Imagine an industry that receives 86 percent of its revenues from the federal government – $32 billion in a single year – but more often than not fails to turn out a successful product.
Imagine that this same industry pays its executives an average of $7.3 million a year, while leaving its consumers and taxpayers poorer.
That, according to a U.S. Senate committee report, describes the for-profit college business. As the prime driver of the burgeoning student debt, this industry is overdue for reform. Unfortunately, it is also adept at persuading members of Congress to fall for its spin, or at least look the other way.
Some findings in the report by Iowa Democrat Tom Harkin’s Health, Education, Labor and Pensions Committee:
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• Ninety-six percent of all students who enroll in for-profit colleges take out student loans. The rate is 13 percent for community college students and 48 percent for students at four-year public colleges.
• More than 60 percent of students who enrolled in associate degree programs at for-profit colleges dropped out, with the median student lasting only four months.
• Students who attended for-profit colleges account for 47 percent of all federal student loan defaults.
The colleges argue that their poor results are a consequence of serving large numbers of nontraditional students. But the report found that the schools, as a group, invest little in student support services. Or, for that matter, in instruction.
Researchers examined 30 for-profit education companies and found they spent 22 percent of revenues on marketing and recruiting. Profits before taxes made up almost 20 percent of revenues. Instruction received just 17 percent, which may explain why students who attended for-profit schools are more likely to be unemployed than those who attended community colleges and public and private universities.
Harkin’s report calls for more reporting on student outcomes, with the ability to receive federal aid tied to results. It also wants the schools to be required to provide more tutoring, career counseling and job placement services.
Those steps would help. But prospective students would be wisest to look first at public community colleges. You’ll spend less and, in most cases, receive much more.