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Scamming Students | The Nation

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Scamming Students

This item was originally published in the Noted section of the September 24, 2012 issue of The Nation.

This summer, Iowa Senator Tom Harkin released the results of a two-year investigation into for-profit colleges that confirmed the suspicions many have had for some time: the rapidly growing industry is focused more on profits than on its students.

The study, conducted by the Senate Committee on Health, Education, Labor and Pensions, probed thirty for-profit colleges, half of which are publicly traded, such as the Apollo Group’s University of Phoenix and the Washington Post Company’s Kaplan Higher Education. The results were staggering. “The for-profit schools take in about 10 to 12 percent of all the students of higher education,” Harkin told NPR, but “they account for over 50 percent of the defaults. Right away, you look at that and you say: Something isn’t right here.”

The for-profits’ programs appeal largely to lower-income people and veterans looking to earn degrees on their own time through online classes. Many of these institutions can cost up to 420 percent more than their public counterparts—and in some cases, even more than Ivy League colleges. Plus the vast majority of students enrolled—95 percent—will seek federal or private loans to pay for the tuition.

The result? At a time when public institutions face debilitating budget cuts, 86 percent of the for-profit colleges’ revenue comes from taxpayers, to the tune of $32 billion in the most recent year. Only 17 percent of this revenue goes to actual education; 22.7 percent (roughly $4.2 billion) is spent on marketing and recruiting schemes that have been criticized as relying on predatory practices.

Harkin’s report also highlights the executive compensation of for-profit college CEOs, like Strayer Education’s Robert Silberman, who took home some $41.9 million in 2009, and the former CEO of Kaplan University, Jonathan Grayer, who got a $76 million severance package in 2008.

Especially now that student debt has surpassed credit card debt—and with economists warning it could be the next bubble to burst—Harkin says the industry needs strict oversight and reform. “We need to think seriously about outcome-based thresholds,” he said, “especially for these colleges that get a huge amount of revenue from taxpayers.”

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