For-Profit Colleges Under Scrutiny

June 30, 2010 Updated: June 30, 2010

WASHINGTON—For-profit colleges are getting attention in Washington, D.C., lately. A senate hearing last week explored the value and risk of for-profit colleges as an investment of federal student financial aid. The Senate committee responsible for education commissioned a study of the growth of for-profit colleges and the debt carried by students who attend them.

Health, Education, Labor, and Pensions (HELP) Committee Chairman Sen. Tom Harkin (D-Iowa) is concerned spending federal dollars to fund students’ education at these institutions may not be a good investment for America’s future.

“The money [federal student financial aid] is an investment by Congress in our nation’s students and also in our country’s future. For that investment to pay off, we must ensure that students are being well educated, and that schools are using federal dollars responsibly,” said Sen. Harkin at the hearing he chaired on the issue June 24.

For-profit colleges such as the University of Phoenix, DeVry University, ITT Technical Institutes, Argosy University, and Corinthian Colleges operate like companies—they operate to make a profit. Some are owned by private individuals and some by public corporations. These publicly traded corporations/schools raise capital by selling shares, making them responsible to produce profit for shareholders.

Nonprofit private colleges and universities rely instead on an endowment of donations from alumni and others to cover costs above and beyond what tuition fees cover. Public colleges and universities rely on state funding.

In a time when many states’ budgets are in trouble, for-profit institutions are able to “bring private capital to bear on funding issues” says Harris Miller, president and CEO of the Career College Association. Mr. Miller spoke with The Epoch Times by phone. He says for-profit career schools help meet the demand traditional nonprofit schools can’t accommodate.

For-profit higher education took off in the 1970s, with schools like the University of Phoenix, founded in 1976, leading the way. For-profit institutions predominantly provide career specific training including programs in accounting, business administration, culinary and hospitality management, emergency medical technology, network administration, and many other fields.

According to the Career College Association, of the students who attend these schools nearly half are children of parents who did not receive higher education.

Forty-three percent of students are minorities and more than 75 percent of career college students work while in school.

Because of the population they serve career colleges receive a large portion of federal student aid money. According to the Health, Education, Labor and Pensions Committee’s study titled “Emerging Risk?: An Overview of Growth, Spending, Student Debt, and Unanswered Questions in For-Profit Higher Education,” for-profit institutions receive more federal aid for the number students they enroll than do nonprofit institutions. The committee’s study reports that for-profit schools enrolled more than 1.8 million students in 2008, or less than 10 percent of all college students. These institutions received 23 percent of all federal student financial aid dollars, approximately $23.9 billion in the 2008-2009 school year.

If the population the career colleges serves tends to be of lower economic means, then based on need, it makes sense for these schools to receive a larger proportion of federal student financial aid.