- The for-profit education industry has been under scrutiny for decades over alleged bad behavior.
- Given the focus on profits, the schools often mislead students into taking on debt they cannot afford.
- Lawmakers have been cracking down on the industry, but many students are continuing to struggle.
- This article is part of The Cost of Inequity, a series examining the systemic issues that disproportionately impact marginalized and disenfranchised groups.
Christina, 40, served her country and then went to a for-profit school thinking she would get a free education. Instead, she got stuck with a $40,000 student-debt load and a degree she regrets pursuing. (She requested her last name be withheld for privacy reasons).
After serving in the Navy from 2001-2005, Christina earned her Associate’s degree from community college using the benefits from her GI bill, which covered her tuition costs. She still wanted to gain a Bachelor’s degree, though, and the only option that allowed her to take classes while working a full-time job was the for-profit University of Phoenix, which gave her the flexibility to take classes remotely.
But despite actively recruiting veterans, Christina said the university would not accept her GI benefits, forcing her to take on a student-debt load.
“I heard from the military folks I had served with that it was very common for the University of Phoenix to recruit us,” Christina said. “When I was stationed in San Diego, they would always reach out to us. I didn’t have time to go to college at the time, but it’s something I really noticed.”
Christina’s experiences are not uncommon, especially when it comes to the for-profit education industry. For decades, for-profit institutions have been under scrutiny over allegations of misleading students, engaging in aggressive recruitment tactics, and leading many to take on student debt when it was often not the best option for them financially. And some major players, like ITT Technical Institutes and Corinthian College, have even shut down following findings of bad behavior.
If Christina hadn’t sought to further her education at University of Phoenix, she said she would like have no, or very little, student debt.
“I served during 9/11, and it’s frustrating that the university recruited us and then wouldn’t take our GI benefits,” Christina said. “It’s very manipulative.”
For-profit schools are ‘reaping profits while leaving students with a great deal of debt’
The goal of for-profit institutions is right in the name: profit maximization. And oftentimes, they will accomplish that goal through every avenue possible, leaving their students worse off than when they started. Carolyn Fast, a higher education senior fellow at The Century Foundation, told Insider that many for-profit institutions get 90% of their revenue from federal students loans, making it very easy to hand those loans out to students.
“These are taxpayer funded businesses that are reaping profits while leaving students with a great deal of debt that they have trouble paying off,” Fast said.
And she said that the “primary problem” often occurs in the recruitment stage. Christina’s experience with what she described as aggressive recruitment tactics is a key characteristic of many for-profit institutions — that’s the stage where they often get caught misleading students to boost enrollment. Fast said that a reason for intense recruitment is because “there is a lot of money at stake” when it comes to the federal student-loan program.
“Federal money coming in is a big incentive, unfortunately, for companies to try to maximize enrollment to maximize their profits,” Fast said. “And there’s less concern about whether people are going to benefit from the program or whether they can be able to pay back their debt.”
Institutions have engaged in ‘outright deception’ at the expense of students
Over the past decade, lawmakers and advocates have been heightening scrutiny over predatory practices for-profit colleges have engaged in, and Fast said those practices can range from “outright deception” to “misrepresentation” of program costs and benefits.
“For example, telling people that they’re going to be able to take credits and transfer them to other programs, when in fact, it is not possible in some cases to transfer credits from a for profit program to, let’s say, a public program,” Fast said. “Or people might be told that they’re not going to have to pay anything and that they are going to be fully funded by the federal government when they’re taking out customers loans.”
In some cases, legal action has been taken against schools accused of misleading behavior. In 2016, the government cut off ITT Tech’s access to federal student loans, causing it to shut down shortly after, and while the University of Phoenix never admitted any wrongdoing, it agreed to a $191 million settlement with the Federal Trade Commission in 2019 over allegations of fraud and deceptive marketing.
But the industry is continuing to recruit students each year, and lawmakers want the Education Department to ensure impacted students get relief they deserve. Borrowers who were defrauded by for-profit schools have the option to file borrower defense to repayment claims, which is intended to forgive their student debt, but the claims ran up a huge backlog under former President Donald Trump.
President Joe Biden has taken steps to approve more claims and give defrauded students over $3 billion in relief, but lawmakers have stressed that the process needs to be sped up — and the executives responsible for the alleged fraud need to be held accountable.
“ED (Education Department) has failed to make good on its promise to defrauded borrowers, and it is time for swift and broad action to right this wrong,” a group of lawmakers recently said.