For-profit colleges like DeVry Education Group (DV) and Apollo Education Group (APOL) are at the center of one of the most controversial topics on education and finance today: the future of higher education and the role of the American taxpayer in paying for it.
DeVry CEO Daniel Hamburger — whose company is one of the US’s largest for-profit education chains by sales — joined Yahoo Finance to discuss DeVry’s prospects amid increased scrutiny of the for-profit education sector.
DeVry's CEO fields a lot of criticism, including what he considers to be mischaracterizations of his business. When asked about the now-defunct Trump University, which is facing lawsuits accusing it of fraud, he quickly said it “was not a university" but rather "a real estate seminar."
As for other for-profit schools, he said, “Even when we go to Washington and talk to policymakers, they’ll always say ‘We have some problems with some private sector colleges, but you can’t paint a broad brush. You have to look at each one,'” he said.
A growing student loan crisis
America’s for-profit colleges produce a disproportionately high number of graduates who end up with student debt they can’t repay, according to a 2015 Brookings report.
Between 2000 and 2014, the number of student loan borrowers doubled to 42 million and their total debt quadrupled to over $1 trillion, according to the report. Meanwhile, the debt owed by graduates of for-profit colleges grew from $39 billion in 2000 to $229 billion in 2014 — largely due to increases in rates of borrowing, the report found.
And DeVry University students accumulated more than $8 billion in outstanding federal student debt through last year — the fourth-biggest sum among US colleges and universities, according to the report.
Hamburger said he takes student debt very seriously.
“I think student debt is a very important issue and we’re very focused on keeping our costs as low as possible for students. We give millions of scholarships every year and you have to look at debt relative to the value,” he said.
In January, the Federal Trade Commission (FTC) filed a lawsuit against DeVry claiming the school misled prospective students about their chances of getting a job in their fields of study.
The FTC took particular issue with DeVry’s claim that 90% of its graduates looking for jobs found them in their fields of study within six months of graduation. DeVry counted a number of graduates as working “in their field” when they really weren’t, according to the FTC.
For example, the FTC accused DeVry of including business-administration graduates who found retail jobs like waiting tables or selling cars as having found work in their field.
Officials say those tactics helped fuel a surge in for-profit school enrollment in the past two decades — particularly among poor and vulnerable Americans. That surge helped drive up student debt that many are struggling to pay back, officials say. The DeVry lawsuit is part of an effort by federal and state officials to root out what they characterize as aggressive and deceptive recruiting strategies by for-profit colleges.
For his part, Hamburger said that DeVry made all its claims with good intentions.
“There’s no disagreement about the value of a DeVry University education. We all agree on that. The government agrees with us on that. We also all agree there’s no fraud here … They’re not saying that we intentionally misled anybody. They’re actually saying they have a disagreement with the methodology that we’ve used,” he said.
He added there is no national standard for the methodology surrounding counting field of study, and that DeVry made judgments about employment characteristics in good faith.
At for-profit colleges, about 90% of revenue comes from the American taxpayer — largely through grants and loans, making their cost and outcome controversial.
But Hamburger argues that DeVry, which charges $250 to $609 per credit hour, is more economical than private university alternatives.
“DeVry University tuition is in the lowest third of all private universities. And you have to look at cost relative to the value,” Hamburger said.
At DeVry’s Chamberlain College of Nursing, for example, students graduate with about $22,000 in debt but start out making an average of $55,000, according to Hamburger. He argues that’s a pretty good return on their investment.
Hamburger said he can make promises about job placement because of the training at the universities, emphasizing fields like engineering, technology, and nursing. There are no philosophy majors at DeVry.
“All our programs are career-oriented. We run about a dozen different institutions globally across 36 countries,” he said. “All of our programs are united by one common thread which is career focus.”