Federal oversight proposals target growing industry of for-profit colleges

By Elaine Korry and Liz Willen
Monday, June 14, 2010; 1:55 PM

SACRAMENTO -- A year ago, Joseph Carrillo Jr. had to fight to get into crowded classes here at the public American River College. He couldn't find a guidance counselor, and he felt lost. So he switched to the private University of Phoenix. There, everything fell into place -- at 17 times the cost.

Carrillo's move from the community college to the for-profit university shows the allure of a higher-education sector that is growing so fast the federal government wants to rein it in. The 24-year-old, who hopes to own a business someday, said he was impressed by the ease of course scheduling at his new school and unconcerned about future debt.

"What good is cheap tuition if classes are so packed you can't even get in?" he asked.

But Congress and the Obama administration are concerned.

For-profit schools might be offering an educational alternative, but that choice often comes with crushing student debt, some observers say.

New federal rules, expected to be formally proposed in coming days, would tighten oversight of the industry. One much-debated proposal would cut federal aid to for-profit schools in certain cases if graduates spend more than 8 percent of their starting salaries to repay loans. Sen. Tom Harkin (D-Iowa) also plans this month to begin hearings on the industry, examining recruiting practices and student loan default rates.

Supporters of the schools say the proposed rules could shut down hundreds of programs, undermining President Obama's goal of making the nation the world leader in college completion by 2020.

"It will have a horrendous effect on programs in California and nationally," said Harris N. Miller, president of the Career College Association, which represents more than 1,400 for-profit schools. The association, which wields some clout in Congress, is mobilizing to fight the proposal.

Nationwide, enrollment in for-profit colleges soared from 673,000 in 2000 to 1.8 million in 2008. The growth has been fueled in California and some other states by discounts and incentives the schools offer to help students apply credits earned online toward community college degrees.

For-profit schools such as the University of Phoenix, DeVry University and Kaplan University (owned by Kaplan, a subsidiary of The Washington Post) offer professional, vocational and technical training and serve a large number of minority, low-income and first-generation college students. But the industry faces federal scrutiny, and in some cases lawsuits, over issues related to debt and recruiting.

Miller has said repeatedly that the default rate on the loans of students at for-profit schools is about the same as it is for students who attend community colleges and nonprofit institutions that specialize in serving minority students. He denied that for-profit schools leave students with too much debt.

"The accusation is absurd," Miller said. "Career college is the fastest growing segment of postsecondary education because it provides value and employable skills. Students wind up with a mountain of debt when their journey through higher education is aimless and, economically, pointless."

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