New report shows many for-profit colleges use deceptive practices to recruit students in order to gain access to federal aid
For-profit colleges in Michigan are overpriced, under-regulated and target students who have low incomes, according to a new report from the Michigan League for Public Policy. The report, For-profit colleges in Michigan: Path forward or dead end?, shows that most for-profit colleges in the state—there were 77 of them in 2018—cost more money than traditional public schools and don’t provide opportunities or degree value that aligns with that high price tag. The schools target students with low incomes, Black and Latinx students and veterans largely because those students are more likely to receive federal aid like Pell grants.
“We see predatory behavior when it comes to the way these for-profit institutions advertise. They’re aggressively recruiting folks earning low wages, nontraditional students trying to raise a family, our nation’s veterans, and Black and Latinx students. In fact, nearly three-quarters of students in for-profit schools in the United States had an income of $24,000 or less in 2016. Meanwhile, the students are graduating with massive debt and lower employment rates than their counterparts at traditional public and nonprofit private schools,” said Gilda Z. Jacobs, President and CEO of the Michigan League for Public Policy.
All told, Black students are overrepresented in for-profit schools when compared to the overall population of potential Black students in the state. In 2018, on average 30.6% of the student body at a Michigan for-profit school was Black. This percentage of Black enrollment was at least 20 points greater than that in other
types of institutions in the state. Systemic inequities in postsecondary education by race and targeted, aggressive marketing strategies likely compound, creating overrepresentation of Black students enrolled in for-profit institutions in the state.
Eighty-three percent of graduates from for-profit colleges in the U.S. took out student loans and graduated with an average of $39,000 in debt. That’s 41% higher than graduates from other types of four-year colleges. What’s more, 30% of students at for-profit colleges in Michigan defaulted on their federal student loans, compared with just 4% of students at public colleges.
“By definition, for-profit colleges aim to make money for investors. So what incentive do they have to keep tuition and other costs down? They’re not only shortchanging students, they’re exploiting them in order to benefit from federal aid like Pell Grants.The influx of students receiving federal aid means taxpayer money is flowing right into these schools and helping them profit. These for-profit schools prey on students who are in need, promising a way forward to the ‘American Dream,’ but they’re not delivering on that promise,” Gilda Z. Jacobs said.
For-profit college recruiters have used misleading claims about cost, time commitment and job placement in order to attract students. This, along with other deceptive practices, has led to several for-profit colleges and their parent companies being prosecuted for consumer protection violations and other protection violations. Attorney General Dana Nessel has signed Michigan on to several multi-state lawsuits against for-profit educational companies that defrauded students.
The League recommends a variety of solutions that state and federal policymakers can adopt, including requiring institutions to disclose all federal funding, encouraging high school counseling offices to provide materials on how to weigh costs and benefits when choosing a college, and restoring student borrower protections that were enacted during the Obama administration and eliminated by the Trump administration.
The higher education needs of all Michiganders, especially students of color and those with lower incomes, continues to be a focus of the League’s policy work. A report released in May 2020, Expanding the dream: Helping Michigan reach racial equity in Bachelor’s degree completion, found that Michigan ranks third-worst in the nation for the number of bachelor degrees earned by Black students. Another recent report looked at COVID-19’s impact on college students and their basic needs.
The Michigan League for Public Policy, www.mlpp.org, is a nonprofit policy institute focused on economic opportunity for all. It is the only state-level organization that addresses poverty in a comprehensive way.