Community College Budget Cuts Drive Students To For-Profit Schools

As Community Colleges Cut Back, For-Profit Schools See Opportunity

ONTARIO, Calif. -- Just after she started working for an ambulance company in this suburban enclave east of Los Angeles, Cierra Nelson came to admire the quick decision making and street smarts of the nurses she met on runs to local hospitals. She soon opted to pursue a nursing degree, settling on a low-cost, two-year program at a nearby community college that has an excellent job placement record.

But despite her efforts to complete the coursework in the ensuing four years, Nelson is still not a nurse. California's budget cuts have forced the state's community college system to scale back the availability of crucial science classes. Nelson found herself repeatedly turned away from the oversubscribed courses required for her degree.

Frustrated and seeking an alternative, she took out more than $50,000 in student loans to enroll last winter in a nursing program at Everest College, one of many for-profit institutions that have sprung up in the area amid massive cutbacks in public funding for higher education.

"When I first saw how high it was, it was kind of a shock," said Nelson, who eventually came to the conclusion that taking out loans made more sense than waiting semester after semester to take the community college classes she needed to advance. "I know it's a lot of money and I'll be in debt, but I've got to do what I need to do."

While the program at Everest comes with a much higher price tag -- nearly $60,000 in tuition, compared to less than $3,000 at area community colleges -- its degrees appear to be less valuable on the career marketplace. More than 90 percent of the nursing students at nearby community colleges last year passed state licensing exams, which are required to practice in California. Fewer than 70 percent of Everest students passed the exams, registering the lowest success rate of all nursing programs in the state.

Nelson's predicament mirrors that of many students navigating the world of higher education in recent years. Community college degree programs, which have long provided affordable pathways to careers, have been overloaded by soaring demand, just as state governments grappling with budget crises have slashed support for such programs. Lack of public funding is among the more potent forces behind the surge in enrollment at for-profit colleges, which has turned their corporate parents into Wall Street darlings.

This dynamic has played out powerfully in California, where cuts to public education have been particularly deep, and where for-profit colleges have been notably aggressive, tacking up marketing notices on bulletin boards at community colleges where students are increasingly unable to enroll in classes.

"The population that is being pushed out is the most needy," said Jane Patton, past president of the Academic Senate for California Community Colleges, a group representing college faculty members. "These are the most vulnerable students that the for-profits have preyed on."

The for-profit college sector has faced increasing scrutiny in the past two years, as attorneys general in at least four states, including Florida and New York, have prosecuted or launched investigations into more than a half-dozen companies for overly aggressive marketing practices and financial aid fraud. More than 20 state attorneys general have signed on to a working group probing industry abuses.

Federal data has shown high rates of default on student loans among students enrolled at these institutions, prompting the Obama administration to promulgate new rules aimed at limiting abuses. A year-long Huffington Post investigation has found widespread rule-breaking at several of the largest for-profit college chains, with many institutions systematically preying on the anxieties of potential students, while making false promises about the success rates of their graduates.

Faced with the fact that large numbers of students fail to secure jobs that pay enough to keep them current on their loans, the industry has defended itself in part by portraying its campuses as the last bastion of opportunity for many Americans aspiring to a college degree. In testimony on Capitol Hill and in media interviews, industry representatives have emphasized that its schools welcome the least advantaged, hardest-to-educate students: people from low-income households, minorities and first-generation college students.

In the for-profits' scenario, any change in policy that risks slowing enrollment growth at their colleges also risks eliminating the only alternative available to more vulnerable segments of the student population.

But while for-profit colleges do indeed educate more low-income and minority students than other institutions, this is in large part because support for the traditional alternative, community college, has failed to keep pace with demand.

Though no one maintains a comprehensive list of state funding for community colleges, state and local support for community colleges on a per-student basis declined by 5 percent in 2009 from a decade earlier, according to Department of Education statistics compiled by the Delta Project, a nonprofit research group that studies higher education spending. The total subsidies provided to students by community colleges, including funding from public sources and other outside support, fell by 10 percent over the last decade, on a per-student basis.

The Obama administration has significantly boosted funding for Pell Grants, which are available to low-income students. Over the last three years of the program, the federal government has more than doubled spending on Pell grants, budgeting $20 billion more this year than in the 2007-08 school year. For-profit colleges have captured an outsized share of this pool -- roughly 25 percent -- despite educating only 12 percent of college students nationwide, according to the most recent federal data.

