New York Governor Andrew Cuomo has won nationwide accolades for his bold plan to give the state’s college students “no cost” degrees from its state university system. But in the background to the dramatic push to expand public higher-education funding, known as the Excelsior program—offering tuition-free state college to households with incomes of up to $110,000—much of the same student aid pool has been siphoned off by for-profit colleges and vocational schools.
Though the industry has in recent years suffered a regulatory drubbing from federal and state officials over systemic fraud and financial abuse, the scrutiny has evaporated under the Trump administration, and corporate higher education is looking to make a comeback. In an extensive analysis of New York’s higher-education system, The Century Foundation (TCF) warns that without tighter oversight, the state’s upcoming budget may become the primary financier of an industry better known for exploiting rather than educating its students.
TCF’s analysis reveals a direct channel between the for-profit college sector, which has expanded with the help of both federal and state student loans and grants—and about $300 million in annual state tuition subsidies. Based on 2015–16 data, “New York State provides more state scholarship funds to private colleges than does any other state,” directing about one in five public dollars from the state’s Tuition Assistance Program (TAP) into private, for-profit schools.
In Albany, the Association of Proprietary Colleges (APC), an industry association, has pushed for access to a new tuition program that parallels traditional TAP grants, the Enhanced Tuition Award (ETA) Program. While non-profit private college students are currently eligible, opening the fund to for-profits would offer comparable financing to an estimated 8,500 of their students statewide. Although Cuomo previously vetoed a measure to include for-profits in ETA, the proposal was just approved in the latest budget plan.
All of this is a problem because the state may be getting less for its money when the students it aids attend for-profits compared to traditional public and private institutions. New York is dotted with for-profit programs that amount to little more than hyped-up diploma mills, often taught with substandard instruction and half-baked online-instruction modules. The industry—led by franchises like Corinthian and ITT—is also notorious for recruiting heavily among poorer students, students of color, and first-generation college students, who are more financially vulnerable to the debt that their courses typically pile up as graduation prospects sink.
According to TCF’s comparative assessment of for-profits to traditional nonprofit private and public institutions, “For-profits charge more but invest less in teaching: For every $1 of tuition revenue, for-profits spent $0.41 on instruction, compared to $0.85 at nonprofits and $2.15 at public schools.” On the whole, about two-thirds of nonprofits spend most of their tuition revenue on teaching, twice the rate of for-profit colleges, despite their hefty price tag and massive debt risks.
“Programs that were established to help marginalized students get a leg up for higher education,” says TCF researcher Yan Cao, “are instead being used to fund schools that are using a lot of their tuition dollars on something other than instruction.” An earlier TCF analysis found that, nationwide, an average associates degree program costs a student about $8,500 annually at a regular state university, compared to an eye-watering $35,000 for a comparable associate’s degree at a for-profit institution. The troubles continue after graduation: “Students at for-profit schools are four times more likely to default on their loans” compared to nonprofit and public schools. For students of color, who generally face more economic barriers in higher education: those attending for-profits accrue more debt on average and suffer a higher risk of defaulting after 12 years.
Many don’t even make it to graduation: Just a quarter of for-profit students finish within four years, while their peers at public and non-profit private schools graduate at triple that rate. And as they accumulate debt with no certain prospects for earning an actual degree, they’ll leave school under an administration that has deregulated and weakened the student lending system. For-profit graduates therefore face even more dismal prospects of paying back their debts: While all nonprofit and public schools in the state provide students with degrees that earn graduates at least as much as a typical high-school graduates, about four in ten for-profit institutions “leave a majority of students with earnings below those of an average high-school diploma holder,” about $25,000.
Although New York joined several states in launching legal challenges to crack down on fraudulent and corrupt for-profit college chains during the Obama administration, the industry has few regulatory obstacles to fear under Trump, and is now aggressively lobbying both Albany and Washington to reclaim lost market share.
In a statement to The Nation, the APC calls the TCF report “inaccurate and misleading,” emphasizing that only a handful of for-profit institutions are degree-granting institutions, and that for-profit schools aren’t requesting direct state investment but simply “equal” access to student aid.
TCF counters that for-profit schools shouldn’t have access to equal funding when they don’t deliver equal outcomes. Absent strong regulations on the federal or state level, students could suffer even more exploitation at the cost of taxpayers. Although the expansion of tuition aid is unequivocally a good thing, Cao argues, Albany should be more discriminating about where in the higher-education marketplace those precious public-tuition dollars are being spent.
Good intentions notwithstanding, Cao says, the funding boost is “coming at a point in time when the federal government is really rolling back the protections and oversight and accountability measures that they had targeted at bad actors concentrated in the for-profit industry historically…. The new proposal to extend funding for for-profit schools doesn’t come with a lot of consumer protections that would even make up what we’re losing from federal rollbacks.” As Cuomo sets out an agenda of establishing universal higher-education access statewide, she adds, “the piece of it that’s missing is having policies to ensure accountability by schools, making sure that the money is spent at schools to provide positive outcomes and lead to more success for their students.” (Meanwhile, Cuomo’s push to establish the Excelsior program has also been criticized for having overly restrictive eligibility requirements. The stiff academic and economic barriers to Excelsior could drive more publicly subsidized students into private colleges).
All of which means that college for all might cost the public in the long run, if predatory schools profit at the expense of struggling students and the taxpayers who invested in their college dreams.