You’ve heard of these bad boys: the Art Institute, ITT Tech, and the University of Phoenix are some of the most notable culprits. Recently, the Education Management Corporation, one of the largest operators of for-profit educational institutions, was forced to pay almost $100 million to settle consumer fraud claims.
As enrollment rates continue to skyrocket, the U.S. Government is beginning to crack down on these schools. Why? Because they’re notorious for leaving graduates with...you guessed it…crippling student loan debt.
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What’s a For-Profit College?
For-profit colleges work like businesses in the sense that they’re out to make money. Period.
Below, we’ve laid out the main differences between public, nonprofit, and for-profit schools.
- Public. Public school are controlled by the state, which offer financial support. In exchange, public schools heighten the state's image with a more educated population.
- Private. Since they’re not run by the state, private schools rely on other sources of funding. Students who wish to attend private schools must often meet other qualifications.
- For-Profit. For-profit schools are funded by profit-seeking companies. Usually, for-profit schools focus more on technical training and less on general learning.
Because of their nature, for-profit colleges aren’t required to have your best interest at heart; instead, they’re simply responsible for forking over financial returns to shareholders.
How They're Adding Fuel to the Student Debt Fire
- For-profit students make up 13% of the "total higher education" population but represent 31% of all student loans.
- Students at for-profit colleges have experienced the greatest increase in student loan debt among any pool of student borrowers. In 2001, 62% of freshmen took out student loans; in 2009, the number jumped to 86%.
- 1 in 5 students from for-profit colleges default on their loans within the first three years of repayment.
Other Shady Stuff They Do
- On average, for-profit higher education companies spend 22.7% on marketing and only 17.2% on instruction.
- In 2009, the five highest paid CEOs of for-profit higher education companies made $7.3 million, whereas the five highest paid non-profit college leaders made $3 million.
- Oftentimes, for-profit colleges pressure students close to defaulting on their loans into forbearance, allowing the school to protect their funding at the student’s expense.
When One Bad Apple Spoils the Bunch
Okay. Maybe not all for-profit colleges are out to get you. But even politicians are fed up, introducing various bills (like the Students Before Profits Act) that are meant to protect students and hold colleges accountable.
Of course, it’s not entirely impossible to attend a for-profit school and snag a job in your field. So, if you’re debating on whether or not to attend one, consider the following:
- “Placed” vs. “Employed”? Placed can mean grad school; employed means work.
- Employed or employed in their field of study? There’s a big difference. Recently, one for-profit school was fined $30 million for advertising a high employment rate when many of their grads were working low-income jobs.
- Time frame? Do students find jobs nine months out, or did they find jobs years after graduating?
In summary, do your research, outweigh the pros and cons, and make sure your school isn’t on this list. At the very least, you should know where your money is going and what you’ll get in return.