Intake of federal Pell Grant dollars, by higher education sector
Source: Department of Education

Had the $7.5 billion that for-profit institutions received via Pell Grants during the 2009-2010 school year gone instead to fund community college systems nationwide, that money could have created capacity for an additional 629,000 community college students, The Huffington Post calculated, using available estimates for the average expenditure per student. That would represent a 20 percent increase in the number of full-time community college students currently enrolled nationwide.

At California's community colleges -- the nation's largest system of higher education, serving a quarter of community college students nationwide -- an estimated 200,000 students will be turned away from classes next school year, according to the state community college chancellor's office, following state cutbacks of nearly 20 percent across the entire system. That amounts to more than 7 percent of the entire state's community college student body, and that does not count those who gave up on plans to enroll due to the difficulties of securing classes.

After accounting for inflation, California is now spending the same amount on community colleges that it did six years ago, despite adding more than 175,000 students in that period, a nearly 20 percent increase. On a per-student basis, the state is spending less this year than it was 15 years ago.

The for-profit college programs that have been absorbing the resulting overflow of students are on average more than five times as expensive as their community college counterparts, according to a Senate report that examined such schools nationally. While only about one in five students at community colleges takes out loans to finance their tuition, four of five students at for-profit two- and four-year schools sign off on loans, according to Department of Education data.

Because of the high costs and high debt loads, students at for-profit colleges are responsible for about 45 percent of all student loan defaults.

In the eyes of public education advocates, for-profit colleges are the inevitable, opportunistic outgrowth of a society that simultaneously rewards those with greater education while it eliminates traditional support for public campuses.

"The economy is essentially telling people that you have to get some kind of post-secondary degree or credential," said Anthony Carnevale, director of Georgetown University's Center on Education and the Workforce. "So the demand is growing very fast, and our ability to fund this function is crashing. It's not just declining, it's crashing. The public sector is basically getting out of the business, so the costs are shifting to the individual students."


California's current status as the leading edge of for-profit college growth represents a substantial change in its history. A half-century ago when the state laid out its master plan for higher education, which quickly became a model for the rest of the country, it leaned heavily on public institutions.

The plan gave rise to one of the most prestigious public university systems in the nation, and it included a vast network of community colleges with a mission of educating "any student capable of benefiting from instruction."

"It is the intent of the Legislature that each resident of California who has the capacity and motivation to benefit from higher education should have the opportunity to enroll in an institution of higher education," the plan declared. "Once enrolled, each individual should have the opportunity to continue as long and as far as his or her capacity and motivation."

The community college system was crucial for career training, but it also provided a logical pathway for transfer to California State University or University of California schools. More than half of Cal State graduates started at community colleges, and nearly a third of UC system graduates began their education there. Nearly 70 percent of the state's college students are enrolled at a community college, a much higher rate than in other states, making California's system by far the largest in the nation.

Perhaps the most revolutionary concept was that of tuition-free education. Under the original master plan, the state subsidized every resident who came through the system, eliminating any out-of-pocket costs, save for some fees for specialized coursework such as labs.

Even as cuts in those subsidies in recent times have forced campuses to increase fees, California has for years offered the lowest tuition for community college in the country. At $36 per credit this year, the price tag is less than a third of comparable community college programs in New York.

The system has been particularly adept at preparing local students for the sorts of jobs that are in abundance. For decades, California's community colleges have been the training pipeline for registered nurses in the state; more than 70 percent of the state's nurses have graduated from the system.

In Riverside, the regional hub of Southern California's so-called Inland Empire -- a sprawling kingdom of classic suburbia east of Los Angeles -- the community college's longstanding nursing program was created at the request of two local hospitals in the 1950s, making it one of the oldest in the state.

Sandy Baker, dean of Riverside City College's school of nursing, explained, "The community asked for it. The community helped start the programs, and we've been here ever since."

A majority of the nursing staff in the area's local hospitals come from Riverside City College, and the school has leveraged partnerships for clinical rotation sites at more than a half-dozen major hospitals in the area, as well as through nearly 40 total contracts with other health care providers, such as nursing homes.

Riverside City College's new nursing facility. Amid state cutbacks, the college has financed expansion mostly through local municipal bonds.

