Federal Student Aid To For-Profit Schools Has Tripled In Recent Years

Back in August, the Government Accountability Office released the findings of their hidden-camera investigation that caught employees at several for-profit colleges encouraging applicants to lie in order to get more federal financial aid. Today, the GAO released a report that sheds some light on just how much money these schools have been getting from the government.

According to the GAO report, which studied data at for-profit schools from 2003-2008, while the number of students enrolled at for-profit colleges has jumped from 1 million to 1.8 million, the amount of federal student aid distributed to these schools has tripled from $8 billion to $24 billion. By comparison, federal student aid to not-for-profit and public schools only increased about 69% during the same time period.

Additionally, while for-profit schools only account for about 8% of total student enrollment, they accounted for 23% of federal student aid in 2008.

In 2008, the average for-profit school received about 66% of its funds from federal student aid, up 4% from 2002. Meanwhile, the number of for-profit schools that received more than 85% of its funding from federal student aid rose from 10-15% during the same time period.

After running the numbers, the GAO called out those characteristics of those for-profit schools that receive the highest percentage of federal student aid:
* Schools that granted no degree higher than associate’s (75% of funding from federal student aid)
* Schools that specialized in healthcare (75%)
* Schools that offered distance education (72%)
* Schools with a student population of more than 2,000 (74%)
* Schools owned by a publicly traded parent company (72%)
* Schools that were part of a chain (70%)

Of particular note are schools that offer distance education. They only account for around 12% of all for-profits, but also account for 55% of students enrolled at for-profit schools and 70% of federal student aid going to for-profits. Additionally, most of these are part of a corporate chain and many are owned by publicly traded companies.

In addition to the questionable tactics caught on camera by the GAO’s investigation, many have criticized for-profit schools for taking advantage of lower-income students, charging exorbitant tuitions — often several times higher than what you’d pay at a community college for the same or better degree/certificate — that will be covered by federal loans. Unfortunately, many students are unable to pay these loans back in a timely manner upon graduating or leaving the school.

To read the entire GAO report, click here to download the PDF

And here’s that GAO video from August:

Comments

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  1. Akuma Matata says:

    how much has federal aid increased to non-profit schools over the same time period?

    • Joewithay says:

      “By comparison, federal student aid to not-for-profit and public schools only increased about 69% during the same time period.”

      • TuxthePenguin says:

        The problem with that is I’m quite sure at the beginning of the period, there was much, much more aid going to the traditional universities than to the for-profit ones.

        If it was a 10:1 margin, it would be 17:… you get my point.

        And I think I can explain away why for-profit accounts for a larger share of federal aid than their portion of the population of students – lack of scholarships?

        • jessjj347 says:

          I was thinking the same thing. You could only compare the two figures in a 1:1 relationship if the non-profit schools had $8 billion and then a 69% increase (total = about 13 Billion). But that’s likely not the case.

        • pecan 3.14159265 says:

          Perhaps a reduction in scholarships, but also the possibility that students who enroll a for-profit colleges are more likely to be low-income. Many students who can’t get into regular universities opt for the for-profit ones because their admissions process is less stringent.

      • Akuma Matata says:

        wow… missed that sentence entirely. Tux brings up a good point though.

      • Coupon says:

        Because non-profits been given so much more throughout the years whereas for-profits are a new phenomenon. It would make sense that non-profits aid would level out eventually.

  2. TuxthePenguin says:

    Now here’s my real question – did these GAO stings take place for traditional colleges as well? I have a hard time thinking that for-profit schools are any worse than traditional schools… both are inflated by the same debt bubble, only one has to fight the fact that they aren’t “traditional” schools; ie, if a student takes out $20k in debt for two years at the University of (Insert State here), no many would bat an eye. But the same amount of the University of Phoenix?

    I really need to read more on this as a whole, but I can still ask questions.

    • TouchMyMonkey says:

      Would you spend your hard-earned education dollars on a degree from ITT Tech when you can get one from your local state university?

