For-profit colleges account for about half of student loan defaults.
Congressional hearings and a barrage of criticism have put for-profit colleges on the defensive, and with many of the sector’s largest schools touting vast web-based course options, those who track the industry say for-profit programs could damage the public perception of online education.
Lawmakers from both major parties have defended the for-profit industry’s business practices, but Sen. Tom Harkin (D-Iowa) has remained one of the most vocal—and active—critics of for-profit colleges’ recruitment and student loan practices.
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Harkin has held five Senate hearings—including a July 21 roundtable discussion with for-profit college officials—and released three reports detailing the industry’s abuses. He has repeatedly pointed out that for-profit colleges educate 10 percent of American students and take in about 25 percent of federal student aid.
Harkin has remained complimentary of for-profit schools that don’t maintain high student loan default rates, but his reports have uncovered strategies for roping prospective students into federal loans that pay for pricey classes.
Many of the industry’s largest colleges with the most recognizable brand names, including the University of Phoenix and Kaplan University, have advertised using the anywhere, anytime convenience of online courses that appeal to adults with hectic schedules.
“Online education is quite distinct from the profit motive of [for-profit schools],” said Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers (AACRAO), who spoke during Harkin’s July 21 roundtable discussion. “But the confluence comes when people see for-profits highlighting their online classes.”
Associating online education with a college sector that has been hammered by public figures, nonprofit organizations, and Education Department (ED) officials in recent years could tarnish the public’s perception of web-based learning, Nassirian said.
“Committing fraud is easier from a distance,” he said, referring to a 2010 Government Accountability Office (GAO) report detailing how for-profits pressure students into signing up for massive student loans. “That’s just the nature of distance delivery. It’s just like eMails you get from princes in West Africa asking for money. There’s more ambiguity online.”
Not everyone who has tracked the huge growth in the for-profit college sector agreed.
Criticism and negative headlines about for-profit programs won’t dissuade prospective students from inquiring about online courses, said Neal McClusky, associate director of the Center for Educational Freedom at the Cato Institute, a conservative think tank based in Washington, D.C.
McClusky, who called the federal “gainful employment” regulations “unfair” because they target a specific sector of higher education, said students understand that criticism of for-profit colleges “has more to do with the for-profit part than the online education aspect.”
“I don’t get the sense that the negative focus on for-profit schools has done much to tar online education generally,” he said. “For-profit schools are associated more with schools that have a small office with a few classrooms in a nearby strip mall than they are with online education.”
ED’s “gainful employment” rules are meant to ensure that students aren’t graduating from for-profit colleges unqualified for the professional world and burdened with excessive student loan debt.
One-fourth of for-profit students default on their loans after three years, for-profit students account for almost half of all federal loan defaults, and graduation rates at those schools hover around 50 percent, according to national education statistics.
A college must fail all three of the government’s “performance requirements” in three out of four years before the institution can no longer receive federal loans, according to ED’s new regulations, which take effect in 2015.
Commercials and internet videos from EducationConnection.com telling prospective college students that they could pursue a degree from the comfort of their pajamas could do more to degrade web-based learning than any government reports criticizing for-profits, said Andrew Magda, a senior analyst for Eduventures, a higher-education consulting firm based in Massachusetts.
“I would think such ads may be tarnishing web-based learning in general, but I would not link it with one school or type of school,” he said. “If there is a perception that [for-profits] are cheapening web-based instruction, I would say it is misinformed or I would say that if it is happening, it is mostly on the fringes and not mainstreamed. For-profit institutions have been innovating over the last decade and trying to position themselves as being similar to nonprofit institutions. For-profits have been trying to raise perceptions of themselves as well as their offerings, many being web-based.”
With Congress tackling the national debt and a stubbornly high unemployment rate, Magda said it’s unlikely Harkin’s hearings or reports would lead to legislation in either chamber of Congress, barring “a massive event or scandal” involving for-profit institutions.
Even if Harkin were to draft legislation further regulating for-profit schools, McClusky said, the proposal would be a nonstarter in the Republican-controlled House of Representatives.
“It would be very low on the overall list of congressional priorities and [would have] no chance of getting through the House,” he said.
A report released by Harkin last year presented charts instructing for-profit college recruiters to prey on applicants’ “pain” and “fear” in persuading them to sign up for classes and large student loans.
In a document labeled the “pain funnel,” recruiters were given a list of questions designed to measure prospective students’ problems and what they’ve done to solve those problems.
The document’s final question asks: “Does the prospect have enough pain to qualify for the next step?”
Another document published by Harkin last year reminds for-profit recruiters that “we deal with people [who] live in the moment and for the moment. Their decision to start, stray in school, or quit school is based more on emotion than logic. Pain is the greater motivator in the short term.”