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How For-Profit Colleges and Universities Take Advantage - Part II

education student loans Aug 24, 2018

A Little Bit of History


For-profit institutions have been around for nearly 200 years.  The first ones were established between the years 1820 and 1850 as institutes owned and managed by wealthy industrialists who made the promise of sharing their business secrets. They were termed ‘mercantile colleges” and they taught some necessary skills, such as penmanship and bookkeeping. These institutions were a great deal for the non-elite who desired to break into the business world.  The rise of the public university came a little later, along with public secondary schools and grant colleges.  These reduced the need for for-profit business colleges and so, they dwindled.


According to Kevin W. Connell, author of Degrees of Deception: America’s For-Profit, Higher Education Fraud, “The for-profit institution was on the brink of collapse but this all changed with a fundamental financial transformation that started with G.I. Bill.”  Prior to the G.I. Bill, private colleges were funded with private money, while public colleges were funded with public money.  With the G.I. Bill, veterans were now able to get federal funding through the institution of their choice.


Trouble Begins


Their non-inclusion in the federal funding agitation of the early 20th century, the for-profit colleges that are left, “lobbied to be included at the table during the next round of government initiatives to promote post-secondary education,” Connell says.  The government agreed and money started flowing from federal coffers to private educational corporations. 


From the very beginning, there were some concerns about this, and rightly so. Way back in 1952, the federal government started insisting on accreditation. But the accreditation system itself wasn’t standardized and this prompted the for-profits to come together to establish the rubber-stamping Accrediting Commission for Business Schools.  Over the next few decades, the for-profits schools had to bring down their tuition charges because of the flow of federal funds.  Most federal funds and aid were designed to help low-income students.  Therefore, lower tuition costs attracted these students who brought more federal aid with them, and so on.


Easy to Get, Federal Funds Fueled a Fire


No one seemed to notice any problems with this until around the 1980s.  Whether the for-profits didn’t begin taking advantage of this system until then or they were just flying under the radar, it’s hard to tell.  Whichever scenario, accusations started coming in around them and the people were shouting, “Fraud!”  The federal government obliged and began to investigate.  By 1992, guidelines were created to rein in the for-profit industry.  In line with the Higher Education Act of that year, a for-profit institution was unable to receive more than 85% of its funding in the form of federal student aids.  Still, when you’re talking about large sums of money, that’s a huge percentage and instead of reining them in, the for-profits put their thinking caps on. 


Primary Question: How Can We Take Advantage of the System?


Looking at the past 20 years in US Higher Education, one of the most significant trends has been the rise in attendance at for-profit universities.  How did for-profit schools, which are considerably more expensive options for post-high school students, raise their attendance so substantially?  They made it considerably easier for their students to take out student loans.  That’s probably the biggest factor.  And, because the tuitions were much higher, the sizes of these loans were substantially larger, too, multiple times larger than would be necessary for a state school’s tuition.  They also began marketing campaigns to attract students and increase their popularity, particularly to black women, a favorite demographic of for-profit schools.


In the 1970s, less than 1% of all students enrolled in degree programs were registered at for-profit schools.  By 2012, that number had grown to 13%.  In the four-year college programs, it went from less than 1% to 17% in that same time frame.  While their graduate enrollment is declining, their two-year programs and certificate programs are not.  This just means that students who know they’ll need at least four years to complete their studies are now realizing the significant cost of attending a for-profit school because they’ve thought it through, in my opinion.


How Do For-Profits Justify the Extreme Gap in Tuition Costs?


For-profit institutions, as I said, charge significantly higher tuition than other schools.  If you read Part I of this article last week, I gave the example of Maricopa County Community Colleges versus Grand Canyon University, which is more than FIVE TIMES the cost of Arizona’s pool of community colleges and universities.  These for-profit schools love to claim that their quality of education is higher or that the reputation of the college will help students find a job after graduation. 


Don’t let their sweet talk fool you.  These are “For Profit” schools.  This means they are businesses designed to make a profit… off of students…their source of income (or rather the government who pays them upfront in the form of student loans).  They have shareholders who won’t invest unless they know they are going to get paid dividends.  It’s a business and businesses are in business to make money.  Sure, they can make a campus look amazing and hire teams of marketers to entice students in every way.  They can have some pretty awesome curriculum and sweet teaching staff but at the end of the day, it’s all about money and profit.  Don’t forget that.


Will You Be Better Prepared or Get a Better Job?


The answer is no. 


According to a recent study by the National Center for Analysis of Longitudinal Data in Educational Research (CALDER), a degree obtained from for-profit universities does not give graduates the needed or expected advantage in the job market.  CALDER also sent out nearly 9,000 fake resumes in response to job postings in six different categories of work.  They measured the response rate of the applicants who had degrees from for-profit universities against students with an equivalent community college certification.


They concluded that degrees obtained from for-profit colleges do not help job applicants any more than those from community colleges.  In fact, the fake resumes from Community College had slightly more responses than their for-profit degree equivalents. 


Researchers pushed even further as more questions were raised.  Questions in regards to the cost of obtaining a degree from for-profit universities as compared to less expensive colleges and universities and what students would earn after obtaining their degrees at both, basically seeing if the higher cost was worth it.  A report from the National Bureau of Economic Research in 2012 reported that graduates from a for-profit university earned $1,800-$2,000 LESS when compared to graduates from other universities.  Mic drop.




Students are being duped into paying not only way, way more for their education, but way, way more on their student loans.  We are talking tens of thousands of dollars more MULTIPLIED by accrued interest on those tens of thousands of dollars.  This is an outrageous problem, first paid for by the taxpayers and then taken on by the students and co-signers.  These kids, young adults, and working parents are victims of a ruse to take advantage of government funding and it’s working big time!  I think the evidence is more than clear.


If you are a student or the parent or grandparent of a student,  don’t allow yourself to fall victim to this massive con.  These for-profit institutions are in business to make money and education is just their way of doing it.  They know that the government funding is there and they are out to get that money.  Getting students to sign on the dotted line means big profit, even without a student loan, because the tuition costs are so much more. 


  • Do your research, check rankings, and you’ll find the school of your dreams.
  • You can earn that degree for much less somewhere else and that means you’ll pay less in student loans and pay less interest, too.
  • For-profit representatives are hardcore Don’t fall for their tactics. 
  • Always keep the cost of tuition at the forefront of your mind. It does matter.  When you finally graduate, it may just matter most. 
  • And finally, unless you’re earning a degree at an Ivy League school, like Yale or Harvard, research says the name of the school won’t do a thing for you. In fact, for-profit schools will get you fewer job offers and earn you less pay.  


I’m not against higher education.  I’m just against paying too much for it.  Use this advice when looking into any school, even state schools.  Take into account what you will potentially earn, what your cost of living will be, and figure out what a reasonable amount is to borrow.  If you can get through school without taking out a single loan, that is the goal.  Take summer jobs and work your way through school.  Don’t burden your parents or grandparents with co-signing on your loans, either.  That just proves it’s more than you can afford.  Good luck and here’s to your future!





Michelle R Russell

© The Prosperity Process, LLC  

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