      I smell a big rat here. My guess is these schools draw most of their student body from the ranks of those who aren’t really college-ready for one reason or another. It’s the same schtick you hear on Glenn Beck’s propaganda show – feed the mark bullshit, while complementing the mark on how smart he or she is for listening to it. Real colleges don’t need to employ the sort of salesmen one might find at your local Dodge dealer.

      • TuxthePenguin says:

        Have you looked into graduate rates? Or the amount of debt people take on to get a worthless degree? Lets no bash for-profit schools without taking a larger look at higher education.

        And the reason many schools don’t have car salesmen recruiting people are two fold: athletics and alumni. How many people want to go to Florida or LSU or Alabama because of the “tradition” or whatever BS they come up with. Doesn’t help that society pushes people into college too… why bother employing salesmen when you have hidden ones doing wonders already?

        • TouchMyMonkey says:

          I think the phrase, “credits earned are unlikely to transfer” speaks volumes about for-profit schools. You don’t hear that much from Florida or LSU or Alabama.

          • broncobiker says:

            I have to defend University of Phoenix a little here. All of my credits transferred to the state university I left for when I was better set up.

            • MrEvil says:

              Yeah, it seems that University of Phoenix is trying to at least give students a legitimate education.

        • pecan 3.14159265 says:

          I read today that nearly 95% of students at for-profit colleges take out loans, versus only about 45% of students at non-profit universities.

    • Matzoball says:

      I would definately read into it. The biggest reason FOR PROFIT charges more than a traditional state school is FOR PROFIT actually spends a ton of money recruiting students and very little money finding them jobs. I will be happy to see FOR PROFITS fail. It is criminal what they do to the ignorant.

  3. CherieBerry says:

    I’m a college advisor for a non-profit city/state-funded community college. Working with special admission cases, I have learned that a large majority of my students have been taken advantage of by these for-profit schools. It is truly heartbreaking how these “colleges” become huge barriers to a student’s education.

    • sonneillon says:

      Accreditation is everything.

      • Marlin says:

        Sorry but it’s not. Just about any school can get it today from somebody. Even the University of Phoenix has it now.
        I work Fed HR and have to accept a degree from these hacks of schools as they are listed with the DoE

        • broncobiker says:

          Comparing University of Phoenix to my current school, Education-wise there really is no difference. I’m covering the same amount of information I’m just less responsible for it on my own. When I was online the entire experience was up to me, I had to learn it myself. At my current school (State U) I have a much more accessible set of resources. But as far as the degree of the education goes, it’s not different. It might be pricier but it’s not different. Check into it before you make assumptions.

  4. cashxx says:

    I think its sick for all education to cost so much. Books are outrageous and tuition is so far out of control its ridicules. Shouldn’t have to sign your life away in debt to take college courses that have nothing do to with what you want to go to school for which are usually what non-profit schools charge for. Its a joke! The smaller for-profit schools are usually courses for what you are going to school for.

    But I can’t believe the for-profit are any worse than non-profit. How much money and grants are used at these non-profit schools for getting a new quarter back for the football team, etc.

    I think they need to investigate all schools not selected ones that are making for-profit schools look bad.

    All your paying for in the end is a piece of paper…..

    • ARP says:

      With all the grammar and usage mistakes, I’m trying to figure out if it’s a real post or if you win the award the best satire post of the day.

      If it’s a real post, I think we all agree that school is overpriced. The point of college isn’t just to learn a particular “trade” (that’s what trade schools are for). College is designed to create a well rounded person with sufficient analytic skills and some specialized knowledge. Whether they pass for fail in that regard can be debated.

      • milkcake says:

        Seriously? You pointed out grammar and usage in a comment section? Even then, maybe he studied engineering and english wasn’t his specialty, so I say he can probably kick your ass in mathematics. As a plus, doing better in math is much better than doing well in English, as we all know engineering degrees dominate top paid majors. Of course, it’s better if you can do both well, but engineering is tough as-is without all the addition of learning what Plato was thinking.

        • speedwell (propagandist and secular snarkist) says:

          Testify, brother! My whole job is to teach and write documentation for engineers. If they could read and write, I’d be out of a fucking job. Pardon my French.