To transition students from the training programs to employment, Riverside has agreements with a half-dozen local hospitals to take recent graduates as unpaid interns as part of a "transition to practice" program. Interns learn additional skills, and the hospitals can decide if the graduate is a good fit. Baker said 24 out of 27 graduates who participated in the program this year were hired within four months. Riverside also has an arrangement that sends its associate degree graduates to Cal State-Fullerton, in nearby Orange County, to pursue bachelor's degrees.

Yet Riverside's registered nurse program has room for no more than 200 students, even though every year some 1,500 qualified applicants are on a waiting list to get in.

For students like Nelson, who endured four years of thwarted attempts to get into required classes such as anatomy and physiology or microbiology for her nursing degree at a similarly overtaxed community college nearby, frustration has come to outweigh the benefits of affordability and a high rate of job placement.

"I got really close," Nelson said. "I just needed a few more classes to be able to apply for the actual nursing program, but when I would apply, the classes would be full, or they would start dropping classes. It was just a colossal waste of time."

In just the past year, California's community colleges have cut between 5 and 15 percent of their course offerings, according to the state community college chancellor's office. Among the hardest hit were costly, yet crucial workforce training programs such as computer information systems, nursing and other health care-related majors, such as radiologic technology.

"California has kind of been a leader in terms of saying, 'Come one, come all,'" said California Community Colleges Chancellor Jack Scott. "Now we see that threatened in a way that it hasn't been before."

At Riverside City College, the beginning of each semester is marked by a frenzy of students jockeying to get the classes they want.

Long lines to the registrar's office spill out of the building and snake around campus. Hundreds of people land on waiting lists. Students attend the first few weeks of desired classes without being enrolled, in the hopes that someone will drop out and create a space.

Izaak Ramirez, a biochemistry major from Riverside, remembers stocking his first semester schedule with loads of unneeded electives, just to get courses under his belt. Having more credits means higher priority registration the next time.

"With these budget cuts, it really places this roadblock in front of you," said Ramirez, 20, a local high school honors graduate who was looking for a low-cost option before enrolling at a UC school. "You're not even dealing with just the difficulty of passing your classes. It's now, 'Can you get into the class?' and 'Can you stay on your timeline?'"

As a science major, Ramirez has among the toughest times getting the courses he needs. For many of the classes, which require lab components, there are only about 40 seats for hundreds trying to get in. He eventually decided to join student government, partially to get involved, but also because it would move him up the chain for priority registration.

Gregory Gray is in the unenviable position of supervising the decline. Since arriving two years ago as chancellor at Riverside, he has presided over cuts that have torn into nearly 40 percent of the district's budget, resulting in a drop in enrollment of about 6,000 students. The state recently introduced another round of mid-year cuts that promise more austerity.

Gray said that eliminating costs for students was an admirable goal decades ago, but no longer makes sense due to disinvestment in the system. He advocates raising fees to a level more in line with other states, or perhaps differentiating fees so that higher-cost programs, such as nursing, cost more than lecture classes like English or history.

But fee increases are a politically touchy subject, he concedes, particularly as they jumped from $26 to $36 this fall and are scheduled to climb to $46 per unit next summer. Fee increases for community colleges are under the control of the state legislature, which puts elected politicians on the spot.

"The fact of the matter is we need to become much more reasonable at a market price," Gray said. "I do believe that the students will be able to afford it, and I believe in today's market they will applaud us, because they can get out of there in two years. They can get the courses they need, and they're not being shut out."

In any event, he added, something must change, because the status quo is merely funneling students eager for education into the hands of for-profit colleges.

"We are creating a market for the proprietary institutions," Gray said. "The fact of the matter is we're driving our students there."

Leslie Campos almost became one of those students. She had applied three separate times to Riverside's nursing program before she got in. And that came after three years of struggling to get prerequisite science courses.

She began nursing classes this fall, after starting at Riverside in fall 2005.

The week before she got the acceptance email, she was on the verge of applying to West Coast University, a for-profit college about 10 miles away that offers nursing degrees at a much higher cost.

"I was literally only considering it because I was so desperate," she said. "It's just all about the money. They see this opportunity to take advantage of these desperate students, where all they want to do is get into school."


Ten miles to the west of Riverside in Ontario, Everest College is housed in a brand-new landscaped corporate office park next to a FedEx delivery plant.

