New Rules are out for for-profit colleges

We’ve been highlighting some of the troubling news stories about for-profit college scams, and we’ve welcomed the notion of new rules governing the industry.

The new rules from the Obama administration are out, but they’ve been scaled back a bit from the initial proposed rules.

The Obama administration on Thursday issued a series of highly anticipated regulations aimed at cracking down on for-profit colleges and other career training programs that leave students saddled with unmanageable debts and contribute to an unequal share of federal student loan defaults.

The final rules issued by the Department of Education, however, are significantly less stringent than a draft version released last year, giving college programs an additional three years to come in line before possibly losing access to lucrative federal student aid dollars. The changes come after an unprecedented lobbying and campaign finance offensive over the past year by the for-profit college industry, which derives a vast majority of revenues from federal student loan and grant programs and has sought to protect that income by gaining influence in Washington.

Education Secretary Arne Duncan said the changes came after discussion with “lots and lots of different folks,” not just the industry, and he pointed out that the colleges were not unanimous in their suggestions for changes.

“What we really wanted to do was give people a chance to reform … this was not about ‘gotcha,'” Duncan said. “We tried to be very thoughtful, very reasonable and give people every opportunity to succeed, but be very clear where we wouldn’t permit ongoing failure.”

The intense lobbying campaign helped the industry, as the rules are weaker. You can check the article for the details. Lobbyist hacks like Lanny Davis did their job.

That said, this is a decent first step. It’s appropriate that the schools have a time frame to remedy problems, and this should help weed out the worst abuses.

Meanwhile, 10 states have opened a joint probe to look into the marketing practices of for-profit colleges, so we might yet see some interesting developments in this area.

The key here is you have to do your research before enrolling in one of these schools and taking on a mound of student debt.

  

Both parties shill for the for-profit college industry

Some Democrats and Republicans are trying to scuttle attempts by the Obama administration to impose new rules on for-profit colleges to prevent abuses against students to rack up huge debt for dubious degrees.

The Department of Education is tired of federally subsidized student loans going to shady for-profit colleges that have poor track records of getting the students who do graduates good work — often leaving them stuck with mountains of debt. To curb this phenomenon, the agency has been moving along with a new regulation they call the “Gainful Employment” rule.

Under “Gainful Employment” rules, for profit schools would have to show that their students can find work without getting stuck with unreasonable debt in order to qualify for federal loans.

But behind the scenes, a bipartisan bloc of House members see things differently. They say the rule would reach too far and clamp down on institutions that do a decent job of educating and preparing students. But they want to tie the Department of Education’s hands completely, and block the funds they’d need to implement the rules at all.

Fortunately, many members of Congress are with the administration on this, and Obama could veto any bill with this language.

  

Only 22 percent of students at for-profit colleges graduate

We’ve done a number of posts about for-profit college scams, so we aren’t too surprised by the terrible graduation rates reported in a new study.

For-profit colleges graduated an average of 22 percent of their students in 2008, according to a new report from Education Trust.

That average palls in comparison to bachelor’s-seeking graduation rates at public and private non-profit colleges and universities for the same year, which averaged 55 percent and 65 percent, respectively.

The report, titled “Supbrime Opportunity” (PDF) also reveals that for-profit colleges increased their enrollment by 236 percent from 1998 to 2009.

The median debt of for-profit college graduates — $31,190 — far outpaces that of private non-profit college graduates, which stands at $17,040, and is more than triple the median debt for those from public colleges, which is $7,960.

The government has helped to create this monster with easy access to student loans for these institutions, who now have the incentive to accept as many students as possible. Then they make money regardless of whether they provide value to their students.

Fortunately, the Obama administration has proposed new rules to make it more difficult for many of these for-profit colleges to waste taxpayer dollars.

  

For-profit colleges that target the homeless?

We keep finding interesting stories around the problem of for-profit college scams. The latest is a report from BusinessWeek in the spring about how some recruiters for University of Phoenix and other for-profit colleges were targeting homeless people in Cleveland and other cities.

Benson Rollins wants a college degree. The unemployed high school dropout who attends Alcoholics Anonymous and has been homeless for 10 months is being courted by the University of Phoenix. Two of its recruiters got themselves invited to a Cleveland shelter last October and pitched the advantages of going to the country’s largest for-profit college to 70 destitute men.

Their visit spurred the 23-year-old Rollins to fill out an online form expressing interest. Phoenix salespeople then barraged him with phone calls and e-mails, urging a tour of its Cleveland campus. “If higher education is important to you for professional growth, and to achieve your academic goals, why wait any longer? Classes start soon and space is limited,” one Phoenix employee e-mailed him on Apr. 15. “I’ll be happy to walk you through the entire application process.”

Rollins’ experience is increasingly common. The boom in for-profit education, driven by a political consensus that all Americans need more than a high school diploma, has intensified efforts to recruit the homeless. Such disadvantaged students are desirable because they qualify for federal grants and loans, which are largely responsible for the prosperity of for-profit colleges. Federal aid to students at for-profit colleges jumped from $4.6 billion in 2000 to $26.5 billion in 2009. Publicly traded higher education companies derive three-fourths of their revenue from federal funds, with Phoenix at 86%, up from just 48% in 2001 and approaching the 90% limit set by federal law.

The article goes on to allege similar problems at Drake College of Business and Chancellor University in Cleveland which has Jack Welch as an investor and spokesman.

The article also alleges that relaxed standards under the Bush administration helped exacerbate the problem, but now the Obama administration is tightening the rules.

Some schools have suspended the policy of recruiting at homeless shelters after the publication of the BusinessWeek article.

  

A look at for-profit college EDMC

BusinessWeek has a recent profile on for-profit college EDMC and the involvement of Goldman Sachs. The article is balanced, as they gave EDMC the opportunity to present success stories, but many of the stories are unfortunately similar to others we’ve heard regarding for-profit colleges – too many students paying huge tuition costs, racking up huge student loans, and then not being able to get high-paying jobs they expected (or were sold on by recruiters). One student profiled in the article got a bachelor’s degree in game art and design at EDMC for a cost $70,000 in tuition and fees. After she graduating she got a job that paid $12 an hour recruiting employees for video game companies. She eventually lost that job and now she’s stripping.

We’re seeing more and more lawsuits in this area, and the article points out some lawsuits against EDMC. Changes are also coming from the Obama administration.

On July 23, the Obama Administration proposed restricting—and in extreme cases, cutting off entirely—programs whose graduates end up with the highest debts relative to their salaries and have the most trouble repaying their student loans. EDMC will be affected more than most other for-profit companies because of its focus on “passion” fields, such as art and cooking, rather than more practical accounting or business degrees, says Jeffrey M. Silber, an analyst with BMO Capital Markets in New York. Cooking, fashion, and arts jobs tend to have low starting salaries: A beginning cook, for example, earns an average of $18,000 a year, according to U.S. Bureau of Labor Statistics data, while a two-year culinary degree can cost $40,000 to $50,000. EDMC spokeswoman Jacquelyn P. Muller says Art Institute students tend to earn more, with those holding culinary degrees starting at $28,000.

You have to do your research if you’re thinking of attending one of these schools, and don’t fall for high-pressure sales tactics!

  

Related Posts