Excluding For-Profit Proprietary Colleges from Receiving Federal Student Financial Aid

Kevin Carey is direct with what he believes is wrong with for-profit universities. He believes that they do offer classes that may be a better option for non-traditional or low-income students. However, these universities are doing these while scamming taxpayers throughout the country. These universities receive millions of dollars in funding from the government in grants and are still able to make a profit, although, many students are unable to repay their student loans in a timely manner. Some personnel within these universities use tactics to convince students to apply for loans, knowing that it is not a financially intelligent decision. Not only is this borderline unethical, but many students that receive these loans default on the payments. The for-profit universities are even attempting to change the funding from the current 90/10 rule, which states, the amount of federal funding cannot exceed 90 percent of total revenue. One quarter of all of federal aid is given to for-profits, even though, they account for less than 10 percent of students. Considering this information, government funding would be better served elsewhere.

The topic of this paper is the states’ decreasing financial support of higher education, the reaction and response from institutions who have lost funding, and the creative ways public institutions are locating additional streams of revenue. States have been the primary backer of public institutions, but since the recession states have shown less commitment financially while still heavily regulating higher education. As a result some institutions have had to change their practices while others have challenged their state’s regulations all together. Many have speculated that state funding may never return to its former highs. Rather than make an enemy of the state, some schools have discovered new and unconvential ways of raising funds for their institution.

The state of California has long been reliant on the University of California system to provide its resident companies with skilled and educated business, technology, and science leaders. Highly regarded as one of the top educational systems in the world, the University of California boasts a high number of distinguished and respected faculty members in almost every field of study. However, while most private colleges and universities have learned how to streamline their processes in order to better respond to stakeholder needs, public educational institutions, such as the University of California, have not been willing to control their bureaucratic growth resulting in a rise of tuition rates and a decline in the level of student satisfaction. In her article for the TIME magazine, Kate Pickert writes that as recently as November of this year the University of California has approved a plan that could raise tuition rates by up to 28% (Pickert). Pickert also points out that the tuition rates at the University of California have more than tripled since 2001. The University of California has blamed the increased tuition on the state of California budget cuts caused by the economic downturn of recent years. However, a closer examination of the University of California faculty and administration data makes it obvious that the higher rates of tuition are cause by the inability and

This means that in order to have a decent job, you usually need some type of degree or training beyond a high school education. Unfortunately, in years to come, this trend toward for-profit colleges could devastate our nation’s economy. The student loan debt in the US is roughly equal to the amount of US credit card debt, they is a frightening fact because for-profit student are more likely to default on their loans (they make up 44% of all student debt defaults), which could burst our student debt bubble. This would have devastating consequences for our government, tax payers, and possibly even the global economy. If our student debt bubble were to burst, like the housing bubble back in 2007-2009, it would have the potential to plunge us into another Great Depression. That, is

John R. Thelin called the period from 1970 to 1980 “turbulent waters” for all institutions (Thelin, 2011, p. 317). After the golden age, the industry of Higher Education in the U.S. faced the not-so-bright future with a lot of colleges and universities being shut down. Thelin (2011, p. 337) points out that the institutions could have been prepared to handle the steadily declining enrollment, decreased revenues, decline in funding, stagflation, and rising campus maintenance costs if only they picked on the first signs of upcoming financial crisis when in 1970, the share price of the NSMC fell from $140 to $7 over the short period of time (Thelin, 2011, p. 317). However, the universities and colleges of that time were so confident and relied on “the public image of higher education as a “growth industry” (Thelin, 2011, p. 318) so much, that they were not monitoring the changing situation and thus, were not fast enough in adopting to new conditions. It does not mean that there were many college closings; vice a versa, some colleges grew, opened new programs and applied for research grants. These colleges adopted the enterprise thinking (Thelin, 2011, p. 337).

For- profit colleges came under the spotlight during the weak job market of the last recession, education was needed in order to get a job under the weak job market which caused people to turn to for-profit colleges.

