Weeds amidst the ivyOn the first day of the Association of Private Sector Colleges and Universities annual convention, a storm worked its way towards the convention center. More than a thousand people milled inside Rosen Shingle Creek, one of the golf resort/convention centers that are endemic to central Florida. The attendees had come for the annual congress of for-profit colleges, hosted by the sector’s trade association and central lobbyist. Its theme: “Opportunity for all.”
That night, a self-described “futurist and demographer” took the stage to deliver the keynote address. Kenneth Gronbach is a big man with a bigger voice, going after laughs more than longitudinal studies. Gronbach calls himself a “generational marketing expert,” and has written a book called The Age Curve. Subtitle: “How to Profit from the Coming Demographic Storm.”
Gronbach’s presentation began with a joke: “How many people are really excited to listen to a demographer for an hour?” A little manic, Gronbach paced the stage, taking audible sniffs as he caught his breath and delivered the next slide. “We’re going to concentrate not on money and stuff, but on people,” he said. But for Gronbach people are opportunity, and opportunity is money.
Gronbach spoke for nearly an hour, touching on everything from Honda motorcycles to how Generation Y requires “transparency, integrity, sense of green, humanitarian, fairness, cyber, and empathy” in the workplace. At one point he said, “I don’t think we could invent a better immigrant than a Latino.”
APSCU had brought Gronbach to the convention to try and help its member schools — all for-profit colleges that cater to 13 percent of American higher education students — better understand their target audience. Who were these students that needed vocational certificates and degrees? How best to get them to enroll, and how best to get them to graduate? As Gronbach promised, “Generation Y is going to change everything. They are going to change your lives.”
For the people in charge of for-profit schools, they already have. They’ve made them very rich. Between 1998 and 2008, for-profit enrollment increased 225 percent by one count, nearly eight times the rate of the rest of higher education. During the bleakest days of the Great Recession, stock prices soared as students went back to school in a bad job market. In 2009, publicly traded for-profits were $3.2 billion in the black, before taxes. But now for various reasons — a rebounding economy, harsh media coverage of the sector’s abuses, and tighter federal regulation — enrollment is down across the sector. A talk like Gronbach’s was meant to pep up morale.
“The antiquated college system is a rotary phone,” Gronbach said before lauding the private sector schools for being more nimble than traditional schools. That’s where their advantage lay, he said. “If you do it right, you’ll be wearing diamonds as big as radishes.”
Soon, a loud hiss started to drown him out, working its way across the room. It was the rain, moving across the thin roof, pounding, hissing, pleading to be let in. The storm had come.
If you care about understanding the country’s student loan situation, the best place to start is with for-profit colleges. For the past ten years there has been no sector that’s relied on student loans more than for-profit schools, and no sector that’s used them more to its advantage.
For-profits include brands you’ve heard of — University of Phoenix, Kaplan, DeVry — and small mom-and-pop outfits you haven’t — Fountainhead College of Technology, National Tractor Trailer School, and Spartan College of Aeronautics and Technology. Overall, it’s estimated over 4 million students attend for-profits annually.
In a more innocent time we called these schools career colleges; their express purpose is to prepare people to take on a job they wouldn’t have been able to get otherwise. They offer certificates, associate’s, bachelor’s and grad degrees, like any other school, just with more of a focus on the outcome than the process. It is all about school equating to a job. In that sense for-profits are the rare party in higher education that acknowledge what college has become: a commodity.
Take, for instance, Corinthian Colleges, Inc., a network of over 100 for-profit schools across the country. Founded in 1995 and IPO’d in 1999, Corinthian has grown by purchasing other schools and creating its own campuses where it sees demand. Unlike many for-profits, Corinthian focuses on campus-based learning, with three main brands spread across the country: WyoTech, Heald, and Everest, each with its own specialties. WyoTech has a host of automotive repair courses. Heald offers associate’s degrees in business administration. Everest’s medical assistant certificates are very popular, at around $16,000 a pop. About 90,000 students attend one of the Corinthian schools.
The people signing up for the courses are, by and large, the ones for whom a traditional college setting isn’t ideal. They’re usually older, poorer, busier, or some combination of the three. And yet they’re spending more money on college. By some counts, 96 percent of for-profit students take out loans, and nearly all of them are drawing from federal financial aid. In comparison, only 13 percent of students going to community college take out loans, because community colleges are a fraction of the cost.
So why go to for-profits? Because they offer the luxuries of convenience and efficiency. Matthew Mastrogiovanni, a 44-year-old logistics administrator went to an Everest campus in South Plainfield, New Jersey to change his career and get certified in its 9-month electrician program.
