For-Profit Colleges: Marketing to the Desperate, Supported by Our Taxes

In the summer issue of The American Prospect, Mark Huelsman profiles the for-profit colleges he calls Betrayers of the Dream.  “The students targeted and affected most by fraudulent operators are disproportionately black, “explains Huelsman.  “The story of predatory for-profit colleges is not unlike that of subprime lending or the proliferation of payday loans.  Wider economic unease was used by the cynical to bring further distress to people of color.”

Huelsman lists the trail of  investigations that finally resulted in the closure of Corinthian Colleges—a for-profit that had “enrolled more students than the Ohio State University and the University of Texas combined.” Corinthian had been flagged by attorneys general in several states, Tom Harkin and the U.S. Senate,  lawsuits from the federal government, and an investigation by the SEC: “These found a broad pattern of deception in recruiting students, bogus reporting of job placement data, and a strategy of combining high tuition and debt levels with a substandard educational product.”  “Corinthian’s story,” writes Huelsman, “is a microcosm of the for-profit college sector….”

Huelsman reports that what finally brought down Corinthian was a relatively simple action by the Obama Department of Education—a  decision to force Corinthian to fulfill the Department’s reporting requirements by withholding federal funds—student loans, Pell Grants, and G.I Bill Benefits—until the college submitted reports. Corinthian was unable to comply with regulations before its cash flow ran out. Like other publicly-traded, for-profit colleges that depend on federal financial aid for 86 percent of their funding, Corinthian was unable to survive the freeze on access to federal dollars.  (Holding the college, not its vulnerable students accountable, U.S. Secretary of Education, Arne Duncan later announced debt relief for 40,000 of Corinthian’s former students and a chance for 300,000 others to apply for relief for student loans that had paid for their Corinthian tuition.)

Huelsman describes explosive enrollment growth at for-profit colleges—an increase of 225 percent from 1998-2008 compared to growth during the same period of only 31 percent in the total college-going population.  “This enrollment growth included a massive targeting of students of color.  The University of Phoenix, for example, was spending as much as $400,000 a day on advertising.  Ads for these colleges were ubiquitous in communities of color, on commercials for day-time television programs, at bus stops and subways…. They enlisted leaders in the black community to advertise on their behalf…”  Recruiters for a St. Louis for-profit, Vatterott College, told recruiters to ‘target the welfare mom with kids’ and ‘pregnant ladies,’ as well as those with records of ‘recent incarceration’ and ‘drug rehabilitation.’  Other colleges had recruiters drop off information at Section 8 housing and and unemployment offices….”

Huelsman quotes Johns Hopkins sociologist, Stefanie DeLuca  describing the young people targeted with such advertising: “These are students often without the benefit of college counselors, making what appear to be logical decisions based on the signals and available information.”  The resulting average debt load, especially for students eventually dropping out without a credential is alarming—“$40,000, nearly $15,000 more than graduates at public four-year colleges, and over $6,000 more than graduates at historically black colleges and universities.” And 53 percent of borrowers in four-year, for-profit programs eventually drop out without a credential that will lead to a job.

Huelsman summarizes the lobbying and political contributions that have led to a bipartisan failure in Congress to regulate the for-profit, higher education sector.  “Phoenix alone contributed $11 million to candidates in the 2008 election cycle.”  And political contributions have been directed to Congressional leaders from both parties.

In very recent years enrollments at the for-profits have fallen—at the U. of Phoenix from 470,000 at its highest point to 214,000 in 2015.  “There are plenty of reasons for the massive retrenchment, but perhaps the most important has been the belated attention on the part of the Obama administration, a handful of Democrats, and even state regulatory officials.”  And a Senate report, “spearheaded by Tom Harkin, the now-retired chair of the Senate Health, Education Labor, and Pensions Committee, pulled back the curtain on an array of recruiting abuses, shoddy academic offerings, and low graduation rates.”

In an in-depth, book-length study of growing inequality in higher education, Degrees of Inequality, Suzanne Mettler summarizes the plight of the typical student at a for-profit college:  “(W)hile the for-profits appear to give struggling Americans a shot at improving their life circumstances, in reality, these schools leave many worse off, to the point of financial ruin.  Simultaneously, they lavish abundant profits on owners and corporate shareholders—at taxpayer expense—effectively benefiting the affluent even as they destroy the lives of the less advantaged.  Most egregiously, the U.S. government not only condones these circumstances but actively facilitates and sponsors them through nearly full subsidization of such schools—paired with, at present, only minimal regulation of how they conduct themselves.” (p. 4)

Degrees of Inequality would be a fine addition to your summer reading list.  But in the meantime, Mark Huelsman’s report is short and pithy, and it documents many of the most serious injustices in the for-profit colleges. I urge you to read it.

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