CAPPS - Avocacy and Communication Professional Development

California Association of Private Postsecondary Schools

College trap: Do for-profit schools adequately serve students?

08/30/2012

The Cap Times - August 29, 2012

Sarah Koran was excited about applying for entry into the veterinary technician program at Madison College in 2010 but her application was denied. That meant hopes of starting the popular associate degree program, which often has a waiting list, was likely pushed down the road for two years.

So instead of putting her life on hold, she decided to investigate other options and was thrilled to learn that Globe University in Middleton, which is part of the burgeoning for-profit higher education industry, also offered a vet tech degree — and she could start classes almost immediately.

Although the total cost of that two-year program at Globe (about $51,000) would be more than four times the price she could expect to pay at Madison College (about $12,200), Koran was eligible for $5,500 per year in federal grant aid and figured it was worth it to take out student loans to help pay for the rest.

"They were like, 'Oh, we know it's expensive but you're going to get a great education and a great-paying job,'" says Koran, noting she now realizes vet techs tend to earn between $10 and $15 per hour after first graduating, not exactly big bucks.

Koran was pregnant when she started school and gave birth to her son during her time at Globe. Trying to keep up with coursework while taking care of a newborn became exhausting, and she knew she needed a break. Koran says she once missed two consecutive weeks of classes — which, according to Globe's policy, should have forced the college to drop her from the course.

"But they didn't drop me," says Koran, who is 25. "They kept making all these exceptions for me. There were times when I wouldn't turn in assignments and didn't do things that were mandatory for class but I'd still get credit for doing them. I actually wanted to get dropped and didn't want to be there, but it was like taking time off and starting fresh wasn't an option. I think they wanted to keep their retention and graduation rates up."

The longer she stayed at Globe, the "more evident it became to me that they cared more about getting my money than providing a quality education," adds Koran, who left Globe after less than a year with $12,000 in student debt and a bad taste in her mouth.

A persistent trickle of stories like these is part of the reason many who work within the more traditional halls of academia tend to view the growing for-profit higher ed sector with a skeptical eye.

And that skepticism grew to more vocal censure last month after U.S. Sen. Tom Harkin, D-Iowa, released a report highly critical of these institutions following a two-year investigation into 30 for-profit higher education companies.

"Some of these for-profits are living off taxpayer revenue, and maybe it's time to ask if the government is getting its money's worth," says Rolf Wegenke, the president of the Wisconsin Association of Independent Colleges and Universities, an organization of the 20 private, but not-for-profit, institutions of higher learning in Wisconsin that includes the likes of Marquette University, Edgewood College and Beloit College.

"Maybe it's time we discussed, as a country, whether or not it's appropriate to offer education in a for-profit mode," says Terry Webb, the provost at Madison College. "Look at the amount of federal financial aid that is paid to these for-profit colleges — it's billions and billions of dollars. The taxpayers are essentially subsidizing the operations of the University of Phoenix and these other for-profits, and oftentimes these schools aren't doing a very good job in helping students."

Indeed, although the 5,000-page report and supporting documents indicate that for-profit colleges can play an integral part in educating nontraditional students, it generally blasts these companies for too often spending more resources to aggressively recruit students — and cash in on the federal financial aid they can bring in — than to provide a quality educational experience. More than half of the students who enrolled in for-profit colleges in 2008-09 left without a degree or diploma, and half of that group dropped out within four months.

Even many longtime followers of higher education locally say they were surprised by some data in the report, which was titled "For Profit Higher Education: The Failure to Safeguard the Federal Investment and Ensure Student Success." The four-volume study was prepared by staff of the Committee on Health, Education, Labor and Pensions, which Harkin chairs.

Among the eye-opening stats:

• In fiscal year 2009, the 30 education companies examined spent $4.2 billion (22.7 percent of their pre-tax revenue) on "marketing, advertising, recruiting and admissions staffing," while just $3.2 billion (17.2 percent) went to instruction. Pre-tax profits amounted to $3.6 billion (19.4 percent of revenues).

