With no federal aid, for-profits charge less
For-profit colleges whose students aren’t eligible for federal student aid charge much less than eligible for-profits for similar programs, concludes a National Bureau of Economic Research working paper by Stephanie Riegg Cellini, an assistant professor of public policy and economics at George Washington University, and Claudia Goldin, a professor of economics at Harvard. Aid-eligible for-profits charge 75 percent more in tuition, roughly equal to students’ financial aid. That supports the “Bennett hypothesis” that colleges raise tuition to maximize aid, the authors wrote.
The tuition difference “seems to match, pretty well, the size of a Pell Grant,” Cellini told Inside Higher Ed.
The U.S. Department of Education estimates that 1.8 million students, 10.7 percent of the total, attend for-profit colleges. That leaves out 670,00 students at schools that don’t receive aid, the study found. Some 61 percent of for-profit institutions don’t participate in federal aid programs. Most are small.
The non-aid-eligible colleges are typically independent operations that skew heavily toward health profession, culinary and transportation programs. Cosmetology schools are the largest group. “There are a lot of students at these institutions and we just don’t know that much about them,” Cellini said.
To participate in federal aid programs, colleges must be accredited, which can be costly.
Online education will lead to the creation of more low-cost for-profit colleges that don’t rely on federal aid, predicts Michael Clifford, a for-profit education investor, in an Inside Higher Ed discussion. “I believe that we will soon see an ‘all you can eat’ online regionally accredited model based on a monthly subscription fee of perhaps $99 per month to serve as a self-paced, self-motivated accredited degree program.”
The Atlantic looks at the Bennett hypothesis, which was meant to apply to public and nonprofit colleges and universities.
Repayment study left out blacks
A U.S. Education Department analysis on the relationship between race and repayment of student loans left out black students, skewing results used to justify the gainful employment rule, reports Inside Higher Ed.
For-profit colleges, which enroll many minority, low-income and older students, argue the high-risk demographics explain their students’ higher default rates on student loans. Not so, said the department in June, concluding that only 1 percent of the variance in repayment rates could be explained by the racial composition of enrollment. Sorry, never mind.
But by failing to count black students, the study understated the impact of race: the actual variance at for-profits is 20 percent over all, and 31 percent for four-year institutions, the department said in the December filing.
Eduardo Ochoa, the department’s assistant secretary for postsecondary education, said “accurate figures would have had no impact on the final regulations.”
Interesting.
The Association of Private Sector Colleges and Universities, the for-profit trade group challenging the gainful employment rules, charges the new figures show that “schools that enroll a higher percentage of minority students are more likely to fail the department’s repayment test.”
President Obama talked about defunding colleges that raise tuition in his State of the Union speech, writes Andrew Kelly on the Enterprise Blog. That means shifting “some Federal aid away from colleges that don’t keep net tuition down and provide good value,” according to a White House blueprint (pdf). Deciding whether a college is providing value for the money will require collecting gainful employment data on all higher education sectors, writes Kelly.
CC cuts push students to costly for-profit schools
Cierra Nelson spent four years trying to complete prerequisites for a nursing program at a community college in southern California. Again and again, she was turned away from science classes she needed, such as anatomy and physiology. Finally, she gave up on the low-cost community college and borrowed more than $50,000 to attend a for-profit, Everest College, writes Chris Kirkham in the Huffington Post.
“When I first saw how high it was, it was kind of a shock,” said Nelson, who eventually came to the conclusion that taking out loans made more sense than waiting semester after semester to take the community college classes she needed to advance. “I know it’s a lot of money and I’ll be in debt, but I’ve got to do what I need to do.”
More than 90 percent of nursing graduates at nearby community colleges last year passed state licensing exams, compared to fewer than 70 percent of Everest students. But Everest students are able to graduate without spending years on wait lists.
For-profit colleges enroll more low-income, minority and adult minority students than other institutions. Graduation rates are higher for career programs that take two years or less, much lower for bachelor’s programs. Default rates on student loans are significantly higher.
While for-profit schools can raise money to expand quickly in high-demand fields, community colleges have cut classes to cope with funding cuts, Kirkham writes.
California has been hit especially hard. Some 200,000 community college students will be turned away from classes next school year, the chancellor’s office predicts.
