For Profit School Presentation by Jennifer Melton

1. Jennifer Melton
For Profit Schools

2. Question
• Do for profit schools
have a place in the
American higher
education system?
• Do these schools
have an overall
positive or negative
impact on
education?

3. Topics Covered
• History of For Profit Schools in the U.S.
• Characteristics of For Profit Schools and their
Students
• Scandals at For Profit Schools and Regulations
Implemented to Address Them
• Outcomes of For Profit Schools
• Conclusion

4. History of For Profit Schools
• Part of America since Colonial times
– Answered demand for training in trades
– Colleges of time were for the elite and were
religious-oriented
• Ben Franklin was a proponent of these
schools
– Education in skills and trades would
help build fledgling American economy

5. History of For Profit Schools
• For profits continued growth into 19th century
– Correspondence schools
• Unlicensed & Unregulated
– Some schools taught subjects competently
• Unregulated medical schools were a disaster
– Contributed to horrific medical
care provided to Civil War
soldiers

6. • Enrollment dipped in early 20th century with
growth of public schools
• 1944 - GI Bill was first infusion of federal
cash into for profit schools
– 2/3 of all for profit schools in country opened after this
bill was adopted
• 1972 – For Profits allowed to participate in
federal student loans and grants
History of For Profit Schools

7. History of For Profit Schools
• 1976 University of
Phoenix founded
• 1990’s Publicly traded
for profit schools
• 21st Century saw rapid
growth due to
introduction of online
curriculum

8. • Maximal use of federal student aid
– Provide 86% of all revenue
• Higher tuition than public and nonprofit schools
– Tuition often set at exact amount of aid students can
qualify for
• Need for profitability and growth leads to
aggressive recruiting of students
– 23% revenue spent on marketing
vs. 17% on instruction
– 32,000 recruiters vs. 3,500 career
services staff
Characteristics of For Profits

9. • Disproportionately poor, minority, single parents,
military
• Tend to be first in their family to attend college
• Most enrolled in 4 year program and attend full
time
• 96% take out student loans
• High default rates
– Account for 47% of all student loan defaults
Students at For Profits

10. • Colonial Period & 19th Century
– Accusations: Unscrupulous, self serving
– Fledgling country unable to investigate and regulate
these schools
• 20th Century - First Investigation
– Ineffective instruction
– Poorly trained workers lowered stature of trades
– Deceptive solicitation of students
– Investigation Response: Smith Hughes Act
• Vocational funding to public schools
Scandals at For Profits

11. Scandals at For Profits
• GI Bill GAO Investigation
– Overstating costs and enrollment
– Recruiting students regardless of ability to benefit
– VA staff colluded with school owners
– Investigation Response
• Schools had be approved and
have contracts with VA
• Removal of avocational
schools

12. • 1980’s GAO Investigation
– For profits represented 74% of all fraud in student aid
program
• Investigation Response:
– Congress enacted over 100 provisions
– Default Rate Rule
– 85/15 Rule
• As a result, 1500 for profit schools were
eliminated or withdrew from federal student aid
program over the next decade
Scandals at For Profits

13. • 2010 GAO Investigation
– All schools reviewed made deceptive statements to
undercover GAO investigators
• Accreditation
• Statistics – graduation, employment, expected salaries
– For profit schools 6-13 times more expensive
• Investigation Response:
– Gainful Employment Regulation
– Schools required to meet minimum thresholds with
debt-to-income rates of graduates
Scandals at For Profits

14. • Dismal outcomes for students
– More likely to be unemployed
– Earn less money
– Fare little better in job market than job seekers with
high school degrees
– Lower satisfaction with education
• More likely to default on student loans
– Catastrophe for student – non-dischargeable in
bankruptcy
– Taxpayers on the hook
For Profit Outcomes

15. • Include Veterans Benefits in 90% limit
• Require for profits to provide career services,
tutoring, guidance
• Use Consumer Protection Laws
– Department of Education should be a “Responsible
Lender”
• Ban for profit schools from federal student aid
program
• Direct federal funding of free education at two and
four year public schools
– Would cost half the amount currently spent on student
financial aid
Proposals to Address Poor Outcomes

16. • Currently, there are not enough public and
private nonprofit schools to meet demand
• For profits reach underserved students
• More responsive to changes in education and
training demand
• Offer shortened timeframes for completing
degrees
Do For Profit Schools Serve any
Beneficial Purpose?

17. • Political reality ensures these schools will
continue to receive federal student aid
• No political appetite to increase funding to public
schools
• Consumer Protection Laws
• Culture of consumer protection at Department of
Education and Federal Student Aid division
– Adequate staffing
Conclusion