In an age when the cost of a college degree continues to soar, many Americans seek to pursue education in non-traditional ways. Enrolling in privately owned for-profit schools, such as the hugely popular University of Phoenix, has become a rather alluring option. The opportunity to receive an education from home or within a less crowded classroom is a valuable resource that almost seems too good to be true. As such, it very well might be.
The for-profit school system has been in the hot seat since 2012, when Senator Tom Harkin and the Senate Committee on Health, Education, Labor, and Pensions released the findings of a two-year probe into the practices and operation costs of these institutes. The results showed that in 2012, taxpayers invested a total of $32 billion in the companies that own these for-profit schools. However, over half the students who had attended them in previous years had not graduated, but had actually dropped out no more than four months into their programs.
For-profit schools are not inherently bad. Indeed, they offer an alternative to state-run universities and community colleges, which often don’t have the infrastructure to support all of the students who wish to attend. The issue, it seems, is that many of the most popular for-profit schools nowadays are owned and operated by rather large, publicly traded companies, who are beholden to stockholders. For-profit schools function as big businesses: their goal is to make money.
However, the way they’ve been going about business as of late is by taking advantage of financial aid–specifically recipients of the GI Bill. These schools also aggressively enforce payment of student loans.
In recent years, the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) investigated numerous for-profit schools. Such investigations are not necessarily tied to wrongdoing; often, they are standard procedure to make sure that any for-profit company is following proper business practices. Over the course of their investigations, however, these regulatory bodies found some statistics that proved otherwise.
Last year, the CFPB went after Corinthian Colleges, a well-known for-profit school system. Corinthian, which was already being investigated by the Department of Education, was accused of inflating graduation and job placement numbers in order to lure in students. The school would then charge exorbitantly high tuition fees, requiring many students to take out loans, and then aggressively pursue the students and demand repayment of these loans once classes were in session.
After a series of probes and a $30 million fine from the Department of Education, Corinthian Colleges went bankrupt and shut down all the campuses earlier this year. The federal government announced a plan to forgive the debts of students who were swindled by this system, though the Department of Education is responsible for paying much of the bill.
Most recently, one of the largest for-profit education systems in the US, the University of Phoenix, came under fire from the FTC. The University of Phoenix has been struggling lately, as enrollment has been cut in half over the past five years and more than 100 campuses shut down. A number of the University of Phoenix’s issues are because the school was accused of focusing its recruiting efforts mainly on students that qualify for federal financial aid. Veterans, for example, have been a huge source of income. Since 2009, University of Phoenix has received over half a billion dollars in GI benefits, much of which fuels its online programs. This number dwarfs the University of Maryland-University College, which had the second highest GI Bill numbers, at just $150 million over the same amount of time.
Lots of the University of Phoenix’s students leave the school without diplomas, and the students who do receive one later discover that many of their credits are not transferrable. Only 13 percent of undergrad students actually receive their degrees within six years; the dropout rate is almost 83 percent. Over one quarter of the students who attend the school, either online or at a campus, will default on their loans.
In 2012, University of Phoenix spent only $1,655 a year to instruct individual students, while siphoning them of as much as $12,319. Though these numbers are well documented, it was only very recently that parties began to take action.
It is arguable that the practices of for-profit schools like the University of Phoenix are immoral, taking advantage of people for trying to better themselves. Though these systems may have gotten away with their tactics for many years, the investigations, lawsuits, and reports may indicate a turn in direction for the persistence of these business models.
Featured image courtesy of CollegeDegrees360.