That amounts to more than 7 percent of the entire state’s community college student body, and that does not count those who gave up on plans to enroll due to the difficulties of securing classes.
After accounting for inflation, California is now spending the same amount on community colleges that it did six years ago, despite adding more than 175,000 students in that period, a nearly 20 percent increase. On a per-student basis, the state is spending less this year than it was 15 years ago.
Riverside Community College in southern California has room for 200 students; some 1,500 applicants are on a wait list. And many more, like Nelson, aren’t able to get into the required classes that will qualify them for the wait list.
In just the past year, California’s community colleges have cut between 5 and 15 percent of their course offerings, according to the state community college chancellor’s office. Among the hardest hit were costly, yet crucial workforce training programs such as computer information systems, nursing and other health care-related majors, such as radiologic technology.
No wonder students are choose for-profit career colleges, despite the much higher costs.
Hess: Edu-stories for 2012
President Obama’s re-election campaign will promote Race to the Top and college affordability to woo suburban swing voters, predicts Rick Hess in Ten Edu-Stories We’ll Be Reading in 2012. The Republican nominee will stop attacking the Education Department and talk up education reform to appeal to moderates, he adds.
For-profit college entrepreneurs will look to expand overseas in response to “relentless attacks” by the media, the Obama administration and Sen. Tom Harkin, Hess writes. This year, for-profit colleges began screening out high-risk students in response to “gainful employment” regulations. Next year, administration officials will complain the for-profits are narrowing access to higher education, he predicts. Future quote: ”Sure, we’ve promised to punish for-profits if they enroll students who don’t graduate or earn enough after completion, but we just assumed they’d find ways to ensure that these students get a degree and a good job.”
Hess also foresees a backlash against anti-bullying campaigns, reminiscent of the “zero tolerance” reaction, and recognition that “flipped” classes — students watch videos at home and work on problem solving in class — don’t work for homework-dodging slackers.
Top community college stories of 2011
“For elevating the discussion of community colleges from access to success,” the Aspen Prize for Community College Excellence — awarded to Valencia College in Florida – leads Community College Week’s top 10 community college stories of 2011.
Also on the list: job training, budget woes, uneven progress on completion goals, Pell Grants under pressure, new measures of college success, veterans on campus, the crackdown on for-profit colleges, state action to help undocumented students and the end of the college enrollment boom.
Study: For-profits lag in student outcomes
For-profit college students don’t do as well as similar students at public and private nonprofit colleges, according to a draft research paper (pdf) by Harvard economists. From Inside Higher Ed:
“For-profits disproportionately attract minority, older, independent and disadvantaged students,” according to the study, which assessed student outcomes after factoring in observable differences in populations who have attended different types of colleges.
. . . The research found that for-profits have some competitive strengths, such as in first-year student retention rates compared to community colleges. But the adjusted data showed for-profits lagging behind other types of colleges in areas such as employment outcomes, student satisfaction with academic offerings, debt levels and loan default rates — gaps that probably cannot be fully explained, the researchers say, by the greater propensity of students at the colleges to have prior risk factors.
Researchers compared first-time undergraduates, but did not analyze older, returning students.
The vast majority of students at for-profit colleges expressed satisfaction with their courses of study and academic programs. But the study found that they report “significantly lower satisfaction than observably similar students” at other institutions.
Not surprisingly, for-profit students, who pay unsubsidized tuition, are less likely to say their education was worth the cost or that their student loans were a good investment.
Given the constraints of the data, the study is a “conversation starter” rather than the last word, said David Deming, one of the authors.
For-profits have strong business models that often allow for a quicker response to changing labor markets than their nonprofit competitors, according to the study’s authors. For example, the sector currently produces 51 percent of associate degrees in computer and information services. And for-profit offerings in health and medical fields, where demand is high, are growing faster than at nonprofits.
. . . “Regulating for-profit colleges is tricky business,” said the study. “The challenge is to rein in the agile predators while not stifling the innovation of these nimble critters.”
$1 trillion in student loans
Student loan debt will exceed $1 trillion this year, reports USA Today. Students borrowed $100 billion for college in 2010.
