Why Government Must Rein in For-Profit Colleges

By Benjamin Todd Jealous and Marian Wright Edelman

A new federal analysis this week found that about one-quarter of students who took out federal loans to attend for-profit colleges defaulted within three years of starting repayment. Numerous other investigations by government agencies and news organizations reveal that many for-profit education programs leave graduates with high debt burdens, low employment potential and a high risk for defaulting on government loans.

A common-sense regulatory proposal put forth by the Obama administration would hold these schools accountable for providing quality programs without drowning students and taxpayers in debt. We urge the Obama administration to issue it without further delay.

Too often, for-profit school tuition is exorbitant, many times higher than comparable programs at community colleges or other state schools. In the race for profits, a number of these institutions employ misleading, high-pressure recruiting tactics that prey on the most vulnerable in society. The worst offenders target low-income people -- many of them people of color, often the first in their families to seek higher education -- who are struggling to gain new skills and find scarce jobs.

A recent report alleges that at one for-profit university -- Kaplan University owned by The Washington Post Co. -- staff engaged in a practice known as "guerrilla registration": signing up students without their knowledge or consent for classes they did not take, in some cases even after they notified the university that they were dropping out. Students and the federal government were left to pay the bill.

What would change
Under the administration's proposed new rule, programs that leave students deep in debt and unable to earn a decent living would no longer be eligible for government loans. The proposal would require that for-profit education programs, as well as short-term training programs run by all types of colleges, actually prepare students for success in the workforce.

Students trying to improve their job prospects shouldn't be duped into taking on crushing debt in exchange for the promise of a future job that will probably never materialize. And taxpayers shouldn't be stuck holding the bag when these Faustian bargains inevitably go bad. The proposed rules are necessary to keep a small, destructive group of for-profit training programs from taking advantage of vulnerable young adults already reeling from the effects of the economic downturn. The for-profit college industry is spending millions of dollars on lobbyists, consultants and advertising to block these sensible federal protections. Some for-profits have even lied to government regulators about job placements for graduates, covering up hiring rates that are often abysmal.

These unscrupulous tactics have repercussions far beyond the damage to individual students. For-profit schools serve 10 percent of United States higher education students, but soak up 25 percent of federal student dollars. Many for-profit schools receive 85 percent or even 90 percent of their income from federal aid. Worse, for-profits account for 44 percent of student loan defaults, and taxpayers must cover the loss.

Some advocates, noting that minority students make up a large segment of for-profit college students, claim that the new rule will narrow educational choices for low-income people and people of color. This claim misses the mark. It's like arguing that because mortgage lenders targeted minorities with their most exploitative products and practices, we should not have stopped them.

Subverting dreams
When colleges and mortgage lenders are allowed to leave vast numbers of our youth and neighbors mired in debts they cannot repay, they subvert the American Dream for all of us and dim our nation's future.

The pending rule is designed to penalize only the very worst offenders -- the bottom 5 percent -- with the highest tuitions, lowest job placement rates and highest rates of default. By these measures, the worst schools tend to be for-profit institutions so more for-profit colleges are likely to be penalized than non-profit or state schools. Eliminating federal aid for these programs is a common-sense remedy.

The proposed rule would help those most in need by channeling scarce financial aid dollars toward effective educational programs and away from programs that ruin students' lives.

At a time when so many Americans face serious problems finding jobs and making ends meet, and the federal government faces mounting deficits, let us help students get the best return on their educational investment and ensure that scarce federal resources go to programs that actually help put people to work.

Benjamin Todd Jealous is the president and CEO of the National Association for the Advancement of Colored People. Marian Wright Edelman is the president of the Children's Defense Fund.

Originally posted in USAToday.com.