For-profit schools

Twice in the past month, I heard that the department of education is considering disqualifying any for-profit school from federal loans in which the students have an unacceptable rate of loan re-payment. It sounds like they said that “unacceptable” was a rate lower than 45%. Did I hear that correctly? Does the department of education consider 50% repayment of student loans an acceptable percentage?

Why do the for-profit schools have such a poor repayment record? What are they teaching them? What are these students studying such that it is not preparing them for gainful employment? It’s one thing to study engineering or economics. Are students taking out loans to study French Art, Basket Weaving, or some other useless (or overcrowded) vocation? Or are they just defaulting because they know they can?

You heard correctly.

A disproportionate number of these schools are quasi-vocational (think cosmetology, computer training – think ads you see on the bus about how to gain a degree in 18 months). Others are online or “distance learning” operations.

A disproportionate number are more or less out and out frauds, existing mainly to solely to hook students up with government-guaranteed loans.

There’s a high default rate for a number of reasons. Some would say that part of the reason is they’re recruiting from the bottom of the barrel of stupid, dishonest people who can’t get into a “real” college. Others fault the for-profit “colleges,” who have every incentive to con desperate lower class people into (very expensive) tuition with unrealistic promises of lucrative careers. When the people see that they’re six figures in debt and no more employable than before, their inclination to pay their debts (when they know they’re government-guaranteed) is very low. Oh, and for many of these places, the idea of helping their “graduates” with job placement (something they’re willing to imply up front is a part of their service) is an empty promise.

I’m a big fan of real education, including vo-tech, for the underclass, and there are certainly good programs out there for non-traditional students. As with anything, the presence of a seemingly bottomless source of “free money” creates distortions in the market and perverse incentives. The predatory schools have preyed upon the “who could be against education?” mindset that predominates in government. I hope DOE is serious about the crackdown.

There’s a Frontline episode on the recent for-profit school explosion, College, Inc. - it’s on Netflix Watch Instantly. There was also, surprisingly, a good Cracked list on the topic.

I worked for one of these and Huerta88 has pretty much nailed it.

The “Admissions” department is made up of high pressure salesmen who have to hit enrollment targets or they are out the door. They tell every prospective student that they are pretty much assured of a 60K+ job if they just sign here right this minute!

The typical “student” is someone who couldn’t make it in a community college. Scratch that. Most couldn’t make it in a real Junior High class. Most only make it one or two semesters before dropping out. The classes are a joke. The instructors are explicitly told not to fail students, as this increases the drop out rate.

Job placement actually does make an effort, but given what they have to work with, it’s nearly impossible. After one of our students says 10 words at an interview, there is no way they are getting hired at any place better than Wendy’s.

It is no surprise to ANYONE who has been to one of these that the default rate is extraordinary.

Another reason for low repayment is the number of people who don’t finish school. Back when I was teaching, graduation rates in many court reporting schools were less than 20%. Students would sign up, get a loan, and realize a year or two later that they were simply never going to achieve the 220 word per minute rates required to graduate.

While they hardly qualify as a reference site, had a good article on for-profit schools a couple of weeks ago that touched on the same things said above.

There’s nothing intrinsically wrong with the for-profit model. I worked at one company that had a string of absolutely superb administrative personnel from what were called, back in the day, “secretarial schools.”

The difference is those schools placed a lot of graduates with companies they had placed earlier graduates with. They had reputations to uphold, and they were hard-asses about standards. If a student wasn’t cutting it, they were invited to leave, rather than drag down the school’s reputation.

Here’s the article from Cracked:

There’s also the fact that many of these places have reputations beneath those of even the lowliest state schools. So even if you do manage to graduate, an employer is going to get skittish when they see DeVry University on your resume.

I have heard (citation: my friend, Tom) that many for-profits, such as University of Phoenix, the on-line school, have many buildings around the country that are essentially loan offices, not classrooms. I also know ( that hedge funds are moving into charter schools because of the enormous tax breaks that provide large potential profits there. Folks, what you used to think of as public education and higher education and well-rounded education, are going the way of the hula hoop, right beneath your nose. xo, C.

Charter Schools are publicly funded and don’t charge tuition. They also don’t provide postsecondary education. This has absolutely nothing to do with for-profit postsecondary institutions; it’s about banks taking advantage of tax breaks to finance public school construction.

My husband and daughter are both in IT, and so is my best friend. All three tell me that DeVry graduates have a very, very bad reputation in the business.

As the OP did not limit his question specifically to postsecondary education, I felt that my post addressed the larger question of financing of education. Incidentally, while charter schools are publicly funded, they are also often supported by funds given privately and corporately, as there are no limits to such “gifts.” If you believe that they have the same essential financial bases as other “public” schools, you’re mistaken.

An interesting story from today:

Just curious… do you think it’s because DeVry has a poor academic program, or because DeVry attracts low caliber students?