5 Recent Developments That Have Changed the State of For-Profit Education

It’s really no secret that more people are seeking out alternative forms of higher education, and that non-traditional students are more commonplace as a result. For-profit colleges are among those other options students can select in pursuit of their education. The for-profit college industry boomed during the Great Recession as colleges targeted the increasing number of unemployed Americans.

But while I’m all for fair education for all, and providing plenty of opportunities for those who need more flexibility due to jobs, family or health issues, for-profit colleges may not be the best option. They have been accused of overpromising on career results later on while taking the money of vulnerable students. Students at for-profit schools default on federal loans at a higher rate than students at traditional public colleges: over 19% after three years, compared with less than 13% at public institutions.

Because of this, for-profit colleges have come under a lot of scrutiny lately. Let’s take a look at five recent developments that have changed the status of for-profit institutions.

  1. The U.S. Department of Education tightens their standards on for-profit education.

The U.S. Department of Education has bumped up its regulation of for-profit career colleges, introducing rules that would halt federal funding to institutions that leave students saddled with enormous debts that they are unable to repay.

The efforts by Obama’s administrations show that federal and state authorities are ramping up their examination of the for-profit college industry, which includes colleges such as the University of Phoenix and Everest College and ITT Technical Institute.

Opponents believe that many for-profit colleges charge a hefty price, yet target low-income consumers, resulting in students who have massive loans to repay and few job prospects.

U.S. Secretary Arne Duncan said, “Today too many of these programs fail to provide the training (students) need, while burying them in debt they cannot repay.”

The Education Department’s new rules intend to penalize schools that cost their students too much debt compared to their earnings post graduation. In order to be eligible for federal student loans and grants, schools must meet debt-to-income requirements for two out of three consecutive years.

The department estimated about 1,400 programs out of 5,500 covered by the regulations would fail the debt-to-income test.

  1. Many for-profit colleges are closing.

The Education Management Corporation and the Career Education Corporation will shutter the doors of more than 25 campuses across the country.

The Art Institute, Sanford-Brown College, Sanford-Brown Institute, and the Le Cordon Bleu culinary school, are all set to close soon.

According to the Chronicle.com, the Art Institute has almost 5,500 students enrolled and the shutdown process will likely take three years..

Earlier this year Corinthian shut its doors due to heavy fines and probes from the federal government. Everest College, maybe its most popular campus, is included under the Corinthian umbrella as well as Heald and WyoTech. Corinthian received nearly 90 percent of its revenue from federal student loans because tuition to attend these schools was astronomical.

The United Stated Department of Education is set to forgive the student loan debt of the Corinthian 100, a group of students who claimed to be financially defrauded by Corinthian Colleges.

The group is made-up of 100 former students who attended colleges under the Corinthian umbrella. Because Corinthian is now defunct and many students were forced to either transfer or just hold the debt, the coalition petitioned the education department to have their loans forgiven.

  1. The stock of for-profit colleges rises despite it all.

In 2014, for-profit colleges and universities saw a rise in stock worth, as well as revenue, according to a CNN Money report. Strayer Education was perhaps the biggest success, with its shares rising 75 percent in 2014 so far. Strayer provides a variety of accreditation, bachelor degree and master’s degree options through programs that are set up at 100 other colleges and universities across the country.  DeVry Education Group and Capella have also seen rising stocks, at 20 percent and 13 percent respectively.

  1. For-profit colleges sue Obama Administration for the new rules.

The Association of Private Sector Colleges and Universities, a group that represents for-profit colleges, sued the U.S. Department of Education and Secretary Arne Duncan on behalf of for-profit colleges. For-profit colleges disagree with the rules released in late October of last year that penalize career training programs for charging high tuition that saddles students with massive debt while offering low-paying job prospects.

For-profit schools filed a lawsuit and asked a judge to reject the new regulation, claiming the Department of Education does not have the right to set debt-to-earning standards. The Association of Private Sector Colleges and Universities called the rule “unlawful, arbitrary, and irrational” and feels it will “needlessly harm millions of students who attend private sector colleges and universities.” They strong believe that the job a student lands and their earnings after graduation “depend heavily on factors beyond the schools control.”

The Education Department announced its “gainful employment” rules, which base a program’s ability to receive federal loans on whether the estimated annual loan payment of a typical graduate doesn’t exceed 8% of total earnings or 20% of the student’s discretionary income.

For-profit colleges will be allotted time to make changes, but if they fail to meet the standards, they will become ineligible for federal student aid, which makes up nearly 90% of the revenue at for-profit schools. The DOE estimated about 1,400 programs would not meet the standards.

  1. For-profit schools shift their priorities.

Many online higher ed schools were focused solely on gathering funding for new programs.

Now, however, according to a new survey by the Education Advisory Board, nearly 100% of executives at online higher education programs and schools want to shift their focus to “track career outcomes” for students once they leave school.

The EAB survey found that executives have concern over how employers view graduates and would like to “improve messaging to prospective students.”

One of the chief concerns of many potential students, and those who have graduated from an online college, is that their degrees are seen as worthless. While all online colleges aren’t seen in the same light, many are grouped together because the accreditation may differ from traditional colleges and universities. Standards for online schools and for-profit institutions with online programs also vary and give many employers pause before hiring a graduate from an online university, specifically that from a for-profit.

It’s clear that the roller coaster of events specifically concerning for-profit schools have led to an increased focus on improving the quality of education and the amount of positive recognition given to for-profit schools. Hopefully the executives of these institutions will see that being proactive in ensuring that the quality of the education that students receive will have a lasting impact on how employers view them once they enter the workforce.



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