For-profit colleges offer non-conventional students an alternative, promising them a quick education and then good jobs, all at a cost higher than community colleges. Unfortunately, the expectations they create mislead students, who disproportionately are Latinos and African Americans, and constitute potential fraud.
Examples abound. Corinthian Colleges Inc., under pressure from the government, agreed to shut down or sell more than 100 campuses in the U.S. and Canada; the University of Phoenix will undergo an extensive federal review starting in August; and ITT Educational Services faces a lawsuit from the Consumer Financial Protection Bureau.
These are just a few cases in a huge industry with a business model that gets more than 80% of its revenue from the government in the form of student financial aid. According to official data, its students graduate with larger personal debts and fewer possibilities of getting a job than graduates of non-profit colleges or universities.
A Senate investigation calculated that for-profit colleges spend an average of 22.7% on student recruitment and only 17.2% on education. As far as salaries, public reports show that top executives in DeVry, ITT Educational Services and the Apollo Education Group, owner of the University of Phoenix, received more than $6 million per year in compensation. In comparison, the president of Harvard University received slightly more than $800,000.
The Obama administration is imposing new oversight rules on the industry, which were unfortunately watered down thanks to the industry’s powerful lobbying. We hope these rules begin to have an impact on swindlers.
Education being a business is not necessarily bad; it all depends on the way a company behaves. It becomes a problem when seeking profits at all costs clashes with the interests of its customers, the students. When the only thing an institution cares about is the money that it gets from students, and it does not matter that it makes false promises about jobs, charges more for tuition and higher interest rates, and leaves students with few job prospects and a lot of personal debt