Federal and state governments are intensifying efforts to ensure that taxpayer dollars spent at for-profit colleges are benefiting students as much as the businesses.
Students at these colleges have a poor track record for achieving a diploma and/or gainful employment. They also have a high default rate on their government-subsidized loans.
On Monday, the U.S. Department of Education and various state attorneys general announced a $95.5 million settlement with Education Management Corporation (EDMC), the second-largest for-profit college company in the nation, for its alleged “boiler room” recruitment practices.
EDMC operates a chain of colleges, including The Art Institute of Seattle and Argosy University, which has a Seattle campus. The U.S. Department of Justice launched an investigation after whistleblowers within EDMC alleged the company was illegally paying recruiters based on how many students they signed up.
For-profit colleges are expensive, typically charging higher rates per unit than traditional colleges and universities without offering much of their own financial aid. But recruiters tell prospective students they can qualify for government loans and grants to cover costs.
The problem for taxpayers and students is there is very little return on investment.
Many states joined the feds’ legal action, including Washington and Idaho.
Under settlement terms, EDMC will forgive 519 former Idaho students $504,000 in outstanding debt, and 1,187 Washington students will be forgiven loans totaling $1.36 million. EDMC must also reform its recruiting and enrollment practices.
It’s encouraging to see this crackdown, but Congress could lend an even bigger hand by passing a bill that would change the so-called 90-10 rule. Under this equation, 10 percent of the cost of an education at a for-profit school is expected to come from nongovernment sources, presumably a student’s own pockets.
A bill would raise this requirement to 15 percent, which should cause students to think twice before choosing such a high-cost option. If for-profits don’t comply, they would lose access to federal aid.
The change is overdue, because a 2010 report by the Education Trust found that a mere 22 percent of students seeking bachelor’s degrees achieved them. That’s compared to 55 percent of students at public universities and 65 percent at private, nonprofit schools.
Students at for-profit schools also accounted for 46 percent of loan defaults, and they ultimately earn less than other students and have a higher rate of unemployment.
The congressional bill would also crack down on the exploitation of veterans, who are recruited hard by for-profit colleges because GI Bill funds are considered non-federal aid under the 90-10 formula. In reality, 100 percent of the education dollars are government, yet veterans who hoped to be better prepared for the job market have little to show for their “education.”
For-profit colleges have been mired in scandal and controversy for a long time, and their targeting of veterans is appalling.
Congress should protect veterans and tax dollars by passing the bill.
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