Profits off For-Profits

While browsing through the Association of Private Sector Colleges and University’s fall magazine, The Link, I was struck by the advertisements. To be clear, a “Private Sector College” is a euphemism for a proprietary institution, and the bulk of their quarterly magazine’s content, at least for the last year or two, is devoted to criticism of gainful employment legislation, and to an extent, whining about public and not-for-profit privates. As you can imagine, their magazine is chocked full of marketing for various companies which offer services that the for-profit sector can use to maximize their profits—things like lead generation companies, website analytic tools that promise to give you more insight about the prospective students checking out your website, and online career tools that allude to higher placement rates. None of this was surprising to me—after all, it is only natural that for-profit educational institutions are going to be viable marketing targets for companies looking to make money in a new area.

What struck me most however, were the ads that were offering service in the area of compliance. For example, Compliance Point is a company that is offering their ACE program, an ‘online compliance portal’, to colleges and universities. Their services include everything from ‘secret shoppers’ to snoop on Admissions Representatives to job placement verification/compliance, and even general “gainful employment compliance”. In this one magazine, I counted no fewer than 5 ads which offered compliance-related services—offering to be “your source for default prevention services” and using terminology such as “compliance driven”, “default preventative”, and event the classic fear-tactic: “are you protected?” to lure the institutions to their compliance-management product.

In my naiveté, I was imagining gainful compliance being handled by the institutions directly, perhaps with the assistance of outsourced services for certain components. I was picturing concerned professionals thinking strategically about how practices might need to change in order to comply with regulations, and discussing strategies with faculty and administrators at various levels of the institution. In the early stages of the development of gainful employment legislation, when I was working at a for-profit, I was not imagining gainful employment compliance as the type of thing that we could simply hand off to an outsourced company to manage. Although I was concerned about the work-load and transitional pains that we might experience, completely outsourcing this responsibility seemed… well, irresponsible. It appears that since that time (I left the for-profit sector just over a year ago), compliance management for gainful employment regulations has blossomed into a full industry itself… and, I imagine, a potentially quite profitable industry too.

Although the various compliance management products are offering to take the burden of compliance management off the shoulders of the institution, I have to wonder about where the buck will stop when inevitably a client of one of these companies is found to be non-compliant. Since the Dept. of Ed. will come after the institution, will the institution attempt to turn around and go after the compliance management company? The compliance management companies are surely aware of this possibility, and they are likely writing their contracts with the institutions to protect themselves (note: I tried to find more information on the websites that I visited, but they were all mysteriously vague…). In short, it is unlikely that they are actually taking on the full responsibility, as their websites and marketing would have you believe.

In any case, here we have profits to be made off the for-profits. This is just one example of further commercialization of higher education—perhaps amplified because it is (mostly) focused on the already for-profit sector. What’s next?

Student loans, for profit

As student financial aid is increasingly used at for profit institutions, people are taking notice. For profit institutions offer degrees focus on specific careers, often geared towards non-traditional students. Enrollment at for profit institutions has increased 225% since 1998. As the government offers fewer scholarship and grants, they encourage and support students taking loans to invest in their education. However – as more and more students are going into debt, are they being taken advantage of by for profit colleges?

About 10% of college students go to for profit colleges, but over half of loan defaults come from for profit institutions. Colorado is one of 5 states with a default rate over 11% (the others are Iowa, Arizona, Arkansas, and Indiana) . For profit colleges attract students who may already be less likely to be able to pay back their loans, but are they also responsible for making sure half of their students don’t default on their loans? Is college more a benefit to the student or to the community (going back to the discussion of a welfare vs neo-liberal state)? If it’s a commodity for a student to pursue, why should the college be responsible or accountable for their debt? Should Best Buy be held responsible for their customers’ credit card debt?

This article has an interesting perspective, that sheds light on how an education is being viewed. In it, they quote the Minnesota Attorney General who says – do your homework. Make an informed decision about where you go to college. What a remarkable idea! This article also shed light on some of the limitations of for profit colleges including their higher cost and lower graduation rates.

You may have also heard that the government is looking into the admissions practices of for profit institutions. This report shows how last fall, the US Government Accountability Office posed as students interested in attending for profit institutions and learned about suspicious admissions practices. Several schools encouraged students to falsify information to better qualify for student loans.

Increased regulations on admissions procedures have, understandably, hurt for profits. Devry’s stock fell 22%. As the government looks to student loans as the solution to increased cost of higher education, they are now faced with the question of how students get to use that loan money. Should we restrict how students spend their money? I know of students who use the money to buy cars and computers, clearly there are many more who choose to spend it on a poor degree or a less-than-reputable institution. What is the government’s role in regulating this?