Changes Coming to For-Profit Schools

The story of students who attend for-profit schools like the University of Phoenix, Kaplan University, and Everest University often goes something like this: as a high school student he didn’t excel. He came from a family without much money. His parents didn’t go to college. After high school he bounced around, attending a few branch campuses of the state university, taking a few credits at a community college. It was hard to find a school that fit his work schedule, however, until he found For-Profit U, which teaches him the skills he needs on his own time.

This is a sales pitch, but it’s also reasonably accurate. What’s left out of this story is that the student is now also heavily in debt. According to an article by Elaine Korry and Liz Willen in the Washington Post:

[One student’s] move from the community college to the for-profit university shows the allure of a higher-education sector that is growing so fast the federal government wants to rein it in. The 24-year-old, who hopes to own a business someday, said he was impressed by the ease of course scheduling at his new school and unconcerned about future debt.

This is the problem. It’s not that for-profit schools don’t respond to students’ needs; they respond very well. It’s just that it shouldn’t cost so much money to respond to the needs of students. According to Korry and Willen, the Obama administration appreciates that, it’s this understanding that’s behind current efforts to reform for-profit colleges.

This is what’s behind the much-discussed gainful employment rule, which should be announced any day.

The federal government also has a certain personal interest in reforming the for-profit sector. While these schools are often known for what they produce (profits for shareholders), it’s also important to remember where they get their money: mostly it’s the U.S. taxpayer.

The trouble is not so much that these schools help some people make money; it’s that three-quarters of this profit comes from federal grants and federally-backed loans. The University of Phoenix, for instance, derives 86 percent of its income from federal money.

The average tuition at a for-profit school is $14,174 a year, versus $2,544 for a community college or $6,000 for a four-year public college. That’s a lot of money to pay for convenience.

Daniel Luzer

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer