Daily Ticker

For-Profit College Scams Hurt Students and Taxpayers

We’ve all heard about the cost to students of rising college tuition and student loan debt.

But what’s the cost of exploiting those trends as a school, and systematically deceiving college students by advertising phony job placement rates to boost enrollment and revenue?

Well, apparently it’s just over $10 million. That’s how much one of the largest for-profit college corporations in the U.S. has agreed to settle with the state of New York for, over such claims.

Of the dirty deeds that Career Education Corporation (CECO) committed, Huffington Post reports the New York Attorney General’s investigation revealed examples like counting students as “placed” in a job if they were involved for a day at a community health fair, even if they weren’t hired. Or, they counted a criminal justice graduate, for example, as employed in that field because he or she processed parking ticket data, and so dealt with the courts. And employees of these schools received bonuses for achieving certain job placement rates, which were inflated as much as 50% according to the settlement.

Related: America's Student Loan Crisis: Generation I.O.U.

The surprises about this industry may not end there if you're just getting up to speed.

In the above video, we discuss the top five startling facts you may not know about for-profit colleges with Jeff Selingo, editor-at-large of The Chronicle of Higher Education, a news source for faculty and administrators in the field.

1. For-profit education companies get 86% of their revenues from taxpayer dollars. That’s according to the findings of a Democratic Senate panel, looking at 15 publicly traded companies in 2009.

2. Veterans are big business. For-profit colleges claim about 37% of post-GI Bill education benefits, about the same amount as public schools. Yet, they received twice the amount of money per veteran student as public schools, at $10,000 per student versus $5,000 per student respectively. That’s according to the Government Accountability Office.

3. For-profit schools account for 13% of students but almost half of all student loan defaults, according to Department of Education data compiled in the same Senate report cited above.

Related: Student Loan Debt is the Biggest Financial Worry of Millennials: Wells Fargo Survey

Related: Student Loan Crisis Can’t Be Fixed Without Write-offs and Writedowns: Robert Kuttner

4. The graduation rate for students at these schools is almost half that of other types of colleges. The Department of Education found that for full-time, first-time students graduating within six years, for-profits saw a graduation rate of 28.4% compared to 56% for public schools and 65.4% for non-profit schools.

Related: Only 150 of 3500 U.S. Colleges Are Worth the Investment: Former Secretary of Education

5. It’s not just about delivering education, but also shareholder value. The Senate panel cited above also reported 76% of for-profit college students attend schools that are publicly traded or owned by private equity investors.

Check out the video to see Selingo’s explanation of the reasons behind these numbers and trends.

In response to some of these issues, there has been a crackdown on for-profit schools. President Obama signed a 2012 executive order taking action so these schools can't target service members as aggressively, for instance. In addition, the government is trying to hold these schools accountable for student loan repayment of their graduates.

Selingo tells The Daily Ticker it's probably too early to tell if some of these refroms are really having an impact. However he does think "many of the abuses have now been exposed and... we’re now starting to see for-profit universities be slightly better players in this field."

That said, just earlier this month the New York State comptroller released an audit finding that more than half of “private career schools” in the state are ignoring reporting requirements on job placement and graduation rates, with schools operating without licenses and "alarmingly little oversight."

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