The Problem with For-Profit Online Colleges and Universities

According a recent report from College Board, enrollment at for-profit colleges and universities is on the rise. Although public and private non-profit schools still dominate undergraduate and graduate student enrollment, the private for-profit sector has been steadily gaining popularity in American higher education since its inception.

In less than a decade, the number of students at for-profit schools has risen from 366,000 to more than 1.5 million.

Though an upward trend in students pursuing higher education is in many ways positive, you should be aware of the debate around the quality of these for-profit schools.

The majority of students enrolled in for-profit colleges and universities are from families with an income of less than $40,000 a year. Though for-profit institutions claim they are working to provide people in this demographic with the tools to make them more competitive in today’s workforce and achieve higher income, the dismal rates of degree completion and job placement in these programs suggests that many for-profit schools are driven more by monetary gain than by a selfless desire to help you get ahead.

If you are considering enrolling in a program at a for-profit school, you should carefully research potential schools before enrolling.

Understand the History of For-Profit Education

In the 1970s and ’80s, for-profit post-secondary education programs first emerged, targeting low-income young people who qualified for federal Pell grants and guaranteed student loans. By the early ’90s, these “trade schools” were offering two-year programs to students who sought training in specific skills, ranging from business and marketing to cosmetology.

Though enrollment in these schools was steady, student surveys from the early ’90s revealed dissatisfaction regarding degree completion, wage outcomes, and job placement after graduation. As a result, Congress passed new regulations requiring these schools to adhere to higher standards in their admission policies, program length, and accreditation. In response, the schools transformed into what a Stanford University study refers to as Accredited Career Colleges (ACCs), and began offering general education courses in addition to career training.

Though these attempts to legitimize for-profit educational institutions temporarily assuaged critics, as enrollment increased, so did federal funding and venture capital for career colleges. Unfortunately, this funding was not used to improve the quality of the overall education provided by the schools. It was funneled into marketing campaigns and new degree programs concentrated in burgeoning fields, and these for-profit institutions flooded the market with advertising touting their programs, diverting both students and funding from community colleges and non-profit liberal arts schools focused on providing a more rounded education.

Explore the Current Issues in For-Profit Education

The debate over the value of for-profit schools is ongoing, with educational purists arguing that for-profit and career schools devalue the distribution of knowledge by transforming higher learning into a business transaction. These inferior training modules, they argue, compete with traditional, humanities-based education.

Yet proponents of the for-profit model assert that a difficult job market demands the skills, experience, and networking that for-profit schools claim to provide. But recent reporting reveals that these schools are often driven solely by profit and are not delivering the education and job outcomes they claim to students like you.

According to a recent Boston Globe article, trends in for-profit education display the same destructive patterns that led to the housing crisis and economic meltdown of 2007. Like the predatory mortgage brokers that led to that crisis, these schools use aggressive recruitment strategies focused on uninformed consumers, so you need to understand the marketing techniques used by these schools and make sure you are getting the quality education you deserve.

For-profit education providers generally target recipients of federal aid, such as veterans and low-income families, and exaggerate the value of a school’s program while down playing its limitations. The high number of dropouts and low rates of graduation and job placement at for-profit schools are usually hidden from the public, along with the comparatively high tuition costs. Instead, these institutions market adaptable degrees and flexible course structures. These claims may not be completely untrue, but the truth about the quality of their education often comes as a shock to students who are expecting to graduate and secure a lucrative job only to be saddled with extensive debt and limited employment prospects.

Moreover, most for-profit schools are not forthcoming about their source of funding. Financial service employees at for-profit institutions are trained to filter student loans and grants from the federal and state government through the student, and directly into the school’s coffers. By focusing on low-income and military families who are already receiving federal aid, the school is assured of a continuous profit stream, allowing it to boast low admission requirements and high acceptance rates: as long as tuition can be paid, virtually any student can attend.

Finally, the financial successes of for-profit schools are closely tied to Wall Street, and financial decisions at these institutions are made primarily for the benefit of investors rather than students. In fact, to keep investors satisfied, the Globe report notes that a huge chunk of school funds are allocated for marketing and profit and a mere 17% of the revenue from these institutions is reinvested to improve the quality of education.

The Future of For-Profit Education

In July 2012, Senator Tom Harkin (D-Iowa) released a report accusing the for-profit sector of misleading taxpayers and manipulating a vulnerable population of young people. It exposed higher than average tuition rates for associate degrees and certificate programs in the for-profit sector, as well as tuition increases based on profit rather than management and improvement. Additionally, it noted that for-profit schools often withheld information pertaining to accreditation, tuition, and fees.

Senator Harkin’s findings sparked partisan bickering between Republican and Democratic politicians. Republican representatives argued the report overlooked broader issues with student loan defaults and federal grants, while most Democrats claimed that the private for-profit sector is a growing problem within higher education.

Despite this continuing debate, Harkin’s report has already resulted in some changes within the private for-profit education sector. For example, one large for-profit educational institution previously used an admissions manual instructing recruiters to respond to students’ questions about its high tuition prices with lines like “When your degree is hanging on the wall, will you tell everyone you got the cheapest one you could find?” Since Senator Harkin called Congress’s attention to such profit-seeking tactics, that manual has been removed from circulation.

In addition to highlighting the predatory practices of many for-profit schools, Harkin’s report also suggests some reforms, including improved data collection on dropout rates and job placement numbers. Careful collection of these statistics is increasingly important, as for-profit schools have begun to respond to critics by artificially bolstering their job placement results by including employment at fast-food restaurants or department stores as successful placement, even though the work has no relation to the education or training the school provided.

Take Smart Steps to Ensure You Get a Good Education

So, what does all this mean for you? Despite Harkin’s report, student enrollment in these career oriented for-profit schools has continued to rise. The purported mission of for-profit schools is to provide students with skills-based training and real-world work experience, a message that can be enticing in a difficult job market. But remember: if it looks too good to be true, it probably is.

Understand that not all online schools are for-profit; many brick-and-mortar schools offer legitimate and highly valuable degrees that you can earn either partially or entirely online. And not all for-profit schools are suspect; in some cases, you can earn a good education that will help you get a job through schools that profit from education.

The best way to ensure you are pursuing a quality investment rather than funneling money from the government into a private company’s pocket is by educating yourself about the actual achievements of individual for-profit institutions. When discussing a program, ask school representatives direct questions about the amount of money you will have to pay from enrollment to graduation, and focus on specific facts about job placement for graduates in their academic field. You should also look at student message boards and the U.S. Department of Education website, and find real alumni to talk to about their collegiate experience. Maintaining this rigorous approach to researching and selecting a post-secondary program is the best way to guarantee a scam-proof education.