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My now 91-year-old father was a pioneer in business computing, back in the days when a computer filled an entire room and was programed with punch cards. In the 1950s he worked for the International Latex Corporation (now ILC) in Dover, Del., a company best known for two of its products. One was the Apollo spacesuit worn by Neil Armstrong when he walked on the moon 50 years ago this month. The other was the Playtex Living Bra.
We moved from Dover when I was nine, and at that time I only appreciated the cultural importance of one of the two. In the late 1960s, my dad transitioned from the corporate world to teaching, and before settling in to a quarter-century stint as a community college professor, he was approached about taking a job at a new initiative being launched by the education division of Bell and Howell, a company best known for manufacturing film projectors. I didn’t realize it at the time, but that was my introduction to the world of for-profit education. The new initiative ended up morphing into DeVry.
The world of for-profit colleges has been in the news thanks to the recent announcement by U.S. secretary of education Betsy DeVos that she is repealing the gainful-employment rule. The Obama administration instituted that rule in 2010 to provide definition for the term “gainful employment” found in the Higher Education Act. It required that career-training programs leave students with a reasonable debt-to-earnings ratio upon completion in order for institutions to continue receiving federal Title IV funds.
So why abolish the rule now? Getting rid of it was a stated goal of DeVos from the beginning of her tenure, and the Trump administration has made no attempt at enforcement over the past year. Is this part of a governmentwide philosophical commitment to deregulation, an attempt to reverse all of the policies of the Obama administration or a step in carrying out the Trump campaign promise to “drain the swamp” in order to build a bigger, more toxic swamp? Or is it an offering to the for-profit college industry that gave the Education Department Under Secretary Diane Auer Jones and once included among its membership Trump University?
In place of the rule, DeVos wants to expand the information provided in the Department of Education’s College Scorecard, moving the federal government’s focus from accountability to transparency. Transparency is certainly a good thing, but is it enough? If the government in Betsy DeVos’s home state of Michigan was transparent and told the people of Flint that their water was not safe to drink, would that have fulfilled its moral and legal obligation?
Rather than debate that issue or the nuts and bolts of the gainful-employment rule, I want to focus on one of DeVos’s primary justifications for getting rid of the rule, the contention that it unfairly targeted for-profit institutions. She described gainful employment as “discrimination based on tax status.” But is that the case? To some extent your answer depends on how you feel about profiling.
The gainful-employment rule focused on programs promising career preparation, and approximately two-thirds of those programs are run by for-profits. But in 2017 when the Department of Education issued a report card, 98 percent of the programs that failed or were in danger of failing the debt-to-earnings threshold were for-profit programs.
The Trump administration did not issue updated figures in 2018. When 98 percent of problems come from one sector, what does that tell us? The for-profit industry admits that there have been bad actors in the past but argues that many of them have gone out of business. A recent New York Times article stated that over the past 10 years nearly 2,000 for-profit colleges, or half, have closed.
Given the past, is giving the for-profit sector close scrutiny reasonable vigilance or discriminatory profiling? At some level for-profit colleges take the idea of higher education as a business to the extreme, and that carries with it both positives and negatives.
For-profit institutions have provided service to adult and nontraditional learners in a way that nonprofits haven’t, embracing asynchronous learning and online delivery. But instruction is delivered largely by adjuncts, and for-profits have sales forces rather than admission offices, with high-pressure sales tactics taking the place of counseling. That is not to say that there aren’t traditional nonprofit colleges and universities with admission practices that push ethical boundaries, but the sales approach is the norm in the for-profit sector.
The real issue, of course, is whether students attending for-profits are receiving a legitimate education or being ripped off. At the risk of generalizing, the evidence is concerning. In 2016 the National Center for Education Statistics reported that the six-year graduation rate for for-profit colleges is 26 percent, significantly lower than the rate for public institutions (59 percent) or private nonprofit colleges (66 percent).The low graduation rate raises concerns related to the student debt crisis, in that the students most at risk are those who go into debt for education but don’t complete a degree.
A Forbes article earlier this year reported that a high percentage of for-profit graduates leave with student debt -- 88 percent, compared with 75 percent for private nonprofits and 66 percent for publics. The average debt is also higher, with nearly $40,000 for for-profit graduates compared with $32,000 for private nonprofit graduates and $25,000 for public graduates.
Another study showed that nearly half of borrowers from for-profits default within 12 years, four times the rate for borrowers who attend nonprofit colleges and universities. Those statistics provide justification for protecting students, which is what the gainful-employment rule was designed to do.
But there is an even bigger issue we should be paying attention to with regard to for-profit colleges, and another group that needs protection. That group is the American taxpayer. The issue that doesn’t get enough attention is the degree to which for-profit colleges feast on federal financial aid programs. A 2017 Brookings Institution study reported that 70 percent of all for-profit college revenue comes from federal money. The Higher Education Act prohibits for-profit colleges from having more than 90 percent of revenue from federal financial aid.
The 90-10 rule does not count veterans’ benefits among that percentage, and many for-profits have seized on veterans as new sources of revenue. According to a Politico story earlier this year, a year after Congress passed the Post 9/11 GI bill in 2008, 37 percent of education benefits were going to for-profits despite that fact that only 25 percent of recipients were attending a for-profit. According to the Brookings study referenced above, when veterans’ benefits are taken into account, nearly 200 for-profit colleges are funded almost entirely by taxpayer dollars.
If we, the American taxpayers, are getting our money’s worth, and the vets and federal aid recipients are truly getting an education that will make them productive earners and taxpayers, then that’s a good investment. If not, then Ronald Reagan’s fabled welfare queen has found gainful employment in the for-profit college industry.
