For Profit, For Shame

The Department of Education has finally announced some much needed regulations of for-profit colleges.  Sadly, however, the reforms are far too modest in light of the problem at hand.  No one should be surprised that the reforms proposed by Arne Duncan’s DOE, while important, are nowhere near strong enough.  Duncan’s legacy is based on his long-standing promotion of a neoliberal educational agenda.  As the former CEO of the Chicago Public School system, Duncan presided over some of the most draconian “reforms” aimed at promoting a “free market” model in public education that assaulted the very notion of education as a not-for-profit, public good.  He spearheaded efforts to privatize entire schools in his love affair with establishing a charter system.  He advocated the termination of entire teacher staffs in schools that performed poorly on high stakes standardized tests, and supported a market-based merit pay “solution” to Chicago’s longstanding educational problems.

Duncan’s solutions were anything but effective.  Scholarly research has found that merit pay does not lead to consistent improvements in student performance, and available evidence suggests that charters schools do not perform academically any better than their public school counterparts.  Furthermore, Duncan is merely one of a countless number of “mainstream” education administrators who ignore the systematic role that community wealth (and inequality between communities), not to mention the resulting vast discrepancies in instructional spending and socio-economic status, play in determining individuals’ academic performance.  In short, the systematic polarization of American schools along class and color lines, rather than teacher/student “laziness” or “inefficient” public schools, is the major culprit behind today’s education crisis,

In light of Duncan’s history of denying the basic problems confronting education, it should be no surprise that his DOE pushed to neuter strong proposed reforms as exercised against predatory for-profit colleges.  For-profits have long taken advantage of poor and disproportionately minority students, charging exorbitant tuition rates, while offering little to nothing in return in terms of job training and reputable degrees.

The Department of Education’s new rules for for-profit colleges now require these schools, which have received billions of dollars in corporate welfare taxpayer handouts (for-profits are 90 percent taxpayer funded), to provide at least minimal evidence that they are providing some service of value for their students.  The new DOE rules mandate that for-profit colleges’ students will no longer be eligible for federal financial aid, and may even be forcibly closed altogether, if they fail to achieve various “benchmarks” related to student loan repayment rates and graduates’ income-to-debt ratios.  Schools will lose eligibility for government aid if 1. less than 35 percent of graduates are repaying principle on their loans three years after graduation; 2. if graduates’ loan payments extend beyond 30 percent of their discretionary incomes; and 3. if loan payments exceed 12 percent of total income.

The DOE’s rules, the New York Times reports, “take a ‘three strikes and you’re out’ approach.  The first time a program failed to meet all three criteria, it would have to report by how much it missed the benchmarks and outline what it would do to improve.  The second time, it would have to warn students that they may not be able to repay their debt and that the program could lose its eligibility.  Only a third strike in four years would result in curtailing student aid.”  Such restrictions are rather meager in light of the revelation that they will not even go into full effect (in terms of implementing a punishment over four years) until 2015.  Furthermore, the 35 percent repayment threshold is truly pathetic.  By the DOE’s logic, student default rates at for-profit colleges of 40, 50, or 60 percent are perfectly acceptable, despite the massive loans incurred while accruing such debt.  Such astronomical default rates are truly staggering with regard to the tremendous resources that are being siphoned from public colleges and universities toward parasitic for-profit programs that offer vastly inferior degrees, and at far higher prices.

For-profit colleges spent $12 million in 2010 and 2011 lobbying against the DOE’s new regulations, which were actually eased substantially in light of pressure from Republican lawmakers.  Republicans worship “market” based solutions as far superior to services provided as public goods (such as not-for-profit education), but their propaganda is fooling no one who’s even remotely familiar with for-profit colleges.  If these schools are so inherently and self-evidently superior, then why spend millions to shore up their sagging public image among legislators and potential students?  Why not let their results speak for themselves?  The reason is obvious; these schools have systematically failed to deliver on the vital service they claim to provide.

My experiences with the rotting cesspools known as for-profit colleges originate from close family and friends who worked for years in these failing schools.  The limits of these schools, I found, are a direct function of their for-profit status, which prioritizes enrichment of stockholders over providing a quality education.

For profit business administrators argue that the rules implemented by the DOE are unnecessary and that they prohibit poor and minority students from obtaining quality education.  They are wrong on both counts.  For profits regularly target low-income and minority students, who are pressured into taking out massive student loans for degrees of marginal value (one classic example is the student who borrows $30,000 for a “pharmacy technician” degree that is not even legally required to work in pharmacy).  These unsuspecting students are lured into these schools with the promise of being the first one in their families to go to college, unaware of the extremely low regard with which these schools are held in scholarly and real-world occupational settings.  Furthermore, most of the disadvantaged students who attend these schools would be far better off attending more affordable community colleges.

