For-profit colleges are screwing society

Have you ever heard of Apollo Group, Inc? You might better recognize them as the group that operates the for-profit University of Phoenix. Despite a Senate report slamming the for-profit college industry for screwing taxpayers, students, and war veterans, Apollo group rides its golden chariot on the broken hopes and dreams of millions on the way to the bank.

What’s so deceptive about these colleges, mostly conducted online, is that most people see the commercials and know it’s a scam. The people who need an education the most tend to not be able to see through the facade while those who know better have no idea just how bad the industry is. It’s no secret that higher education costs got out of hand, but legitimate schools don’t admit in a deposition that stock price trumps the importance of quality, and celebrate the CEO’s birthday party by unrolling an eventual plan to use five years to gain 5 million students and $5 billion.

The company’s seen associate degree students rise from 4,000 to 146,500 in four years, indicating the company’s targeting of adults looking for an education while working, mostly through online courses. An associate degree in Arts or Business costs about $25,000 while a nearby community college offers the same degree for $4,000. These marked-up tuitions go across the board. University of Arizona offers a Bachelor of Science in Business for a hefty $44,200, but compare that with University of Phoenix’s nearly $75,000 tuition for the same.

Recruiters are trained to not provide direct answers to questions students had about costs. They quell skepticism by ensuring the prospective student that he’ll immediately get a good-paying job, he’s investing in himself, and that he doesn’t want to tell people the degree hanging on his wall is the cheapest he could find. Remember that Apollo follows a business model and must continue growing revenue at all costs. Recruiters enhance the hard sell with artificial urgency in order to force the student to commit without proper thought. The school doesn’t tell people upfront that they’re applying for loans they’ll have to pay back and that the tuition is sky-high. One student with a felony conviction was specifically told by an admissions counselor that her felony conviction wouldn’t stop her from becoming a pharmacy technician, even though the licensing board bans for life people with certain felony convictions. Even if she had no felony, what ethical pharmacy would hire someone with a degree from the University of Phoenix? The woman’s stuck with a useless degree and $27,000 of debt.

The near-worthlessness of their degrees doesn’t even matter much considering how 60.5 percent of 2009 enrollees withdrew, and those students stayed for a median of only four months yet are saddled with debt. The student default rate flirts with 30 percent, which is problematic for Apollo because three-year default rates of over 30 percent result in losing Title IV funding. Apollo manipulates that rate down by putting student loans into forbearance or deferment so they’re technically not in default. These methods not only prolong the inevitable default but allow debt to continue accruing.

The biggest head-scratcher is how for-profits hurt taxpayers by collecting on federal student loans, up to 90 percent of a for-profit’s revenue. Society chipping in to help subsidize higher education is marvelous in theory, but taken to an extreme, it becomes a major cash flow to these companies and their investors.

As bad as it is that they target the uneducated, they heavily targeted veterans because the post 9/11 GI Bill helps for-profits get around the 90/10 rule that limits federal aid to 90 percent of total revenue. They saw a huge enrollment spike from 2008 and onwards, meaning that as the economy crumbled and is still slowly recovering, these companies thrived on taxpayer money and filled students with insurmountable debt.

It would take way too long to lay it all out here, but these examples cite most of the problems with this sector. As the full report below indicates in more detail, these schools have flat-out defrauded students, with some like ITT Tech and Kaplan University even recruiting using the “pain funnel,” an exploitative method that gets to someone’s true sorrows and crosses it with that person’s inner child. Rates at physical locations are generally a little better than the online offerings, but these schools still primarily pump money into marketing/advertisements while leaving less than half for “other.”

For more information, here’s an annotated Senate report section for Apollo and here’s the report in its entirety.

 

1 Comments

  1. Wade Woodall

    I see your point here and I agree to an extent. The only problem is that there are those of us out here that will be able to use the degree. It’s not for everyone, but when I started taking online courses it was encouraged by my current employer at the time. Now, to the expense you are correct. But once you’re knee-deep in debt, it’s hard to turn back. I only have two more classes and will be attending the University of Miami Online for my Masters.

    The problem is not UOP, it was the lack of choices before a year or two ago. Now state colleges are offering online courses. UOP will have to adapt or be forced out of the market.

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