Education Spend Management: For-Profit Universities Can Offer High Tuition, Low Pay-Off

I was extremely lucky to have two generous parents who paid for my undergraduate education at a fantastic university. Munificent as they were, I was (understandably) left alone to fund my graduate education, which I must admit has been a murky world of FAFSA forms, long, long lines of befuddled looking people like me at the financial aid office, more calls to Direct Loans than I can count, mandatory loan counseling, this interest rate or that, subsidized vs. unsubsidized -- all for sitting in a classroom twice a week to study how to make sentence diagram trees and dive into another murky world, that of literary theory.

Consider this, though: my debt in graduating with a Masters from a reputable school -- it'll be close to $30k, all said and done, and all federal loans with a few scholarships thrown in -- is more acceptable (and potentially a better total cost investment) than the debt assumed by someone attending a for-profit school. But why?

NPR recently featured a story on All Things Considered entitled For-Profit Colleges Under Senate Microscope, which asks "Are for-profit colleges taking low-income students to the cleaners or helping them improve their lives?" The article spotlights a hearing in the senate that asked whether or not for-profit universities are skewing their data in terms of post-graduation job placement rates, hoping to lure students into borrowing federal dollars to pay high tuition rates for programs that, unfortunately, they statistically most likely won't finish. The feds want to interfere:

"Under the proposed rules, the Education Department would monitor loan repayments and starting salaries among graduates of for-profit colleges. To remain fully eligible for student loans, education companies would have to show the agency that at least 45 percent of their former students are paying off their student loans, or that graduates pay less than 8 percent of their total income or less than a fifth of their "discretionary income" on student loan payments," says this article on Bloomberg. Furthermore, "If the rules were in effect today, programs enrolling about 8 percent of the students at for-profit colleges nationwide would lose eligibility, the Education Department said."

Senator Tom Harkin (D-IA), heading the panel, says "57 percent of students withdr[ew] within the first two years based on self-reported numbers by the institutions themselves. Now these students take with them thousands of dollars in student loan debt." I would hope that a student considering a for-profit institution would not be "duped" into believing statistics (statistics they could easily look up themselves, from reputable sources as well), skewed or not, that the school presents to them. For-profit universities are indeed plagued with abysmally low graduation rates, but then again, so are some non-profit universities as well. Mike Enzi (R-WY) states, "If we want to make sure that students have access to high-quality college education and make higher education more affordable, why aren't we looking at these problems throughout higher education?"

Rather than turning this into the partisan debate it's sure to become, I think it's important to think about this in pure monetary terms. You're purchasing "an education" in the same way that you'd purchase anything else: by performing a total cost analysis and cost comparisons in all of your options: for-profit, non-profit, community college, or heck, sitting in on lectures for free. Whatever your choice, look where it might leave you a decade out if the Federal government steps up it's intervention on the loan front -- hopefully it won't be as an in-debt non-graduate of a bankrupt and no-longer operating University of Phoenix/DeVry/ITT Tech/etc.

Sheena Moore

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