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: