Snyder and the Michigan State Legislature work together to swiftly regulate the for-profit college education industry as part of a strategic policy for reducing student debt overall.

According to a 2012 report by the United States Senate Health, Education, Labor and Pensions Committee, 96 percent of for-profit university students hold education-related debt, compared with 48 and 57 percent of students at public and private nonprofit colleges, respectively. Further, 22 percent of students at for-profit schools will default on a loan payment within the first three years, as compared with about 9 percent of students at a nonprofit college.

For-profit institutions, as the name implies, operate as businesses — some even with shareholders and a corporate organizational structure — that sell education as a product. With the incentive to earn a profit, they must find ways to attract students to enroll. For-profit schools spend about 22.7 percent of their total revenue on sales and marketing. The University of Phoenix alone spends about $400,000 a day on advertising. Other institutions like DeVry and ITT Tech are among the largest advertisers on Google.

Some of these unsavory business practices by for-profit institutions of higher education have also precipitated government legal action. Last year, California’s attorney general took a large for-profit chain to court for fabricating statistics, creating false advertising and engaging in other deceptive practices to lure minority or low-income residents to their schools. In February, the Consumer Financial Protection Bureau sued ITT Educational Services, Inc., for predatory lending to students.

Acceptance rates are comparatively high and tuition is about twice that of non-profit institutions. Meanwhile, only about 31.5 percent of students in for-profit schools graduated compare to 57 percent for public nonprofits and 66 percent for private nonprofits, according to a 2014 article. The University of Phoenix, which has a location in Ann Arbor, graduates only 16 percent of its students through campus learning, and only 4 percent of its students who take courses online, according to a 2013 article. For those who do manage to graduate, students are less likely to receive callbacks from employers. This evidences that students are paying a high cost for a low return on their investment.

Advertisements for for-profit schools boast their accelerated learning, online options and job placement records. They claim to offer to students what they may think is not available to them through traditional schooling, like targeted curricula, specific or technical job training, accelerated degrees or optimal return on investment. Likewise, prospective students may choose for-profit schools because they may initially appear less expensive than a traditional college. However, these students may be unaware that nonprofit schools often offer scholarships and grants to cover some, sometimes even all, of the costs for qualifying students. In planning for their educational futures, students should consider a wide variety of schools.

But this problem extends far beyond individual decision-making. Systematic changes and regulation of for-profit schools need to be implemented to curb predatory practices. It is important that the state takes seriously the negative long-term effects, most notably high student debt, of enrolling in a for-profit university for students who might best benefit from other forms of education or work experience.