This material was created by Campus Progress.
by Jen Kalaidis
It seems the for-profit industry—expensive colleges offering low-quality education and employing corrupt recruiting techniques—may finally be meeting its demise.
More aggressive regulations by the federal government and a growing campaign against predatory practices have resulted in steep plunges in student enrollment numbers for the multi-billion dollar industry, with many for-profit institutions seeing numbers drop by more than 45 percent, according to the Wall Street Journal.
Campus Progress has been a driving force in advocating for reform in the for-profit industry, bringing to light many of the troubling practices occurring at for-profit colleges around the country. Most disturbing is the number of students who report leaving such institutions with mounds of debt and few, if any, job prospects.
Corinthian Colleges, Inc., a for-profit-college based in Santa Ana, Calif., was one of the hardest hit in recent months with declining enrollment numbers leading to a 90 percent profit decrease in the fourth quarter earnings. Further, its shares tumbled to a 12-year low after news of the company’s economic shortcomings became public Tuesday morning. Other colleges saw similar declines and at Kaplan, the for-profit giant owned by the Washington Post, new-student enrollment fell by 47 percent in the “June quarter.”
Federal regulations on for-profit schools tightened earlier this year after the Department of Education mandated the “gainful employment” rule, which requires for-profit education institutions to prove that their programs lead to jobs and economic sustainability for graduates in order to receive federal aid, typically in the form of student loans and Pell grants. Campus Progress and the Center for American Progress initially lauded the rule. But the final draft, despite being an overall positive step, differed significantly from the original proposal and unfortunately gives colleges more leeway.
Failing to show that their programs are worth students’ time and money would effectively shut down these institutions—though some would still qualify under the less stringer final rule—as many for-profit collegesreceive 90 percent of their revenue from the federal aid students use to pay tuition.
Critics argue for-profit schools are predatory, disproportionally targeting lower-income and minority students who have a student loan default rate more than five times higher [PDF] than their white counterparts. Others are quick to point out that there are both good and bad players in the for-profit game.
“There have been some absolute superstars,” Secretary of Education Arne Duncansaidof for-profit colleges in June, but noted “there have been some players whose intentions, quite frankly, we doubt.”
(Screw U: More Coverage of the For-Profit Industry from Campus Progress.)
Enrollment at for-profit colleges spikedin the first year of the recession as institutions aggressively increased marketing to target newly unemployed people looking to gain new skills. But following the new regulations, declining enrollments and dwindling profits, many for-profits have scaled back advertising efforts in order to re-evaluate the market and figure out how to turn a profit while adhering to new consumer-protection regulations.
The default rate for student loans from for-profit colleges continues to be more than double that of students from public universities.
This could be the wake-up call these for-profit colleges need. Making a quick buck at the expense of a generation of young people is not only wrong—it’s bad for business.
Jen Kalaidis is a staff writer with Campus Progress. Follow her on Twitter @JenKalaidis.
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