Wednesday, September 1, 2010

Avoiding the Trap of For-Profit Colleges and Universities


I mentioned in an earlier post that at Central Dallas Ministries, we are formalizing our work in public policy and advocacy. One of our initial efforts in this area is a rather significant issue that had escaped my notice and that of many people: this issue of for-profit, or proprietary colleges and universities. It's the subject of my monthly column in the Dallas Morning News and the focus of a public awareness initiative that we have already started with our neighbors, will continue with our staff and about which we will continue to educate others.

We've discovered the problem that for-profit schools pose in conversations with adults who want to escape poverty by continuing education, by enrolling in these schools, but who end up with credits that don't transfer, credentials that aren't recognized, incredible debt and no at the end of their training.

Aggressive tactics on the part of recruiters either pressuring, low income wage earners or the unemployed to enhance their skills and increase their marketability, make this a problem. A researcher contacted us earlier this summer told us that the new fertile ground for some recruiters are the homeless.

It's important that regulations that protect those who are vulnerable and sometimes desperate, to get an education that will improve their life prospects be enacted. But its also important that those who want to continue their education, whether new high school graduates or adults wishing to return to school, do their homework and investigate the schools in which they wish to enroll. Some may arrive at the decision that one of these schools is the best choice, but its important to make an informed decision.

Aside from the column, here is some other information about for-profit colleges...

Proprietary schools-received over $16 billion in federal loans, grants, and campus-based aid under Title IV of the Higher Education Act in 2007/08. The Department of Education makes loans available to students to help them pay for higher education at public, private non-profit and proprietary schools, and the students who attend proprietary schools are most likely to default on these loans, according to analysis of recent student loan data. Students from proprietary schools have higher default rates than students from other schools at 2, 3, and 4 years into repayment. Academic researchers have found that higher default rates at proprietary schools are linked to the characteristics of the students who attend these schools. Specifically, students who come from low income backgrounds and from families who lack higher education are more likely to default on their loans, and data show that students from proprietary schools are more likely to come from low income families and have parents who do not hold a college degree. Borrowers who are not successful in school and drop out also have high default rates. Ultimately, when student loan defaults occur, both taxpayers and the government, which guarantees the loans, are left with the costs. Although students must meet certain eligibility requirements to demonstrate that they have the ability to succeed in school before they receive federal loans, weaknesses in Education's oversight of these requirements place students and federal funds at risk of potential fraud and abuse at proprietary schools.

Recommendations
Federal – The federal government should strengthen its monitoring and oversight of federal aid eligibility and accreditation requirements. Revising regulations to strengthen controls on graduation requirements and could help address the problem of low-income individuals falling prey to diploma mills, large student debt, and a perpetual cycle of unemployment.

Local – DFW
Public and political pressure should be placed on local community colleges to address the needs of the demographic population they serve. An increasing number of non-traditional students are choosing to go back to school and need to take night classes to maintain a day job and meet their family or financial obligations. There are more than 44 proprietary schools in the DFW area alone and only 8 Dallas community colleges. Creating a forum and sending petition letters regarding the public needs could be the first step to creating an effective change.

Recruitment
Proprietary schools have tripled enrollment to 1.4 million students and revenue to $26 billion in the past decade mainly by targeting:
 Low-income students
 Active-duty military
 Non-traditional students

Quality of Education & Graduation Rates
• The median graduation rate for proprietary schools is only 38%—by far the lowest rate in the higher education sector.

• Some proprietary schools offer a good education, but many more are subpar at best
 Accreditations or licenses are not widely accepted
 Difficult to find job
 Trouble transferring credits to other institutions

Debt & Financial Consequences
• 60 % of bachelor’s degree recipients at for-profit colleges graduate with $30,000 or more in student loans
 One and a half times the percentage of those at traditional private colleges
 Three times more than those at four-year public colleges and universities

• Students at for-profit schools have higher than average loan default rates
 Proprietary schools: 11%
 Across higher education: 6%
 Nonprofit private colleges: Under 4%

• Financial consequences for defaulting on loans:
 Ineligible for assistance for other federal loan programs
 Ineligible for Title IV federal student aid
 Negative credit score
 Harm ability to obtain job
 Rent an apartment
 Social Security benefits and tax returns can be intercepted
 Debt cannot be erased in bankruptcy

• The federal government and taxpayers pick up 97-100% of the cost on defaulted loans

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