College & Workforce Readiness

For-Profit Graduation Rates Low, Student Debt High

By Caralee J. Adams — November 23, 2010 2 min read
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While students may enter a for-profit college with high hopes of getting a degree, the vast majority never get one. What they do often leave with is unmanageable debt. Low completion rates and high levels of debt in this growing sector of higher education were outlined in a new report released today by the Education Trust, a nonprofit in Washington that focuses on closing the achievement gap.

Just 22 percent of students at for-profit colleges earn a bachelor’s degree within six years, compared with 55 percent to 65 percent at public and private nonprofit colleges and universities, according to Subprime Opportunity: High Dividends, Low Baccalaureates for For-Profit Colleges. The median debt for students attending for-profits is $31,190—nearly twice as much as it is from private, nonprofits and four times greater than for students at public universities. Data in the report come from College Results Online.

Fueled by federal student-aid subsidies and private student loans, enrollment at for-profit schools has grown by 236 percent over the past 10 years. There is a heavy investment from government in this sector with $4.3 billion in Pell Grants (nearly four times the amount a decade earlier) and $20 billion in federal student loans going to students at for-profits, the report chronicles.

While the growth in itself is not the issue, the authors of the report said they became more alarmed as they looked at the quality of services and found the profit model was based on sustained failure, not success. This industry also enrolls more low-income and underrepresented minorities than other sectors, often with aggressive recruiting techniques, a government report this summer found.

“For-profits claim to be models of access in higher education,” said Jose Cruz, vice president for higher education policy and practice at the Education Trust. “The odds of earning a degree are stacked against students who enroll in these instituions. And yet, they are virtually guaranteed one thing: years of student-loan debt.”

For first-time, full-time freshmen seeking a bachelor’s degree at for-profit colleges in six years, the average graduation was 9 percent at the University of Phoenix, 31 percent at DeVry University, and 27 percent at Westwood College, the report shows.

It also costs more to go to these college. After maxing out grant aid, the average low-income student at a for-profit pays $8,500 more per year than the average student at a private nonprofit. It’s often hard for these students to find jobs that match their qualifications and end up unable to repay their loans. Loan-default rates among students from for-profits are about 10 percent in the first two years and 19 percent over three years—substantially higher than those in other sectors.

The authors pointed to the proposed gainful-employment rules from the Department of Education and a needed remedy to oversee this industry.

“Nobody is minding the store. The existing government structure to police these schools is not adequate to the task,” said Kati Haycock, president of the Education Trust, at a press conference today. “A more aggressive federal regulatory policy is needed. Clearly there are abuses going on, and no one is stopping them.”

A version of this news article first appeared in the College Bound blog.