If you are thinking about going to a for-profit college in order to fast track your professional career you might want to rethink your decision. A recent conflict between the Obama administration and the for-profit college industry brings to light some major concerns about the value for students in the for-profit college world.
Student debt is a huge problem in the United States. Believe it or not, it has eclipsed the $1 trillion mark. That’s a big enchilada. And when you think about the current economic prospects for many college graduates and the difficulty many will have repaying their loans that debt starts looking scary.
That brings us to the for-profit colleges. They are smack dab in the middle of this mess. Their students have much more debt than public school students and the default rate is far higher too. A bad combination.
Some people allege that the for-profit schools admit students (and shackle them with Everest-size debt to pay the tuition) even though they know many won’t be able to repay the loan. The schools don’t care (so say the critics) because under current law many of these institutions are subsidized by the government. The schools get their money and the students get their debt. No bueno.
New government proposals might end all that. If the Department of Education gets its “gainful employment” rule finalized, federal money will stop flowing towards this private college if the grads end up with high student debt compared to their income.
Why Is The Government Targeting The Nice People In This Business? What’s it got to do with you?
Let’s go back to the Department of Education. According to their statistics, 66% of those who attend for-profit schools fail to graduate. That’s 50% higher than the dropout rate for public schools. 66% of the kids who graduate from public school graduate with debt but 88% of their colleagues in private for-profit school do. The students who do graduate for-profit schools end up with close to $40,000 in debt which is 56% higher than those who go to public college. And the default rate among private for-profit students is 21% compare to 13% for the public school grads.
The detractors conclude from these statistics that the private for-profits are admitting students they know will end up in low-paying jobs but drenched in debt. They have a point.
What’s All This Got to Do with You?
This is not to say that all for-profits are evil or that it would always be a mistake for you attend. It still might be smart for you to go this route. But the current dust up between the Feds and the for-profit universities highlight a few very important considerations:
1. Some of these schools may not be in business very long.
According to a Senate committee report, taxpayer money may account for more than 85% of the income these schools receive. If that dries up, those school are DOA. Many of the publicly traded companies that operate these schools are already on their knees. Their enrollments are down and their stock prices are in the gutter. Many are being investigated by the government for fraud and others have been successfully sued and have settled for millions with the government.
This is not true across the board of course. Some schools are axing worthless degrees and pushing students towards studies that can actually help them support themselves as adults. A novel idea.
The point is, before you sign up at one of these places, look at the financials to make sure the school is still going to be in business by the time you graduate. Bien?
2. Consider Carefully Your Field Of Study
If you have to borrow money in order to go to college (something I’m generally very much against) make sure the numbers work. What are the employment prospects for people in the profession you want to study? How much do people earn? How long will it reasonably take you to repay your loans? What are your alternatives? Are you sure you’re decision is the smartest move?
Private for-profit colleges can provide a short-cut to good paying jobs but they are not a magic bullet. Some schools and some degree programs are worthless and can make your current financial situation far worse.
Do you have any experience with private for-profit schools? What was the result?