Harkin: For-profit colleges a terrible deal

July 30, 2012

The Senate Health, Education, Labor, and Pensions (HELP) committee, headed by Sen. Tom Harkin (D-Ia.), is out with a long promised report on the for-profit college industry (full report here, PDF summary here), and almost every finding is a doozy. Let's break it down, point by point.

Most students don't graduate

This is the headline conclusion, and it's important, especially when comparing for-profits to peer institutions. The report finds that 62.9 percent of students who enrolled in an associate's degree program at a for-profit college in the 2008-09 school year left before finishing their degree, and that the median student lasted only four months. A smaller majority — 54.3 percent – left bachelor's programs before graduating, and 38.5 percent left certificate programs. Taken together, all programs had an average dropout rate of 38.5 percent.

They're really expensive

Especially in comparison to public institutions, such as community colleges that represent many for-profits' main competition, the schools charge a pretty penny:

Bachelor's programs cost an average of 20 percent more, and associate's programs an average of quadruple public school tuition. This isn't too surprising when you look at how for-profit colleges are spending their money. The Harkin report found that 22.7 percent of revenue at for-profits goes to marketing and recruitment, that for-profits have an average profit margin of 19.7 percent, and pay an average of $7.3 million a year to their chief executives. That's all money that drives up tuition without going to educational programming. Actual instruction made up a paltry 17.2 percent of expenses. As a consequence, a far greater percentage of for-profit college students are in debt:

You're paying for it

Perhaps the most startling conclusion of the report was that the vast majority of for-profit college revenue comes from the federal government in the form of subsidized loans, Pell Grants, veteran and military benefits and other aid:

In the 2009-2010 school year, $7.5 billion in Pell Grants, 50 percent of Defense Department education aid, and 37 percent of GI bill aid went to for-profits, money that, because of the programs' much higher costs, financed significantly less education than it would have if directly at public or private non-profit institutions.

(The Washington Post owns Kaplan, which runs a for-profit college service.)
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