For profit colleges often claim that their degrees are so over-priced (relative to tuition at community colleges and state schools) because they do not have access to state and federal funding.  This assertion is flatly false in light of the fact that the state is the primary means of financial support for these schools.  To add insult to injury, the sizable taxpayer funds directed toward for-profit colleges are squandered on programs that overwhelmingly rely on online courses of marginal utility, and consistently victimize low paid “adjunct” faculty who are compensated far less (as hard as that is to believe) than their non-tenure counterparts in public and private non-profit colleges.  The average pay for an instructor per course in one Chicago for-profit, for example, was a meager $1,500 per quarter.  Many of the instructors teaching in these settings accept meager pay because they’re desperate, with many being laid off from previous jobs or seeking supplemental income.  They accept unjust contract labor because many (most in the circumstances I saw) have never worked in higher education before.

Instructors are also denied the benefits of tenure or unionization, which are seen as unnecessary and “oppressive” burdens on for-profits.  These schools would rather direct a vast amount of their spending toward executive compensation and advertising, rather than towards instruction or teacher benefits.  Top-down management of course content is another major problem, with assigned readings and curriculums being chosen by college administrators who often have little to no experience in education, rather than by instructors.  The preferred means of “teaching” in these courses is through standardized testing, which is a travesty for any professor with a modicum of self-respect.  This “educational” model seldom provides students with critical thinking skills, which are increasingly regarded with contempt within the corporate culture.

For-profit colleges are a dramatic failure with regard to their student population-to-default ratio.  While these schools’ students make up 12 percent of all college students, they account for an astonishing one-half of all loan defaults.  Such defaults are not hard to understand in light of these schools’ systematic and predatory targeting of low-income, low-skilled, disadvantaged students who will find it difficult, if not impossible to pay back massive loans incurred for degrees with low occupational prestige.  Unsustainable borrowing to pay for for-profit colleges (not to mention increasingly expensive public college/university degrees) may very well be contributing to the next economic bubble.  Increasingly we are seeing the emergence of an entire generation of students that are shackled with unsustainable debt in an economy that is providing few well-paying or secure jobs.

One of the most predatory practices of for-profits is their deceptive luring-in of first time students.  These colleges spend a tremendous amount of resources on ads, high school recruitment, job fairs, and other means of attracting students.  When students do express interest, they are enticed with free promotional items and treated like gods by recruiters who are only interested in signing up new students, rather than retaining them.  Recruiters lull students into a sense of false confidence during campus tours.  Campus directors talk of not wanting to “scare” prospective students by telling them about grade and graduation requirements and the levels of work involved in getting a college degree.  Most of the college resources are expended on making sure the student “starts,” because a recruiter only gets credit for the student if they actually enroll in classes.  Those recruiters who sign up larger numbers of students are showered with bonuses; those who recruited less are routinely fired. It is only after many of these students start classes that they realize they are ill-equipped to succeed in a higher educational setting. Most at risk are those who are functionally and computer illiterate, but encouraged to enroll nonetheless because of profit-motive.  I’ve heard many stories of students staring classes after having developed a relationship with recruiters who courted them, only to see those same recruiters drop off the face of the earth when students start classes and begin to have trouble making the grade.  Recruiters promised that instructors would hold students’ hands through the teaching process, but these students are rudely awakened to the reality they are on their own after a few short weeks.

The travesty of this entire process is that students are sidled with unsustainable debt, while being systematically deprived of quality education, and still suffering under dim prospects for decent employment in the anemically performing “post-recession” Obama economy.  Ironically, many of these for-profits also soil their own reputations by at first recruiting students who are not equipped to handle the college experience, and then unable to recruit higher caliber students in light of their sullied reputations.

Perhaps most outrageous is the claim of for-profit representatives that increased government regulation (even if tepid under the DOE’s new rules) is unnecessary.  Friends and family I spoke with who work/worked in for-profits explained that it was precisely when Congress began to deliberate on increased regulation of for-profits that they finally started to consider changing their worst predatory habits. Even the mere threat of regulation was enough to provoke fearful administrators to raise recruitment and entrance standards, and as a result retention standards.  It took the threat of government cutting off the spigot of federal aid for these administrators to realize that their non-stop gravy train of taxpayer funded corporate welfare may be coming to an end.

For-profit colleges have long been radically inferior to publicly run colleges and universities.  The latter institutions provide (despite massive tuition increases in recent years) educational opportunities that are still less expensive than those provided by most for-profits.  Community colleges in particular provide vastly superior instruction, buttressed by real worker protections in the form of unionization and tenure, coupled with affordable tuition rates for students.  For-profit colleges are finally taking the heat they deserve after years of victimizing the poor and disadvantaged.  Stronger regulations will further serve to improve the quality of higher education in general, although such initiatives are unlikely under an Obama administration determined to find “common ground” with conservatives, free marketers, and Republicans committed to failed and morally degenerative for-profits colleges.

Anthony DiMaggio is the co-author with Paul Street of the newly released Crashing the Tea Party (Paradigm Publishers, 2011). He is also the author of When Media Goes to War (2010) and Mass Media, Mass Propaganda (2008).   He has taught U.S. and Global Politics at Illinois State University, and can be reached at:




Anthony DiMaggio is Associate Professor of Political Science at Lehigh University. He is the author of Rising Fascism in America: It Can Happen Here (Routledge, 2022), in addition to Rebellion in America (Routledge, 2020), and Unequal America (Routledge, 2021). He can be reached at: A digital copy of Rebellion in America can be read for free here.