Students aren’t the only ones benefiting from the billions of new dollars Washington is spending on college aid for the poor.
An Associated Press analysis shows surging proportions of both low-income students and the recently boosted government money that follows them are ending up at for-profit schools, from local career colleges to giant publicly traded chains such as the University of Phoenix, Kaplan and Devry.
Last year, the five institutions that received the most federal Pell Grant dollars were all for-profit colleges, collecting over $1 billion among them.
This year, the trend is accelerating: In the first quarter after the maximum Pell Grant was increased last July 1, Washington paid out 45 percent more through the program than during the same period a year ago, the AP found. But the amount of dollars heading to for-profit, or “proprietary,” schools is up even more — about 67 percent.
For-profit colleges say the country has little choice but to accept their help to achieve President Obama’s goal of getting every American to enroll in some form of education beyond high school. But critics say the increased federal aid has unleashed a new gold rush. They complain the industry has too many incentives simply to enroll students and tap the spigot from Washington — and not enough to make sure students succeed.
The industry is “an aggressive sales operation that has a voracious appetite for recruiting the poorest students,” said Barmak Nassirian, associate executive director of AACRAO, a group representing admissions officers and registrars at traditional colleges.
“The victims here are the students themselves and the taxpayers, who have to pick up the tab.”
Regardless of how AP’s findings are interpreted, they underscore the extent to which the United States has ramped up its support for low-income college students in recent years, but increasingly outsourced the job to the private sector.
— Last year, Washington paid out a record $18.3 billion in Pell Grants, which typically go to families earning under $40,000. Proprietary colleges collected about $4.3 billion of that, or about 24 percent — roughly double the proportion a decade ago.
— In the first quarter of the current academic year, for-profit colleges collected $1.65 billion, or 67 percent more than in the same period a year ago. On July 1, the government made more students eligible for Pell grants and increased the maximum award by $600 to $5,350.
— For-profits are also grabbing a growing share of loans subsidized by the government to help low-income students. They collected about $7 billion in subsidized Stafford loans in 2008-2009, up from $4.7 billion two years before. Overall, the sector enrolled about 2.7 million students in 2007-2008, the latest year with complete federal data available.
The numbers are even more striking for low-income students: The number of Pell recipients enrolled in for-profit schools is 50 percent higher than two years ago.
Phoenix alone had more than 230,000 Pell recipients last year. Its campuses educate nearly four times more low-income students than the entire Big 10, and more than 30 times the Ivy League, the AP found.
Critics acknowledge for-profit schools can be a good match for some. But they point out median graduation rates of just 38 percent (for-profit colleges counter they’re taking on less well prepared kids, and say they actually do much better than community colleges with two-year programs). Students who don’t graduate will be hard pressed to repay their debts.
On average, for-profit schools cost five and a half times the price of community colleges. Virtually all students must borrow some money, and even among graduates of for-profit four-year programs, the average borrower ends up owing $33,000, according to the latest government data analyzed by Mark Kantrowitz of the Web site finaid.org.
The federal government has taken steps to help students make more informed choices, said Deputy Undersecretary of Education Robert Shireman.
“Our primary concern is that consumers and students are served well,” he said.
But, he added, “This is a consumer choice system. If people who are eligible for federal financial aid choose one school over another, that is their choice.” F
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