Fed Aid Goes to Utah For-Profit Colleges

Ligaya Peterson is listening for the sounds that distinguish a heart murmur from an arrhythmia with the help of formerly stray dogs Xango and Trixie.

Peterson and 179 others are learning the veterinary-technician trade in the state’s only two-year program, operated by Utah Career College in a former pizza parlor in West Jordan. A 22-year-old married mother from Sandy, Peterson is among more than 11,000 Utah students using federal aid to attend a for-profit college.

Millions in federal stimulus money are reaching Utah college students in the form of enhanced Pell grants, but an analysis of U.S. Department of Education data shows a disproportionate share going to for-profit schools like Utah Career College (UCC).

These high-tuition programs, whose enrollment has exploded in recent years, are tailored to working adults. But critics say they might not be the best option for some low-income students because they cost significantly more than public colleges and require many students to take on big debt loads. Accordingly, loan default rates among former students at Utah’s for-profit schools are substantially higher than for other schools. The default rate for students of West Valley City’s Everest College whose loans came due in 2007, for example, was 17.2 percent, eight times the state average.

"You have people making boatloads of profit on student training that could easily be done in a community-college setting," says Phil Clegg, Utah Valley University’s director of student life.

Clegg is among a growing number of educators who contend too much federal aid is going to schools that are accountable primarily to private individuals and shareholders.

Lori Sisneros, a 31-year-old mother of two who lives in Taylorsville, studied for an associate of applied science degree at UCC. In the process, she gained $14,000 in debt, a degree in health and exercise, which hasn’t gotten her a job, and a mound of credits no other Utah school recognizes because of accreditation differences. She is starting over at Salt Lake Community College (SLCC) on Pell assistance and more loans.

Other Pell-supported UCC students, such as Peterson and nursing student Gary Spencer, are happy with their choice. Even though the tuition is about four times SLCC’s $2,800 per year, UCC offers associate-degree programs that can get them started in their careers in about two years, which isn’t possible at a community college because of waiting lists or the lack of a particular program.

Tough questions

Over two fiscal years, the American Recovery and Reinvestment Act (ARRA) will pump $17 billion into the nation’s largest need-based financial aid
program. As part of this stimulus program, the maximum Pell awards were bumped up by $500 to $5,350.

When the stimulus finishes running through Pell, up to $150 million will have gone to Utah students. So far, more than one-third of the $17 million in stimulus money that has reached Utah has gone to for-profit schools, according to federal data. That percentage could drop once all the money is disbursed, federal officials say.

Last year, $174 million in Pell money benefited 58,107 Utah students, an average of about $3,000 per award. Department of Education (DOE) data indicate at least 17 percent of this money went to for-profit schools, according to a Salt Lake Tribune analysis. Higher education officials say the for-profits now serve 20,000 to 22,000, or 10 percent of Utah’s college population.

Overall, for-profit schools now get 25 percent of all federal financial aid awarded to U.S. college students under Title IV of the Higher Education Act, funds that include Pell grants, Stafford loans, and work study, according to several published analyses. That fact has provoked a national discussion about policies that send so much public money to corporations that spend millions recruiting students and return millions more to shareholders.

In fact, the DOE is in the process of revising regulations for institutions that participate in Title IV. Under discussion are incentive compensation for recruiters and institutions’ alleged misrepresentations to students about success rates, touchy subjects in the for-profit sector.

While the country may need greater access to postsecondary education, the disproportionate share of low-income students heading to the for-profit sector is cause for tough questions, says Jane Wellman, executive director of the Delta Project, a Washington, D.C.-based nonprofit that examines cost, productivity and accountability in higher education: Are these students being adequately screened to ensure they will graduate? Are the institutions accredited by an agency recognized by the DOE or the Council of Higher Education Accreditation?

"If you are Pell-eligible, and the institution is encouraging you to take out loans, you want to look at their job placement and income data," says Wellman, a member of Argosy’s board. "Nobody should be taking out loans unless they are really confident they are going to get a job."

