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Student loans: Beauty schools lead to high levels of debt, study finds

·5 min read

Beauty school programs are relatively costly and leave students saddled with very high levels of student loan debt, according to a new report that examined federal data from the National Center for Education Statistics.

The analysis, conducted by libertarian organization Institute for Justice, highlighted how cosmetology schools are tapping on billions of dollars in federal aid and coronavirus stimulus funding while leaving students with poor outcomes. 

"Cosmetology school is expensive, time consuming, it's risky, it rarely pays off in terms of earnings," Michael Bednarczuk, one of the authors of the study, told Yahoo Finance. "These findings suggest the current system of cosmetology licensing is a failed model of professional development and mainly serves to transfer wealth from students and taxpayers to cosmetology schools."

Institute of Justice
Institute of Justice

From 2011 to 2017, 12-month beauty school programs cost about $16,100 on average and students borrowed an average of roughly $7,300 to attend. However, fewer than one-third of cosmetology students graduated on time during the most successful year analyzed. And for those who did, the income level for cosmetologists is only about $26,000 a year.

The statistics reveal an industry-wide problem, experts said.

“We’ve seen too many of these schools promise students a better life only to leave them worse off than they started," Aaron Ament, president of the National Student Legal Defense Network, told Yahoo Finance. "It’s clear we need stronger oversight from accreditors, along with state and federal regulators to protect consumers.”

Have you attended a cosmetology school and want to discuss your experience? Email the reporter at aarthi@yahoofinance.com.

Furthermore, there are a lot of beauty schools in America: Out of 2,698 for-profit schools that receive federal financial aid from the Department of Education (ED), according to an analysis of College Scorecard data by Yahoo Finance, more than 1,000 institutions have the terms "beauty," "barber," "cosmetology," hair," "salon," "spa," "makeup," "esthetics," or "aesthetics" in their name.

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Bednarczuk noted that cosmetology is "one of the most widely licensed occupations" and "has some of the most onerous licensing requirements," contributing to the length and costs of programs.

"For example, the average school takes about 1,600 hours to complete," he explained, noting that training includes services like shampooing, curling, braiding hair, applying makeup, and so on.

The number of students at these schools are generally smaller than other schools. For instance, for-profit institution Arkansas Beauty School in Little Rock only enrolled 8 students, according to the data, while the for-profit American Institute of Beauty in Florida had 120 students.

Nevertheless, these schools draw on a substantial amount of federal dollars: The CARES Act in March 2020 allocated a quarter of a million to the Arkansas school for institutional purposes, and also to distribute to students. The American Institute of Beauty, despite relatively few students, was allocated around $676,000.

Cosmopolitian Beauty and Barber School students practice cutting hair at their clinic on March 19, 2004, in Annandale, Virginia. (AFP PHOTO/Joyce NALTCHAYAN)
Cosmopolitian Beauty and Barber School students practice cutting hair at their clinic on March 19, 2004, in Annandale, Virginia. (AFP PHOTO/Joyce NALTCHAYAN)

'Most cosmetology students come from lower-income backgrounds'

Around 61% of cosmetology students during the 2016-2017 school year took out student loans, compared to 45% of students overall. On average, these loans were about $7,100.

Accentuating the financial burden, the report noted, is that "most cosmetology students come from lower-income backgrounds and most must finance their education with the help of financial aid."

Many students use their Pell Grants — a form of need-based aid made available to low-income students — to attend these programs. The authors estimated that during the 2016-2017 school year, over 60% of cosmetology students received Pell Grants (compared to 55% of college students overall).

The report noted that even graduates of these programs often face an uphill struggle when considering the cost of the programs and earnings out of school.

Institute of Justice
Institute of Justice

"The cosmetologists in our sample reported earning an annual median personal income of between $20,001 and $30,000 in 2016," the authors stated. "This is in line with the Bureau of Labor Statistics’ most recent estimate, which was $26,090 in May 2019." 

Given these numbers, Bednarczuk added, cosmetology students "take on student debt hoping that their education will lead to greater economic opportunity, but our report reveals that beauty school is often a raw deal."

Some states have attempted to loosen requirements for specific services so that some workers wouldn't have to attend a cosmetology program.

For instance, as of 2021, 12 states have exempted those who thread eyebrows from licensure as a cosmetologist or esthetician. Thirty states exempt rural hair braiders from a full cosmetology license. And seven states (Arizona, Arkansa, Minnesota, Tennessee, Utah, Virginia, and West Virginia) have also modified cosmetology laws to de-license shampooers.

Nevertheless, the broader fact remains that a lot of these schools operate as for-profit businesses with the primary incentive to make as much money as possible from students.

Reading, PA - June 15: Student Joel Sotelo gives a haircut to Cameron Gieringer. At the American Barber and Beauty Academy on Lancaster Ave in Reading Tuesday morning June 15, 2021. (Photo by Ben Hasty/MediaNews Group/Reading Eagle via Getty Images)
Student Joel Sotelo gives a haircut to Cameron Gieringer at the American Barber and Beauty Academy in Reading, Penn., on June 15, 2021. (Photo by Ben Hasty/MediaNews Group/Reading Eagle via Getty Images)

As with some other for-profit schools, the lax oversight and profit motives can lead to subpar educational services and even crimes.

In 2018, the former owner and CEO of Alden's School of Cosmetology and Alden's School of Barbering was sentenced to 30 months in federal prison after being convicted of a scheme to defraud the U.S. Department of Education and steal Pell Grant funds.

In July, the Education Department approved borrower defense claims — student debt relief for defrauded students — for those who attended the now-defunct Marinello Schools of Beauty. The move led to the cancellation of $2.2 million in student loan debt owed by former Marinello students.

Marinello was previously found to have "made widespread, substantial misrepresentations about the instruction that would be offered at its campuses across the country" from 2009 to 2016.

"The Department found that Marinello left students without instructors for weeks or months at a time as part of a pattern of failing to provide the education it promised," ED stated in a recent press release. "As a result, students found it extremely difficult to pass necessary state licensing tests and receive any return on their educational investment."

Aarthi is a reporter for Yahoo Finance. She can be reached at aarthi@yahoofinance.com. Follow her on Twitter @aarthiswami.

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