Students are borrowing twice what they did a decade ago after adjusting for inflation, the College Board reports. Total outstanding debt has doubled in the past five years — a sharp contrast to consumers reducing what’s owed on home loans and credit cards.
Defaults are up, despite federal forbearance,
“Students who borrow too much end up delaying life-cycle events such as buying a car, buying a home, getting married (and) having children,” says Mark Kantrowitz, publisher of FinAid.org.
“It’s going to create a generation of wage slavery,” says Nick Pardini, a Villanova University graduate student in finance who has warned on a blog for investors that student loans are the next credit bubble — with borrowers, rather than lenders, as the losers.
The highest default rates are at for-profit schools which enroll more lower-income students. Community colleges enroll similar students, but few take out student loans because the tuition is subsidized state and local taxpayers.
Obama’s college confusion
President Obama is confused about his college goals, opines Rick Hess. The president wants more Americans to earn college degrees and everyone to get at least a year of postsecondary education. But his administration is trying to shut down for-profit colleges, “the only institutions eager to help fulfill his grand ambitions.”
Obama’s Justice Department is suing Education Management Corp., the nation’s second-largest for-profit college company, charging it violated federal law by paying recruiters based on students enrolled. Obama’s Department of Education has pushed “gainful employment” regulations that could “stifle for-profit institutions whose graduates don’t earn enough.”
Between 2000 and 2009, for-profit institutions increased enrollment by 300 percent, while public colleges and universities grew by 27 percent. For-profits have rapidly grown capacity and customized services for nontraditional students, even as public colleges and universities have shown little appetite for revamping established routines.
To meet “gainful employment” rules and reduce defaults, for-profit colleges will have to turn away bad risks, Hess writes. For example, blacks and Hispanics are more likely to enroll in for-profit colleges. Overall, 54 percent of students in for-profit two-year colleges are classified as “high-risk,” compared to 36 percent in community colleges.
Graduates of for-profit college programs that last two years or less, report a 50 percent increase in annual income, according to U.S. Education data, Hess notes. Of course, community colleges could provide the same boost — if students could get in and get the classes they need.
Unfortunately, where for-profits are growing like kudzu, community colleges are turning away students. In California, for instance, the community college system turned away 140,000 potential students this year.
Why would financially pressed community colleges turn away students, given that more students bring more dollars? . . . California’s community colleges cost students $1,080 per year, but they also cost the state another $5,000 in subsidies. When those state subsidies aren’t forthcoming, community colleges slam the doors on would-be students.
It’s the for-profits that have a selfish, practical incentive to find ways to add students, even those with families, obligations and unpredictable schedules. Of course, this aggressive competition can result in unseemly, unsavory or outright fraudulent behavior — but you’d think a president championing post-secondary access would be a lot less willing to toss out the baby along with the bathwater.
Obama is trying “to drive a car with one foot on the gas and one foot on the brake,” Hess writes.
We need for-profit colleges, adds New York Times columnist Joe Nocera. State universities are too expensive for poor and working-class students. Community colleges are too crowded.
The for-profits can offer class times that are convenient for students, rather than for professors. They can offer online classes, which many traditional universities have been reluctant — or unable — to dive into. They pay professors to teach, not conduct research. A well-run for-profit college could teach its nonprofit counterparts a thing or two about efficiency and innovation. That’s the part of the profit motive that grades well.
Nocera endorses two ideas floated by Robert Silberman, CEO of Strayer Education. Force the for-profits to share in the losses when students default and set up a national test to screen out students who lack the skills to attend college.
Two-year default rate rises to 8.8%
College loan defaults rose from 7 percent to 8.8 percent in the first two years of repayment, the U.S. Education Department announced. Fifteen percent of for-profit students, 7.2 percent of public students and 4.6 percent of private nonprofit students were unable to pay their loans.
Education Secretary Arne Duncan blamed “hard economic times.”
“These numbers could be a wooden stake in the heart of the for-profit college industry,” writes Mike Riggs on Reason’s Hit & Run. Federal aid and occupational licensing laws (hair stylists, interior designers and florists need hours of training to get a job) created the “vampiric behemoth” of for-profit education.
