Private, For-Profit Colleges Under the Microscope

by Reeve Hamilton | Texas Tribune
July 20, 2010

Dallas personal injury lawyer Julie Johnson’s foray into the fight against private, for-profit colleges began with a handful of would-be interior designers.

A few years ago, a group of students had come to Johnson for help: They had forked over thousands of dollars at a private, for-profit school, but their non-accredited course work didn’t pass muster for an interior design license. Since then, Johnson has devoted most of her practice to hounding “proprietary” or “career” colleges for failing to make good on their claims.

She’s not alone in her focus. Career colleges find themselves in the hot seat this year, as U.S. Sen. Tom Harkin, D-Iowa, leads federal hearings on the need to regulate for-profit recruitment practices and the warnings of hedge-fund manager Steven Eisman (who famously predicted the crash of the housing market) that the student loan market is the next bubble to burst. And one of Johnson’s most recent cases — Dallas-based students claiming they were misled into believing that their psychology doctoral program was in the process of being accredited by the American Psychological Association — landed a prime-time slot on PBS’s Frontline.

Bob Cohen, senior vice president of the Career College Association, a national coalition of proprietary schools, dismisses what he describes as self-interested detractors who tend to generalize isolated incidents for the sake of publicity. “A lot of what we’re seeing is the attempt by short-sellers on Wall Street or trial lawyers who have made a specialty practice to try to drum up this story,” he says. “But the basic fact remains that you have 2.8 million students in career schools, and they’re getting a good education.”

The pitch at these schools — ITT Technical Institute, Everest Institute and Kaplan College are some of the more pervasive names in Texas — is simple: Without the hassles of developmental courses and required liberal arts courses, students can get career-focused training and join the workforce in less time. Cohen says for-profit schools avoid what he dubs the “scavenger hunt” for courses that can occur at community colleges. “There, a lot of the onus was put on the student to get over that steeplechase and graduate,” he says. “At career colleges, we say, forget all that.” To the dismay of education traditionalists, that’s not a tough sell for an increasing number of Texans, even if the short-term cost of attendance is steeper than comparable public-sector options.

Johnson argues that the pitch is too often made to the most vulnerable Texans, who might not be aware of other options like a traditional community college route. “The kids that go to these schools do not come from three generations of Longhorns,” she says. “They’re the first to go.”

The population served by career colleges — which accounts for about 5 percent (more than 72,000) of total fall enrollments in the state and 7 percent (more than 130,000) of 12-month enrollments — mirrors that of community colleges: Nearly two thirds are minorities, many of them first-generation college-goers. But unlike their counterparts at community colleges, students at proprietary schools have difficulty transferring their credits to other Texas schools. Often this is a matter of traditional universities opting to only recognize the more prestigious regional accrediting bodies, whereas for-profit schools are generally accredited by national organizations.

At an April 20 hearing of the House Higher Education Committee, Joe Fisher, the former chair of the Career Colleges and Schools of Texas and the current president of for-profit Hallmark College, laid out his understanding of the dynamic. “It’s a turf war,” he said. “It’s elitism."

More than half of institutions of post-secondary learning in Texas are for-profit schools. Of those 216 schools, 72 percent offer certification in less than two years, while only 7 percent offer four-year degrees. A number of the certificates offered are not often found in traditional academia. For example, according to the Career College Association, 97 percent of somatic bodywork and related therapeutic services awards in Texas come from career colleges, which account for approximately 46 percent of all awards for health and clinical-related professions in the state.

Getting those awards (certificates, associate's degrees, bachelor's degrees or beyond) doesn’t come cheap. Argosy University, for example, charges $510 per credit hour for undergraduate courses, as opposed to the $50 per credit hour charge for Texas residents at public universities. As is the case at most schools, the answer for many students lies in loans — primarily of the federal variety, which career college students receive at rates similar to and occasionally higher than they would at public and private non-profit schools.

[For a breakdown of federal grants — totals and averages — given to Texas students at different types of institutions, click here.]

Education is changing, Cohen says, and to maintain the working middle class, it needs to be more tailored toward professions with a “tangible” return. “It can’t be where you go to school for six years and come out with a degree in Chaucer,” he says.

Speaking of return on investment, what if you take out a big loan and end up with a credential that employers and schools won’t recognize? The 16.5 percent default rate for proprietary schools in Texas notably outpaces public schools (7.7 percent) and private nonprofit institutions (4.9 percent). And that debt never goes away — student loans cannot be discharged, even in bankruptcy.

Johnson says she fully understands why people like Eisman are calling it the next housing crisis. “These students are being charged for educations that are poorly run with promises of employment that are undeliverable,” she says. “What are they going to do?”

Cohen insists that the default rates are in line with the expectations for the less well-off population they serve. As for the credential they receive, and how and if they can use it, that’s up to the student. While some professional societies require certification, sometimes certificates earned at career colleges can only be used as a resume booster — at best. “There’s various ins and outs,” Cohen says, “and the students really need to do their homework to understand what the circumstances are going in.”

“There is an element of self-responsibility to getting an education and getting a job,” Johnson acknowledges. “I think that there are students who go to one of these schools and then, depending on the degree that they choose, may ultimately get a career. But those are fewer than the norm.”

One bet that can be taken to the bank: Career colleges aren’t going anywhere. Faced with a budget shortfall projected to be as much as $18 billion at a time of record enrollments in higher education, Texas needs all the capacity-expanders it can get.

“They play a unique role,” says state Rep. Dan Branch, R-Dallas, who chairs the higher ed committee. “But they’ve got to balance access and quality. Obviously, we don’t want the credential to be illusory.” The regulatory structure in place to prevent degree mills is provided by the two agencies: the Texas Workforce Commission, which licenses institutions to operate, and to a lesser extent the Texas Higher Education Coordinating Board, which oversees degree programs. Currently, no state version of proposed federal regulations to curb predatory recruitment is in the works.

“We are monitoring the activities at the federal level, but I think Texas remains confident they have structured themselves right with the Workforce Commisson and the Coordinating Board,” says Jerry Valdez, a lobbyist for the Career Colleges and Schools of Texas.

Last session, Branch passed a bill bolstering (to the modest tune of $1.2 million) the Texas Career Opportunity Grant, which provides awards to economically disadvantaged Texans enrolled in career schools. He says career colleges are increasingly drawing attention as more education statisticians begin to count an individual with a certificate from a less-than-two-year program as a credentialed adult. Such considerations are important as Texas tries to close the achievement gaps that exist between it and other states in the next five years.

As proprietary schools stand to increase in numbers, capacity and relevance to the state’s higher education strategy, Johnson hopes that so, too, will the number of watchful eyes upon them.