Unlike the college campus environment at Riverside -- which has large courtyards, student life centers and views of the valley and surrounding mountains -- Everest's campus has the feel of a doctor's office. Prospective students enter a waiting area to receive information about programs. Inspirational signs adorn the walls: "DARE to dream" reads one, with pictures of graduates parading in gowns. "Look Who Got Hired!" declares another, which shows Polaroid snapshots of graduates and notes about where they got jobs.

The nursing program was launched only three years ago. Administrators said many of the students who inquire about the program are on waiting lists at community colleges.

"They're tired of waiting," said Ruth Abbott, the national director of nursing for Corinthian Colleges Inc., Everest's parent company. "We have students who have always wanted nursing but haven't been able to get in, and haven't even been able to get into any of the prerequisite courses [at community colleges]."

Though the demand is not nearly as high as at Riverside City College, not everyone makes it into Everest's program. For 40 slots, there are about 150 applicants each semester, nursing administrators said.

As a relatively new program, Everest is still forging relationships with local hospitals and clinical sites where students can practice.

"Clinical placement is a challenge," said Martha Keough, who oversees Everest's nursing program. "Schools that have had relationships for 50 years with various hospitals want to be protective of that."

Everest College nursing students practicing in a lab course

The clinical sites for Everest's students tend to be at smaller area hospitals that are farther away from campus, some as far as an hour's drive. Riverside Community Hospital, by contrast, one of Riverside City College's main clinical and career placement sites, is right across the street from campus.

"You have an unknown entity, where even though the students may have been in your facility, you really haven't had any graduates from that program, where[as] you've had graduates from the community college for the last 30 to 40 years, so you know what their product is," said Abbott, the national nursing director for Everest's company. "Now that they can see a finished product and our students are actually working there, then we have institutions who come and tell us, 'We want to give you more slots for your students because we like the product.'"

Everest is accredited by the Accrediting Council for Independent Colleges and Schools, a national body that mostly deals with for-profit career schools. But almost all of Cal State and University of California campuses accept only credits from regionally accredited institutions, meaning that Everest's associate degree credits are rarely transferable to these state institutions -- a major impediment to its students pursuing advanced studies elsewhere.

And that amounts to an impediment to job prospects: Recent national research on nursing has pointed to an even greater demand for nurses with higher-level bachelor's, master's and doctorate degrees.

A spokesman for Everest's corporate parent, Corinthian Colleges, said the institution tells students upfront that their credits may not be transferable. Although Everest students registered poor passing rates on the nursing exams last year, the spokesman said scores have been improving in recent quarters.

In interviews, several Everest nursing students said they had been on community college wait lists for several semesters before finally deciding to apply to Everest. They said community college was their first choice, but the waiting game was excruciating.

"If I had gotten in, I would have gone there, but it just wasn't happening," said Christina Franco, who lives in Pomona. "I don't like the amount it costs here, but at the same time, too, it's what I want to do. You have to figure what you'll be making when you're done."

Loren Betancourt was almost done with her prerequisite classes when the economy took a dive, forcing the community college that she attended to cut back on nursing spots. She looked at several other private colleges before choosing Everest.

"To me, it's a vicious cycle, because the economy goes bad, so they cut funding for schools. But then everyone goes back to school to move higher up, so they're crowding out the younger kids," she said. "It just makes it three times as hard."


Everest is but one example of an increasingly crowded field of for-profit colleges mining for lucre in the financially strapped communities of Southern California.

All along Interstate 10, the freeway threading through the valleys and craggy mountains of San Bernardino and Riverside counties, signs of this expansion are evident. Gleaming corporate office buildings for University of Phoenix, Argosy University, American Career College and West Coast University line the east-west thoroughfare running through the Inland Empire.

Sociological factors and economic strife have combined to make this particularly fertile ground for the for-profit colleges. The Inland Empire has a high percentage of minorities, and among the highest unemployment rates in the state. Much like Las Vegas and the Gulf Coast of Florida, its real estate market has been savaged by foreclosures.

Community college students in the Inland Empire have left to attend for-profit colleges at the highest rate of any region in California, according to a report that tracked more than 250,000 community college students for six years, conducted by Cal State-Sacramento and the Campaign for College Opportunity, a state higher education organization that advocates college access for disadvantaged students.

