Will the For-Profit Education Bubble Burst in 2011?

Will the For-Profit Education Bubble Burst in 2011?

http://www.consumeraffairs.com/news04/2010/12/will-the-for-profit-education-bubble-burst-in-2011.html

First there was the high-tech bubble, then the housing bubble. What bubble will burst in 2011?
Many are betting it will be for-profit education - as critics question the value of the expensive degrees and certificates awarded by the likes of Kaplan University and the University of Phoenix.

"Serious questions have emerged about the share of the military educational benefit pool going to for-profit schools with questionable outcomes," said a report issued earlier this month by the Senate's Health, Education Labor and Pensions Committee.

The "gainful employment" Rule Will Deny Two Million Students The Opportunity to Go to College. Committee chair Tom Harkin (D-Iowa) said that by extending benefits similar to the GI Bill to current veterans, "Congress may have unintentionally subjected this new generation of veterans to the worst excesses of the for-profit industry: manipulative and misleading marketing campaigns, educational programs far more expensive than comparable public or nonprofit programs, and a lack of needed services."

The for-profit colleges make big profits on federally-guaranteed loans but critics say that even students who graduate - a small percentage - aren't likely to snag the kind of high-paying positions they're led to expect.

For-profit schools exploded over the last decade. They appeal to working adults seeking training that will help them advance their careers, veterans and active-duty military hoping to smooth the transition to civilian life and, in many cases, those who did poorly in high school and are unable to gain admittance to more selective universities.

Kaplan's bubble may already have burst. Owned by the Washington Post Company, Kaplan is facing Congressional investigations and numerous lawsuits, including a whistle-blower suit filed by the school's former director of education, David Goodstein.

The lawsuits claim that Kaplan recruiters aggressively signed up students who were unqualified and enrolled students in vocational-training courses for industries that they knew to be over-staffed.

Alarmed by the reports of graduates who leave school with heavy debt only to wind up working low-paying jobs, the U.S. Department of Education has proposed regulations that would cut off federal financing to programs that have high debt-to-income ratios and low repayment rates.

One such student is Hope of Hahira, Ga. She graduated from Kaplan in 2006 with an associates degree in paralegal studies and despite having a straight-A average in school, she was fired after a year because her Kaplan education was inadequate, she said in a complaint to ConsumerAffairs.com.

"I now owe all of this student loan debt and am unable to find a job in my field and am in default of my student loans because I can't support myself," Hope said. "I wish that I had known that this school was not a school where credits are transferable and where the "material" isn't appropriate or conducive to learning how to work in the legal environment."
The Washington Post Company has been quick to defend Kaplan, its most profitable unit. It reported spending $350,000 on lobbying during the third quarter of 2010, more than any other higher-education company.

Post Company chairman Donald Graham, a powerful figure in Washington, has also put his personal influence to work, schmoozing lawmakers and regulators. The Post has editorialized against the regulations, saying they would limit students' choices.

"The aim of the regulations was to punish bad actors, but the effect is to punish institutions that serve poor students," Graham said in a recent interview with The New York Times.

But Department of Education figures show that only 28 percent of Kaplan students were repaying their student loans - well below the 45 percent level generally considered the minimum acceptable rate. At the University of Phoenix, by contrast, 44 percent of students were repaying their loans.

The Florida Attorney General has also launched an investigation of Kaplan. In a statement, the office of Attorney General Bill McCollum said the investigation concerned "alleged misrepresentations regarding financial aid; alleged unfair/deceptive practices regarding recruitment, enrollment, accreditation, placement, graduation rates, etc."

Earlier this year, Sen. Harkin's committee held hearings that included undercover videos showing high-pressure recruiting tactics by Kaplan and other for-profit colleges.

The Post Company's Graham called the videos "sickening" and said the company has done its best to clean up the abuses.

The lobbying muscle of the Post Company and other for-profit education companies may be adequate to squash further Congressional action and head off restrictive new regulations.

But the question for consumers to ponder is whether a degree or certificate from a for-profit school will carry the same weight as a similar degree from a community college or public four-year university. Returning veterans and job-seekers hoping to advance their prospects are often better off going directly to potential employers and talking with them about the requirements and aptitudes they look for in prospective employees, employment counselors say.