        • MMD says:

          None of what you said excuses anyone from the basic expectation to communicate effectively.

          Cashxx, this is the digital age. People will judge you for what you write online, regardless of where you write it. You might want to brush up on your writing skills.

        • sinfonian94 says:

          With comments like that, I highly doubt that he has an engineering degree. The point of a real education is to produce a well rounded and educated student. Anyone who graduates from (or even spends at least two years attending) a real college can write better than that. The point is that this guy’s criticism of the college system is like a guy who once changed an alternator criticizing the quality of study leading to an ASE certification.
          And yes, I believe that VERY FEW for profit colleges (maybe 1 in 50) are REAL colleges. If a job posting states that they require a degree, they don’t mean an associates. They also don’t mean a degree from U of P. While associate’s degrees have a place in society, they are more of a certificate of completion of two years of college than an actual degree.

      • cashxx says:

        Am I in grammer school now? Just a blog post bud, I’m not too worried about how I write a post on a blog!

        • howie_in_az says:

          It’s a little ironic that your post should have so many grammar and spelling mistakes when speaking poorly of colleges.

    • Michaela says:

      If you feel that all you got out of college was a sheet of paper, then obviously you didn’t use your college years wisely.

      All the time and money I have invested to continue my education has given me the opportunity to learn more about the things I love. I have learned skills that will make me a more desirable job applicant, and I have given a chance to expand my knowledge on a variety of subjects. The sheet of paper I get at the end will just signify the three years I was given to do such things.

      Is college expensive if you do not get scholarships? Yes. Is it right for college to be expensive? It depends. The rates should not exceed the true needs of the institution.

    • pecan 3.14159265 says:

      A piece of paper you obviously did not invest the time and energy to get.

    • chargernj says:

      Look up the philosophy of a liberal arts education. When you go to a “traditional” college the whole point is that they will be teaching you things “that have nothing do to with what you want to go to school for”.

      If you don’t like that educational model then you should consider a more focused education like what you would get at a trade school. Like it or not, our educational model has descended from the Socratic model in which it was felt a more rounded education was better.

  5. evnmorlo says:

    Result of the more generous military education benefit?

  6. Coupon says:

    STOP, STOP, STOP comparing tuition at a for-profit to tuition at a non-profit like a community college. It makes ZERO sense to compare an apple and an orange here.

    • TuxthePenguin says:

      Really? Both are more than happy to take your money knowing a good portion of their students will never graduate. At least for-profit universities don’t let you major in worthless majors… sorry, but $50k of school is a waste on a Pre-Ottoman Gay Arabic Art degree…

      • jessjj347 says:

        Last time I checked community colleges don’t have those sort of degrees.

        I think the OP means that community college and for-profit schools are different.

        • Coupon says:

          Yes, thank you. Their source of funding is different, which makes their overall strategies different. So what if gov’t funding didn’t increase as much %-wise with non-profits… they’ve been getting gov’t funding for years and years and years and years. That’s the majority of the reason why a community college is SO much less than a for-profit- it’s government subsidized… a PUBLIC school. It just doesn’t make sense to compare the two monetarily.

      • ARP says:

        It’s Pre-Ottoman LESBIAN Arabic art, thank you very much.

      • MMD says:

        It’s not for you to decide what a “worthwhile” major is.

  7. Zclyh3 says:

    They should stop all federal aid to all for-profit institutions. If they truly are free market, then the market should let it self dictate. Save all the federal aids for non-profit schools.

    • TuxthePenguin says:

      I had to laugh at this. Which is a worse school?

      One that offers “business” or technical degrees with a graduation rate of 25%, or
      One that offers a universe of degrees (many of which are worthless outside of academia) with a graduation rate of 50%?

      Higher education is a problem… is not graduating a bad thing compared to compiling another 20k in debt for a Gay Arabic Arts degree?

      • milkcake says:

        I agree! I always tell people those majors are for the “rich” who enjoys intellectual stimulus that won’t help you earn any money.

