High Debts and Low Graduation Rates at For-Profit Universities

For-profit education companies claim to offer access to higher education to low-income and minority . Data analysis of 16 for-profit schools indicates that students are more likely to leave without a diploma while being straddled with debt.

Enrollment is growing even more quickly than previously understood and masks high withdrawal rates:

Annual enrollment measures fail to capture that, because of high withdrawal rates, schools must recruit large numbers of new students each year to maintain, or grow, their enrollment levels.

In 2008-09, one school started the year with an enrollment of 71,246 and ended the year with an enrollment of 89,479. However, the school added 120,638 new students over the course of that year. Recruiters had to enroll 120,000 new students to increase enrollment by a net of 18,000 for the following year.

Fourteen out of 16 schools analyzed recruited a greater number of new students than their entire starting enrollment in 2008-09, however their net enrollment only increased by 22 percent.

Students at for-profit leave without a diploma at an alarming rate:

The data received and analyzed by the Committee provides new evidence that, at many schools, more than half of students withdraw within two years of enrollment.

In total, out of 16 for-profit schools analyzed, 57 percent of students who entered school between July 2008 and June 2009 have withdrawn.

Over a three year period, an estimated 1.9 million students have left the 16 for-profit schools, most with nothing to show for their time in a for-profit school but student loan debt.

Two large for-profit schools that enroll a combined 44,000 students across the country in associates degree programs have withdrawal rates above 75 percent for 2008-09 enrollees.

Almost all students at for-profit schools take out to pay high tuition and they are likely to amass significant debt even in a few months:

For 2008-09 students withdrawing from associates or bachelors programs, median attendance was approximately 20 weeks. A student who attended for that length of time would pay approximately $8,800 to $11,000 in tuition.

Most students at for-profits borrow to pay tuition. More than 95 percent of students at two-year for-profit schools and 93 percent at four-year for-profit schools took out student loans in 2007, while only 16.6 percent of students attending community colleges and 44.3 percent at public four-year institutions borrowed during the same period.

According to a 2005 report published by the National Center for Public Policy and Higher Education, students who drop out without completing their degree were ten times more likely to default on their student loans, which may foreclose the opportunity to earn their diploma at another school.

High enrollment and withdrawal is up the amount of federal dollars flowing to for-profits:

Across the schools analyzed, the amount of federal dollars flowing to for-profit schools is escalating rapidly. Eight schools have more than doubled the amount of Pell grant dollars they received between 2006 and 2009, with three more schools nearly doubling. At least two additional companies have seen increases of 85 percent or more in Pell grant funding between fiscal year 2009 and 2010.

Federal programs outside the Department of Education are also experiencing rapid growth in funds flowing to for-profits. Between fiscal year 2009 and 2010, two schools saw increases of $56 million in non-Title IV student aid funds received and a third is on pace to see an increase of up to $85 million.

Despite dismal student outcomes, for-profit institutions are raking in record profits:

For the 16 companies analyzed, profits in 2009 totaled $2.7 billion. Between fiscal year 2009 and 2010 alone one company doubled its profits from $119 million to $241 million, while a second went from $235 million to $411 million.

For-profit college revenues are largely made up of the taxpayer dollars intended to support student success:

This report for the first time provides a full picture of the federal revenues flowing to some for-profit schools.

Across 14 schools analyzed, federal dollars total 87.4 percent of 2009 revenues and ranged from 93.1 percent of revenues to 85.2 percent of revenues.

Enrolling low-income students requires a commitment to provide support and resources to ensure those students succeed. Based on the poor outcomes at many for-profit schools, those schools are falling short in adequately assisting the students they claim to be serving.

The data analyzed suggests that some for-profit schools are efficient subsidy collectors first and educational institutions second. Under current law, a for-profit school can be extremely profitable while failing a majority of its students. This is clearly not what Congress intended when it allowed for-profit schools to access federal student aid dollars.