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The death of for-profit colleges is coming

Don’t let the door hit you on the way out.

For its entire existence, University of Phoenix has struggled with its own legitimacy. The online, for-profit college has been the butt of jokes for more than a decade. It’s lack of any real accreditation has earned it increased public scrutiny, and the rise of free online courses from even Ivy League institutions has many people questioning if a University of Phoenix degree counts for anything at all. Like most for-profit colleges, the most important thing their students walk away with is a mountain of debt.  

Now, it seems like the University of Phoenix might actually become little more than a joke. Since 2010, UP has bled half of its students and posted massive losses this week, with investors giving an “F” grade to its parent company, Apollo Education. The for-profit education industry as a whole is suffering to survive among crushing regulation and competition from verified, real colleges. In fact, if President Obama’s initiative to make community college free for most students becomes a reality, it’s easy to see how the entire business model collapses underneath itself.

The most important thing their students walk away with is a mountain of debt.  

And good riddance. For-profit colleges prey upon the poor and minorities by offering false hope to those looking for a chance at an education. Although only 12 percent of college students are enrolled in a for-profit school, over half of student debt defaults come from places like the University of Phoenix. Tuition at a for-profit college can often cost five times what a community college might charge, but 72 percent of graduates can expect to earn less than a high school dropout. These institutions are distinctly built to rob the federal government of money it gives to students and then saddle those same students with massive piles of debt and a degree that can’t help them pay it off.

This paradox has become the target of intense regulation. Last fall, Secretary of Education Arne Duncan unveiled new standards for any college or university hoping to receive federal money in the form of student loans. By the Department of Education’s new rules, every university must show a direct linkage between the cost of a degree and the earning power one can expect from said degree. If a college’s graduates walk away with debt amounting to 8 percent or less of their earnings, they get a passing grade. If not, they cannot receive federal loans.

This is a particular threat to for-profit institutions. According to DOE figures, 840,000 students attend a college that does not currently meet the new standards and of those 99 percent are enrolled in a for-profit college. In fact, 86 percent of income at for-profit schools comes directly from the federal government.

As more media coverage has enlightened the public to the crookedness of these institutions (University of Phoenix got the John Oliver treatment last year and has been a satirical target for Adult Swim), a core competitor has risen in their stead. Massive Open Online Courses, or MOOCs, provide students with the ability to self-educate themselves by participating in top-level college courses across the country for free. In the last year alone, the number of accredited colleges offering MOOCs doubled to 400, with 22 of the top 25 universities in the U.S. offering some level of courses free online.

While MOOCs do not generally hand out degrees, most people participating in them are looking for more than a sheet of paper. According to Coursera, the most popular MOOC provider service, the most commonly searched for topics by prospective MOOC enrollees are generally coding and programming languages like Python and Javascript (i.e., the tools individuals need to boost their own earning power).

By giving students exposure to course loads from the most prestigious (and most expensive) colleges in the country, MOOCs allow even low-income students to strengthen their skills in the fastest-growing fields: computer science and health care. Many courses offer certification in technical fields to aide students in verifying their completion of the work; there’s even a solid movement to have completion of a MOOC translate into college credits.

For-profit colleges prey upon the poor and minorities by offering false hope to those looking for a chance at an education. 

Community colleges, too, could signal the end of online for-profit schools. In his State of the Union earlier this year, President Obama announced an initiative to make community college free for most students or, in his words, “those willing to work for it.” Although the plan is not perfect (some worry that cheap community college might drive people away from pursuing four-year degrees at more accredited institutions), the plan could open up the bottleneck that has funneled so many poor people into for-profit institutions.

The damage places like the University of Phoenix are capable of is astounding when taken into full context. By promising a low-cost, convenient way to improve one’s situation, they actually use students as a cipher to take money from the federal government, stick the student with the debt, and give them a degree that offers no chance of earning back the money they’ve lost. Those people will then be likely to rely on public assistance to survive, all while trying to pay back the money the college took from the federal government in the first place. The University of Phoenix’s latest troubles should be a welcome development in not just the fight to educate and develop America’s workforce but in the fight for the truth and promise of opportunity.

Photo via leyrlo/Flickr (CC BY ND 2.0)

Gillian Branstetter

Gillian Branstetter

Gillian Branstetter is a reporter and essayist who specializes in the intersection of technology, LGBTQ issues, and privacy. In April 2018, she joined the National Center for Transgender Equality as a media relations manager.