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It Is Possible to Graduate From a for-Profit College

For-profit higher education's failings have the feds exercised anew. If only there was some way to know who might thrive in these institutions....
College fund, student loan debt, money in a jar


For-profit colleges face a lot of grief these days, as a bit of heavy handed satire set at Doonesbury’s Walden College highlighted last year:

Dean: We’re now down to 18 percent of students graduating in four years. Sixty-five percent never graduate at all.

School president: It’s like we’re a for-profit school.

Dean: Only without the profit, yes, sir.

School president: So we have a graduation rate as bad as for-profit colleges.

Dean: Well, maybe not that bad. Remember, for-profits take any warm body with federal aid. They’re all about enrollment, not completion. And why not? Last year the taxpayers sent the failure factories $32 billion.

You might be laughing; the Obama administration isn’t. Stymied by the courts last year, the U.S. Department of Education is again going after for-profit colleges for spending lots of federal student loan dollars to churn out students who don’t get jobs. The administration proposes turning off the aid spigot for colleges and vocational programs whose graduates’ loan debt exceeds 12 percent of the annual income (or 30 percent of their discretionary income) for two out of three years after leaving school. Using this debt-to-earning rate is seen as a way of determining if students were lured into taking on too much debt or assured that gainful employment awaited them when most likely it didn't.

For-profits see a darker motive in the new regulations, which both double the number of institutions (to 11,000) that would have been covered by the rules the court rejected, and doubles the number that would immediately fail (974). “There should be no doubt about the department’s true intention here,” a release from the Association of Private Sector Colleges and Universities quotes its president, Steve Gunderson. “This regulation, developed by the department for consideration by a panel of negotiators stacked with individuals opposed to the very existence of our institutions, will cut off access to postsecondary education for the students who stand to benefit the most.”

Whether the panel is gunning for for-profits or not—and we’ll have a chance to observe when hearings start Monday—there hasn’t been a lot of love showered on for-profits lately. In a 2011 paper looking at media coverage of for-profits in the first two years of the Obama administration, Tim Gramling, the president of for-profit Colorado Technical University-Kansas City, termed it an “all-out war.”

Weapons deployed that year included a critical Government Accountability Office report and an ever more-critical Senate report that called for-profits an important piece in the educational mosaic even as it blasted their high costs, low spending on instruction itself, and poor returns on that investment. “Despite dismal outcomes and high defaults,” according to the Senate report, “for-profit colleges enroll between 10 and 13 percent of students but receive 25 percent of all federal financial aid dollars.”

(The furor wasn’t new. A newspaper editor a decade ago, I remember my own daily’s hard look at the recruiting practices of the local for-profit vocation school and the weird sensation of having lead stock analysts from the major brokerages needling me for extra information.)

A National Bureau of Education Research paper—subtitled "Nimble Critters or Agile Predators?"—summed up the dichotomy nicely:

We find that relative to these other institutions, for-profits educate a larger fraction of minority, disadvantaged, and older students, and they have greater success at retaining students in their first year and getting them to complete short programs at the certificate and associate degree levels. But we also find that for-profit students end up with higher unemployment and “idleness” rates and lower earnings six years after entering programs than do comparable students from other schools, and that they have far greater student debt burdens and default rates on their student loans. Not surprisingly, for-profit students have trouble paying off their student loans and have far greater default rates.

Gramling, who as president of a for-profit has both a unique perch and a dog in this fight, has a new paper in the open-access journal SAGE Open specifically looking at the for-profit graduation issue. As the GAO and other have noted, studies show for-profit students graduating at higher rates for certificate programs, but at much lower rates for bachelor’s degree programs than students at non-profit/public schools (22 percent versus 55 percent). Students seeking associate’s degrees, presumably the middle ground in effort between a certificate and BA, had the same graduation rates.

The author argues that public policy which focuses on the for-profit’s institutional characteristics will not improve the graduation rate. However, focusing on certain student characteristics at the front end would help (which nonetheless suggests worries about over-eager recruitment aren’t off base).

To find those student characteristics, Gramling used registration and financial aid records for 2,548 new undergrads at his university who enrolled between 2005 and 2009 and were scheduled to graduate before June of 2011. (He did not look at online students.) Applying a regression analysis on 16 different variables, including things like income, marital status, gender, and previous education, he identified five that could predict with 87 percent accuracy whether the student would or would not graduate. “No research on record has produced higher predictive power than the present study,” he writes.

Four of his predictors could be known when a student applied:

• How many credits they were taking; half-timers were less likely to graduate, suggesting that time pressures may be at play for dropouts.
• Race; blacks were more likely to graduate than whites, which is dramatically not the case at public colleges.
• How many credits were required to complete the program; fewer is better.
• And how much money the students had to supply out of their own pockets; more was better.

The most reliable variable, which could only be apparent once they started taking classes, was the student’s grade point average. That proved better at predicting who didn’t graduate—low performers dropped out—than who did.

Gramling doesn’t suggest his results are necessarily universal in the for-profit cosmos, and suggests that similar studies be conducted at other institutions. And while he argues that these student-oriented markers remove some of the onus laid at the door of for-profits, his own success at identifying them suggests that not just “any warm body with federal aid” should cross that threshold.