A Higher Education, a Higher Profit

The Senate Committee on Health, Education, Labor and Pensions (HELP) has released a report detailing its findings on an investigation into the nation's for-profit colleges and universities. For-profit educational institutions are operated by private, profit-seeking companies and have been flourishing in the United States since the 1990s. This report is the first of such magnitude released by a government entity and it purports that such for-profit entities are growing at the expense of taxpayers and at the detriment of students.

Here are a few remarkable facts about for-profit schools:

• For-profit schools enrolled nearly 2 million students in 2008, less than 10% of all higher education students; however, they receive 23 percent of all Federal student financial aid dollars.


• Between 1998 and 2008, enrollment at for-profit schools grew 225 percent. Apollo Group, a conglomerate of several for-profit schools, enrolls over 458,000 students, more than the total undergraduate enrollment of all of the schools in the Big Ten conference.


• Pell Grants are need-based education dollars given to low-income students. During the 2008-2009 school year, non-profit schools saw their Pell funding decrease, while for-profits saw their Pell funding increase, indicating that a large percentage of students at for-profit institutions fall into a lower socioeconomic bracket.


• For-profit schools are often publically-traded on the stock exchange. The HELP report indicates that these schools spend a bit over 50 percent of their budgets on expenses categorized as education, 31 percent on recruiting and advertising, and about 16 percent on administrative overhead.


• Students who attend for-profit schools are much more likely to default on their student loans.

These key points have led many within and apart from HELP to call for reform within the for-profit education sector. The Department of Education has proposed a cut to federal student aid for individual academic programs within for-profit schools that have a large amount of students who do not repay their student loans after matriculation. Education Secretary Arne Duncan is concerned that some institutions "have profited and prospered, but their students haven't." The stock-holders and key personnel at these for-profit institutions receive returns in the form of student aid, dollars paid through tax subsidies. With so much federal aid going to for-profit education, tax-payers have a right to know that such institutions are doing an adequate job of preparing students for life post-academy.

For all their emphasis on generating revenue, for-profit schools are filling a niche in the sector. This is particularly important when considering that attendance at for-profit schools continues to grow with a sour economy and high unemployment; a majority of these schools offer online programs allowing students to learn from virtually anywhere. President Obama's push for a more educated citizenry, with the goal of doubling the number of college graduates in ten years, may well rest on for-profit schools - they expand more rapidly than public and campus-based institutions. This is clear in California where, after deep cuts in 2009 to the Cal State University and University of California systems, attendance at for-profit colleges grew 20 percent.

Others say it's not enough. HELP Chairman Senator Tom Harkin writes: "Taxpayers are investing billions of dollars in for-profit colleges, yet student debt and default rates at these schools are disproportionally higher than at non-profit and public universities. This data begs for oversight of this industry …"

Are for-profit education institutions doing a disservice to their students? Or are such schools providing opportunities for those who otherwise couldn't attain an education?

Photo Credit: Chad Miller