For-profit colleges like Everest, ITT , Kaplan and Sanford Brown have destroyed the education and career dreams of thousands of young people.
These predatory institutions are gaming the federal financial aid system to line the pockets of their investors and CEOs by luring unsophisticated students to take out exorbitant student loans to attend programs whose credits do not transfer and that do not lead to gainful employment. The students end up with broken dreams and a lifetime of debt.
Senator Tom Harkin (Iowa) and Dick Durbin (illinois) and Representative Elijah Cummings (Maryland) are leading efforts in the United States Congress to hold these schools accountable.
The Department of Education has been attempting to promulgate commonsense regulations that would protect student consumers from the for-profit's predatory practices. But the for-profit sector is waging a multi-million dollar lobbying effort to derail these efforts and protect their huge profit margins.
Last week the New York Times editorial board urged the Obama administration weighed in urging the Obama administration to resist these lobbying efforts and pass strong student protections. It wrote:
The for-profit college industry is pressuring the Obama administration to water down proposed new rules that would deny federal student aid to career training programs that saddle students with crippling debt while giving them useless credentials.
That’s a potent threat from the government, given that for-profit schools can get as much as 90 percent of their revenue from federal student aid programs. But it doesn’t go far enough. The administration should actually strengthen the rules to put the worst actors in this industry under tighter scrutiny.
The proposed rules require career training programs to meet two reasonable standards to remain eligible for federal aid. The estimated annual loan payment of the typical graduate should not exceed 20 percent of discretionary earnings, or 8 percent of total annual earnings. And the default rate for former students should not exceed 30 percent.
The overall approach is sound. But the percentage of people who are actually paying down their loans should also be taken into account to make sure that students are earning enough money to meet their responsibilities. If the repayment rate is left out of the picture, schools might escape sanctions by putting students in temporary forbearance programs that push loan defaults into the future.
The for-profit industry is fighting hard against even the more limited proposed rules, and it is lobbying Congress to stop them. It claims that the new federal requirements would limit educational opportunity, particularly for poor minority students who might not qualify for traditional private or public colleges. The facts, however, show that for-profit schools often hurt the poor by luring them into questionable programs that cost considerably more than comparable courses of study at community colleges.
According to federal data, graduates of two-year, for-profit career training programs average a loan debt of $23,590. By contrast, most community-college graduates owe nothing.
The Department of Education recently reported that, of the thousands of for-profit programs it analyzed, an astonishing 72 percent produced graduates who, on average, earned less than a high school dropout who worked full time. This means that the most debt-ridden students are unlikely to earn enough to ever repay their loans. While students at for-profit colleges are 13 percent of the total higher education enrollment, they account for nearly half of all student loan defaults.
The department’s analysis, which covered both for-profit and nonprofit career programs, found that 98 percent of the students enrolled in the lowest-performing programs are in for-profit schools.
And among the certificate programs most commonly found to be substandard are the ones that typically advertise on buses and subways in cities all over the country, targeting less sophisticated audiences; these include programs that claim to train cosmetologists, medical assistants, paralegals and other fields.
For the sake of poor students and their families all over the country, the Obama administration needs to issue strong rules that will push substandard programs to improve and force predatory schools out of business.