• Federal taxpayers, in the form of student grants and loans, invested $32 billion in for-profit colleges during the 2009-10 fiscal year. That's 25 percent of the total Department of Education student aid program funds, even though the for-profit sector only accounts for about 13 percent of the nation's college enrollment.

• Pell Grants — the nation's key program to help low-income students — flowing to for-profit colleges increased from $1.1 billion in the 2000-01 school year to $7.5 billion in 2009-10. The publicly traded Apollo Group — which runs the University of Phoenix, the largest for-profit college — got $1.2 billion in Pell Grant funds in 2010-11, a four-fold increase from 2007-08.

• For-profit colleges in 2009-10 also received the largest share of military educational benefit programs: 37 percent of post-9/11 GI Bill benefits and 50 percent of Department of Defense Tuition Assistance benefits. Eight of the top 10 recipients of post-9/11 GI bill funds are for-profit schools, with the Apollo Group receiving $144 million in 2010.

• The report estimates that in 2009, when all sources of federal taxpayer funds are taken into account, the 15 companies examined in the report that are publicly traded received 86 percent of their revenues from taxpayers.

"In the absence of significant reforms that align the incentives of for-profit colleges to ensure colleges succeed financially only when students also succeed, and ensure that taxpayer dollars are used to further the educational mission of the colleges, the sector will continue to turn out hundreds of thousands of students with debt but no degree, and taxpayers will see little return on their investment," asserts the report's executive summary.

Despite Harkin sounding the alarm, no one is expecting legislative action related to these concerns before the November elections. That's because like so many issues these days, the topic is politically divisive. Democrats tend to argue that more regulation is needed to keep these for-profit colleges in check, while Republicans generally view them as important free-market options.

"On the one hand you could interpret this as these greedy for-profits going out and grabbing people out of homeless shelters and giving them Pell Grants and they're duping them and taking their money and leaving them with debt and then running away," says Richard Vedder, the director of the Center for College Affordability and Productivity and a retired professor of economics at Ohio University.

"But the other spin on it would be that there is an underclass that the traditional universities, such as a UW-Madison, have kind of ignored and turned away. And as a consequence, others are filling those gaps, including the for-profits. Maybe this is just the price we pay to give everyone a chance at the American Dream."

Some Republicans and those within the for-profit sector ripped Harkin's report as a partisan hatchet job that unfairly singled out for-profit institutions. After all, there's no shortage of problems associated with public colleges and universities and private not-for-profit institutions. It also must be noted that the report wasn't even officially endorsed by the other Democrats on the committee, with the document instead being submitted by committee staff. And everyone seems to agree it's unfair to lump all for-profits into one big pile of unsavory actors.

"My main problem, generally, with the report is it had no context," says Renee Herzing, the president of the for-profit Herzing University, which is headquartered in Milwaukee and has 12 physical campuses (including two in Madison) in eight states. It also offers online classes.

Herzing University was one of the 30 for-profits examined in the Harkin report. And while the company wasn't singled out for egregious actions, it also wasn't among the handful of colleges praised by Harkin for generally rising above problems highlighted in the report.

"There is no context to help answer the question of whether these institutions are providing as much value as a community college or public university," says Herzing. "What kinds of students are each serving? What is the actual return on investment for different kinds of schools? I think that would be a great question and something to examine. But the report was driven by ideology and by a person who wanted to prove that for-profits are bad and he's got the seat and power to do what he wants."

•    •    •    •

Part of the reason the spotlight is being focused on the for-profit higher education industry is its relatively fast transformation over the past two decades.

Harkin's report notes that in the 1990s, two-thirds of for-profit colleges enrolled students in training programs lasting less than a year, with the sector primarily made up of small trade schools that awarded certificates in fields like cosmetology and truck driving.

Although such offerings have continued to grow, a significant increase has taken place in the number of degree programs offered, with the report highlighting that from 2004-10 the number of associate degrees awarded by for-profit colleges increased by 77 percent and the number of bachelor's degrees jumped 136 percent. In Wisconsin, the Educational Approval Board — an independent state agency tasked with protecting consumers by regulating for-profit postsecondary schools, colleges and universities — now oversees 214 institutions that serve nearly 60,000 students per year. David Dies, the executive secretary of the EAB, which also oversees some nonprofit colleges and universities that beam online courses to Wisconsin, says that a decade ago the agency kept tabs on 122 schools.

