Federal Government Moves to Prevent For-Profit Schools from Getting Student Aid

The Department of Education is moving to stop Student Aid to For-profit schools. Is it surprising that students going to for-profit schools have more debt? Public institutions get much more of a subsidy from taxpayers that allow them to pay less in tuition. The question is what is the total cost when one looks at the subsidies in other forms to public universities.

A recent study completed for the Florida legislature concluded that for-profit institutions were more expensive for taxpayers on a per-student basis due to their high prices and large subsidies. . . .
Unlike public or private nonprofit institutions, for-profit institutions are legally obligated to make profitability for shareholders the overriding objective. Furthermore, for- profit institutions may be subject to less oversight by States and other entities.
There are reasons for concern that some students attending for-profit institutions have not been well served. Student loan debt is higher among graduates of for-profit institutions. For example, the median debt of a graduate of a two-year for-profit institution is $14,000, while most students at community colleges have no student loan debt. There are 18 title IV, HEA loan defaults for every 100 graduates of for-profit institutions, compared to only 5 title IV, HEA loan defaults for every 100 graduates of public institutions. Investigations and news reports have also produced anecdotal evidence of low-quality programs that leave students with large debts and poor prospects for employment. Despite these concerns, these institutions and suspect programs have never been required to substantiate their claim that they meet the statutory requirement of preparing students for ‘‘gainful employment.’’ . . .
The number of institutions with very low loan repayment rates, particularly in the for-profit sector, is alarmingly high. . . .
For certificate recipients, less than 2 percent at public institutions and 11 percent at for-profit institutions have debt of $20,000 or more. . . .
The proposed regulations would lessen the potential for these negative consequences by ensuring that programs subject to the gainful employment standards actually produce students with sufficient incomes (relative to their debt) to make their debt payments. . . .