In the Two Minute Drill, we explain complex issues in politics in 500 words or less (roughly the amount of words it takes the average adult two minutes to read on a monitor). Politics just isn’t always that complicated. Without the fluff and partisan bias, even the most complex of our political differences can be explained succinctly. This week we examine Trump University and the scourge of for-profit colleges in the United States. This is The Two Minute Drill for June 3, 2016.
Before Donald Trump was the presumptive Republican nominee for President of the United States, he spent part of his time promising to share the secrets of his real estate investing success. He did so by charging thousands of dollars for an education at “Trump University.” The only problem: Trump University wasn’t anything close to a university. It was a multilevel marketing scheme.
Trump University lured students in with a free 90-minute seminar, then promised that insider knowledge – including access to Trump himself – could be theirs if they committed to purchasing the next level of classes. According to blunt testimony revealed Tuesday, former managers of the school portray Trump University as a “fraudulent scheme” designed to exploit “the elderly and uneducated to separate them from their money.”
Trump is embroiled in a lawsuit over the school – students have argued that Trump’s eponymous university defrauded them. For Mr Trump, whose entire presidential campaign hinges on his reputation as a businessman, the controversy offers an unflattering snapshot. Much has been, and will be, written about Trump University. But Trump University is the tip of an iceberg, a window into the (dark) world of for-profit colleges.
Leaving aside Trump University, what do student outcomes typically look like at for-profit colleges in the United States?
The Explanation (500 or Bust)
You know what a for-profit college is. You’ve probably seen advertisements for these institutions everywhere. DeVry, IIT Technical Institute, Kaplan University, the University of Phoenix. Ring a bell? These are all for-profit colleges – institutions that are run by companies and operate under the demands of investors and stockholders. They exist, in part, to earn money for their owners. And you know of them because they have exploded in popularity over recent decades.
From 1998 to 2008, enrollment at traditional colleges and universities increased just 20%. The for-profit sector, however, grew tremendously – over the same period, the number of enrolled students at for-profit institutions more than tripled, from 553,000 to 1.8 million. Much of this growth came through minority and low-income students, which make up 37% and 50% of the schools’ enrollments, including many veterans. As a result, for-profit colleges have succeeded in giving underserved communities access to higher education – education which they typically would not have access to.
That access, however, comes at a cost.
A 2010 report by the Education Trust finds that, for many students, the high cost of attending a for-profit institution often saddles students with crushing debt. Because of their higher tuition and lower financial aid, for-profit schools require students to finance (on average) nearly $25,000 in tuition every year (keep in mind, also that just 22% of students earn degrees within six years). In contrast, private non-profit schools require less than $17,000 and public schools require approximately $8,600. To cover the cost of the high cost of attendance, 94% of students at for-profit colleges take out federal Stafford loans – compared to 54% of students at private nonprofit institutions – and 46% of students take out private loans. As a result, the median debt level of students at graduation from a bachelor’s degree in a for-profit institution is $31,190, nearly double that of a student at private non-profit institutions and about four times the amount of students at public institutions.
If for-profit institutions were giving students a meaningful platform for success, perhaps the high cost of attendance could be justified. But that just isn’t the case. Instead, the cost of attending for-profit institutions greatly outweighs the promised benefits.
A 2012 paper from Boston University for the National Bureau of Economic Research, “Evaluating Student Outcomes at For-Profit Colleges,” analyzed data from 16,680 student records in order to compare the effect on earnings of obtaining certificates or associate degrees from for-profit, not-for-profit and public educational institutions. Among the studies findings:
The study notes that “[s]tudents starting certificate programs at for-profit institutions have significantly worse outcomes than students starting in not-for-profit/public institutions. Income in 2009 is approximately $5,500 lower for students starting at for-profit institutions than for students starting at not-for-profit/public institutions.” For associate degrees this figure was $3,000 less.
Some demographic factors complicate such comparisons: “Students starting in certificate programs at for-profit institutions are much more likely to be Black, Hispanic, female, younger and single at the time they enter college. They are less likely to speak English as their primary language, and their parents are less likely to have been born in the United States.” Despite that, the study found that “even after controlling for an extensive set of background variables, students at for-profit institutions do not benefit more and often benefit less from their education than apparently similar students at not-for-profit and public institutions.”
Certificates from institutions provided “little labor market benefit.” There is, however, one exception: certificates for a health-related employment field.
The scourge of for-profit institutions has not gone unnoticed by federal regulators. In fact, following a two-year investigation which concluded in 2012, the U.S. Senate found “overwhelming documentation of exorbitant tuition, aggressive recruiting practices, abysmal student outcomes, taxpayer dollars spent on marketing and pocketed as profit, and regulatory evasions and manipulation.” The inquiry determined that for-profit institutions account for just 13.2% of enrollment nationwide, but 46.8% of all student loan defaults.
Despite this, however, the for-profit college industry remains largely unregulated.
Word Count: 662 (bust)
The Democratic Nominating System Isn’t “Stacked” Against Bernie Sanders. He’s Just Losing.
In case you missed it, check out The Weekly Column. We argue that, rather than being the victim of an undemocratic nominating system, Bernie Sanders has benefitted from its most undemocratic components. And we conduct a thought experiment, estimating the results of previous primaries if we made the election more “fair.” Read the Column for May 31, 2016.