The Pros and Cons of For-Profit Colleges

For many adults looking to go back to school,  for-profit colleges seem like an obvious choice. These schools cater to adult students by offering degrees at night or online, and also have flexible programs geared for the student's individual pace. But many for-profit schools have also  fallen under the scrutiny of government regulators and even prosecutors for some of their actions.

Today more than 2.4 million students are enrolled in a for-profit college .with the majority of these students being over the page of 24. Add to this the fact that in 2009-2010, $7.5 billion in Pell Grants were given to for-profit colleges, and it is easy to see why this industry has become a focus of government assessment.

The for-profit education system we have today came about in 1972 when Congress passed a reauthorization of the Higher Education Act. This law increased the amount of government student aid available to for-profit schools. With government funding available, many more students could attend college. To meet the increased demand for higher education, for-profit colleges proliferated.

According to the U.S. Department of Education, the for-profit college's market share of higher education rose from 0.4 percent in 1976 to 12 percent in 2012. With this kind of growth, investors on Wall Street saw an opportunity to make significant profits.

Today, the vast majority of for-profit colleges are operated by large, publicly traded corporations or by private investment funds. For example the University of Phoenix, among the largest and best known of the for-profit schools, is owned by The Apollo Group.

For the adult student, for-profit colleges have certain benefits that many public and nonprofit colleges do not have. The University of Phoenix, for example, works almost exclusively with enrolling nontraditional students and for a long time the school did not accept any applicants under the age of 23. Many for-profit colleges have created programs that run in the evenings and on weekends. Other programs are offered almost exclusively online or in a hybrid format with students coming to a classroom once or twice in a term. Many for-profits have developed programs that satisfy the needs of nontraditional students.

In 2010, Senator Tom Harkin, of Iowa, spent two years examining the operations of 30 for-profit colleges and found that of 1.1 million students who had enrolled at these institutions, better than 50 percent had dropped out within two years. In 2012, this same Senate committee found that for-profit colleges were particularly aggressive in their recruiting efforts of active U.S. military personnel. One for-profit college, Bridgepoint Education's Ashford University, employed 1,700 recruiters but just one job-placement counselor. Bridgepoint was the third-largest recipient of military students' tuition-assistance funds.

Finally, students who attended for-profit colleges ended up defaulting on their student loans in much higher numbers compared with students who took out loans at traditional four-year colleges. For example, 26 percent of students at for-profit schools who took out between $5,000 and $10,000 in student loans ended up defaulting, compared with 7 percent at four-year schools. And 16 percent of for-profit students taking out between $10,000 and $20,000 in loans ended up defaulting, compared with 2 percent who took out that much money at traditional four-year schools.

If we use the University of Phoenix as an indicator on how for-profit colleges are doing, the future does not look encouraging. The university's enrollments fell by more than one-third between May of 2010 and the end of 2012. Last year, Apollo also closed more than 100 University of Phoenix campuses and learning centers and eliminated 800 positions nationwide.

All of these findings should compel adults to closely examine the for-profit college market. Adult students should find out what the graduation and job placement rates are at any for-profit schools. Adult students should also closely compare the cost of attending for-profit colleges with both nonprofit private colleges and public institutions to find out which truly offers the best education at the best price.

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