With sky high loan rates and even higher drop-out rates, do these colleges educate students or bankrupt them?
Tonight, Tuesday, June 4 at 8:00pm ET
DALLAS -June 3, 2013 This week on "Dan Rather Reports" we take an in-depth look at the business of for-profit colleges. Schools like ITT Technical Institute, DeVry University and University of Phoenix differ from schools such as Penn State or USC because they actually treat education as a business - teaching students while still turning a profit. And, while most people may be aware that these colleges are for-profit, what they probably don't know is that most of these profits come from the federal government. In fact, in 2012 ITT Tech reported revenue of 1.3 billion dollars - more than 1 billion of that came from the taxpayers.
This taxpayer money comes in the form of Pell Grants, money that the Government gives to low income students to help fund a college education, and federal student loans.
"I always said they had a bad business model and the business model was, go out and recruit the poor students. Why? They get the most Pell grants and they get the most loans," Iowa Senator, Tom Harkin told Dan Rather.
Harkin lead a Washington investigation into for-profit colleges and how students, who drop out, or who have to take on high interest personal loans in order to bridge financial gaps, are affected by the expense of a for-profit education.
In the case of ITT Tech, Harkin's investigation uncovered a huge disparity in costs.
"The cost for the associate degree was $48,000. Two years." Harkin told Rather. "Not too far away is Des Moines Community College. Exact same degree, $9,000."
And, students at for-profit colleges default on the Federal loans at twice the rate of those attending traditional colleges. They are responsible for half the Federal loan defaults while only making up 10% of the student body.
And while these numbers look to stack up against for-profit colleges, those in the industry say that they are offering an important service to high risk students.
Steve Gunderson, President of the Association of Private Sector Colleges and Universities (the organization that lobbies on behalf of the industry) tells Rather, "92% of the students who enroll in our schools are non-traditional students. Almost every student has multiple barriers to academic success."
But when questioned about high interest rates on the loans that these students must obtain to pay tuition, and whether or not the schools could charge less money, Gunderson says, "What's the school to do? I think you and I would both criticize the school more if they abandoned the student at the 96th percentile of their academic journey."
"Dan Rather Reports: For-Profit Colleges" airs Tuesday, June 4 at 8:00pm ET/5:00 p.m. PT only on AXS TV.
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