How For-Profit Colleges and Universities take Advantage - Part I
Aug 17, 2018For-profit colleges and universities are educational institutions established with the main aim of profit-making or financial gain. For most of their history, they existed separately from public and traditional non-profit colleges and universities but no longer.
The separate identity changed in 1972 after the Higher Education Act was reauthorized. This change created a platform that enables students attending for-profit institutions to be treated the same way as students at other institutions (public and traditional non-profit colleges and universities). For-profit schools now have access to grants and subsidized loans to pay for their tuition and that’s where the problems began. Because these schools are profit-driven, I would argue that they do not have the students’ best interests in mind. They are all about the money.
For-profit colleges are known to be predatory. They entice applicants with easy entry, courses with flexible schedules, online classes that can be taken in the comfort of your home and work around busy schedules, and an amazingly easy student loan process that allows these schools to charge several times what a state school does per credit hour, multiplying the cost of education several times. This is where the money is. They don’t care if their students graduate or finish degrees or certificates. They only care about getting them to register for classes and getting the tuition – most of which is coming to them in the form of student loans.
Working off of potential students’ high emotions, they are like used car salesmen talking them into taking out student loans in large amounts with high-interest rates but constantly avoiding any discussion about tuition costs, especially when compared to local schools. Although some may argue that a few of these schools are more like private schools, like Grand Canyon University, I say they are still selling overpriced used cars. It may look like a Lexus but it’s just a Toyota with a really nice logo painted on it. Don’t get me wrong. Toyotas are really good cars but I don’t want to pay four times what they are worth plus stretch out those payments over the next few decades at a high-interest rate. That, my friend, is exactly what these schools are doing.
The federal government is fully aware of these types of problems. It has acknowledged the misleading marketing practices of these schools, gross exaggeration of graduation rates, and misleading claims about career placements which all amount to consumer fraud. Still, the government is giving out billions in funding to their students each year. This makes no sense. Fannie and Freddie are doing to education exactly what they did to housing: creating a bubble of rising tuition costs while burying the consumer in debt they cannot afford. Worst of all, this debt cannot be erased through bankruptcy because many are Federal Loans. The government’s answer to the huge amount of debt these schools burden their students with is even more surprising. Slavery. Well, I call it slavery but it’s more like indentured servitude, which is a nice word for slavery. The government just says they’ll eliminate your loans if you work for “such and such” company, for “X” amount of pay, and for “a designated” amount of time. Hum. Sounds like indentured servitude to me. Just call it what it is.
Last year, Republican Senator, Chuck Grassley of Iowa, introduced the Understanding the True Cost of College Act of 2017. It will provide greater transparency in financial aid letters or the billions that Fannie and Freddie (and others) are passing out willy-nilly, at great consequence. The act would require the Department of Education to develop a consumer-friendly financial aid offer form, much like the loan papers you get when you get a car loan that states the amount you are borrowing and interest you will be paying, the amounts of the payments, and for how long. Hopefully, this will pass and student loan institutions will be required to provide these forms to students before they sign for student loans, making them think twice…or maybe even for the first time in regards to borrowing.
Here’s a great rule of thumb: Don’t take out a student loan if you don’t know what degrees you are pursuing. Knowing your degree and the value of your finished degree is imperative. Only then can you get a really good idea on how much you can potentially earn per year, then calculate what your expenses will be based on the area you’ll be living in, and then figure out exactly how much you can afford to borrow. Work it backward. You don’t want to have $100,000 in student loans at 12% if you can only make $75,000 a year in the state where the cost of living is extremely high, like Northern California. It would take you decades to pay that loan off and any life changes, like a child, might make it worse. Plus, in some areas of California, $75,000 a year is poverty level. Think about every possible scenario first.
What else should you take into account? Well, an example might be a for-profit law school that guarantees to mint lawyers but has no bar association accreditation. When you dig deep, you can discover things like this. Hopefully, you do so before, completing the program, because finding out after could be too late. You’ll already be buried in debt. Along with high-interest loans, your career prospects will be limited, to say the least, until you correct that. Thinking and planning ahead makes all the difference.
Also, take into account that there are inexpensive state schools that may offer the same variety of courses online as well. In Arizona, Rio Salado offers classes that begin each and every Monday. How convenient is that? Plus, their cost per credit hour is only $85, while Grand Canyon University (the Lexus that is really a Toyota in disguise) is $458 per credit hour. So, the same 3-hour course would cost a part-time undergrad $255 at Rio or $1374 at Grand Canyon University, more than 5X as much. Spread that equation across the board for the total price of your education. Not only would you pay five times more but you would be paying interest on that as well. Imagine paying 10% interest on $10,000 or 10% interest on $50,000. Which one sounds better? You would be getting the same amount of credit hours, the same amount of education, but just at a higher price tag.
We’ll continue with this story next week.
End of Part I
Michelle R Russell
© The Prosperity Process, LLC
for BNB-Boss
Want to hire a Virtual Assistant but don't have a clue about how to get started...
We've created a program just for you inside our membership, VA Advantage. Not a member yet? We've got you covered, too. We've made this program available for "outsiders" for a limited time and for less than $20. Grab it now before it's too late!
Go and Grow...
If you want to become financially free, you need the right education. That’s why we created our Mini-Courses on investing in Short-Term Rentals. If you are serious about investing your time and money into an Airbnb (aka Short Term Rental), you need a system. Our courses are jammed packed with everything you need to know to create massive, passive income. Plus, they're affordable.
and take a look at July's BNB Budget Makeover Series inside our blogs...
This month, we give you loads of great ideas on using your orphan days to make inexpensive changes to your properties. Begin here, with Budget Room Makeovers: Weekend Projects for Under $1000.
Don't miss a beat!
New articles, blogs, podcast episodes, and courses delivered to your inbox.
We hate SPAM. We will never sell your information, for any reason.