For-profit colleges owned by private businesses can be decent schools — some have good programs and provide flexible hours — however many of them are fairly devious. The for-profit system usually enrolls as many students as it can with the intention of cranking out easy degrees.
For-profit colleges usually target low-income families by making their programs very flexible, advertising that they accept students who have failed to graduate high school or are parents who work full time. They can charge an inflated tuition based on the assumption that students will be guaranteed a job at graduation. The major issue with this is that students are fed facetious post-grad salary expectations, and the jobs they become eligible for simply aren’t worth the exorbitant tuition costs.
This causes many of these students to default on their loans. Despite these students only making up 13 percent of the total higher education student body, they make up half of all federal student loan defaults.
For-profit colleges are able to operate this way because their reputation is not reliant on the success of their attendees. These institutions advertise not on the quality of their educational programs, but on the speediness with which they can award you a degree. Very often, for-profit colleges advertise that you don’t have to deal with general education classes, that you only need to take your major focused-classes to get a degree. Their main source of income is through the Higher Education Act Title IV and the GI Bill. These provide lots of government funding through financial assistance for students from low-income families and returning military personnel.
This system is undergoing some serious changes, however. Starting in 2013 a new plan for the higher education system was proposed in D.C. The new plan focused on assisting students with their loans to prevent defaulting, in order to increase transparency in the quality of higher education, and to tie financial aid to college performance. The Pay as You Earn plan allows students struggling with student loans to cap loan payments at 10 percent of their monthly income. The Forgiveness program forgives the remaining debt after 120 payments (20 years). These programs were made to help combat the massive amount of student debt that has built up over the last 20 years, with the average student on federal loans graduating $26,000 in debt.
To help provide greater clarity to adults and high school seniors, the Department of Education has provided a new kind of rating system.https://collegescorecard.ed.gov/ is a new website that changes up the college scorecard significantly. Before, the best way to judge colleges was to look at enrollment statistics, such as student acceptance rates, tuition costs, student body size and diversity. The new scorecard focuses on three main things: average annual cost, graduation rate and salary after attending. These are then compared to the national average. The website also provides some really amazing statistics such as students receiving federal loans percentage, typical total debt, typical monthly loan payment and average cost by family income.
It’s pretty clear that something like this is a serious threat to the business of for-profit colleges. Our standard view of college — the one that’s been beaten into us since childhood — is that people with college degrees always get higher paying jobs than high school graduates. This has not always been the case, and, especially in recent years, that higher salary has had a large amount of debt tacked onto it. In fact, on the scorecard website there is a statistic that tells you the percentage of graduated students earning more than high school graduates (the U is at 71 percent, in case you were wondering). It’s a threat to for-profit colleges because it looks at the real cost of education and the results of those costs. While raw data can’t tell you everything about a college, having access to it certainly is a major improvement from the old system. However there’s one more change that is really going to impact education quality: the “gainful employment rule.”
The gainful employment rule is a way for the government to distinguish between effective and affordable institutions and ineffective ones. The rule restricts student aid to the performance of the institution based on program costs, graduation rate, student salary after graduating and the amount of debt students accumulate. The rule restricts for-profit colleges from using federal student aid money — their main source of income. It should help in lowering tuition costs for these kinds of schools and push the focus away from earning a degree and towards improving the quality of education. The change is not just to make higher education more affordable, it’s an attempt to encourage schools finding employment for students on financial-aid. It takes the pressure of finding a job off of the student and puts it on the college.
With the gainful employment rule in effect, in addition to the new changes to student loans and college scorecards, we should soon see a very sharp decline in for-profit colleges. If they do not manage to make up the gap in tuition costs and students’ salaries after graduation, they will lose their lifeline of government dollars. In addition to greater transparency to college result rates, the system as a whole is changing for the better. Hopefully, in for-profit and public schools alike, we’ll see an overall improvement in the quality of education being provided.