THE ATLANTIC: For-Profit Colleges: Here to Stay

Career College Central Summary:

  • Last week, critics of for-profit colleges rejoiced at the news that University of Phoenix's enrollment numbers have dropped by nearly 50 percent in the last five years. Revenues are down 14 percent, and last year the institution shut down 115 of its physical locations and laid off 800 employees. The university's owners announced it will relocate staff from its San Francisco office in a consolidation effort.
  • The University of Phoenix is the largest for-profit university in the U.S. For-profit educations are mistrusted and harshly criticized for charging prices higher than those of public institutions, yet providing lackluster outcomes for their students. Worse are the reports about their questionable marketing and recruiting practices including reports of recruiters and admission officers misleading students. A lawsuit against Premier Education Group by a former employee alleged that its for-profit schools falsified records to keep federal money coming in.
  • Is the end near for the University of Phoenix and its for-profit brethren? Likely not. Even though for-profit colleges across the country have seen a slight drop in students in the past few years, enrollment at these schools is still quite high relative to what it was decades ago. Consider that, according to the National Center for Education Statistics, undergraduate enrollment at private for-profit colleges increased by 634 percent between 1990 and 2012. In contrast, according to the National Student Clearinghouse Research Center, enrollment at for-profit four-year programs dropped by 9.7 percent from 2012 to 2013, and by just 0.4 percent from 2013 to 2014.
  • And yet, the road ahead for the for-profit higher-education industry doesn't look quite as bright as it once did: Obama has announced his intent to change the "90-10 Rule," which says that for-profit colleges can only derive up to 90 percent of their revenue from federal student aid (that currently does not count veterans' benefits). In addition, the President wants to make community college free—a move that is anticipated to take students away from for-profit colleges as they draw from a similar pool of applicants. And though massive open online courses (MOOCs) from traditional public and private universities are not yet an established pathway to career security, the possibility is out there.
  • "There’s a significant increase in competition in the marketplace, you’re seeing more non-profits and state schools expand their mission beyond where they’ve traditionally been," says Mark Brenner, chief of staff for Apollo Education Group, the company that owns University of Phoenix and several other for-profit education institutions. "They’ve gone beyond state lines and a little further out there in terms of online education." Brenner also attributes the University of Phoenix's enrollment decline in the last five years to a free orientation program and in-class trials. He suspects these programs have made some students decide not to enroll—which he sees as a good thing, as some prospective students might not want higher education online or be ready for a bigger commitment, to a degree program.
  • But perhaps the biggest threat to for-profit higher education isn't external but internal: For-profit higher education hasn't proved itself to work for its students. There are two particularly damning numbers: The poor graduation rate and a high loan-default rate. The University of Phoenix uses a modified graduation rate, a percentage of students who complete a degree at 150 percent of normal degree completion time of two years. Even so, only 34 percent graduate within three years and 36 percent within four. "They’re not where we would like them to be, but we focus everyday on enhancing the student experience to improve retention," says Brenner. And, in their most recent earnings report, the University of Phoenix cited a three-year cohort default rate of 13.6 percent, down from 19 percent in 2011.

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