        • MMD says:

          If you’re going to college solely to take courses that are directly related to the job you want, you’re not only limiting yourself to getting only that kind of job, but you’re not even getting educated. You’re getting trained.

          All of these “worthless” subjects people complain about are subjects that teach you to think critically. Last time I checked, thinking was an important skill, regardless of career path.

          • TuxthePenguin says:

            I got my degree in Accounting because I wanted to be an auditor. Yes, a lot of my education was training… but the problem with that is? I actually wanted to get the most bang for my buck in my higher education.

            I love when people try to defend worthless majors. Yes, because all that ability to think critically is going to help you when you’re trying to get a job and all they see is your resume…

      • tsukiotoshi says:

        I dunno, I accumulated that debt for biology. Working out pretty well for me so far!

    • broncobiker says:

      So what you’re looking for is a government monopoly on higher education?

    • darthwaveous says:

      Bravo let the free market sort it out. Look at the default rates for these schools. Insane.

  8. rage says:

    Everest College grads sue, alleging fraud

    The suit, filed Friday in Salt Lake City’s 3rd District Court, alleges Everest’s recruiters subjected prospective students to high-pressure sales tactics that omitted or distorted crucial information about the transferability of credits, as well as the debt loads associated with enrolling.

    http://www.sltrib.com/sltrib/home/50363247-76/everest-miller-students-credits.html.csp

    • cashxx says:

      Then if thats true they should be shut down. Not all for-profit schools are bad. I’m sure non-profit schools are doing some bad things as well!

      • MMD says:

        Do you have any evidence to support this claim?

        (A good liberal arts school would teach you how to make a solid argument and support your claims. Just sayin’.)

        • Verucalise (Est.February2008) says:

          A good math teacher would show you, based on evidence, the percentage of probability that there is indeed, a few bad apples even among the non-profits. Probably few and far between, according to my math LOL.

    • rage says:

      It’s the accreditation factor are the credits transferable .

  9. TakingItSeriously is a Technopile says:

    So a question for all the “This can’t be any worse than a for profit school people”. WATCH THE VIDEO – it is accurate.

    What is wrong with seeing the financial aid people and sorting out the financial aid BEFORE signing a legally binding contract?

    I have been through a Trade school over 17 years ago, and it was the same experience. Trade schools are the same. They gave my father and I the hard sell, and we went for it. They exaggerated the job placement opportunities, and the money I would make after I graduated. I graduation with top marks, and ended up making $1 over minimum wage.

    The school folded up and moved on after it was discovered that the owner (from the another country I am not saying where to avoid any sort of bias) was skimming off peoples cost of living loans (which had to be sent THROUGH the school). I lost whatever Job Placement assistance they could provide less than 6 months after graduation.

    These schools prey on the people out there looking to make a fast change in their lives. People who are out of work, and are looking to get into a career asap to support their family. Then when the school disappears they are left holding 10, 20, or even 50K in student loans with no way possible to pay them back. My father and I paid 10ish K in student loans back with nothing to show for it. My education was derailed for close to 5 years because of this (my father could not afford to pay the loans, so I had to work to help him pay therm off at a MUCH slower pace due to the vastly reduced expected income).

    I just helped my son (19) go through CC enrollment. The experience was a complete 180. They were open about everything. There was no pressure. If we had a question they either answered it, or brought in someone who could. They did NOT got get their manager.

    These places are a scam business that need to be shut down.

    • TakingItSeriously is a Technopile says:

      My initial sentence was SUPPOSED to read

      So a question for all the “This can’t be any worse than a NOT for profit school people”. WATCH THE VIDEO – it is accurate.

    • TakingItSeriously is a Technopile says:

      And yes – I am sure there are a few of these places that have all the right intentions, and maybe even give people a good education. They are the exception to the rule.

      Go google “For profit college scams”. There are About 2,220,000 results

      Compare that to “Nigerian Scam” at About 312,000 results

  10. bben says:

    There are no longer any non profit schools. The current president of my alma mater was appointed because he is a good fund raiser and not because anyone thought he would make a good university president. The fees and costs of a college education have increased ten fold. And the schools are actively recruiting students that shouldn’t have even graduated from high school, and have lowered their academic standards just so they can take their money.