Mastrogiovanni’s whole family had been to Everest — his wife completed the Medical Insurance Billing and Coding program, and she only went because she was so impressed with the sales pitch when she brought their son in to register for a pharmacy technician program. For Mastrogiovanni, who works night shifts but wanted a career change, it was their testimonial plus Everest’s “very flexible schedule,” that appealed. He said Everest had told him the electrician field was booming with jobs — “and it is booming if you’re 18 and you’re living at home with mom and dad,” he said. He faults Everest for not specifying that the jobs wouldn’t pay him what he needed as a middle-aged guy with a family. Since graduating almost a year ago, he’s had only one job interview, and he found it on his own. He still works in logistics for a stock room company. His electrician program cost more than $19,000. He’s had to put his loans in deferral as he pays off the Everest loans for the rest of his family.
The schools justify their extra cost by offering accelerated programs and more robust distance-learning options that can accommodate a more demanding lifestyle. This, they’ve determined, is what the rest of higher education isn’t offering — and it’s what’s worth at least an extra $10,000.
This is all made possible because the federal government has made it possible with its financial aid program. For-profits long ago realized that the most sustainable business model is the one that feeds off of the government’s largesse. Going up against community colleges is a lot easier than going up against Harvard, especially when the federal government can foot a large part of the bill. The market has confirmed their suspicions. By one count, the sector burned through $32 billion of federal funds in 2009-2010, a quarter of the DOE’s student aid allotment. In 2010, the federal government spent $509.3 million in Pell grants just for Corinthian’s 113,818 students. But Pell grants don’t have to be paid back; the sector’s $32 billion is comprised largely of loans. Ultimately, it’s students who are on the hook.
The readily available funding from student grants and loans has created an entire industry — and one that many now consider a predator against the very population that the loans were meant to empower. It’s an unintended consequence of legislation: our ideals demanded we provide loans so people can afford to go to school before they can actually afford to go to school, but the market’s demands created an opportunity to profit.
Without federal financing, the for-profit sector would be a fraction of the size and its students would be much less in debt. But far fewer Americans would have diplomas. It’s a trade-off: If we as a country want to ensure there’s a path to upward mobility, we have to help finance the way. But financing comes with risk, and some students are going to be left behind rather than thrust ahead.
This is what makes the political debate over for-profits’ role in higher education so warped. Here’s a sector that should be a liberal cause. It serves America’s neediest population, and uses tens of billions in public funds to do it. But its emphasis on the private over the public sector and its unabashed interest in pursuing profit aligns it with Republican orthodoxy. In a different Washington this would lead to bipartisanship. In our Washington it leads to scorched earth campaigns.
As a case study, take Senator Tom Harkin’s crusade against for-profit colleges. For two years he and his staff worked on a report on for-profit colleges’ questionable practices and heavily indebted students. It is the most comprehensive third-party report available on the sector, and much of the preceding data comes out of their work.
Harkin’s team found that for-profit students carry a lot of debt, and aren’t good at paying it off. An executive summary:
- “Independent students,” the report says, “leave for-profit schools with a median debt of $32,700, but leave public colleges with median debt of $20,000, and private non-profit colleges with a median debt of $24,600.”
- The “Department [of Education] estimates that 46.3 percent of all dollars lent to for-profit students who entered repayment in 2008 will default. The comparable number for 2-year public and non-profit colleges is 31.1 percent.”
- To cap it off, the report found that somewhere between 50 and 70 percent of students left school without getting a diploma. Going into debt but not getting a degree is probably the worst outcome for any college student — the student assumes much of the cost without attaining most of the benefit.
Gunderson and others I spoke with think Harkin and his team are opposed to the very idea of for-profit higher education, and so trying to change their minds is futile. They think Harkin’s report manipulates data, composes an incomplete snapshot, and uses select cases of malfeasance to build an overly-broad narrative about the industry. Chief among the criticisms is that opponents don’t take into account that for-profits are serving students far more likely to drop out of school or have trouble repaying debts, because they come from disadvantaged backgrounds. It is difficult for high schools to educate the students society has left behind, so why should it be any different for for-profit colleges?
Before wading through education statistics — and there’s a swamp of them — it’s best to pack a machete.
For-profits make easy targets. They’re more expensive than community colleges, less established than storied elites, and less glamorous than mid-tier schools with gleaming athletic facilities. They’re also some of the few schools that still explicitly traffic in an increasingly outdated American Dream: come from adversity, go to school, get a job, become financially stable. And then of course there’s that emphasis on profit, something that’s anathema to the platonic ideal of American education, if not the modern reality.
For-profits, in other words, are weeds amidst the ivy, thriving in the cracks and growing faster than they can be cut down. They keep growing for a reason — they’ve adapted to modern higher education better, and sooner, than nearly any other bloc of schools. They may not be pretty, but they’re here to stay.
But poor results and abuses throughout the sector have forced the Obama administration to try and regulate the colleges. For the past few years the Department of Education has tried to ensure for-profits don’t manipulate students into enrolling, and then leave them unable to make their loan payments after graduation.
The regulations have already changed for-profits, and even they admit it’s largely been for the better. But now there’s a new debate taking place, and it’s one that demonstrates just how hard it is to force colleges to be accountable for how much debt their students have after they leave. The rise and regulation of for-profits can help explain how, for some, college went from being a gateway to the middle class to being an obstacle along the way; and what we can, or should, do about it.