Economic Snapshot | Education

For-profit colleges use taxpayer dollars to recruit vulnerable students, rake in profits

The Senate Committee on Health, Education, Labor and Pensions released a report this week on how many for-profit colleges prey on the most vulnerable students while enriching their shareholders, owners, and CEOs. Students attending for-profit colleges are more likely to be female, low-income, and African American or Hispanic. Significant numbers of veterans also enroll at these colleges.

The tuition at for-profit colleges is very high, yet the likelihood that a student will obtain a degree is quite low. The average associate degree program, for example, costs four times what it would cost at a community college. The for-profit colleges investigated by the Senate relied overwhelmingly on government student aid programs for revenue. In 2009, 86 percent of revenues for the 15 publicly-traded for-profit colleges came from the Department of Education federal student aid and U.S. military educational benefit programs.

These taxpayer dollars do not primarily go toward the education of students. As the figure shows, for-profit education companies take away more in profits than they spend on education. A large share of the revenue is also used to recruit new students, most of whom get deep into debt. The committee described typical recruiting practices as “aggressive,” and “deceptive.” And, this too is paid for by taxpayers.

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