Former For-Profit School Chief Admits ‘Very Questionable’ Practices Occur At Subprime Schools

The Department of Education has been trying to move forward with new regulations for the for-profit college industry, but has run into a slew of complaints (and a horde of lobbyists) from for-profit schools attempting to preserve their access to federal largesse. As we outlined here and here, for-profit colleges rely on the federal government for 90 percent of their revenue, while engaging in predatory lending and leaving many students bankrupt, without a degree that will enable them to get a good job.

Graduation rates at for-profit schools are low, student debt for those who do graduate is high, and an ever-growing pot of public money is being uncritically dumped into for-profits, lining the pockets of executives who make far more than traditional university presidents. The typical rejoinder from the for-profit schools bristling against more regulation is that they serve traditionally underserved communities, and are not all that different from the standard community college. “The singular focus on the problems of the career colleges is a waste of time and money and forgets the institutions that serve a much larger number of students,” said Jean Norris, who produced a report for the Coalition for Educational Success (a coalition of for-profit schools).

But the former head of a for-profit college wrote at Higher Ed Watch yesterday that the industry is actually deserving of the criticisms levied against it, and “needs to stop patting itself on the bacK”:

So far the Career College Association, its members, and even some of their accreditors have mostly responded to the criticism by trying to downplay the differences between their schools and traditional colleges and universities. But these differences are real. Career colleges that are publicly held must be answerable to their stock holders and thus need to maximize their profits — which causes many of the issues Congress is looking at. […]

In my personal history as a chancellor and consultant to career colleges, I have observed some leaders of companies, schools, and departments doing things to make numbers that were to be polite, very questionable. And yet, they were rewarded for doing so. In the business, we all know of schools that are “shaving the edges” of the rules to hit financial goals with little regard to how these actions would affect student learning or the industry at large should the “shaving” draw public blood.

The Education Department want to implement new rules — governing what’s known as “gainful employment” — which would cause for-profit programs, as well as some programs at non-profit and state schools, to lose their access to public money if their graduates fail to meet a certain debt-to-income ratio or have high rates of student loan default. Currently, just 11 percent of higher education students in the country attend for-profit schools, yet they account for 26 percent of federal student loans and 44 percent of student loan defaults. The latest data shows that 25 percent of for-profit college students default on their student loans within three years.


Earlier this week, new documents from the Senate Education Committee showed that for-profit schools tell their recruiters to use “pain” and “fear” to find new students. “We deal with people that live in the moment and for the moment. Their decision to start, stay in school or quit school is based more on emotion than logic. Pain is the greater motivator in the short term,” read one document from the for-profit Vatterott Educational Centers Inc.