For-profit colleges and universities: Can quality education and business coexist?

By Lauren Hungarland, staff editor Secretary of Education Arne Duncan announced new regulations this past week regarding for-profit colleges and universities.  The regulations are meant to hold for-profit institutions accountable to both their students and the government.  This increase in oversight is necessary after complaints about questionable recruiting practices by some universities that made false claims about job placement and salary expectations.

Although for-profit institutions of higher-education have been around for a long time, there has been an increase in scrutiny towards these institutions as their profits rise quickly and their students default on federal student loans.  Additionally, many students complain about false statements made by recruiters saying almost anything to get students to sign up.  Providing incentives for recruiters at these institutions has been illegal for a number of years, but loopholes in current policy encourage aggressive behavior and deception regardless of current regulations.

For-profit colleges receive most of their tuition payments in the form of federal student loans (accounting for 80 percent of their income).  These loans have increasingly high default rates as recruiters convince students to take on loans that they cannot afford.  According to the U.S. Department of Education, students at for-profit institutions represent 43 percent of federal loan defaults, even though they represent only 11 percent of all higher education students.   The new transparency standards set in place as of July 1, 2011, will require that schools be forthcoming with students about the jobs their graduates receive and expected incomes following graduation.

The new measures also regulate what is considered a “credit hour.” Until now, there has been no definition of what constitutes a “credit hour.”  For-profit institutions inflate the credit hours of their classes to raise tuition rates and therefore increase profits from federal loan programs.

For-profit institutions offer a whole host of other problems for students.  Many are not regionally accredited, and thus their credits cannot be transferred to other four-year universities.  Many students claim recruiters made this unclear when they took out student loans to support their studies at for-profit schools.  Additionally, the tuition levels at for-profit institutions also appear to be higher in many instances than local community and public four-year colleges.  For-profit institutions market themselves by offering night, weekend, and online courses for working students and by making tuition sound more affordable than it really is with inflated post-graduate salary statistics and high levels of student loans.

Can education be a profitable business without sacrificing quality and values?  Should the needs of students be sacrificed to meet the needs of shareholders? Hopefully the new regulations set forth this week by the Department of Education will keep companies from taking advantage of students wanting to better themselves through continuing education.

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