For-Profit Institutions

For-profit institutions have become the hot topic in the secondary education industry now. These schools in the eyes of the Department of Education seem to be an indictment to the American education system. For-profit institutions have been apart of the post primary education system for decades now but have gone by titles of career colleges or art institutes. Major for-profits that many people know are University of Phoenix, DeVry, and many other colleges. We see these colleges publicly marketed on billboards, over the radio, and on t.v. commercials. It seems today as more and more individuals seek a post secondary education community colleges and larger universities are turning a larger number of students away. That is when these individuals seek out other education opportunities and end up at for-profit schools. community colleges will take any student that applies but lately these colleges have been underfunded and can no longer accept all the incoming students. Kevin Carey, a professor at John Hopkins University author of a short text titled “Why Do You Think They Are Called For-Profit Colleges?” sheds light on some positive and negative aspects of for-profits colleges. Carey has published articles for The New York Times, The New Republic, Slate, and  The American Prospect, among other publications. Also he has been recognized as one of the leading authors

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on higher education. He delves into arguing that for-profits account for a disproportional amount of the student loan debt and that these institutions specifically target veterans seeking a college

degree. Now he also illustrates a positive aspect of these colleges. For-profit institutions fill a void left by traditional nonprofit public and private schools. That void is the ever increasing number of students that were not accepted into those schools and have no where else to turn but to for-profits. They play a an almost safety net role and have been catching all the students falling through the hands of the nonprofit institutions. In this paper I will address Carey’s positive and negative positions using outside sources on for-profit institutions while extending or challenging his claims.

For-profit institutions are under extreme scrutiny from the government and President Obama has even proposed cutting off for-profit funding due to the substantial debt their students have from taking out student loans according to Carey. A large and growing number of graduates from for-profit colleges are having trouble paying off those loans. All colleges, for-profit and nonprofit, have students with loans taken out so they may attend college but the ratio of student loans to students in for-profits far exceed that of nonprofit colleges. Also almost exclusively for-profit colleges make most of their money from these loans or grants which is what they prefer to call them. Of the entire U.S. 25% of students loans are for for-profit colleges and they only enroll 10% of the post secondary student force. In “For-Profit Colleges: Undercover Testing Finds Colleges Encouraged Fraud and Engaged in Deceptive and Questionable Marketing Practices” a testimony by Gregory D. Kutz given in August of 2010, showed how some for-profits would go to some extreme measures to reach their main goal which was to get that

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individual to sign up for a loan. Gregory Kutz is a managing director of forensics audits and special investigations for the government accountability office, GAO, which is an independent agency that provides audit, evaluation, and investigative services for the United States Congress. Kutz’s first hand accounts of fifteen colleges tested saw that four encouraged fraudulent practices. Kutz recalled in his testimony:

Our covert testing at 15 for-profit colleges found that four colleges encouraged fraudulent practices, such as encouraging students to submit false information about their financial status. In addition all 15 colleges made some type of deceptive or otherwise questionable statement to undercover applicants, such as misrepresenting the applicants likely salary after graduation and not providing clear information about the colleges graduation rate (Kutz 7).

The extent that these colleges are willing to got to in order to get individuals to take out a loan to attend their school is ridiculous. The type of students attracted to these colleges normally do not have the adequate funding to attend these colleges. For-profit colleges on average cost eight times as much as nonprofit community colleges and twice as much as nonprofit state schools. The loans that these students are taking out will follow them to their grave. To add onto what Carey wrote that many of the degrees these students dive so far into debt for are nearly worthless. The government is not longer sitting on the sidelines staring out at for-profit colleges while they slowly root their way into the American education system of the future.

