For-profit colleges are under growing federal and state scrutiny as well as civil lawsuits after investigations have found that the schools employ high pressure sales tactics to recruit and sign up potential students. The prospective students are promised high paying jobs in the career fields for which they study. When questioned about repaying student loans, the recruiters tell the students that since they will find good paying jobs as a result of their studies, there’s no need to worry about financing their education at these for-profit schools.
Typically, the problems begin when the students take their required courses and graduate but then are unable to find gainful employment in their field of study. When the student loans come due, the unemployed or under-employed student has no way to repay the student loans, resulting in default and ruined credit for the student.
Another tactic under investigation involves the transferability of credits earned at for-profit schools. Many students enter a for-profit knowing that at some point, they will be transferring to a four-year college. At the time of admission, these students have been assured that the majority, if not all of the credits earned will transfer. What these same students have discovered is that little to none of their credits are transferrable to other Colleges or Universities, resulting in that student having to re-take courses at an additional expense.
The problems at these for-profit schools are not limited to those students seeking their undergraduate degree. Claims of misrepresentation, harassment, and intimidation have been noted in Graduate level and Post-Graduate/Doctoral level programs. For-profit schools promise ample opportunities for required internships, however, because these same institutions are accepting so many students into their graduate and post-graduate level programs, in order to maintain the appearance of high internship placement numbers, schools are forcing students to either withdraw from their program, transfer to another program, or at worst, schools are dismissing students from their program.
The largest for-profit institution, the University of Phoenix, has a student body of more than 440,000 students. That’s more than all of the universities in the Big Ten combined.
This explosive growth hasn’t gone unnoticed. Because nearly 90% of the revenue at some for-profits colleges comes solely from federal student loan programs, the federal government has begun looking into the practices at many for-profit schools.
The Senate committee, chaired by Senator Tom Harkin of Iowa, found an average dropout rate of 57 percent within two years of enrollment at 16 unnamed for-profit schools. Students at for-profit schools also account for nearly half of all student loan defaults, the committee found. Sen. Harkin’s committee found that for-profits tend to charge more for tuition than comparable public schools and spend a large share of revenues on expenses unrelated to teaching.
Recruiters for these for-profit colleges are often paid commissions based upon the number of students they’re able to enroll. The admission requirements for these for-profit schools are minimal at best and in some instances, non-existent as long as the prospective student is able to qualify for a federally-funded student loan.
While there are numerous for-profit schools doing business across the country, some of the largest are part of larger corporations such as Education Management Corporation, Corinthian Colleges Inc. , and Bridgepoint. All of them are run first and foremost are profit-driven businesses and not as higher education institutions. Some of the larger schools include Argosy University, University of Phoenix, The Art Institutes, Capella University, Everest University, Everest College, Kaplan College, Kaplan University, and Schiller International University.
On Monday, August 8, 2011, the US Department of Justice and four states including California, Indiana, Florida, and Illinois filed a multi-billion dollar fraud lawsuit against Education Management Corporation. The Department of Justice lawsuit is based in part on The False Claims Act which is designed to prevent such companies from enrolling students for their aid money. According to the 122-page complaint, Education Management got $2.2 billion of federal financial aid in fiscal 2010, making up 89.3 percent of its net revenues.
According to the NY Times, “Education Management, which is based in Pittsburgh and is 41 percent owned by Goldman Sachs, enrolls about 150,000 students in 105 schools operating under four names: Art Institute, Argosy University, Brown Mackie College and South University.”