  11. sopmodm14 says:

    colleges are a scam in itself anyways, holding you financially hostage, lol

  12. katia802 says:

    I’m going to a for profit trade school for vet tech. Main reason for my choice is it was either a 18 month course for an associates, or get the same associates degree at a college two states away, taking two years, at approximately the same price. Yes, some of the students, welll, honestly, a lot of them not in my program are almost illiterate. Apparently you don’t have to be very intelligent to be a medical assistant. Graduation rate for my program, which was disclosed to me while I discussed enrolling, is 25%. It’s really easy to say go ahead and spend the extra time, but circumstances differ, most of the people in my class group don’t have time or money to go on to be a veteranarian right now. Yes, they take advantage of people in reduced circumstances. But considering the choice of starving on a minimum wage job, or a chance to get a decent job, which way would you go?

  13. Extended-Warranty says:

    We need to regulate colleges and hospitals more than anything else. I hope we get off the topic of financial reforms. Financial meltdowns happen when people get overloaded from huge debts they can never pay back. Obviously, common sense need not apply, so we need to save everyone.

    I have no sympathy for those who got screwed by big colleges. I know too many of them. Few of them laughed at my choice. I ended with a bachelor’s degree, $0 in debt, and started at $40k right out of college. I wouldn’t change a thing.

  14. caj111 says:

    I don’t want to name that little for-profit institution that started in Arizona on this blog, but I hear they have a graduation rate of about 15% and I’ve seen this cited in several places. How can a place justify itself with a graduation rate of 15%?

    • broncobiker says:

      If you’re talking about UoP and they have a graduation rate closer to 35%
      That’s because most of the people going don’t graduate at all. They appeal to a different part of the college going crowd. These people take a class here and a class there, rather than the full 2-4 years at once, withdrawing each time and enrolling at different schools to continue. This doesn’t happen to 20-somethings out of high school, it happens to 40-somethings at work.

      • MrEvil says:

        Because traditional colleges/Universities live in a parallel dimension where nobody has to work for a living and you ALWAYS have time to show up for class.

        Its one of the reasons I never finished my degree. The only credits I had left were two academic credits and those math/science instructors were the LEAST flexible when it came to me not coming to class (at the time I worked crazy hours as a field tech). The technical classes I took were MUCH more flexible and didn’t dock anymore than 10% of my grade for not showing up except for tests. I would have taken those credits online, but the morons at the school placed class-size limits on online courses that were SMALLER than classes on campus.

  15. DEVO says:

    Are we now pretending there is “for profit” and “Not for profit” Higher learning facilities. Maybe someone can please tell me the justification for textbooks costing 150 bucks a piece at a “Non profit, we really give a shit about your education school”

    • Michaela says:

      Complain to text book companies more than schools about that issue.

      Also, there really isn’t a real need to purchase paper textbooks anymore. With electronic books and textbook rentals, even a student who needs over $500 in textbooks can get away spending only about $200.

    • broncobiker says:

      Are you a student somewhere?

      If you are you might know you don’t buy textbooks from the school. Even on campus bookstores are contracted out to the best operating bidder. You’re not buying it from them, you’re buying it from (Barnes and Noble in my case).

      I spent something like 400$ in books this semester. I’ll get most of that back when I sell them to someone at the end of the semester.

    • GrimJack says:

      Speaking as a person that once worked in the college bookstore industry (rhymes with Cairns and Robles), I can tell you that the books themselves are the least profitable items in the store. There was something like a 35% markup over cost compared to the industry standard 100% markup on things like clothing, art supplies, food, rah rah stuff, etc. They are also the most troublesome – you constantly chase faculty to get book orders for the semester, you quietly roll your eyes when they demand you stock 15 different titles for their class, knowing that the students won’t buy them and you’ll be sending them back. If you want to vent your ire, direct it at the publishers – they are the ones that set the prices and publish new editions every 2 years in an attempt to gut the used book market….