The more expensive option

According to federal documents, 847 of Utah Career College’s 981 students — 86 percent — last year were awarded Pell grants totaling $1.7 million, compared to 22 percent at SLCC. More than three-quarters of UCC’s revenue is in some form of federal financial aid, still below the federal limit of 90 percent.

"We serve one of the needier populations. We get students that don’t go to the public colleges," says James Cox, regional director of the Career College Association of Utah. "We are training for the jobs that the stimulus is trying to feed. That’s the health fields."

Two of state’s biggest for-profit Pell winners are Stevens-Henager, which has four locations in Utah, and Everest College, whose students last year were awarded $9 million and $4 million, respectively. Officials at these schools did not respond to interview requests. Some 31 Utah-based for-profit schools are dialed into Pell, with hundreds of awards going to schools like Utah College of Massage Therapy and the Cameo College of Essential Beauty in Murray.

The for-profits’ disproportionate cut can be explained in part by the demographic they serve. Their students are older, more likely to be supporting themselves and dependents, and often starting second or third careers after falling on hard times — and therefore, more likely to be eligible for Pell assistance and larger awards.

The state operates low-cost, open-access institutions — SLCC and Utah Valley University (UVU) are the largest — whose programs are designed with these students in mind. They hold classes in the evening and on weekends, provide inexpensive day-care and are situated in convenient locations with loads of parking. But recession-induced enrollment spikes and budget cuts have hampered these big public schools’ ability to accommodate every student. Officials fear many aspiring students dropped out this fall after failing to get the courses they needed.

"We’re not adjusting the [public] system to make it feasible for these students to do it; otherwise they wouldn’t be choosing the more expensive option. We have to take some of the blame ourselves," says UVU’s Clegg, who is studying the effects of financial aid on Utah enrollment. "If the state doesn’t address these needs, the private for-profits will step in and do it, but the cost will be significantly higher for the students, but also for all of us as taxpayers."

Gary Spencer, a 40-year-old married Army veteran with an adult son and a baby on the way, is a case in point. He moved from Hawaii to pursue an associates degree in nursing at SLCC, but while he was taking prerequisites, the waiting list to enter the program grew to three years, he said. Spencer learned about UCC from his wife’s colleague; he signed up last year.

"There’s a lot of hands-on training here. We do clinicals at hospitals throughout the community," says Spencer, who is using the UCC program as a stepping stone to a graduate program in Houston. His loans, Pell grant and a military scholarship cover all his UCC tuition, which runs $540 a credit hour.
Much more aggressive

For-profit schools are much better at responding to work-force demands and meeting student needs than traditional institutions of higher learning, contends Harris Miller, executive director of the Career College Association, a Washington, D.C.-based trade group that represents 1,450 accredited for-profit schools enrolling 1.3 million students.

"Yes, there’s general ed going on, but we don’t have this idea that you take four years out of your life and change your major 12 times before you decide what you want to be when you grow up," Miller says. "Our skills are for people who have decided, ‘I want to be a nurse, I want to be an IT worker,’ and we are going to get you there in the most efficient and effective way."

Community colleges have a broad mission that includes enrichment courses, transfer education and ESL instruction, while the career colleges are fixated exclusively on work-force training.
Miller cited data that suggest that up to 57 percent of eligible students at community colleges are not taking advantage of the Pell program. The career colleges, on the other hand, are much more aggressive in helping students navigate the financial aid bureaucracy.

In recent years, meanwhile, enrollment growth at for-profits nationwide has outpaced that at traditional institutions by a factor of six, Miller says. That growth is apparent along Utah’s Interstate 15 corridor where career colleges are proliferating near off-ramps. Utah Career College has established new campuses in Orem and Layton. Its main campus operates out of converted retail and office space in a West Jordan strip mall just four miles south of SLCC’s main campus.

"We are training them for jobs, not for a degree in a topic that might not get them a job," says UCC director Cox, while gazing across a car-filled expanse bordered by his classroom buildings, a McDonald’s and a bowling alley. "We turned a parking lot into a community."
Tribune reporter Tony Semerad provided computer-assisted data analysis for this report. Brian Maffly can be contacted at bmaffly@sltrib.com.


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