Although the Harkin report notes that these for-profit degree programs average about four times the cost of similar programs at comparable community colleges, there nonetheless are plenty of reasons beyond well-funded recruiting and advertising departments that these schools can draw students.

In a nutshell, the for-profits tend to do a better job of catering to working adults, those who are looking to complete or continue their education, and other non-traditional students. These institutions offer more classes at night and on the weekends than traditional schools, with near-continuous start dates so students don't have to wait months for a semester to start.

Karla Carpenter is a good example of the type of person who tends to be drawn to a for-profit college — and this mother of two teenage boys offers a compelling success story.

Carpenter explains that prior to starting a family she spent a decade after high school in the workforce without a college degree. Although she took a handful of college courses over those years, she says she was more focused on making money, and was able to secure a good job with Trek Bicycle.

She then left Trek at age 29 to spend the next 14 years as a stay-at-home mom. But after getting divorced, she was forced to return to work to support her sons, and quickly realized she needed to update her skills to become marketable.

"It was pretty scary thinking about returning to school as an adult," she says.

Carpenter explains she "investigated all possible educational opportunities" in the Madison area. UW-Madison accepted her back, but in a program she no longer had an interest in. And Madison College had waiting lists and couldn't guarantee the availability of her preferred programs or class times. She ultimately went to Herzing University in Madison because it offered the best degree program choices, plenty of scheduling options, the quickest graduation timeline and, she believes, the best total value of any school in the area after taking into account the time she wouldn't have to spend underemployed in the workforce.

After one-and-a-half years, Carpenter in 2007 earned an associate's degree in computer networking and has worked at Quest Software in Madison ever since, currently managing the release of new software products.

Today, Carpenter refers to Herzing as the "hallowed halls of second starts," and doesn't understand why anyone would question someone else's decision to attend a for-profit school.

"What I cared about was the relevancy of the coursework that I took and the convenience and availability of those courses as a returning adult student," she says. "Herzing offered me the very best in those two categories, and clearly it has paid huge dividends."

In an afternoon spent at Herzing's main Madison campus on the far east side, I heard stories from several others who, like Carpenter, decided the for-profit higher ed route was right for them:

• Vini Clark, a 2001 graduate of Sun Prairie High School, earned an associate's degree in graphic design from Madison College in 2011 but quickly learned most of the better-paying jobs he wanted required a bachelor's degree. He considered some highly regarded but pricey schools of art in Milwaukee and Chicago, and also checked out UW-Madison, which would have been the most reasonably priced option.

"I looked into UW and took their tour," says Clark. "I got to sit in on an art class but there were about 120 people in the room. The class was being taught by a teacher's aide, and multiple people were asking questions and she just couldn't get around to helping everyone. I was like, 'Wow, how is anyone going to learn from this?'"

He ultimately decided to pursue a B.S. in graphic design through Herzing. He has been enrolled for about a year, works part time as a graphic designer for Imagination Trends in DeForest, and is set to graduate in five months.

Although he earned his associate's degree without taking on debt, he took out loans this time around and will graduate about $31,000 in the hole — but says it's well worth the investment as he eyes a career as a web programmer or designer.

• Dan Golson has a bachelor's degree in psychology from UW-Whitewater and has worked in the fields of mental health and social work for the past 11 years. Now the 37-year-old father is in the midst of an accelerated, 20-month program at Herzing to become a registered nurse (associate's degree).

He had started to pursue a nursing degree by taking some prerequisites at Madison College's Watertown campus, but says he was still on a waiting list to get into that program when he opted for Herzing.

"I like the scheduling flexibility at Herzing and the fact I can get in and get done in a short amount of time," says Golson.

He acknowledges the price tag of Herzing's tuition (listed at $39,000 for an associate's RN degree) was a bit of a concern. He took out student loans to pay for the degree and adds that he's also still paying off student debt from his UW-Whitewater days. But Golson says the sacrifices now should pay off in the long run.

