Upon learning he and the rest the Omega Fraternity were being expelled from Faber College, John Belushi’s character in the 1978 film Animal House elicited audience laughter with the line "Seven years of college down the drain!"
The fact of the matter is a sizable percentage of students in bachelor degree programs do not graduate in four years. According to statistics from the U.S. Department of Education, nearly 43% of students who enroll full-time in a 4-year bachelor degree program fail to graduate in six years. The graduation rate also varies by race and gender. The Ed Dept does not make available data break-down based on socio-economic status.
Notwithstanding this reality, the Department of Education is fixated only on career colleges. Unlike state-owned public institutions and private, not-for-profit colleges, career colleges operate on a for-profit basis. In addition to 2-year, 4-year, and master’s degree programs, career colleges also include post-secondary schools that offer certificate, continuing professional education or occupation-specific education such as golf academies and culinary, technical and cosmetology schools.
In November, the Ed Dept charged ahead with a slew of new rules that would impact the ability of career colleges to enroll students who rely on federally backed student aid. The typical career college student is already in the workforce, 25 years of age or older, minority, oftentimes single and female, has lower income, cannot rely on family resources to finance college, and comes from a family without college degree experience.
In general, the demographic of the typical career college student is more prone to defaulting on loans, much like the high loan default rate of students attending historically black colleges and universities.
Because of these demographics, career colleges tend to have a much higher percentage of students who rely on federal student financial aid that is parceled out under Title IV of the Higher Education Act of 1965 (federally insured loans, Pell Grants, etc.) than do students at public universities and private colleges.
The most significant of the new Ed Dept rules focuses on "gainful employment," an arbitrary standard to determine if graduates are earning enough income to repay school costs. Schools whose graduates and former students fail to meet this standard will be cut-off from enrolling students using such aid.
The gainful employment standard is not only arbitrary but also applies only to career colleges. Applied to public universities and private colleges, the same rule would severely restrict aid to medical, dental, law and engineering school students as well as students attending some of the most elite private schools with high enrollment costs.
This narrow focus is justified, claims Education Secretary Arne Duncan, because career colleges "benefit from billions of dollars in subsidies from taxpayers." It is true that career colleges have student enrollments that more heavily rely on federally backed student aid than do public universities and private not-for-profit colleges.
When judging the "value" of for-profit versus not-for-profit schools one ought to assume a broader approach. There are trade-offs between for-profit and not-for-profit schools. Public universities and not-for-profit colleges receive billions of dollars in taxpayer money — directly in the form of government outlays and/or indirectly by taxpayer subsidies due to non-profit status. In contrast, career colleges do not receive government monies and instead pay taxes to federal, state and local governments.
These taxpayer subsidies significantly add to the cost of education. An analysis prepared by Professor Bradford Cornell of the California Institute of Technology found that when accounting for direct taxpayer subsidies the overall cost is an additional $25,000 for a student to graduate from a public 2-year college than from a 2-year for-profit college.
There are other tangible differences between for-profit and not-for-profit colleges. The extracurricular activities of college students such as Faber’s Omega House that are prevalent at campuses around the nation are virtually non-existent at career colleges.
Briefly scouring news headlines in just one week in October revealed these campus gems:
The following incidents occurred during the same week at career colleges:
Among the reasons why students choose career colleges over "traditional" colleges is the expense. The skyrocketing cost of tuition and other school costs at traditional schools greatly exceed the rate of inflation. According to a recent report from the College Board, this year students will have to pay nearly an 8 percent increase in tuition and fees at public universities and a 4.5 percent increase at private not-for-profit colleges. Runaway school costs have been the trend for years.
Another troubling new rule taking effect is how the Ed Dept scores repayment compliance. Career college students who elect federally approved repayment options that include limited-time interest-only payments or whose payment is based on post-graduation income levels are judged to be in non-compliance.
Clearly, the Ed Dept is stacking the deck against career colleges. This may be due to the anti-corporate attitude that is prevalent throughout the Obama Administration. In retrospect, the Administration’s nationalization of the private student loan industry was clearly the first salvo.
There may also be elitism at play regarding what some may view as the pedestrian career colleges in contrast with the Ivies and other elite programs. Additionally, this may also represent payback to academia, which gave heavy political support to Obama during the 2008 campaign.
Lastly, there is good old-fashioned competition playing out between the for-profit and not-for-profit college sector. Public universities have been losing financial aid dollars to students attending career college programs.
The Ed Dept’s effort to cut off federal aid to students attending career colleges has created a backlash in the minority community. This is because career colleges enroll a larger share of minorities than do traditional schools. The National Hispanic Caucus of State Legislators has urged the department to reexamine the issue. The National Black Chamber of Commerce is firmly opposed to it. And a number of members of the Congressional Black Caucus have criticized the rule.