Stop Federally Subsidizing For-Profit Institutions

The federal government should at least do no harm when it comes to helping students attain a college degree. Instead, through student loans, our tax money is used to prop up institutions that are more predatory than educational—for-profit educational institutions.

These institutions charge their mostly low-income students so much for so little that the federal government’s involvement amounts to exploitation. Too often, these institutions aim to make money ahead of their duty to educate students. Their aggressive sales tactics convince vulnerable individuals to sink into debt for a degree that is less usable—and more expensive—than an equivalent degree from a community college or four-year institution.

That is, if students attain a degree at all. The fact is, most don’t.

Only 30.7 percent students entering four-year, for-profit institutions complete their degrees in six years. Their education is often a failed promise. By contrast, 48.7 percent of students at public four-year institutions, and 58.5 percent of students at private, nonprofit four-year institutions, complete their degrees within six years. The numbers are even worse for Pell Grant receipts who enter four-year, for-profit institutions, 27.9 percent of whom complete their degrees in six years.

These dismal outcomes are more troubling because many of these students are low income or first generation, often coming from families with little or no college experience.

For-profit colleges disproportionately enroll recipients of federal grants, including Pell Grants. Of all the students attending four-year for-profit institutions in 2019–20, 69.2 percent were federal grant recipients. This is about 20 percentage points higher than the proportion of students receiving federal grants at public four-year institutions.

Marketing ploys convince students with fewer resources or little family support to attend for-profit institutions. They see the promised education as the key to entering the middle class. Yet all too often, all those students attain from the experience is eye-popping debt that makes them worse off financially, not better.

Students at four-year for-profits borrow far more than those at four-year nonprofit institutions. About 87 percent of students who graduated in 2015–16 with bachelor’s degrees from for-profit colleges took out student loans, compared to 66 percent at public institutions; among those borrowers at for-profit institutions, the average borrowed for bachelor’s degree completers was $44,610, compared to $34,430 at private nonprofits and $29,070 at public nonprofits.

The cost is breathtaking. Too many of these students fall into enormous debt for a substandard education.

Yet our government continues to allow 704 for-profit institutions in our nation to administer student loans to the 787,811 students who attend.

Our tax money should not be used this way. The federal government should pull out of giving students loans to attend for-profit colleges. These institutions are not providing a public service, and their outcomes and degree-attainment data have proven that the government should not support costly speculative higher education institutions when students’ lives are on the line. At the minimum, the government should develop stricter laws and regulations based on the success of the few for-profit institutions that do get it right.

For-profits will object to ending student loans for their institutions. They will say that they are market-driven, more flexible than traditional colleges and offer students practical classroom learning to enable them to work in the real world. They may even say that their market-based approach will inspire creativity, efficiency and effectiveness to satisfy shareholders and consumers.

But if they are so market-driven and proud of their role in our capitalist system, they shouldn’t need the federal government to continue to prop them up with student loans. They shouldn’t rely on making money by trapping students in debt. They should be entirely market-driven and make money on the strength of their product, like every other business in America. As we all know, if your product fails, your business will close. Let these for-profit colleges stand or fail on their own merits, without federal help.

The federal government has acted to forgive student loan debt from students who attended defunct for-profit institutions. However, continuing subsidies to enable other for-profit institutions to continue failing students is an insult to taxpayers. It is also a gross disservice to students who only wish to better themselves through education.

It’s time the government stood with students, not those who exploit them.