In the coming months, millions of unemployed Americans will be seeking ways to improve their chances of getting a secure, well-paying job. Unfortunately, recessions bring out the worst in some college marketers, especially those at for-profit colleges and programs. Prospective students need honest advice about whether available programs at a school fit a student’s skills, background and goals. Instead, consumers are most likely to interact with a recruiter driven by sales targets rather than an advisor. Usually the prospect ends up in a program that invests very little of students’ tuition money on their education because the funds instead go to marketing and profit.
While student debt at for-profit colleges as a share of all student debt is still well below Great Recession levels (see Figure 2), it is rising swiftly-at a time when debt at nonprofit and public colleges is still declining or staying flat. Now is the time to prevent a resurgence of the predatory for-profit sector and avoid all the problems that it would bring.
FIGURE 2
One key to preventing the rise of predatory schools is to adequately fund public higher education-as explained in TCF’s analysis of the HEROES Act-especially community colleges. At the same time, the Trump administration’s cuts to oversight should be reversed, and important consumer protections such as the Gainful Employment rule should be reinstated. In the CARES Act, Congress prohibited the payment of emergency funding to contractors that are engaged in marketing. Congress should now take that concept further, prohibiting the use of any federal student aid funds, including the GI Bill, from being used for marketing and recruiting.
The agency should issue a public warning about the apparent poor value, and reach out to those students with other options they could consider.
Methodological Note
TCF merged quarters of data, matching by OPEID. In the event that an institution changed its name or sector, institution name and sector were retrieved from the most recent quarter of data in which the institution existed with the same OPEID. Data on loan disbursements and loan recipients were totaled and compared as described. In prior years the first-three-quarter trends have been consistent with the full-year trends. Given the COVID-19 emergency, new debt in the current fourth quarter (April 1 to https://paydayloanstennessee.com/cities/alcoa/ June 30) will likely diverge from trends, affecting the annual total. Of the four quarters, the fourth is typically the smallest for nonprofit and public institutions (about 15 percent of their full-year total) but the largest for the for-profit schools (about 40 percent of their full-year total).
Loan disbursements are frequently processed as institutional income (for example, for tuition, fees, and on-campus housing), but also include dollars distributed directly to students for eligible expenses (such as textbooks, transportation, food, and off-campus housing). Recipient counts are not a precise count of students enrolled and receiving loans, as a single student may be the recipient of more than one type of loan (for example, an undergraduate student might be the “recipient” of a subsidized loan, an unsubsidized loan, and a Parent Plus loan).
Data regarding the attendance online or in-person of students at institutions was obtained from the Integrated Postsecondary Education Data System (IPEDS). Where institutions were designated by a single OPEID in FSA data but as multiple institutions in IPEDS, data were matched and summed by OPEID.
What is especially troubling is that a new version of hazardous for-profit education has emerged in recent years, as reputable public and private colleges rent out their names to third-party, for-profit online program management companies (OPMs). OPMs run many aspects of colleges online programs, including marketing, and in exchange frequently take half or more of the tuition revenue charged to federal student loans. The contracts are likely illegal, but both the Obama and Trump education departments have allowed them anyway.