For-Profit Colleges: Futile Degrees or Fruitful Employment?

For-profit colleges such as the University of Phoenix and Kaplan University offer an alternative to traditional two-year and four-year non-profit institutions by focusing, if their rhetoric is to be believed, on learning “relevant material you can apply immediately to your workplace.” With the rise in unemployment and the difficulties college grads are experiencing securing jobs, for-profit colleges are able to leverage their practical approach to attract both traditional college-aged students as well as adult learners. Yet for-profits have their critics.

For-profit colleges offer the following reasons when claiming they are the most viable option for postsecondary learning:

  • Productive and timely career training programs that especially target low-income and minority students historically underrepresented in postsecondary education. As the University of Phoenix website states, “roughly 30% of the University’s 443,000 students are African-American and about 11% are Hispanic, compared to the national enrollment averages of 12% and 10%.”
  • Lower student-to-adviser ratios compared with community colleges, as well as higher rates of persistence and graduation. As Arthur Keiser told, his for-profit Keiser University produced a “graduation rate for 2009 [of] 72 percent, well above community colleges and many state universities.”
  • A distance learning option, that is, the ability to earn a degree online. As the University of Phoenix website states, distance learning allows one to create a “schedule that fits your life.” This is seen as a necessary option for adult learners with jobs, families and other obligations.

Still, many argue that such proprietary colleges do little in the way of offering meaningful degrees and instead saddle students with debt. Worse, students often do not realize what they are getting themselves into and end up defaulting on loans at higher rates than their peers. New York Times op-ed contributor Jeremy Dehn notes: “It’s disturbingly easy to get accepted [to for-profit colleges], receive thousands of dollars in loans and then flunk out with crippling debt and no degree to show for it.” Misleading marketing tactics and deceptive for-profit advisers are often to blame for such negative outcomes.

As a response, in July 2010, the U.S. Department of Education implemented the “gainful employment rule.” This means that federal loan money is rescinded to for-profit schools that fail to provide students with degrees that secure good career prospects. Just last week, the Obama administration released new regulations with respect to student aid in hopes of “protecting students from aggressive or misleading recruiting practices.” Additionally, such rules are aimed at increasing students’ knowledge about the financial aid process. Disseminating aid information in easily understood ways is an effort to decrease the amount of student loan debt carried.

However, some note that for-profit colleges provide access to postsecondary education for nontraditional students such as adult learners and career-changers by providing flexible hours and certificate programs. has started a campaign to “put the brakes” on the gainful employment rule, stating that such a proposal could “limit access to much needed career training for hundreds of thousands of students.”

And just recently, the New England Board of Higher Education at its “Reinventing the University” conference proposed that perhaps its usual audience of nonprofit and public educators could learn something useful from their for-profit counterparts. Representatives Rob Lytle of the Parthenon Group, Peter P. Smith of Kaplan, and John R. McKernan Jr. of Education Management Corp. were adamant about how their mission should not stand in opposition to nonprofit colleges, but rather, should be seen as two different means to achieve the same ends.

Yet with loan defaults disproportionately high for students enrolled in proprietary colleges—and the increasing number of graduates fr0m these institutions who are unable to find “substantial employment”—this is a hard argument to make, even for the most skillful marketers and recruiters.


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