For-profit education companies have
been in the limelight, covered all over the news in both mainstream
and financial media. anecdotal accounts of students saddled with high
debt, violations in recruitment, school certification problem, and
many more examples of bad behavior. Hedge fund manager Steve Eisman's
presentation is one of the financial world's most talked about
Dr. Henry Bienen, a vice chairman of
the board of Rasmussen Inc., a for-profit college, and president
emeritus of Northwestern University wrote an opinion in defense of
for-profit colleges in The Wall Street Journal.
The growth of for-profits was even compared by Sen. Tom Harkin
(D., Iowa) and financier Steven Eisman to the sub-prime mortgage
The facts according to Dr. Bienen:
The for-profit field has grown swiftly over the last decade. As of
2008, it included 9% of students enrolled in American colleges and
universities. For-profit colleges offer courses from vocational
schools that award certificates for culinary or beautician training
to schools that grant bachelor's, nursing, medical, and master of
business degrees. Regional accreditation, which is the highest type,
from the same organizations that certify top public and private
universities, is what some of these schools have.
Some of for-profit institutions' graduation rates are well above
50%, either as high or higher than those of numerous four-year public
colleges, not to mention community colleges and non-selective public
and private colleges ? which often have rates below 50%.
Students who attend for-profits typically work during the day and
go to school at night. Often they matriculate online. They may be
single mothers. They borrow not just for tuition but for general
expenses. And they do have relatively high default rates. Their
average two-year default rate is 11%. For public nonprofits the rate
is 5.7% and for private nonprofits it is 3.7%.
Graduation rates of all schools are motivated by selectivity and
demographics which includes the income, race, age, and prior
education of students and their parents educational attainment.
For-profits students usually work during the day and attend school in
the evening. Largely, they enroll online. Their default rates are
relatively high. Their average two-year default rate is 11% compared
to public nonprofits rate of 5.7% and for private nonprofits rate of
Default rates are demographics driven like graduation rates.
Thirty-nine percent (39%) of degrees are allotted to minorities at
for-profit colleges. These are students who tend to have, on average,
limited financial capability and more likely to be the first in their
families to pursue college. Twenty percent (20%) of graduates at
public nonprofits are minorities. Furthermore, 76% of students
attending for-profit colleges pays for their own expenses. Parents
are not supporting them. Student borrowings are not controlled by
colleges, therefore, they can't control how much debt students
With regards to career placement, more than 90% of graduates of
Rasmussen College, with which Dr. Bienen is associated with, are
currently employed, regardless of the recession. Dr. Bienen is proud
to say that there is a high placement rates for students of
for-profits colleges who get degrees in business administration,
medical technology, information technology and design.
Admittedly, Dr. Bienen said that many students at for-profits face
the risk of not finishing their degrees, as increasing access and
opportunity do not always result to high graduation rates. He argues
that critics and education officials need to realize that increased
access is likely to mean strains on graduation rates. Though that is
not an argument against providing nontraditional students an
education that would otherwise be unreachable
For-profit colleges leads in the online education. And it will be
critical in the 21st century according to President
Barack Obama and the Department of Education. A lot of nonprofits
still do not possess the expertise or financial capacity to develop,
dispense, and support effective online programs. Leading some to
agree to an online-education partnerships with for-profit
Dr. Bienen explained that t is not a secret that students at
for-profits use federal Pell Grants and Title IV loans to help pay
their tuition. For-profits, on the other hand, use private capital
for construction and not state or federal funds for budgets for their
operations, and they also don't squander taxpayers funds to hold down
tuition rates ? as every state university does.
Because of cost pressures, nonprofit public universities such as
the University of California are already cutting access. Besides,
many students are now failing to find suitable places in state and
community colleges. For-profit colleges provide these students ways
to better careers and higher income. No one will benefit from
hindering a growing sector that is training under-served people.
According to Ben Strubel who made an
in-depth analysis of the education sector and examined some of
Eisman's arguments, he found out that in many cases the allegations
against for-profits have some basis in reality, but tend to be
overblown or affect the educational system as a whole.