Why Duncan is insisting that more money be funneled to schools that will turn around and jack up tuition and fees, as opposed to lambasting state legislatures that require poor people to attend for-profit colleges before they can transcend the grease-caked plexiglass ceiling of customer service, is beyond me.
Two of the for-profit colleges that will lose eligibility for student loans specialize in hair styling, Riggs points out.
The two-year default rate underestimates borrowers who are in financial trouble. It doesn’t include defaults after two years or the many people using forbearance measures to postpone repayment.
Debt-burdened graduates of San Francisco’s California Culinary Academy are suing the for-profit cooking school, claiming they were misled about job prospects.
Career Education Corp., which owns the chain of 16 Le Cordon Bleu cooking schools, has agreed to offer rebates up to $20,000 to 8,500 students who attended the Culinary Academy between 2003 and 2008, reports the San Jose Mercury News.
In 2004, (Emily) Journey was a recent high school graduate, dreaming of opening her own bakery, when she enrolled in a 7-month program in pastry and baking arts at the San Francisco school. Recruiters convinced her it was a worthwhile investment and helped her borrow $30,000 to pay for it.
After finishing the program, the only job she could find paid $8 an hour to work the night shift at an Oregon bakery — “something anyone could have gotten without a culinary certificate,” she said.
Journey, who now lives in Bakersfield, has abandoned her baker’s dream and now plans to attend community college to become a nurse or dietitian.
Le Cordon Bleu schools in Pasadena and Portland also face lawsuits from former students who charge deceptive advertising on the schools’ job placement rates.
WGU challenges for-profits
Western Governors University — an accredited, low-cost, nonprofit online university — is The College For-profits Should Fear, writes John Gravois in the Washington Monthly. Designed for working adults, WGU costs less than $6,000 a year, while tuition at for-profit universities averages $15,600.
WGU degrees are based on competency, not on “seat time,” so students can move at their own pace.
By gathering information from employers, industry experts, and academics, Western Governors formulates a detailed, institution- wide sense of what every graduate of a given degree program needs to know. Then they work backward from there, defining what every student who has taken a given course needs to know. As they go, they design assessments—tests—of all those competencies. “Essentially,” says Kevin Kinser, a professor of education at the State University of New York at Albany, “they’re creating a bar exam for each point along the way that leads to a degree.”
. . . At the beginning of a course, students are given a test called a “pre-assessment.” Then they have a conversation with their mentor—a kind of personal coach assigned to each student for the duration of their degree program—to discuss which concepts in the course they already grasp, which they still need to master, and how to go about closing the gap. The students are then offered a broad set of “learning resources”—a drab phrase, sure, but no more so than “crowded lecture hall”—that may include videos, textbooks, online simulations, conversations with a WGU course mentor (an expert in the subject matter who is on call to answer questions), or even tutors in the student’s hometown.
Students pay $6,000 for as many courses as they can finish in two semesters. The average student is able to complete a bachelor’s degree in two and a half years for about $15,000.
Traditional-age students don’t do well in WGU’s online, competency-based program, but the model works for adults with some college and work experience. The average student is 36 years old, the same as in University of Phoenix’s online programs.
WGU offers bachelor’s and master’s degrees in education, business, information technology and health professions, mainly nursing. The model works well for professions with a proficiency test, such as the nursing certification exam or the Praxis for teachers, Gravois writes. For example, Ray Shawn McKinnon, a former pastor hoping for a business career, will have to pass the national human resources management certification exam to earn his MBA in human resources.
In an online education sector plagued by accusations of low quality, Western Governors can show that its degrees are backstopped by the official guardians of various professions. (It also helps that WGU students tend to score higher than the national average on such professional exams.)
WGU’s six-year graduation rate — calculated by the feds only for first-time, full-time students — is only 22 percent, the same as the for-profit average. WGU estimates 40 percent of all students, including part-timers and those returning to college, complete a degree. Those rates look back to 2004, when WGU’s program was weaker, writes Gravois. This year, 77 percent of first-year students returned for a second year, “higher than the national average at both for-profits and traditional schools.”
As the for-profit colleges report shrinking enrollments, WGU’s enrollment is growing by 30 percent a year. Indiana has made WGU a state university, which means students can qualify for state aid. Washington, Texas, California and Arizona and other states may follow suit.
