May 17, 2011

It’s college commencement season in America, a time of excitement and celebration. For the millions who will graduate this year, the events of this month and next represent not just the end of college but the beginning of a new and meaningful chapter in their lives.

That chapter, for most, however, will be accompanied by hefty student loan payments. According to the Wall Street Journal, the average debt for a bachelor’s degree recipient in 2011 will reach almost $23,000, making this year’s graduating class the most debt-burdened in history. In fact, student loan debt is expected to outpace credit card debt, probably reaching more than $1 trillion this year.

This is partly a function of tuition, which the Wall Street Journal reports has increased at a rate of 5 percent a year. It is also a function of a flailing economy in which parents are far less able to help their children pay for college. It’s no wonder that a staggering 85 percent of 2011 college graduates are moving back home after graduation.

Still, for many, if not most, college students, the decision to take out loans to pay for a college degree will be one of the most important investments they will ever make in their future, and the cost of repayment, while historically high, will be worth it. Last month’s jobs report found that the unemployment rate among college graduates was 4.5 percent, half of the national unemployment rate. And according to a College Board report cited by the New York Times, the median bachelor’s degree recipient working full-time in 2008 made 65 percent more than the median high school graduate.

But there is a growing group of students who will find a harsh reality when they enter — or at least try to enter — the workforce. These are the students who have enrolled in the growing industry of for-profit colleges.

For-profit colleges aren’t new to the national landscape, but over the past decade their numbers have surged dramatically, creating a $23 billion industry. In 2000, about 670,000 students were enrolled in for-profit colleges. By 2008, nearly 1.8 million were enrolled, a 225 percent increase.

These companies make their profits by aggressively recruiting students and pushing them to take out large federal loans to cover the cost of tuition. Seventy-seven percent of the revenue at the five largest for-profits comes from federal student loans and grants.

That cost of attendance isn’t cheap. According to Forbes columnist Susan Adams, tuition at for-profits is twice as high as in-state public colleges and about five times as high as two-year public colleges. And while for-profits educate 11 percent of U.S. post-secondary students, those students hold 26 percent of the nation’s student loans and make up 43 percent of those who default.

The problem for these students is not just that they are being strapped with outrageously high debt. It’s that they are being preyed upon, misled into enrolling at institutions that often lack accreditation and have dismal records of job placement. The University of Phoenix, for example, quadrupled its enrollment over an eight-year period by targeting vulnerable students to join its ranks. That group, according to Bloomberg News reporter Dan Golden, included an intellectually disabled woman with an IQ between 65 and 70, who, not coincidentally, qualified for federal aid.

There may be no more egregious example of corporate interests preying on the innocent on behalf of their shareholders than the for-profit college industry. The consequences are even worse than those stemming from predatory mortgage lenders; unlike a mortgage, student loan debt cannot be discharged in bankruptcy. Students who are deceived into enrolling in for-profit institutions are left with no exit — and no recourse. It is a tragedy of the highest degree, counter to our nation’s values. And it must be stopped.

At least 16 states have passed or proposed laws regulating for-profit colleges . The Obama administration, too, is working to regulate the industry. New rules will take effect in July that will prevent for-profits from paying recruiters based on the number of students they enroll, a process that encourages deceptive practices.

The Education Department is also considering what’s known as a “gainful employment” rule, which would prevent for-profits that fail to meet certain standards from being eligible for federal financial aid programs. The ineligible group would include colleges with high student-loan default rates and ones at which students end up having to put a large part of their salaries toward paying down their debt. But that important rule, which was supposed to be implemented in 2010, has been delayed. The Education Department now says it will take effect in 2012, but many who follow the issue closely remain skeptical.

That’s because for-profit colleges are fighting tooth-and-nail to prevent the rules from taking effect. According to the Sunlight Foundation, in 2010, the industry spent $7.57 million on lobbying, which was more than three times what was spent in 2009. It also contributed more than $1.3 million to political campaigns. The industry’s efforts are only expected to intensify. So, too, must the efforts of those fighting for legislation to rein in the for-profits.

Our debt “crisis” has become something of a national obsession — and a misplaced one at that. For all the talk of debts and deficits, we too often ignore this crisis, the real debt crisis, and its impact on millions of Americans. We owe them better.