I’ve been receiving quite the education in the world of for-profit education lately. It started with a spammy infographic distributed by OnlineSchools.org, lead me into the murky world of online lead-generation, and deposited on the doorstep of a multi-billion dollar industry that’s been the subject of a lot of government scrutiny over the last few years.
My quest started with two simple questions: Who are these guys, and why are they so desperate to sign me up for a second-rate online diploma mill?
The answer, as is usually the case: Money. BIG money. Much bigger than the $50 to $250 those spammy telemarketers receive when I fill out a Web form and/or sign up for classes.
There is an enormous amount of money in the for-profit education industry – and much of it is coming out of your pocket and mine. How much? In 2009 some $32 billion worth of Federal money was given to for-profit colleges, mostly in the form of financial aid and student loans, according to a two-year investigation by the Senate Committee on Health, Education, Labor, and Pensions (HELP).
Those institutions pocketed an average profit of nearly 20 percent – and that’s after deducting more than $4 billion spent on marketing and recruitment (ie, the lead-generation Web sites and telemarketers I wrote about in Part I and Part II of this series).
What did we get for our money? Per the HELP report [PDF]:
More than half of the students who enrolled in in those colleges in 2008-9 left without a degree or diploma within a median of 4 months… Among 2-year Associate degree-seekers, 63 percent of students departed without a degree.
The vast majority of the students left with student loan debt that may follow them throughout their lives, and can create a financial burden that is extremely difficult, and sometimes impossible, to escape.
It gets worse. In August 2010 the General Accounting Office, an investigative arm of the US Congress, issued a blistering condemnation of the for-profit education industry. I’ve never seen a report quite like this from any government entity.
In 2009, GAO operatives posing as students enrolled in 15 for-profit colleges – all of which received at least 89 percent of their income from Uncle Sam. The result? All 15 universities “made deceptive or otherwise questionable statements to GAO’s undercover applicants.” Four of the schools engaged in outright fraud, for example: encouraging applicants to falsify their assets so they might qualify for financial aid, misleading applicants as to the total costs of tuition, or lying about their potential salaries when they graduated. Like this one:
A small beauty college told our applicant that barbers can earn $150,000 to $250,000 a year. While this may be true in exceptional circumstances, the Bureau of Labor Statistics (BLS) reports that 90 percent of barbers make less than $43,000 a year.
Then there was the tsunami of telemarketing from the lead gen sites, which I also experienced:
In addition, GAO's four fictitious prospective students received numerous, repetitive calls from for-profit colleges attempting to recruit the students when they registered with Web sites designed to link for-profit colleges with prospective students. Once registered, GAO's prospective students began receiving calls within 5 minutes. One fictitious prospective student received more than 180 phone calls in a month. Calls were received at all hours of the day, as late as 11 p.m.
Not surprisingly, tuition costs at these private institutions are up to five times as expensive as those from public schools, per the HELP report. An associates degree that cost $8,300 at a local community college costs $35,000 at one of these schools. A bachelors runs $63,000 – or about $11,000 more than your typical state school. Professional certificates cost close to $20,000 on average – nearly five times what they would cost at a public institution.
Granted, these public schools are subsidized by taxpayer money – but then, so are the for-profits. Pro Publica has a nice breakdown of these and other numbers relevant to for-profit schools.
Students who are duped into enrolling into one of these education mills emerge with a mountain of debt and poor employment prospects, per HELP. The unemployment rate for students who attended for-profit schools was 23 percent in 2009 – more than twice the national average back then for everyone else. Students at for-profits are also much more likely to default on their loans, sticking you and me with the bill.
After the GAO report appeared two years ago, the Obama Administration vowed to seriously reform for-profit universities. That was met with what one Department of Education official told the New York Times was “a ferocious response” by the for-profit EDUs. Per the Times:
Officials at the White House and the Education Department described the industry’s aggressive efforts as unusual even by Washington standards. Mr. Sunstein, the White House official, characterized the intensity as “extreme.”
New regulations are now in place, but they’re pretty weak. For-profit schools must demonstrate they lead to “gainful employment” by showing that at least 35 percent of students are repaying their loans (a requirement that has already been struck down by a federal court) and that loan repayments don’t exceed a certain percentage of the graduate’s annual income. Nothing about fraud, nothing about hyper-aggressive marketing. Mostly just nothing.
To recap: Spammy infographics buttered all over the Web, networks of anonymous Web sites using black hat SEO tricks to fool Google, insatiable lead-generation companies, tenacious telemarketers, aggressive recruiters signing people up for dubious degrees attached to vast amounts of debt -- all of that is underwritten by tax dollars. Does that tick you off? It ticks me off.
The good news? The heyday of for-profit education may already be behind us. In October, the University of Phoenix announced it was shuttering 115 locations, after a drop in enrollment of roughly 25 percent since 2010. Still, nearly three million students still attend for-profit schools (including more than 300,000 at the U. of Phoenix alone), most of them supported largely by you and me.
To be clear, not all online schools are bad, and not all for-profit educational institutions are sleazy. I firmly believe that online education is the future. Things like iTunes U, Kahn Academy, and K12.com have been an enormous boon to tens of thousands of students, as well as to me and my kids personally.
There’s even a place for ethical for-profit institutions in that mix. But only if we clean up the sleaze first. And at the moment that appears to be in bountiful supply.
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