Enabling Class Litigation as an Approach to Regulating For-Profit Colleges – Note by Blake Shinoda

From Volume 87, Number 4 (May 2014)

The above quotes from two of the primary players in the for-profit college industry highlight the industry’s polarizing and divisive regulatory issues. This industry has seen unprecedented growth in recent years, increasing enrollment by 225% from 1998-2008. In fact, for-profit┬ácolleges received $32 billion in federal grants and loans from 2009-2010. This number accounted for about 25% of all federal student aid distributed despite the industry enrolling only 10-13% of all college students (about 2.4 million students). The prominence and growth of for-profit colleges is highlighted by one for-profit college’s recent entry into a Division I athletic conference.

However, recent reports of fraudulent and deceptive recruiting, and high student default rates have plagued the industry, culminating in the release of a negative Senate report by the Health, Education, Labor, and Pensions Committee (“HELP Report”). One such report was an undercover U.S. Government Accountability Office (“GAO”) report of fifteen for-profit colleges that found that each school made questionable or deceptive recruiting statements. Additionally, the HELP Report found that the average tuition at for-profit colleges exceeds that of their respective public school counterparts (for certificate programs, associate’s degrees, and bachelor’s degrees). For example, a bachelor’s degree in business administration at the for-profit Alta College in Colorado costs $80,466 compared to $60,704 at the University of Colorado Boulder.” Moreover, the Education Department recently released the three-year cohort default rate from 2009, measured by the percentage of student borrowers who entered repayment and defaulted within the past three years for a given school. The three-year default rate was 22.7% in the for-profit college sector compared to only 11% in public colleges and 7.5% for nonprofit private colleges.



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