Smart Borrower Blog

For-Profit Colleges Blasted in Latest Report


Nov 24th, 2010 @ 9:43 PM by Amber Nelson


Students at for-profit colleges may not be eligible for government grants and student loans in the future if the Obama Administration has its way.

A new study from the Education Trust, a nonprofit research and advocate group, called “Subprime Opportunity: The Unfulfilled Promise of For-Profit Colleges and Universities,” claims that for-profit colleges are essentially like subprime mortgage lenders because they are “peddling access to the American dream but delivering little more than crippling debt.”

Just like with subprime home loans, for-profit colleges seem to attract minorities and low-income students. The report found that 37 percent of all enrolled are minorities and more than half are low-income.

And the tuition costs are often more burdensome than state or private schools. For students getting their bachelor’s degree at for-profit colleges, the median debt load is $31,190. Compare that with $7,960 at public schools and $17,040 at private schools, according to the Education Trust.

“For-profit colleges provide high-cost degree programs that have little chance of leading to high-paying careers and saddle the most vulnerable students with heavy debt,” the report said as quoted in a Bloomberg article. “Instead of providing a solid pathway to the middle class, they pave a path into the sub-basement of the American economy.”

And the drop out rate is so much higher with these schools as well. The report said that 22 percent of first-time, full-time students pursuing bachelor’s degrees actually graduate within six years. Public schools boast a 55 percent graduation rate and private schools are even higher at 65 percent.

President Obama’s administration has proposed some regulations that would limit the amount of taxpayer money available for federal grants and loans for these for-profit colleges. At the present time they receive 90 percent of their revenue from these two sources.

In defense of their school, Ryan Rauzon, spokesman for the University of Phoenix said,

“Today’s report provides many interesting data points, but fails to include the fact that proprietary institutions cost the taxpayer significantly less than traditional schools which do not receive direct state subsidies and do not benefit from tax- free status.”

He also added that

“it is unreasonable to expect non-traditional college students to complete their studies within the government’s arbitrary, predetermined timeframe, especially when we know those students take longer to finish their degrees because they have families and professional obligations.”

These institutions do seem to be taking advantage of the poor and minorities, but why is the first course of action always new laws and regulations? What about an awareness campaign to educate these groups about the different college options and about the dangers of taking on serious student loan debt? Why not try to help people help themselves?

About Amber Nelson
Amber Nelson is a seasoned mortgage industry writer and a regular contributor to Loan.com and Mortgage101.com.

One Response to “For-Profit Colleges Blasted in Latest Report”

  1. Not the longest post, but then again my LED Lighting Blog site hasn’t much either, and a really old theme – Great post all around, added your RSS feed! Love this theme, too!

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