  16. Extractor says:

    Anybody read the fine print on those TV ads- “Credits earned most likely will not transfer”.

  17. Extractor says:

    My education cost as follows (after dropping out of high school):
    $620 for 62 credits at the comunitty college. About $30 per credit hour for the remianing 1 1/2 yrs undergrad. $6000 per year for 4 years of Dental school. This was in the mid to late 70’s.
    Most of us refer to graduating as when we got out, like a prison. I do. Wonder why?

  18. veg-o-matic says:

    From what I understand, a big reason why for-profit financial aid has shot up since the early Double-Aughts is in large part due to the accreditation process.

    The person placed in charge of said process during the Bush administration (I forget which entity it was, not just one of the regional bodies, but a federal one) was a woman who held a significant stake in a for-profit educational institutions herself. And like magic, once she was in charge, accreditation became much easier for the for-profits, thereby unlocking millions more in financial aid.

    I’ve got that info lying around somewhere, must find it. Fascinating stuff, since it makes it a little clearer that it’s not just for-profits encouraging students to actively seek (lie for) financial aid, but rather manipulation of accrediting standards that’s sending out all this money to the private sector.

  19. dush says:

    These for profit schools should pay off the loan if the student doesn’t get a field related job within two years.
    Obviously their product failed so they should provide a refund to their customer.

  20. Not-A-Cynic says:

    I work for a for-profit college, I won’t say which one and I’m no spokesperson of any kind, however, I’m off the clock and feel compelled to stand up for myself and my employer in the face of what looks to me like a “witch hunt” brewing. I don’t think it’s realistic or fair to simply dismiss all for profit colleges based upon a few rotten apples.

    In many cases you get what you put into your education. It’s the same with anything in life. I’ve seen some great success stories out of students who applied themselves and took their programs seriously and believed in themselves and in what we were doing for them. 99 times out of 100 they’re the ones who get placed in a good job.

    Then there’s the few cyinical ones who think everyone is out to pull the wool over their eyes. They get out in the business world and, surprise, no one wants to hire them because they basically radiate their negativity wherever they go.

    So who do you think ends up running around the Internet telling the whole world what a scam their education was, the successful ones or the ones who shot themselves in the foot from the outset?

    Our college must uphold certain job placement rates in order to meet the criteria of our accreditation. As far as I know most public universities and colleges have no such preassure. You can major in the proverbial “underwater basket weaving” there because it doesn’t matter whether your degree is marketable or not. You won’t find such majors at for-profit schools for that reason. It’s a shame in some cases.

    I studied Philosophy at the state funded university where I went and count myself lucky to have had the opportunity to study it. I recently looked for a school to continue where I left off with my studies at the university. I tried contacting the admissions department at a certain large state university to do their online philosophy classes. To this day they haven’t returned a phone call or e-mail I’ve sent. Bottom line, they really don’t care if I achieve what I want to achieve because they have no motivation to do so. If I could find a for-profit school that offered a degree in philosophy and called their admissioins dept they would be all over me in a heartbeat. But philosophy isn’t a degree that prepares you for a career. So no accredited for-profit school is going to touch it because their accreditors would be all over them for their placement rate. Such is life I suppose.

    You can approach life as though everyone is out to scam you or you can appreciate what’s out there for what it is. I guarantee you’ll be more successful with the latter outlook than the former. But yes, you have to watch out for the rotten apples too. They do exist and one can only hope that they drive themselves out of business. But I don’t think it’s fair nor prudent to characterize a whole industry for reason of a few bad apples.

    And one last parting remark: As a financial aid administrator a few of the most messed up FAFSA’s I’ve seen have come from students transferring from local community colleges…things our school couldn’t dream of getting away with because the Feds would be all over us like butter on toast. We’ve had to go back and redo some FAFSA’s denying some possible Pell grants to those students just to stay within regs. I don’t know if it’s a matter of “who cares, no one is watching us so we can be sloppy” or “let’s try to get the poor kid a little extra money” but it seems to happen from time to time with the community colleges.