And just down the road from Herzing's main Madison campus is Globe University's Madison East campus, where Katelyn Neumaier discussed her choice to pursue a bachelor's in business administration from Globe.

The 2004 Barneveld High School graduate says she picked up an associate's degree in fashion marketing from Madison College before looking at options to further her education while working at a clothing store.

She likes the fact that Globe offers small class sizes, hands-on learning opportunities, community outreach projects and more night classes than a typical college. She's currently taking two classes at Globe's Madison East campus and another two online, and is scheduled to graduate in March.

Neumaier says she isn't sure what type of career she wants to pursue. And although, with help from her parents, she got through Madison College without taking on any student debt, she'll leave Globe owing $70,000 in loans.

"I'm not concerned," Neumaier says of her debt load. "My parents will help out until I get a job. Maybe not everyone has that support system, but I'm lucky that I do."

•    •    •    •

The Harkin report elicited some sharp responses, including a harshly worded letter to the editor from Madison College President Bettsey Barhorst.

"At best," wrote Barhorst, "the report documents predatory recruiting practices and 'gaming regulations to maximize profits' at the expense of taxpayers. At worst, the report reveals that these colleges place the desire to fatten their bottom line above the interests of students. As an institution that is publicly funded, we take offense to that. So should every taxpayer."

When asked why she felt the need to speak out, Barhorst says that "we have, in the past, been more careful and respectful of the for-profits because they are our colleagues in higher education. But after the report, in addition to all the stories I hear from students and concerned parents on a consistent basis about problems they've had at for-profits and the debt they accrue, I felt it was time to say something. I'm not sure students understand the financial impact of all this debt."

Similarly, that's why Koran, the vet tech student, wanted to share her story about her experience at Globe University.

"I'm really frustrated by the fact I feel like I got preyed upon and cheated from there," says Koran, who this week started the vet tech program at Madison College. "I just hope maybe we can save a couple people from going through what I went through, because I'm not any smarter from what I went through at Globe and I'm $12,000 in debt."

Of course, there's no hiding the fact that attending college — even a publicly subsidized one — is getting expensive. In 2010-11, 32 percent of Madison College's students had loans, with the average loan at $6,540. And that same year, 71 percent of in-state students earning an undergraduate degree from a UW System institution left school with debt. Of those, the average amount was $27,000.

Add it up, and those on both sides of the debate over the merit of for-profit colleges can showcase plenty of figures and anecdotal evidence to support their views. But what can be done to make sure the students, themselves, have information to make an educated decision about their future?

Dies, the executive secretary of the state's Educational Approval Board, says the EAB has ramped up efforts in recent years to collect and present more useful data to students who are considering a for-profit school that operates in Wisconsin, and just this summer launched an online, searchable database that provides a wealth of information on approved schools and programs.

Specifically, the website lists every for-profit institution, and the range of programs each offers. The site contains information on the program length and total cost, plus statistics — including job placement rates and whether or not the client was satisfied with the education — on student outcomes. The one caveat, notes Dies, is that the colleges self-report the information.

The website also helps prospective students see what types of jobs they can likely land by completing a particular program, and links are provided to a U.S. Bureau of Labor Statistics site that shows information on wage data and types of jobs available in different parts of the country.

Unfortunately, notes Dies, there is no umbrella organization in Wisconsin that oversees all the various higher ed sectors — the UW System, tech college system, the state's private not-for-profits, and the for-profits — which makes it nearly impossible to accumulate and disseminate easily comparable data on the different groups.

Moving forward, Dies says his agency hopes to create performance standards and benchmarks for the for-profits to meet in order to continue operating in the state, although implementing such standards is likely years away.

"While we all share some of the concerns the Harkin report noted, I'm not sure what, exactly, we should do," says Dies. "Do we shut down a school because some students there report problems, but then deny those students who are having success at that institution? When is it right to draw the line in the sand? These are ethical discussions that I don't know if I'm ready to weigh in on."