Do for-profit colleges spend too much on bus ads?
A new report from a Senate education committee adds a fresh layer of data -- most of it critical -- to the debate over the wisdom of allowing colleges to operate for profit.
The "Emerging Risk?" report emerged Thursday from the Senate Health, Education, Labor and Pensions (HELP) Committee, as the panel convened for its first hearing on whether the sector requires greater government oversight.
Sen. Tom Harkin, the Iowa Democrat who chairs the committee, said the "limited amount of publicly available data" available for study illustrates "an alarming trend in this industry.
"Taxpayers are investing billions of dollars in for-profit colleges, yet student debt and default rates at these schools are disproportionally higher than at non-profit and public universities," Harkin said in a statement. "This data begs for oversight of this industry, which will begin with our first hearing today."
(Disclosure: The Washington Post Co. has a stake in the outcome of this regulatory episode as the owner of Kaplan Higher Education, a big player in the for-profit sector.)
The Obama administration has proposed a series of tweaks to federal law that would curb the worst alleged abuses in the for-profit industry. Two have captured the most attention: a regulation that would discourage the institutions from compensating recruiters based on a head count of students recruited, and another to restrict programs whose graduates have unreasonably high levels of student debt relative to their earning power.
In fewer than 20 pages, the report pulls together a fairly comprehensive portrait of the data points that have congressional regulators worried.
1. For-profit colleges have exploded in enrollment. The 14 publicly traded companies in the industry enrolled 1.4 million students as of 2008, up from 200,000 students in eight companies 10 years earlier.
2. Online education is fueling the boom, facilitated by a 2005 rule change that allowed schools to furnish more than half their courses online.
3. For-profits gobble up student aid. The institutions enroll 10 percent of students but receive 23 percent of federal aid.
(Industry leaders say that's because the sector serves a disproportionate share of low-income and self-supporting students, a point its critics do not dispute. The report notes that for-profits "actively recruit primarily low-income students.)
4. For-profit colleges spend barely half of their budget on education and nearly one-third on recruiting and marketing, spending heavily "on television advertisements, billboards, phone solicitation, and web marketing." Some publicly traded schools spend as little as 32 percent on education.
5. Large numbers of students cycle through for-profit colleges. Completion rates are a mystery in the for-profit sector. But available data show the for-profits tend to enroll more students over the course of an academic year than their total starting enrollment. One school studied started the year with 62,000 students, enrolled another 117,000 students and ended the year with 86,000 students. Where did the rest go?
6. As previously noted on this blog, for-profit students borrow more than other students, and one-quarter of 2008 graduates borrowed more than $40,000.
(For-profit leaders note, again, that they serve a largely low-income student population, hence the loans.)
Conclusion? The data, on balance, yield a "mixed portrait" of the sector that "calls into question the taxpayer return on their multibillion-dollar investment."
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Daniel de Vise
June 25, 2010; 9:10 AM ET
Categories: Access , Admissions , Aid , Attainment , Finance , For-profit colleges , Marketing , Online , Public policy | Tags: for-profit college tuition, for-profit debt, for-profits, higher education finance, senate investigation for-profits
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