For-Profit Universities: High Profits, High Withdrawal Rates

For-profit colleges are growing at an astounding rate, propelled by significant investments in marketing and an aggressive recruitment model. However, the new enrollments are hiding real institutional problems. More than half of students will withdraw from for-profit colleges within the first two years. At some schools, students pursuing associates degrees withdraw at a rate of more than 75 percent within the first two years. For students attending a for-profit school a degree is a possibility, but debt without a diploma is far more likely.

The high raise a fundamental question about the value of for-profit schools for lowincome students. These institutions ask students with the most modest financial to take a big by enrolling in their high-tuition schools. If students succeed they may increase their income. However, if they drop out, as an overwhelming majority does at some institutions, they are left with significant debt, and a serious risk of default. Debt will not only make day-to-day life more difficult for former students, it may also hinder them from returning to school and completing their degree.

That companies are incredibly profitable even as hundreds of thousands of their students leave every year is deeply concerning. That these institutions should derive these profits almost entirely from federal revenues raises serious questions about federal policies regulating this sector. It is the obligation of Congress and federal regulators to provide effective oversight and regulation of federal financial aid dollars. However, many for-profit schools appear to be operating without the academic quality that would generate from a broad range of students and financial commitments from outside the federal financial aid system.

Finally, the high withdrawal rates, coupled with high profits, suggest that not all for-profit schools are quality educational institutions. Some appear to be nothing more than highly efficient government subsidy collectors. For these companies, high dropout rates and low student success rates appear to be irrelevant. The schools can be profitable, and many are, even if most of their students fail, so long as their federally subsidized marketing machine can continue to convince more Americans to enroll.