Background: For-Profit Schools and Predatory Schemes
Resources for Students
The North Carolina Justice Center’s “Predatory For-Profit Schools Project” (PFPSP) works to educate students and the general public about deceptive and predatory practices that are endemic in the for-profit school industry. We also provide legal representation to students who were lured by deceptive advertising to enroll in certain for-profit school programs and are now left with little more than crushing student loan debts.
Background: For-Profit Schools and Predatory Schemes
What are "For-Profit Schools"?
For-profit schools are privately owned, post-secondary schools. Like any for-profit company, these schools are motivated to maximize profits for their individual owners or investors. A majority of students enrolled in for-profit schools are enrolled in two-year certificate programs, ranging from nursing and graphic design to accounting and business administration.
For-Profit School Predatory Scheme
A substantial part of the profits obtained by many for-profit schools derive from targeting low-income students who take out government-guaranteed student loans to pay for the artificially high tuition costs charged by the for-profit institutions. Rather than creating quality programs that are commensurate with the cost of tuition, for-profit institutions routinely funnel the bulk of their revenues into advertising and enrollment efforts (as well as exorbitant executive salaries), ensuring that a constant stream of financial-aid dollars are flowing into their corporate coffers.
Meanwhile, students are often set up to fail. With an enrollment strategy centered on getting as many new students to enroll as possible, for-profit schools commonly pay little attention to whether the students are ready for and would benefit from the programs they have signed up for. It is unsurprising, therefore, that a great number of students enrolled in for-profit programs drop out without finishing their degree.
These students are left with worthless credits and crushing student-loan debts. The for-profit school industry does not suffer when students cannot pay back their loans—1 out of every 5 loans for for-profit students result in default —the schools have already pocketed the money, and the loans are guaranteed by the government. While taxpayers are left to pick up the tab, the real losers are the students, who disproportionately come from low-income communities and who were seeking to make a positive change in their lives. If the students are unable to pay back their student-loans, the debt becomes a millstone around their necks, preventing them from qualifying for subsequent student loans to attend legitimate educational institutions in the future, destroying their credit ratings, and impairing their ability to get credit and to pass workplace background checks for years into the future.
These concerns led Senator Tom Harkin to spearhead a two-year investigation into the for-profit industry. In 2012, the Senate Committee on Health, Education, Labor, and Pensions released its report, which found, among other things:
- Most for-profit colleges charge much higher tuition than comparable programs at community colleges and flagship State public universities. The investigation found Associate degree and certificate programs averaged four times the cost of degree programs at comparable community colleges. Bachelor's degree programs averaged 20 percent more than the cost of analogous programs at flagship public universities despite the credits being largely non-transferrable.
- Because 96 percent of students starting a for-profit college take federal student loans to attend a for-profit college (compared to 13 percent at community colleges), nearly all students who leave have student loan debt, even when they don't have a degree or diploma or increased earning power.
- Many for-profit colleges fail to make the necessary investments in student support services that have been shown to help students succeed in school and afterwards, a deficiency that undoubtedly contributes to high withdrawal rates.
- For-profit colleges spend the billions of taxpayer dollars they receive each year primarily on non-education related expenses. In fiscal year 2009, for example, the companies examined by the Senate committee spent:
- $4.2 billion or 22.7 percent of all revenue on marketing, advertising, recruiting, and admissions staffing.
- $3.6 billion or 19.4 percent of all revenue on pre-tax profit.
- $3.2 billion or 17.2 percent of all revenue on instruction.
- In 2009, the CEOs of the publicly traded, for-profit education companies took home, on average, $7.3 million. In contrast, the five highest paid leaders of large public universities averaged compensation of $1 million, while the five highest paid leaders at non-profit colleges and universities averaged $3 million.
- The lack of investment in education-related expenses and student-support services may help to explain why more than half of the students who enrolled in in those colleges in 2008-9 left without a degree or diploma within a median of 4 months. Among 2-year Associate degree-seekers, 63 percent of students departed without a degree.
- The vast majority of the students left with student loan debt that may follow them throughout their lives, and can create a financial burden that is extremely difficult, and sometimes impossible, to escape.
- Students who attended a for-profit college accounted for 47 percent of all Federal student loan defaults in 2008 and 2009. More than 1 in 5 students enrolling in a for-profit college—22 percent—default within 3 years of entering repayment on their student loans.
- The investigation also documented that many companies’ recruiting tactics misled prospective students with regard to the cost of the program, the graduation rates of other students, the job placement of other students, and the transferability of credits.
See For-Profit College Investigation
Resources for Students
Choosing the Right School
Use these resources for help on finding the right school for you. For example, through the US Dept. of Education’s College Navigator, you can search for a school and find out whether it has a for-profit or non-profit status, what its accreditation is, and what its default rates are for students.
Resources for Veterans
Veterans shoulder the burdens of combat on behalf of their fellow citizens. Once they return home, veterans who seek to use their G.I. Bill benefits to pursue a post-secondary degree or vocational training are often heavily recruited by for-profit colleges. As Senator Tom Harkin told the New York Times: “For-profit schools see our active-duty military and veterans as a cash cow, an untapped profit resource. It is both a rip off of the taxpayer and a slap in the face to the people who have risked their lives for our country.”
Before choosing a college, veterans should use the many resources listed above to make the best choice for their future. The links below also offer resources specific to veterans:
Help with Student Loan Debt
Information for Students Enrolled at Corinthian-Owned Schools (Everest, Heald or Wyo-Tech)
The U.S. Department of Education has forced Corinthian Colleges, parent company of Everest, Heald, and WyoTech colleges, to agree to close or sell off its schools and programs. The Dept. of Education resorted to these measures after Corinthian failed to provide required job placement data for its students. Corinthian is required to provide written notice to the more than 81,000 students enrolled in programs at Everest, Heald, and WyoTech colleges of the impending sale or closure of Corinthian’s campuses and programs. Students will have different options regarding the completion of their degree program and possible discharge of their student-loan debts, depending on whether their Corinthian-owned program is being closed or sold off.
Filing an Administrative Complaint (Regarding deceptive or unfair treatment by a for-profit school)
You can write to/email us at:
Predatory For-Profit Schools Project
c/o NC Justice Center
PO Box 28068
Raleigh, NC 27611
Please provide your name, the for-profit school you attended or are attending, and your contact information, so we can get back to you. Please do not send us your original documents.
Please do not provide us with any confidential information. Unsolicited emails and information you provide to the North Carolina Justice Center, or your sending a written request for assistance, will not create an attorney-client relationship. Unless the Justice Center advises you otherwise, the Justice Center does not represent you and you remain responsible for any filing deadlines that you may have.
The information and materials on this website are intended for information purposes only and are not intended to be treated as legal advice. The information is general in nature and may not apply to particular factual or legal circumstances. Neither this website, nor the use of information from the website creates an attorney-client relationship.