By Charlene Crowell
Weeks before the U.S. Department of Education (DoE) announces a new rule governing career education programs, the Center for Responsible Lending (CRL) has released research that finds high-cost, for-profit colleges make millions each year by targeting students of color. While these college profits are generated largely from taxpayer funding, their students incur heavy debts with low graduation rates and nearly no marketable skills.
The report is titled, Do Students of Color Profit from For-Profit College? It compared educational and financial outcomes at public or private, non-profit schools with those at for-profit institutions. CRL researchers found that a student enrolling in for-profit, four-year colleges would pay more than $40,000 more than a similar program at a public institution. Though for-profit colleges enroll only 13 percent of all college students, they account for nearly half of all student loan defaults.
According to the report, “Because students of color disproportionately attend for-profit colleges, borrow more, and have lower graduation rates, they may be at greater risk and experience disproportionate harm.”
“For profit colleges have positioned themselves as a means for traditionally underserved students of color to achieve educational success and thus to increase their ability to earn higher incomes, and build wealth,” states the report. “If these schools do not engender better outcomes for their students and instead merely saddle students with debt, then the access these schools provide could prove to widen existing income and wealth gaps, rather than to narrow them.”
These poor outcomes and high costs at for-profit schools annually cost taxpayers about $33 billion in funds through Title IV of the Higher Education Act. Title IV provides funding for both Pell Grants and federal student loans. Currently, Title IV funds can contribute up to 90 percent of an institution’s revenues in a school year.
When these same colleges recruit current or former military service men and women, even more taxpayer-funded revenues are accessed through the Post-9/11 GI Bill. These revenues are in addition to those received through Title IV.
Yet, access to these large public revenues has little to do with for-profit instruction. Only 17 percent is actually spent on instruction. Marketing and recruitment, for example, represents 23 percent of expenditures.
These disturbing findings could help to shape the upcoming “gainful employment rule” that will establish new parameters for institutions offering career education programs. Expected to be announced by early November, the rule will consider formal comments received earlier this year that informed Department of Education concerns from a wide number of education stakeholders.
In late May, a coalition of 53 state and national organizations that included educators, civil rights leaders, veterans, labor and consumer advocates wrote Education Secretary Arne Duncan. Their unified voices said in part, “[O]f all the federal financial aid recipients enrolled at the lowest performing programs, 98 percent are at for-profit colleges. . . . These poor outcomes are of particular concern for low-income and minority students, since they are heavily recruited by many for-profit colleges and enroll disproportionately as a result.”
On September 16, the Consumer Financial Protection Bureau (CFPB) filed a lawsuit against one of the largest for-profits, Corinthian Colleges. CFPB is seeking $569 million in forgiveness of loans for its use of bogus advertising that promised high-quality job prospects when it actually paid some employers to temporarily hired its students for as short a period as a single work day. Corinthian is also alleged to have charged tuition rates so high that its students were forced into taking on private loans – in addition to federal ones – with repayment terms that began while they were still enrolled.
Corinthian also faces further charges from by 20 state attorneys general and received a grand jury subpoena in Florida, and another from Georgia.
With for-profit colleges relying so heavily on taxpayer-funded dollars, they should be thrifty stewards of the public purse. Instead, they are price-gouging and leaving what should have been a student’s promising career into a struggle to overcome extraordinarily high debt with few — if any — marketable skills.
Here’s hoping that the Department of Education will announce a new rule that is strong and broad enough to eliminate financial predators from higher education.
Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at Charlene.firstname.lastname@example.org.