Why CAI Cares About the Issue of Private For-Profit Universities

ImageIn today’s economy, it is increasingly difficult to find a job, particularly for young people with little education.  This leaves young men and women looking for a way to obtain an education that will lead to a well-paying job. Unfortunately, some private for-profit universities are only too willing to take advantage of the growing desperation among young adults who are seeking a way to survive and compete in a highly competitive job market.  This is an issue that has been receiving a great deal of attention recently, due in part to a report released by Senator Tom Harkin (D-IA) and his Senate Health, Education, Labor and Pensions (HELP) Committee on August 1, 2012 (the Harkin Report). The report was based on a comprehensive investigation of 30 of the largest for-profit college companies.

Private for-profit universities can be quite expensive, which would seem like a deterrent for young people with little or no income.  But these universities helpfully guide their prospective students through the loan process, making the enrollment and application process as turnkey and seemingly simple as possible, with little or no out-of-pocket obligation.  Because they are for-profit, these colleges spend a great deal of money on expenses that, while they may not serve the students well, serve their profit motive. For example, these colleges put a great deal of resources into marketing and recruiting. The Harkin report found that the schools investigated had 2 ½ recruiters for every student services staff member. The students get access to their education, the universities get student loan dollars, and promises are made that students can worry about paying their loans after they’re placed in a lucrative job.

Many of these universities go so far as to promise job placement. They promise to prepare their students for careers in fields such as the medical field, engineering, or fashion and design. Unfortunately (and not surprisingly), the reality is not quite as dazzling as the promises. 

While private, for-profit universities account for just 10% of the student population nation-wide, they account for nearly half of student loan defaults, with students often leaving early and/or unprepared for the career for which they had hoped to receive training.  Too many students leave these for-profit universities not only with their education benefits depleted, but with enormous student loan debt, and unprepared for any kind of a job that would pay enough to repay the student loan debt. This spirals and leads to credit problems, which causes problems when students attempt to complete their education, and which impact other important areas of students’ lives as well, such as buying a car, and renting or buying a home.

This problem came to the attention of the Children’s Advocacy Institute (CAI) when veteran’s groups sounded the alarm. Veterans groups have become aware of some private for-profit universities that were preying on returning veterans who had access to education assistance through the G.I. bill.  After being targeted by such universities, veterans deplete their benefits and then run up student loans that they are unable to pay back. They then they find themselves in the untenable position, in this economy, of having bad credit, no job or a job that does not pay them enough to make a decent living, and an incomplete or substandard education.

CAI has found that the problem extends beyond veterans to another vulnerable population of young people who receive educational assistance from government and other programs—transition age foster youth (foster youth between the ages of 16 and 25).  Many of these youth have struggled to get their education as they are often moved from one school to the next. They are eager to get their post-secondary education or training and move on to careers.  CAI has seen the same institutions target these young people. One poignant example is Gina, a former foster youth.

Gina had a baby 2 weeks prior to graduating from high school. She was the first in her family to graduate from high school and she was determined to get a college education, but she needed to find something that she could achieve while continuing to be a good mother to her infant son.  She opted for a private university that offered an online option. She enrolled at this university (referred to for the purposes of this blog as P. University) and she took out $12,000 in loans when she did not get enough financial aid to pay the entire tuition.

Gina spoke with a counselor from the school and informed the counselor that she wanted to work toward a degree in Criminal Justice. Gina said she did not feel like she learned anything in the first semester of classes, and did not understand how the classes were preparing her for the degree she was promised. She found out that she had been enrolled in the wrong classes for the semester. She then had to take out yet another $12,000 loan to pay for the school to enroll her in the correct classes. Eventually, she had to drop out due to financial difficulties. Now in debt, she is doing her best, but has been unable to pay back the loans. Gina says that she attempted to enroll at a community college but the admissions office told her that her debt will bar her from admission.  She very much wants to complete her education so that she can provide for her children, and she continues to look for options.

CAI believes that private for-profit universities can serve a valuable role, and not all of them are guilty of the kinds of abuses discussed in this blog. Some private for-profit universities deliver exactly what they promise and provide a quality experience. That said, private for-profit universities that are using our tax dollars to help promote their own bottom line must be more stringently regulated. These businesses must be prohibited from promising more than what they can deliver and from engaging in any deceptive marketing practices; they must provide students with worthwhile educational experiences; and they must be required to disclose information about the jobs and salaries that have been obtained by graduates of their programs.  CAI is advocating both at the state and federal level for these universities to be held accountable and to lose their eligibility for state and federal monies (Cal Grants, for example), if their students have a high default rate.

For-profit universities must stop taking advantage of the poor economy to prey on ambitious, yet vulnerable, young adults.


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