Regulating for-profit colleges requires ‘care’
Higher-education officials said the federal government has a balancing act to maintain during its crackdown on student aid and recruiting rules.
John Ebersole, president of New York-based Excelsior College, a nonprofit online school, said the Obama administration needs for-profit institutions run by companies like Apollo Group Inc. and Career Education Corp. if the government is going to meet its lofty goal of leading the world in college graduates by 2020.
“While not-for-profits such as Excelsior … are doing their best to serve this community, we do not have the marketing budgets” of for-profit colleges that have caught investors’ attention in recent years, Ebersole said.
Projections show that for-profit colleges will serve 42 percent of the undergraduate market by 2019, according to a report published in June by Edventures, a research and consulting firm based in Boston.
The Obama administration should avoid painting the entire higher-education industry with a broad brush while creating the new student aid and recruiting policies, Ebersole said.
“While everyone is on board with the idea of stopping any real abuse, whether in recruiting or financial aid distribution, this needs to be done with some care,” he said.
“Rather than target an entire sector, which includes a number of ethical institutions, I think enforcement should focus on those few who are really violating the spirit, if not the letter, of current rules.”
Ebersole continued: “Coming down on the for-profits in an excessive and non-discriminatory manner will not serve the president or the country well.”
For-profit colleges fight negative perception, research
Criticism of the for-profit industry intensified last year when research suggested for-profit colleges are gaining market share among online learners as the recession drives more people back to school.
Students who took out loans to pay for education at commercial institutions such as the University of Phoenix and DeVry University had a 21-percent default rate within three years, according to the Dec. 14 ED report, which used data from students who began loan repayment in fiscal year 2007.
For-profit schools’ default rate in fiscal 2006 was 18 percent.
Overall, American college students defaulted at a 12-percent rate, up from 9 percent the year before.
The rising default rates could affect commercial universities’ government funding. Starting in 2012, schools that have a 30-percent loan default rate won’t be eligible for federal student aid programs. About 5 percent of colleges and universities evaluated in the ED report had loan default rates of 30 percent or more; 80 percent of those schools were commercial colleges.
The data do not account for private student loans, just government-backed loans.
For-profit institutions hovering close to or beyond that 30-percent default mark include seven Kaplan University schools and 22 Everest College campuses, according to the government analysis.