For-Profit Colleges

For-Profit Colleges

For-Profit Colleges: And Their Predatory Marketing Practices

Executive Summary

In the United States, there are over seven thousand institutions of higher education, more than fifteen million students attending such institutions, and even more young people who dream of being college students. Many different kinds of colleges – liberal arts, trade, polytechnic, public, community, private non-profit, private for-profit, and more – seem indistinguishable, especially to those whose parents did not go to college, and who have limited access to college and career advising. However, the way that a college is managed can reveal a great deal about its educational quality.

For-profit colleges are run by companies, and they exist, at least in part, to earn money for their shareholders. Thus, they are incentivized to maximize profits first by collecting tuition dollars from as many students as possible, without regard for the students’ academic preparation or ability to afford tuition, then by expending as little as possible on quality teachers and resources.

In 2012, Senator Tom Harkin, the Chairman of the Senate Health, Education, Labor and Pension Committee, unveiled a report on the findings of a two-year investigation of the for-profit higher education industry that uncovered documentation of overpriced tuition, predatory recruiting practices, sky-high dropout rates, aggressive and misleading advertising campaigns, and exploitation of regulations to maximize profit. He said, “These practices are not the exception – they are the norm.”

Such tactics may benefit shareholders, but they hurt students who are trying to escape poverty. For-profit colleges disproportionately enroll students from lower socio-economic backgrounds, employing advertisements that tell success stories and paint positive images of happily employed graduates. Students are enticed into taking out loans to afford tuition in hopes of graduating with new skills and greater earning capacity. Instead, they often graduate saddled with debt and without job prospects.

But why should we care? One reason is that the fraudulent practices of for-profit colleges unfairly hurt those that already have less. Many people, including those who are troubled by growing inequality in this country, see college as one of the great equalizers, a major engine of socioeconomic mobility. For-profit colleges turn that expectation on its head – transforming the hope of opportunity into a trap that heightens inequality.

Another salient reason to care is that for-profit colleges are using taxpayer dollars to exploit students. More than a quarter of for-profit colleges receive 80% of their revenues from taxpayer- financed federal student aid. Thus, taxpayer dollars are lost on unfinished and inadequate education. This paper describes the predatory practices of for-profit colleges, the effects that these practices have on students, and possible solutions.

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