For-Profit Higher Education: Recruitment Trumps Retention

With a still struggling economy and a persistently high unemployment rate, the value of a college degree and what it represents are more critical than ever. Fortunately for veterans, the Post-9/11 G.I. Bill is a game-changing benefit, allowing them to earn a degree that will in turn improve their chances of securing employment and more, importantly, a career. In March 2012, the VA reported that since the bill’s passage in 2008, more than 702,576 individuals have received approximately $17.24 billion in benefit payments. Yet these generous Federal benefits make veterans a ripe target for for-profit institutions, whose business model often favors recruitment over retention and sales over student success. The for-profits have made their move. Now it’s time for vets to push back and defend themselves and the benefits they worked so hard for.

Operated as businesses, many for-profit schools look to make a quick return to satisfy investors at whatever cost, a cost often passed along to the student. Combined, the fifteen publicly traded companies enroll at least 1.4 million of the 2.2 million students attending for-profit schools. On average, tuition at a for-profit college costs 350 percent more than public schools located in the same state. As a result of higher tuition costs, the Department of Education reports that 96 percent of students at for-profit schools take out student loans, compared to 13 percent at community colleges, 49 percent at public universities, and 57 percent at private non-profit universities.

According to the recent report by the Senate Committee on Health Education Labor and Pensions (HELP), FOR-PROFIT HIGHER EDUCATION: The Failure to Safeguard the Federal Investment and Ensure Student Success, even if funding and resources were increased at public universities and community colleges, it would be virtually impossible to accommodate and meet the needs of the 2.2 million students who are currently attending for-profit colleges.

The HELP committee found that eight of the top ten recipients of VA Post-9/11 GI Bill funds are for-profit education companies and that during the 2011-2012 school year these institutions collected 37 percent of Post-9/11 GI Bill benefits and 50 percent of DOD Tuition Assistance benefits. Boil it down, and between 2009-2010 Federal taxpayers paid $32 billion dollars to for-profit institutions. While these institutions receive a significant amount of Federal aid, their students pay higher tuition than comparable state programs, take out additional student loans, and suffer from high student loan default rates and poor completion rates.

In 2009, the average profit margin for the 30 companies included in the HELP report was 19.7 percent. In order to generate these high profits, sustained growth in enrollment is a must. The HELP committee found that on average for-profit schools employed about three times as many recruiters as student service representatives and 10 times as many recruiters as career services representatives. In 2009, the 30 for-profit companies included in the HELP report spent an average of $2,622 per student on marketing compared to only $2,050 per student on instruction.

This emphasis on marketing and recruiting over investment in academics clearly shows that for-profits prioritize their bottom line over the experience of their students. While it is admittedly difficult to measure the quality of education, the Department of Education currently relies on cohort dropout rates and student loan default rates as metrics. When compared to the public and non-profit sector, the quality of education is relatively low within the for-profit sector: more than half of the students enrolled in the 15 publicly traded for-profit colleges in 2008-2009 left without a degree or diploma within an average of 4 months. The second metric, loan default rates, continues to paint a bleak portrait of for-profits, as students at for-profit colleges are also more likely to default on a student loan. The Department of Education reports from that 2005-2008 slightly more than 1 in 5 students who attended for-profit schools defaulted on their student loans as compared to 1 in 11 students at public and non-profit schools during the same period.

The HELP Committee recommends increasing transparency of data on student outcomes, strengthening oversight of Federal financial aid, and establishing meaningful student protections. With an unprecedented amount of Federal tax dollars flowing into the for-profit schools sector, Congress must enact legislation to effectively regulate their business practices and make them accountable for their educational outcomes. The greed of for-profits can’t be allowed to bleed out something as important to our nation’s future as the G.I. Bill.

Are you a student veteran who has been impacted by a predatory for-profit schools? Click here to tell us your story, the school you attended, and explore our resources for legal and financial assistance to recoup any lost GI Bill benefits.

Maura McCarthy serves as IAVA's Research Director in Washington, D.C. Follow her on Twitter at @MoMcCarthy.