Schools of profit

It has been a tough semester for the nation's for-profit colleges and universities.

These are the schools of higher education — such as the University of Phoenix, Kaplan University, DeVry, and others — that call themselves “career colleges” and cater to low-income students while offering flexibility to those who work while going to class.

Many of the schools' practices have come under scrutiny by the Senate education committee, and for good reason. After seeking data from 30 for-profit colleges, Sen. Tom Harkin, the Iowa Democrat who chairs the panel, issued a troubling report in September that showed many students leave the schools with huge debts, no diplomas, and little chance for the kind of jobs they were seeking.

The report stated that 57 percent of the students who enrolled in schools operated by 16 for-profit companies from July, 2008, through June, 2009, had withdrawn by August, 2010. Ninety-five percent of students at the colleges take out loans, compared to 44 percent at public four-year institutions and 16 percent at community colleges.

The schools get 85 percent of their revenue from federal student aid, meaning their handsome profit margins — 37 percent for one school, 33 percent for another — are underwritten by U.S. taxpayers.

It would be one thing if few students attended these schools, but the Association of Private Sector Colleges and Universities reports that 2.3 million are enrolled. While they are 12 percent of the nation's college students, they get one-fourth of all federal aid and account for 43 percent of student-loan defaults.

These numbers come at a time when students and college employees have made disturbing claims to federal officials about policies at some of the schools.

Four lawsuits against Kaplan University accuse the company of deceptive practices in a bid for profits. A former instructor and director of career services said Kaplan manipulated its reported placement rates and raised instructors' grades to keep students eligible for federal aid. Kaplan officials said they saw no evidence of such activity.

Because of these and other allegations, the Obama Administration, through the Department of Education, wants to impose regulations on the for-profit schools that would cut federal financing to programs that produce graduates with high debt-to-income ratios and low repayment rates.

Congressional Republicans are trying to block the move, but something needs to shake up the industry. It's time for tougher scrutiny and more accountability in this industry, and the U.S. taxpayer should not be a party to educational oversell.

The schools must either reform their practices or be ready to use their considerable profits in place of federal aid.