Because of loopholes in the way federal educational funding is managed, it has caused an issue with military and veteran students being misled into going to a for-profit college. They are promised a degree equal to a community or state college, but some active duty service members’, veterans’, and family members’ have found that the credentials do not transfer to other colleges or are not recognized by all employers, which they do not find out until after they have exhausted their G.I. bill, taken out loans to cover the rest of their degree to graduate or dropped out. Senator Tom Harkin (D-IA), Chairman of the Senate Health, Education, Labor and Pensions Committee, set up a committee that conducted a two-year study on the troubling realities of For-Profit Schools, he says “In this report, you will find overwhelming documentation of overpriced tuition, predatory recruiting practices, sky-high dropout rates, billions of taxpayer dollars spent on aggressive marketing and advertising, and companies gaming regulations to maximize profits. These practices are not the exception -- they are the norm; they are systemic throughout the industry, with very few exceptions” (United States). For-profit colleges are abusing the system and taking advantage of the active duty service members’,

Presently, the availability of educational opportunities at the college and university level is a critical state and personal interest given the needs of the state for a well-educated workforce which has never been greater. Too many, the focal point of attending college is receiving a high paying job in the future. Unfortunately, in most states, tuition is on the rise and students who come from low-income families find themselves struggling to fund their education. According to legislatures, “The cost of college in New Jersey, as in the nation, continues to grow faster than the rate of inflation.” (State of New Jersey 1). In the national financial aid policy resources that are typically given to the neediest families are shifting towards

Proprietary education dates back to the late nineteenth century where institutions focused on professional training in teaching, medicine, and law (Breneman, Pusser, & Turner, S., 2000). The 1972 Higher Education Reauthorization Act included for-profit institutions in federal financial aid programs and changed the vernacular of higher education to postsecondary education (2000). This piece of legislation along with new technologies along with increased demand for higher education and prompted a resurgence of for-profit institutions in the latter half of the twentieth century (2000). From these changes, a new era of postsecondary education was born

The building phase of a new college is extremely expensive. The potential entrant, setting up a public college, needs to have substantial government-supported student base. The state budgets are shrinking, and the potential entrant attempting to receive funding from the government will be difficult. College of Central Florida has gone through the process of accreditation. The accreditation process will deter the new potential competitor. In addition, the new college entrant will not be able to offer students financial aid under Title IV of the act. The college, offers low tuition costs to in-state students because of economies of scale, and subsidies from the government. The switching costs, students resist transferring to another college because of strong social networks. In addition, students avoid transferring because of strong facility support, with academics. Brand loyalty, students are loyal to the college, the campus is active with clubs and organizations. The ratio is 29:1 with students to facility. Tuition cost, ranked third in affordability for in-state residents. The college has a very strong athletic program that annually produces NCAA student-athletes. The absolute cost advantages, the pathway to alternative learning by online courses, which the college offers with the low cost tuition. The policies and regulations set forth by the government is a barrier to

For-profit schools are corporations that intentionally target low-income single mothers as their ideal customer. These companies claim to give these poor individuals gainful employment and a chance for a middle-class life. However, the fine print to these student degrees reveals a huge debt contract that one cannot escape out of; even with bankruptcy. For a student who attends these online schools, they are making the investors a lot of money. All of these corporations receive tens of billions of dollars in taxpayer subsidies to do to this. These corporations are actually universities.

Public-private partnerships are on the rise in higher education in the United States of America. What appears to be a viable solution might be a practice that is predatory in nature. An exploration of the concept of public private partnerships will critically evaluate the practice.

For years, public schools and private entities, such as religious-based schools and textbook manufacturers, through Private-Public Partnerships (PPP) have worked hand-in-hand to provide educational services (Brewer and Picus, 2014, p. 583). Regarded as a means to improve efficiency, equity, and effectiveness, privately controlled education providers have become more visible in recent years. As the demand for specialized and higher quality educational opportunities has changed, privatization has become a means to fill the void and provide services and resources not available or offered in the public school setting. The demand, however, is not limited to primary and secondary schools. Institutions of higher education have also become more specialized in their program offerings. Commercials advertising flexible online degree programs, credits earned for life and work experience, and shorter degree programs are evidence of the market reflecting the changing needs and wants of the consumer.

For-profit universities are recently being recognized as a social problem. A for-profit university is defined as a school that is owned and operated by private corporations, whose top priority is to make money (IPFW). These schools often only offer two-year associate degrees and certificate programs, but they rarely offer general education and liberal arts programs. This means the students cannot advance to a higher degree.

There has been tremendous growth in private higher education from the beginning of the 1990, this growth has been unprecedented; infact, before 1990 there were very few private institutions. By private institutions not mean the private aided colleges that have been in existence before independence, but private, self-financing colleges, which started emerging during the last quarter of century. The growth of self-financing colleges has been phenomenal; the number of private colleges in several states grew from a few in late 1980s to several hundred, particularly in the case of engineering colleges, management and medical institutions. In all, private, self-financing colleges grew to such a level that in relative size, the public sector became infinitesimally small.