This article is adapted from David Halperin’s new e-book, Stealing America’s Future: How For-Profit Colleges Scam Taxpayers and Ruin Students’ Lives, available at Amazon.
Many of America’s for-profit colleges have proven themselves a bad deal for the students lured by their enticing promises—as well as for US taxpayers, who subsidize these institutions with ten of billions annually in federal student aid.
More than half of the students who enroll in for-profit colleges—many of them veterans, single mothers and other low- and middle-income people aiming for jobs like medical technician, diesel mechanic or software coder—drop out within about four months. Many of these colleges have been caught using deceptive advertising and misleading prospective students about program costs and job placement rates. Although the for-profits promise that their programs are affordable, the real cost can be nearly double that of Harvard or Stanford. But the quality of the programs are often weak, so even students who manage to graduate often struggle to find jobs beyond the Office Depot shifts they previously held. The US Department of Education recently reported that 72 percent of the for-profit college programs it analyzed produced graduates who, on average, earned less than high school dropouts.
Today, 13 percent of all college students attend for-profit colleges, on campuses and online—but these institutions account for 47 percent of student loan defaults. For-profit schools are driving a national student debt crisis that has reached $1.2 trillion in borrowing. They absorb a quarter of all federal student aid—more than $30 billion annually—diverting sums from better, more affordable programs at nonprofit and public colleges. Many for-profit college companies, including most of the biggest ones, get almost 90 percent of their revenue from taxpayers.
So why does Washington keep the money flowing?
It’s not that politicians are unaware of the problem. One person who clearly understands the human and financial costs of the for-profit college industry is President Obama. Speaking at Fort Stewart, Georgia, in April 2012, the president told the soldiers that some schools are “trying to swindle and hoodwink” them, because they only “care about the cash.” Speaking off the cuff last year, Obama warned that some for-profit colleges were failing to provide the certification that students thought they would get. In the end, he said, the students “can’t find a job. They default…. Their credit is ruined, and the for-profit institution is making out like a bandit.” And, he noted, when students default on their federally backed loans, “the taxpayer ends up holding the bag.”