Flogging For-Profit Colleges

WASHINGTON -- The release of yet another report highly critical of for-profit higher education by yet another advocacy group in the nation's capital barely qualifies as news these days -- except that the report and the reaction to it so clearly underscore how critics and defenders of the colleges are talking past one another.

November 24, 2010

WASHINGTON -- The release of yet another report highly critical of for-profit higher education by yet another advocacy group in the nation's capital barely qualifies as news these days -- except that the report and the reaction to it so clearly underscore how critics and defenders of the colleges are talking past one another.

The study, released Tuesday by Education Trust, largely repackages previously published data on higher education companies -- their booming enrollments (particularly of minority and low-income students), escalating dependence on federal financial aid, relatively low graduation rates (compared to most public and independent four-year colleges), and high student debt and default levels -- to suggest that the colleges are a breeding ground for another crisis of the magnitude of the subprime mortgage loan meltdown. (The report's none-too-subtle title: "Subprime Opportunity: High Dividends, Low Baccalaureates at For-Profit Colleges.")

“If the for-profit sector as a whole did its part to ensure that the students they enroll got the kind of high-quality education they thought they were paying for, these institutions would be making an important contribution to our economy, indeed to our democracy,” said Kati Haycock, the group's president. “Instead, too many are taking advantage of the system by operating a business model based on systemic failure and foreclosing on the futures of vulnerable students before they have a chance to begin. That’s unethical, but it’s also un-American.”

The report by Education Trust, which advocates for equitable educational opportunity and high achievement for low-income and minority young people, is of a piece with numerous other studies by researchers and advocacy groups that, taken together, seek to reinforce the view of the Education Department and Senate Democrats that for-profit higher education deserves extraordinary federal regulation and scrutiny. Both the Obama administration and the Senate's education panel have singled out the sector, the former through a set of tough new rules and the latter through a highly publicized (and damaging) set of hearings.

Backed by their own self-funded studies, and utilizing their advertising and lobbying might, the colleges and their defenders in Congress have bristled at the idea that for-profit institutions stand out among higher education institutions for having high prices and low graduation rates. A key theme underlying their arguments is that most analyses ignore the heavy state and other subsidies that flow to the public two- and four-year colleges to which the for-profit colleges are most often compared (unfavorably), and that any calculations of the "cost" to society of the institutions must take into account the tax benefits enjoyed by traditional institutions.

Despite the frequently harsh tone of its report, Education Trust is better inoculated than many other such groups against the argument that it is unfairly picking on for-profit colleges, since its advocacy for low-income students has led it to issue scathing assessments of selective flagship universities and of institutions that have big gaps in the graduation rates of their black and white students. And the report released Tuesday does single out a small number of for-profit colleges that perform comparatively well (the School for Visual Arts and ITT Technical Institutes) and points out that graduation rates for two-year institutions in the sector are better than those at public community colleges (while noting that many of the for-profit colleges' graduates have less-valuable short-term certificates rather than associate degrees).

But while Education Trust may have concerns about the performance of all sectors of higher education, its officials made clear that they believe for-profit institutions have a distinguishing set of traits and problems that warrant special attention -- and the characteristics she cited show the disconnect between the sector's critics and advocates.

Yes, many institutions have low graduation rates, particularly for the minority and low-income students that Education Trust especially aims to protect, Haycock said during a telephone news conference about the new report. And yes, there "is a role for this sector" in the American higher education infrastructure, particularly "at a time when we really need to ramp up the numbers of of young people who get postsecondary credentials."

But the reason why groups like Education Trust (and others like the Institute for College Access and Success that have been more active in the debate over for-profit higher education) are so concerned, Haycock said -- "aside from what the numbers tell you" -- "is that the price of failure is so much higher here" than in other sectors of higher education.

Students drop out of other types of colleges, too, but for the many students who fail to earn a credential at commercial colleges, "if they've spent a year or even two" there, "the debt that they accumulate is substantially higher than at community colleges or four-year universities."

The combination of low success rates and high prices is seen as dangerous by the consumer-oriented student advocates who have encouraged the federal government's push to tighten its regulation of the colleges -- "the existing government structure to police these schools is not adequate to the task, which is why a more aggressive federal regulatory approach is so important now," Haycock said -- and their concern, first and foremost, is about the potential impact on individual students.

Given that view, the kinds of rebuttals that for-profit college representatives offer to reports like Education Trust's are unlikely to resonate with the authors. "Today’s report provides many interesting data points, but fails to include the fact that proprietary institutions cost the taxpayer significantly less than traditional schools," since for-profit colleges "do not receive direct state subsidies and do not benefit from tax-free status," Ryan Rauzon, a spokesman for the University of Phoenix's parent company, the Apollo Group, said via e-mail. The Education Trust report singled Phoenix out for the six-year graduation rate of its full-time students of 9 percent, (Like many institutions, Phoenix takes issue with the use of the federal methodology for calculating graduation rates, noting that it focuses only on the very small proportion of students who are in college full-time and for the first time, and fails to account for the reality that so many of the online giant's students have numerous academic, financial and cultural "risk factors.")

Rauzon cited a recent Apollo report showing that "the cost to taxpayers to educate a student at University of Phoenix is less than at any other type of institution." Harris N. Miller, president of the Association of Private-Sector Colleges and Universities, said much the same thing in an interview, noting that the Education Trust report compares his member institutions to public and private nonprofit colleges that are generally much more selective in admissions and for which "every student receives a very large taxpayer subsidy, which is never recouped by the government."

But for critics worried primarily, if not solely, about how individual students fare, statements like those are likely to matter little.


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