Posted on July 31, 2012 |
Yesterday, the Senate Health, Education, Labor & Pensions (HELP) Committee issued a searing indictment of for-profit colleges. The report, “For Profit Higher Education: The Failure to Safeguard the Federal Investment and Ensure Student Success,” was the result of Chairman Tom Harkin (D-Iowa)’s two-year investigation into the growing for-profit higher education sector.
The report found that although for-profit colleges, in theory, have an important role to play in higher education and should be well-equipped to meet the needs of non-traditional students—such as older students and single parents—the reality is quite different.
For-profit education is a big money-making industry that puts profits ahead of student success. More widgets = more profit. Except for that the widgets in this case are students. So it’s no surprise that companies that the report examined spent $4.2 billion (with a capital “B”) on marketing and recruiting, equivalent to 22.7% of all revenue.
This incentive structure has led to aggressive, misleading, and deceptive recruiting practices that look a lot like a sales process. For example, training materials from some for-profits showed that recruiters were taught to locate and manipulate prospective students’ fears.
And it’s working! These schools sink incredible amounts of money on marketing and recruiting, and are reaping incredible profits. In 2009, publicly traded companies operating for-profit colleges had an average profit margin of nearly 20% (and paid their CEOs an average of $7.2 million). Read more »