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Covering the business of for-profit higher education

February 24, 2016

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Photo by Flickr user UBC Library Communications

Billions of tax dollars go to support public universities because of their role in preparing the next generation for jobs and vocations that keep the economy healthy. That means an abundance of information is available, including a long paper trail of documents. Reporters can use that information to investigate everything from campus crime and annual spending, to nonprofit institutes affiliated with the university and athletic programs. You may find less available information at private, for-profit institutions of higher education, because these institutions needn’t open records to the public, but a hefty paper trail still exists.

At many for-profit schools, most revenue comes from federal student loans. Despite raking in millions of dollars in federal student loan revenue, the graduation rates at many for-profit schools remain much below those of their public and private school counterparts. That leaves students holding the bill for hefty student loans, with no diploma in hand. Individual school student loan cohort default rates are available for fiscal years 2010, 2011 and 2012 through the U.S. Department of Education for all institutions eligible to receive federal loan monies.

Another way to see if trouble is brewing at a for-profit school is to check whether the school’s regional accreditation body has issued any warnings or sanctions. Schools without accreditation are not eligible to accept federal student loan funds.

Shahien Nasiripour, chief financial and regulatory correspondent for the Huffington Post, wrote about a new report that says the U.S. Department of Education is doing little about massive for-profit schools because, like banks, it considers them “too big to fail.” The report’s author, a consultant to unions on student debt problems, says the Education Department is failing students by not penalizing for-profit schools that are violating federal and state rules.

For-profit school issues have dominated the media in the last decade including the following: curriculum violations (schools offering degrees not approved by accreditation bodies); for-profits preying on veterans; for-profits using the majority of revenue on marketing, rather than curriculum and core education; for-profits with poor record-keeping systems that are unable to account for federal student loan funds; very low graduation rates (often below 10 percent), accreditation warnings (the most severe sanction a school can receive); and schools closing without final wind-down plans for where they will place students.

Many schools are allowed to close without repaying the government for unaccounted-for student loan funds. Often, students can file for student loan forgiveness when a school closes abruptly, leaving taxpayers holding the bill. That situation could be avoided by demanding substantial letters of credit, at least 10 percent of a school’s previous year’s total of student loans and grants, to ensure that the school’s ownership, not taxpayers, shoulders the costs when a school closes.

Much like the colossal Lehman Bros. failure that brought the banking industry to its knees, Corinthian Colleges collapsed and filed for bankruptcy in May 2015. That move left its 72,000 students without classes to attend. Taxpayers were left on the hook for millions of dollars because the company declared bankruptcy.

If you’ve already sniffed out trouble at a local for-profit school, reporters also can file Freedom of Information Requests with the Department of Education for everything from internal emails between the government and school officials to audit records and student loan review files. While it may take some time, it’s often worth the effort.


  • Jennifer Backer

    Jennifer is a business writer and news junkie who has written about everything from copper mining to soaring cotton prices. Her work has appeared in Bloomberg News, The Arizona Republic, The St. Louis Business Journal, and The Seattle Times, among ma...

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