Black and Latino students transferred to for-profit colleges at the highest rates, mirroring similar enrollment patterns across the country.

"The reality is that there is huge demand, and we've not supported our public colleges and universities to meet this growth in demand," said Michele Siqueiros, executive director of the Campaign for College Opportunity, the state higher education advocacy group. "Students are in dire need of making sure that colleges can offer courses at a time that's feasible for them, and colleges that give them a very clear prescription for particular career pathway. Many of these for-profit colleges and universities advertise just that."

Brochures and fliers for DeVry University, West Coast University and other for-profit colleges in the area appear on classroom bulletin boards and in cafeterias at local community colleges. Recruiters for for-profit schools regularly set up booths at career fairs, marketing to students who are frustrated with delays in getting needed courses.

"Every day I sit in my math classroom, there's something on the wall either telling me to join the Marines or go to the University of Phoenix," said Joey Reynoso, student vice president at Riverside City College.

On a national level, the for-profit college lobby has seized upon these strains in the community college system as a way to justify the industry's growth and its high tuitions.

The industry has commissioned a number of studies in recent years that have highlighted deficiencies in the community college system, while touting its schools as a better deal for taxpayers because they do not receive direct subsidies from state and local governments.

Trade groups and for-profit college systems such as the Washington Post Co.'s Kaplan University have sponsored reports arguing that, despite much higher costs and debt loads, students at two-year for-profit colleges have much higher graduation rates than students at community colleges: Two-year for-profit colleges have a 58 percent graduation rate, compared to a 21 percent graduation rate at public two-year colleges, according to Department of Education statistics.

But outside researchers have pointed out that community college graduation rates are severely undercounted because many students transfer to four-year colleges before actually earning an associate's degree -- something not reflected in DOE statistics.

In a report funded by Kaplan titled "Taxpayers' Costs to Support Higher Education," the authors argue that for-profit two-year colleges could achieve the Obama administration's goal of producing 5 million more graduates with certificates and associate's degrees by 2020 at a much lower cost to taxpayers than increasing subsidies for public higher education.

The report notes that because for-profit colleges have a higher rate of two-year graduates, and because students at its schools are not subsidized by taxpayer money, they are the most efficient of all college sectors, even with higher default rates on the money that students borrow from the government. Those costs "are more than offset" by the taxes that for-profit colleges pay on their earnings, the report asserts.

Intake of federal student loan dollars, by higher education sector
Source: Department of Education

Advocates for public education reject that logic for failing to factor in the value of affordable education as a public good.

"They set up this weird tautology here that lowering tax expenditures is a good thing, period, and that the goal of public policy should be to reduce tax expenses, period," said Jane Wellman, executive director of the Delta Project, which has analyzed reductions in public support for higher education. "So you lower tax expenses for these institutions, and you have -- guess what? -- higher student tuitions."

Brian Moran, the interim president and chief executive of one of the largest for-profit college trade groups, said he doesn't believe the industry is trying to replace community colleges. It is simply offering another option, he argues.

"We are a more expensive alternative, but at the same time we're growing, because of the flexibility that our schedules provide," said Moran, the head of the Association of Private Sector Colleges and Universities. "I just think we all should be at the table. I think community colleges serve as vital a purpose in our society as we do."

Based on public securities filings for companies that own for-profit colleges, it is clear that tuition money from federal subsidies is being substantially diverted to areas that are unrelated to the education of students. Bridgepoint Education Inc., for example -- the swiftly growing company that owns the online Ashford University -- devotes 37 percent of its operating costs to education, according to its most recent annual securities filings. The rest goes toward marketing, executive compensation and other overhead.

Corinthian Colleges Inc., which owns Everest College, devotes about 63 percent of operating expenses to educational services, and almost a quarter of its operating costs on marketing and recruiting.

The industry-funded studies also fail to put a value on what detractors say is the most poignant cost of their operations: that borne by society when large numbers of students, loaded up with untenable debts and armed only with degrees of dubious value, wind up confronting the job market.

"The American taxpayers are not investing in higher education to break even," said Jose Cruz, vice president for higher education policy at The Education Trust, a nonprofit research group. "You don't get a return on your investment when you cripple the economic livelihoods of tens of thousands of students every year. Who cares, in that sense, if the federal government breaks even?"

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