The for-profit college sector isn't what it once was. In the past decade, hundreds of for-profits have shuttered, pressured by targeted regulations, steep enrollment declines and accusations that the sector's worst-performing schools leave students with crushing debt they can't repay.
Those claims aren't unfounded.
This week brought fresh evidence to back some of those charges. A new study released by the U.S. Department of Education found that students who completed their bachelor's degrees at for-profit schools in the 2015-16 academic year took on more debt on average than other students.
"It's a buyer-beware situation," said Erin Dunlop Velez, the report's lead author. "There are more (for-profit) students borrowing, and in addition, they're borrowing a lot more."
The study looked at the outcomes of about 26,500 students, a year after they graduated with a bachelor's degree. It found that those who attended for-profits borrowed $43,600 on average. That's well above the $27,900 average for public college graduates and $32,500 for private nonprofit grads.
For-profit students who completed their bachelor's degrees in 2015-16 ended up borrowing 18% more on average than those who graduated in the 2007-08 academic year. That's compared to a 34% increase for public college graduates and 12% increase for private nonprofit graduates.
Moreover, nearly 85% of for-profit graduates borrowed in 2015-16, compared to roughly two-thirds of students at other institutions. For-profit graduates also took on more in federal loans that year than did students who completed their degrees at other institutions.
The data reveals one possible reason for the higher debt: It took students who earned their degree at a for-profit college on average more than eight years to finish, compared to about four years for students who got their degrees at nonprofit colleges.
That's partly because for-profit schools attract nontraditional students who may be juggling college with work and family responsibilities. "(For-profits) have rolling admissions, they have many more online classes, they have many more evening classes," Velez said. "The scheduling can be a lot more flexible."
However, for-profit students were less likely to land a job after graduating. Nearly 9% were unemployed, compared with 5% of students at nonprofit public and private colleges.
Still, it's not all bad news for the sector. For-profit students made up 6% of all bachelor's-degree recipients in the 2015-16 academic year, up from 4.6% in 2007-08. And those who had a full-time job one year after graduation reported a higher median salary than their peers, at $42,500, compared to a median of $39,000 for public college graduates and $40,000 for private nonprofit graduates.
One reason for that could be the age difference between for-profit and nonprofit graduates, said Robert Kelchen, assistant professor of higher education at Seton Hall University. For-profits tend to enroll older students, who are more likely to have previous job experience and thus earn a higher salary.
A changing sector
Steve Gunderson, president and CEO of Career Education Colleges and Universities (CECU), a for-profit college association, says the report doesn't accurately capture the industry because it's limited to students who earned bachelor's degrees. Of the 2,700 for-profit colleges in the U.S., about 2,200 only offer two-year or even shorter programs, he said.
Shorter-term credentials, which for-profits focus on, can improve economic mobility for a lower cost, said Gunderson. Indeed, recent research suggests that non-degree credentials can boost pay and employment prospects, and that well-paying jobs requiring less than a bachelor's degree but more than a high school diploma are on the rise.
Outcomes data for those with shorter-term credentials from for-profit colleges tells a familiar story. More than half (55%) of students who earned an associate degree from a for-profit in 2012 had $20,000 or more in debt, compared to 9% of those who received that type of degree from a community college, according to data from the Center for Analysis of Postsecondary Education and Employment (CAPSEE).
"During the recession, this was the sector that focused on access. Policymakers, the media and others appropriately said, ‘Wait a minute, access without outcomes isn't very good.' This sector heard that message."
CEO, Career Education Colleges and Universities
Graduates with associate degrees from two-year for-profits also fared worse in the job market, CAPSEE data shows, earning a median salary of $28,700, compared to community college graduates' median salary of $32,700. Graduates of four-year for-profits earned $38,700 compared to $42,400 by four-year public college graduates.
At two-year for-profits, first-time, full-time undergraduates are borrowing less on average than they were previously, according to other data from the Education Department. In the 2016-17 academic year, their average loan amount was $7,800, down 11% from 2010-11 levels. Public two-year institutions saw a similar decline.
Still, Gunderson contends that a heightened focus on student outcomes is prompting the for-profit sector to refocus. Although for-profit enrollment has plummeted by about 1.5 million students since the end of the recession, academic awards increased by 52,000 during that time, according to data provided by CECU.
"During the recession, this was the sector that focused on access," Gunderson said. "Policymakers, the media and others appropriately said, 'Wait a minute, access without outcomes isn't very good.' This sector heard that message ... and so we have less students and we have dramatically higher academic awards then we did before."
A shifting regulatory landscape
Policies meant to crack down on the sector may have helped weed out some of its worst-performing schools, according to a 2017 analysis from New America, a nonpartisan think tank.
In 2014, the Obama administration rolled out the gainful employment rule, which was designed to remove access to federal aid for any for-profit school or career education program that left students with more debt than they could pay off.
Even though the Trump administration delayed critical parts of the rule from taking effect — and jettisoned it altogether last month — most programs that would have failed the rule's new criteria have been shut down.
Without the rule in place, however, some in the industry warn that remaining or new predatory schools could go unchecked.
"There are some bad apples in there, and that makes it hard for uninformed consumers because they don't necessarily know who those bad apples are. But it's something we definitely need to address."
Erin Dunlop Velez
Education research analyst, RTI International
"The decision to completely repeal gainful employment is an attack on the students whom the U.S. Department of Education is trusted with protecting," said Denise Forte, senior vice president for partnership and engagement at The Education Trust, in a statement last month. "Eliminating this rule will mean that predatory programs, many of them at for-profit colleges, will continue to access billions of federal dollars while harming students financially."
Some schools continue to draw concern. Take Premier Education Group, a for-profit operator that focuses on certificates. This month, a joint investigation from The Hechinger Report and NBC News found that most Premier students earned less than $25,000 six years after enrolling and that default rates were above 30% at some campuses.
While for-profit certificate programs can put students on the path to a better job, the majority of students who borrow to attend such schools earn less than the average high school graduate, The Hechinger Report found.
"Talking about for-profits is really difficult because there's huge variation," Velez said. "There are some bad apples in there, and that makes it hard for uninformed consumers because they don't necessarily know who those bad apples are. But it's something we definitely need to address in higher education because for-profits are probably here to stay."