Report shows for-profit institutions to be abusive, exploitative

By Hannah Sparks

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Flickr/Matt Grant

The phoenix, a mythological bird that bursts into flames only to be reborn from the ashes, is a symbol of regeneration. Perhaps this inspirational image is something the flailing University of Phoenix should focus on in order to regain its reputation following its October decision to close 115 of its locations nationwide after a drop in enrollment and profits. The jig may be up for the University of Phoenix and other for-profit institutions of higher education, however, as the various abusive and exploitative practices of these companies are held up to the light and scrutinized.

For-profit colleges were but a blip on the higher education radar until the 1970s, when University of Phoenix founder John Sperling started the first class, later expanding to include online courses as early as 1989. At the time, these schools were revolutionary in their ability to suit the flexible schedules of working adults, and reaching other “non-traditional” students. Though proponents of for-profit education argue that this flexibility is still an important benefit of for-profit institutions, critics argue that those institutions are inherently exploitative.

Over the summer, the Health, Education, Labor and Pension Committee (HELP), released a report titled “For Profit Higher Education: The Failure to Safeguard the Federal Investment and Ensure Student Success.” The report, spearheaded by Iowa Senator Tom Harkin, the chairman of the committee, contains statistics that expose some of the unethical practices of for-profit universities.

Across the board, degrees from for-profit colleges or universities cost more than they do anywhere else. Most shockingly, the cost of a two-year associate’s degree from a for-profit institution costs about four times more than one from a comparable community college ($35,000 versus $8,300, respectively). Students at for-profit institutions also graduate with more debt and account for almost half of all student loan defaults. While 96 percent of students at for-profit colleges take out loans, only 48 percent of public college and 13 percent of community college students do.

Additionally, the retention rates at these institutions are generally low, with only 20 percent of attendees graduating in four years. This may have something to do with the fact that the average amount spent on instruction per student at a for-profit was just over $2,000 in 2009, less than a third of that spent on students at public universities. Despite these figures, between 1998 and 2008, enrollment at for-profit institutions grew by 225 percent, whereas in the same period, enrollment at other institutions grew by only 31 percent.

This is probably because in 2009, the for-profit higher education industry spent over $4 billion on marketing, recruiting and admissions staff, about a billion more than that spent on instruction. In 2010, over 35,000 recruiters were hired by 30 for-profit companies, while the industry as a whole employed only about 3,500 career services staff. To make matters worse, the average pay for the CEO of one of these companies is over $7 million.

Well, at least we know where their priorities are.

The continued growth of the industry, despite its more expensive costs and low returns in regards to graduations rates, suggests some deceptive marketing and recruitment practices. According to an article by Michael Stratford for the Chronicle of Higher Education, the companies “created a ‘boiler-room sales atmosphere’ for their recruiters, who were trained to capitalize on prospective students’ fear and emotions.”

Running a school as a business can only mean bad news for potential students. Tuition hikes at for-profit colleges are primarily motivated by the desire for higher profits, not for higher quality instruction. Stratford says “the educational interests of students rarely, if at all, figured into that decision making.” Not only are these schools mostly unconcerned with their student’s success (or lack thereof), they actively prey upon and make huge profits off of the anxieties students face in the economic downturn.

It isn’t just the for-profit companies themselves that are to blame: The report also targets, as the article states, “regulatory problems at the federal and state level,” as well as inefficiencies and cronyism in the accreditation process which allow faulty for-profits to stay afloat. Shoddy business practices affect everyone, not just the students who are being ripped off. Huge amounts of debt hurt the economy, as does the misuse of $30 billion of taxpayer money as well as the federal aid being funneled into these institutions every year.

Finger-pointing abounds, but the report ends by identifying three areas for improvement. The first is greater transparency, including requiring schools to provide more complete data about student enrollment and retention, as well as earnings and employment after graduation. The next suggestion is improved oversight of finances, especially in regards to where federal money is going. The final suggestion calls for greater legal and financial protection for students at these institutions, including an improved complaint process, improved student services and ending the practice of compensating recruiters based upon how many students they can enroll.

Though the ads in which a diverse array of people proudly declare, “I am a Phoenix” may (or may not) be inspiring, they put a shiny, false veneer on the cynical and predatory for-profit education industry. The for-profit system is just one of a number of questionable bricks in the higher education wall. Harkin’s report helps to bring some of its abuses to light, but what is really needed is a systemic reevaluation of the whole wall. Whether or not it needs to be torn down is a different story altogether.

Hannah Sparks is a Collegian columnist. She can be reached at [email protected]