Boom Times No More
Amid Heightened Scrutiny, For-Profit Conferrals Sag
Throughout the recent history of Community College Week’s Top 100 listings, there has been one constant:
The University of Phoenix’s online campus ranked first in the number of associate degrees conferred, and by a wide margin.
This year analysis is no exception. In 2012-13, the for-profit behemoth awarded 25,820 associate degrees. That figure is 5,395 more than the second-place finisher, Miami Dade College.
But more significantly, the university awarded 13,521 fewer degrees in 2012-13 than the year before, a drop of 34 percent.
Overall associate degree production in 2012-13 declined slightly from a year before, according to the CCWeek analysis (See related story, page 11). Many prominent community colleges have seen their degree production decline as the economy has recovered. For example, even the country’s top associate degree producer among public colleges, Miami Dade College, was down 13 percent in 2012-2013, a reduction of 1,534.
No category of community colleges, however, is seeing reductions on the scale of for-profit colleges.
For example, Colorado Technical University, an online college which enrolls more than 20,000 students, awarded 2,288 degrees in 2012-13, a 50 percent reduction from the year before. Conferrals at ECPI University dipped 34 percent between 2011-12 and 2012-13. Based in Virginia, the institution serves students in Virginia, North Carolina, and South Carolina through online and on-campus classes.
The sagging numbers are part of a larger trend. College enrollment is down across the board from the heights they reached in 2010 after the Great Recession, a function of an improving economy and demographic trends. Enrollments at the University of Phoenix was 270,000 in the 2012-13 academic year, about half of its peak of 471,000 in 2010.
The shrinking number of associate degrees being awarded by for-profits came as no surprise to Kevin Kinser, an associate professor of the State University of New York’s University at Albany and an expert on for-profit colleges.
“This is the state of play for the for-profits,” he said. “Their enrollment is declining, and their graduations are declining. With so much focus on student debt, people are being very cautious about enrolling.”
Kinser said some students may have turned away because the for-profit sector has been flooded by a deluge of bad publicity in recent years and is currently under unprecedented scrutiny.
In 2012, an investigation carried out by the U.S. Senate Health, Education, Labor and Pensions Committee resulted in a scathing report. It said that in 2010, the forprofit education sector enrolled 10 percent of students, received 25 percent of the total taxpayer-funded student aid dollars, but accounted for almost 50 percent of the student loans in default.
Additionally, the report found that many students left with debt, but no degree: more than half of students who enrolled in 2008- 09 had withdrawn by mid-2010. For associate degree students, that number was even higher: 64 percent of 2-year students left with no degree.
Just last month, Corinthian Colleges, one of the largest for-profit colleges with an enrollment of more than 70,000 students, agreed to sell 85 of its campuses.
The collapse of Corinthian came after the U.S. Department of Education suspended Title IV disbursements to the college for 21 days amid some financial reporting irregularities. So dependent was the college on the federal money — for-profit colleges typically get nearly 90 percent of their revenue through Title IV student aid — that it was unable to survive for three weeks.
The episode has led to demands from six Democratic U.S. senators for more aggressive regulation of for-profit colleges.
In a letter to President Obama, the senators, led by U.S. Sen. Tom Harkin, D-Iowa, chairman of the HELP Committee, asked the administration to provide more information on current efforts to ensure that the situation with Corinthian does not repeat itself.
“Corinthian Colleges Inc.’s failure raises serious questions about the financial integrity of other similarly situated, publicly traded, for-profit colleges,” the letter said. “The Department’s own records indicate that more than 23 additional companies that enroll 4,000 or more students currently have failing or close to failing financial integrity scores.”
“One publicly traded company, ITT Tech, for instance, has already notified investors of significant financial concerns. Given that students attending such schools, including Corinthian, hold a combination of Title IV, institutional, and other private loans, we believe it is absolutely critical to protect these students from a repeat of Corinthian.”
Meanwhile, a leading consumer group is urging states to increase their scrutiny of for-profit colleges. According to the National Consumer Law Center, since 2004, 27 state attorneys general and five federal agencies have initiated 64 investigations of or lawsuits against for-profit colleges. But few states have taken steps to improve oversight of the for-profit colleges.
“The increasing number of state and federal investigations of large, publicly-trade for profit colleges point to industry-wide deceptive practices that are harming hundreds of thousands of families,” said Robyn Smith, an NCLC lawyer and author of a new report on for-profit colleges. “If state agencies, state lawmakers and student advocates work together, they can increase oversight so that for-profit education provides real opportunity rather than insurmountable debt and broken dreams.”
The report says that for-profit colleges, because of their fiduciary responsibility to shareholders, demand heightened scrutiny.
“Nonprofit schools are charitable organizations that have an obligation to achieve a philanthropic educational mission,” the report said. “They are barred from distributing excess revenues to the individuals who are in control of the school and are required to reinvest excess revenues back into the nonprofit business. For-profit schools, on the other hand, are not so constrained. They have a legal obligation to maximize and distribute profits and owe their highest fiduciary duty to owners and shareholders. To keep stock prices high and satisfy shareholders, publicly traded companies must demonstrate constant growth in profits.”
“For-profit schools’ fiduciary duty to maximize profit and demonstrate consistent growth can cause them to focus on pursuing federal financial aid dollars through increased enrollments rather than on delivering high quality educational programs…..Strong state oversight is necessary to counterbalance the incentives created by the legal duty to generate and distribute profits to owners—a duty that does not exist in either the public or private nonprofit education sectors.”
But even critics of the for-profit sector acknowledge that it plays an important role in the country’s higher education system. They account for a large and growing number of certificate awards and enroll large numbers of non-traditional and minority students.
The report recommends ten steps states can take to improve the accountability of for-profit colleges. They include:
Eliminate reliance on accreditation as a substitute for oversight and require all accredited and unaccredited for-profit schools to comply with minimum standards and consumer protection.
Establish and enforce minimum performance standards as requirements for state approval.
But Smith is not optimistic that states will increase regulation.
“The for-profit colleges have an incredible power to lobby and influence lawmakers,” she said. “We have real concerns about students being able to have their voices heard.”