Source: Doug Webber, FiveThirtyEight, April 6, 2017
… In recent years, the public debate over student debt has often focused on the roles of the students who are borrowing the money and the government policies that encourage that borrowing. But there is also another key element of the equation: the colleges themselves. Colleges and universities benefit from the federal student debt system, which lets far more students afford tuition than otherwise could. But they shoulder none of the financial risk that comes with that debt; they get paid just as much regardless of whether students pay off their loans on time. In the most extreme examples, these misaligned incentives have led to outright fraud and other bad behavior by some schools. Corinthian Colleges, one of the biggest players in for-profit higher education, shut down in 2015 amid allegations it had misled students and the government about its students’ graduation rates and employment prospects. Another big, for-profit college, ITT Technical Institute, closed its doors last year after similar allegations. The real issue, though, isn’t outright fraud — it’s that colleges are partially insulated from basic market forces, and they behave accordingly. They have financial incentives to enroll as many students as possible, and little incentive — or at least, little direct financial incentive — to ensure that those students will graduate on time and find jobs that pay well enough to repay their loans. The issue is particularly acute at less selective institutions including, but not limited to, for-profit colleges. …
For-Profit Schools: Trump Delays Enforcing New Rules, Lifting Shares
Source: Josh Mitchell and Gunjan Banerji, Wall Street Journal, March 12, 2017
It isn’t exactly 2006 again, but for-profit colleges are riding high on Wall Street. Stocks in the industry, some left for dead five months ago, have climbed rapidly since November as investors cheer President Donald Trump’s talk of easing regulations. Last week, for-profit schools got an inkling he might deliver on the promise when the Education Department announced it would delay enforcing rules drafted under the Obama administration. Those rules, known as “gainful employment,” threatened to shut down hundreds of for-profit campuses in the next two years due to high debt levels among former students. …
For-profit colleges may lose access to federal student aid
Source: Kimberlee Payton-Jones, American School and University, March 18, 2014
In response to what appears to be a growing national concern, the Obama Administration announced new steps to force career and for-profit colleges to better prepare students for the work force or risk access to federal student aid, according to a press release from the Department of Education.
“The proposed regulations address growing concerns about unaffordable levels of loan debt for students enrolled in these programs by targeting the lowest-performing programs, while shining a light on best practices and giving all programs an opportunity to improve,” Department of Education Secretary Arne Duncan said in the press release.
The regulations seem to be directed at for-profit colleges, which have a higher rate of student loan default than do public institutions. “Students at for-profit colleges represent only about 13 percent of the total higher education population, but about 31 percent of all student loans and nearly half of all loan defaults,” the release said. “In the most recent data, about 22 percent of student borrowers at for-profit colleges defaulted on their loans within three years, compared to 13 percent of borrowers at public colleges.”
Obama Administration Takes Action to Protect Americans from Predatory, Poor-Performing Career Colleges
Source: U.S. Department of Education, Press Release, March 14, 2014
New ‘gainful employment’ proposal targets training programs
that saddle students with debt but provide few opportunities for success. The Obama Administration announced today new steps to address growing concerns about burdensome student loan debt by requiring career colleges to do a better job of preparing students for gainful employment—or risk losing access to taxpayer-funded federal student aid….
Will a For-Profit Degree Help You Get a Job?
Source: Sophie Quinton, Atlantic, March 25, 2014
Education Department data show associate- and certificate-program graduates face low salaries and high debt. … Philosophy majors at liberal-arts colleges used to have the best claim to unemployable—or at least underemployable—futures. But students at for-profit colleges and universities are also finding that their degrees too often fail to translate into well-paying jobs. New data from the Education Department suggest that for-profit schools usually don’t deliver on their promises to prepare students for successful careers. Of the more than 5,000 career programs for which the agency has recent earnings data, 72 percent offered by for-profits produce graduates who earn less than high school dropouts. (The comparable figure for programs at public institutions is 32 percent.)….
Senator Warns Of A Student Loan Bubble
Source: Linda Wertheimer, NPR, Morning Edition, March 27, 2014
….On investigating for-profit colleges:
We found that a lot of these for-profit schools were going after the poorest students so they could get the maximum Pell Grants and loans. A lot of the students were not getting a good education; they were dropping out and … defaulting. But the for-profits got to keep the money.
Comparing for-profit colleges and the savings-and-loan crisis:
I think that’s an apt comparison. The housing program started out with, I think, good intentions. But then financiers and others found out how to make a lot of money, so they created this housing bubble. I think what we have now is another bubble in the student loan sector with these for-profit colleges….