Following the fraudulent tactics taken up by for-profits to get civilians to sign for loans to attend the school, for-profits have turned their crosshairs on veterans who are looking for college

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degrees. Carey notes that, “ The University of Phoenix will make $1 billion from Pell Grants this year and $4 billion in federal loans” (Carey 53). This gargantuan number is for the University of Phoenix alone, so imagine the numbers of all the for-profits combined. Since the G.I. bill grants money to veterans so they can earn a post secondary degree it has become a new option on the menu of fort-profit institution targets. According to Hollister K. Petraeus, who had published an article for the New York Times titled “For-Profit Colleges, Vulnerable GI’S,” for-profits are taking advantage of our veterans through the use of misleading marketing tactics. Then they provide them with below average degrees and poor advising and counseling services. Beyond the poor services given the main issue is the amount of money the for-profits are squeezing out of our veterans. Petraeus argues that, “Between 2006 and 2010, the money received in military education benefits by just 20 for-profit companies soared to an estimated $521.2 million from $66.6 million” (Petraeus 1). This excerpt from Petraeus’ article extends Carey claim that most of the money made by for-profit institutions are through Pell Grants and student loans. In expanding their horizon for students for-profits have formulated the idea that veterans are money signs in uniforms. The G.I. Bill works for veterans just as Pell Grants and students loans work for the civilian students of America. Many of the veterans are returning today and willing to obtain post secondary degrees to replicate the generation that returned from WWII and supercharged the decades following in industry.

Although Carey’s strongest claims were against for-profit institutions he also made some appealing claims as to why they are prospering. We cannot place all the blame onto for profits for all the students they recruit and eventually lead into debt. Our nonprofit post secondary schools are receiving record numbers of applications and now even the community

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colleges are having to turn students away due to underfunding. Carey argues the claim that for profits exist in large part to fix educational market failures left by traditional institutions, and they profit by serving students that public and private nonprofit institutions too often ignore. Due to the large amount of adults going back to college and all the young adults just getting started on their college career, many nonprofit colleges are only accepting the elite few and then the rest fall on the community colleges that are unable to supply the amount of courses required for all the students applying for them. Carey states, “While old-line research universities were gilding their walled-off  academic city-states, The University of Phoenix was building no-frills campuses near freeway exists so working students could take classes in the evening.” These simple but very smart strategic moves made by the University of Phoenix and by other for-profit schools have made their campuses easy to access and thus you might say more user friendly. Brian Darling author of “For-Profit Education Under Assault,” extends Carey’s claim that for-profits’ are as big as they are today as a direct result of the nonprofit schools turning down and rejecting students. Darling also believes that these institutions are filling the holes dug by nonprofit colleges. They are providing blue collar working class people with an education and the potential resources to better their degrees and find a better life them and their families. Darling argues that:

For-profit education is under assault from elitists who hate the idea of free market educational institutions.  It is also under attack from bureaucrats at the U.S. Department of Education who are trying to make it hard for students to arm themselves with the education needed to find a job (Darling 1).

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Darling is content on relaying the message that the government is punishing for-profit organizations for doing what he believes is right. Moving beyond that Darling argues that the elitists within the nonprofit industry are pulling strings with the Department of Education officials to handicap for-profit institutions because they are threatened by them. For-profits are alternatives to the traditional nonprofit university or community college and offer similar options in many career choices.

For-profits have strategically maximized their opportunities by moving into specific areas around the U.S. to enroll students. Their enrollment has been greatly increasing every year and soon their student numbers will rival those of nonprofit schools if they keep up the pace. With that a growing number of students who will be unable to pay off their loans will come be a result. Among those students will be the veterans seeking a college degree and for-profit schools seeking their the money from the G.I. Bill. For-profit colleges are ran like a business and seek to maximize revenue in every aspect they can. They have shareholders as corporate businesses have shareholders. They make education a business. They also accommodate those who are left behind by all other colleges. They are their to provide the option of an education for those who want one but do not have the necessary requirements met for nonprofit universities. For-profit institutions serve our community in a manipulative way but also fill voids left open by traditional colleges. There are some aspects that for-profit colleges shine for but there are other aspects that they are seen as frauds for. The way in which they draw students in, how they get them to pay, and how the degrees are subpar compared to other colleges are very large negative traits. For-profit institutions should not be chosen as a main source of an education. Post secondary

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education degrees should be able to carry some weight behind them but a degree from a for-profit college is seen as a below par. Whether we like it or not for-profit institutions are going to be apart of America’s education system for the foreseeable future.