Cuts to public higher education funnel students into for-profit colleges, raise financial concerns

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As the state’s public institutions come under the knife, California’s for-profit colleges have thrived, enrolling more students and benefiting from lax regulation — a trend that could place more students at financial risk.

Continued cuts in state funding have forced some cash-strapped public schools to reduce class offerings and collapse programs, forcing students to turn to for-profits, a February study by the Center for Studies in Higher Education at UC Berkeley shows.

This trend may continue, as public universities would struggle to expand accessibility in the face of potential cuts of $200 million to the UC and CSU, should voters reject Gov. Jerry Brown’s November tax initiative.

The CSU announced earlier this week that it will not accept new students at most of its 23 campuses in spring 2013 and may reduce enrollment next fall if the initiative does not pass — cuts that could result in more students enrolling in for-profits.

But Rich Williams, higher education advocate for the U.S. Public Interest Research Group, said he was concerned that for-profit schools like the University of Phoenix fall short in ensuring their students graduate with marketable skills.

“The incentive structure for for-profit schools is based on profit,” he said. “Their accountability is less to the students and more to their shareholders.”

For-profit schools represented just 12 percent of all higher education students in the nation in 2011 but accounted for 46 percent of all student loan dollars in default, according to the U.S. Department of Education.

For-profits benefit tremendously from government grant programs.

A winter 2012 study by Harvard University economists found that in 2008-09, federal grants and loans received under Title IV of the Higher Education Act made up almost three-quarters of the revenues for eligible for-profit higher education institutions.

“The combination of relatively weak oversight — including virtually no oversight for a few recent years — and an unusually generous state grant program have made the state an attractive place for for-profit colleges to do business,” said Debbie Cochrane, program director of the Institute for College Access and Success, at a Feb. 14 state Assembly Higher Education Committee and Senate Committee on Business, Professions and Economic Development hearing.

Documents show that these institutions lobbied heavily last year when the state was considering budget cuts.

Bridgepoint Education, a for-profit college company, gifted Assemblymember and chair of the Assembly Higher Education Committee Marty Block $346 worth of events tickets last year — the largest gift amount he received from any single source, according to recently released Form 700 statements of economic interest from 2011.

Without much regulation, for-profit colleges have engaged in predatory recruiting practices, said Ed Emerson, chief of federal policy and programs at the California Student Aid Commission.

“You had schools recruiting students from homeless shelters, admission counselors working on commission — a practice called churning, where you have to over-enroll — a lot of fairly unscrupulous effort,” he said.

Last March, Brown signed SB 70 into law to improve regulation. The legislation ties an institution’s eligibility to receive Cal Grants to the rate at which its students default on loans.

Now, higher education institutions in the state cannot have more than 30 percent of students default within three years of beginning payment on loans in order to receive Cal Grants starting in the 2012-13 academic year.

The California Student Aid Commission has already cut off about 70 for-profit campuses from Cal Grant money as a result, Emerson said.

Kent Jenkins, spokesperson for Corinthian Colleges, which operates a number of Everest College campuses in California, said the company acknowledges high student default rates.

But, he added, the company has improved student financial literacy over the past few years by spending around $8 million to $9 million on new programs to reduce default rates.

Emerson confirmed that a number of colleges, including those run by Kaplan, have recently established pre-enrollment programs to increase students’ awareness of their financial burdens.

“We understand that the money students invest in tuition needs to pay off for them in terms of a diploma and a degree and increased job skills, and we understand that taxpayers have to feel the money from Cal Grants is well spent,” Jenkins said.

Curan Mehra covers higher education.

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  • Liberal_Lunacy

    NO CUTS!
    NO FEES!

    • libsrclowns

      Waaaa. Waaa. Waaa

    • adlibbin’

      Sounds like a plan, but let’s apply it to everyone, to be fair. Let’s start by taxing the rich their fair share and not crawling to them begging them to “create jobs”. Then we can implement a public healthcare system so a poor person diagnosed with cancer can have just as good a chance of surviving as you and me. Then we can cut the ~$200,000,000 a day funneling of taxpayer money into the military-industrial complex and re-employ those people doing something CONstructive. Then, when everyone has just as good a chance as the next man to succeed, we can implement your plan. :)

      If you really want to live in anarchy, I don’t think that you’re welcome under the constitution.

      •  [Let’s start by taxing the rich their fair share]

        The top 1% already pay 30-35% of all state and federal income taxes. That sounds like well more than their fair share, but if you still don’t think they are paying enough, please  tell us how much YOU pay. I’m willing to bet you’re one of the net takers, as opposed to one of the net contributors…

      • Calipenguin

         The rich have already paid their fair share, and then some.  Instead of trying to confiscate their wealth why not learn their secrets so that you can become wealthy and donate your money to public schools and county hospitals? 

      • I_h8_disqus

        If you want to apply this to everyone, then why are you singling out the rich?  They should have no cuts, fees, and someone should pay for them too.  You are willing to crawl to them and force them to pay taxes for your lazy ass, but you are not willing to beg them to create jobs?  So you are a free loader.  You notice how you like to spend other people’s money?  You should buy a little dog for your purse, and hit the social circuit.

  • Calipenguin

    Here is a list of UC Regents:

    At the top is Richard Blum, husband of Democrat Senator Dianne Feinstein, who encouraged UC to invest in fraudulent for-profit diploma mills that waste billions of dollars.  As long as Democrats control the Department of Education nothing will change except tax hikes.

    Here are good background stories on Regent Blum:

    Blum’s actions make the adventures of Diane Leite seem insignificant.

    • libsrclowns

      The entire Lib infested SACTO legislature must go.

  • Another op-ed passing as a “news” piece. I guess the Daily Cal writers take their marching orders from the UC administration, and parrot the politically correct spin of the day, as opposed to doing any critical thinking or independent investigation…

    • Guest

       Like you do, with all of your cited facts, lol.

      •  I cite far more in the way of facts than you left-wing crybabies…

      • I_h8_disqus

        We are just making comments.  We are not journalists.  Hopefully, you expect a newspaper to do more that people commenting on articles.

  • Stan De San Diego

    If government-funded colleges and universities concentrated on an economically sustainable model, maybe they wouldn’t be in the current crisis mode. The original concept behind public universities was that educating those who showed potential and ability would allow them to become more economically productive members of society, as well as better citizens. However, the emphasis on social engineering, both in terms of admissions as well as curriculum, means that instead of taking the best and brightest, and offering coursework that is academically rigorous and geared towards the genuine economic needs (math, sciences, medicine, agriculture, engineering), instead we are accepting a bunch of mediocre performers in the name of “diversity”, then tracking them through fluff courses (Ethnic Studies, Mass Communications, Sociology) that emphasize politically correct indoctrination over actually learning something useful. Therefore, we have a whole bunch of graduates whose minds are full of the fashionable social theories of the moment, and nothing of substance. These empty minds can’t find much better than menial employment, and can barely pay back their own student loans, much less pay enough in taxes to compensate the state for their own education. Meanwhile, the geniuses in Sacramento think of new ways to chase the economically productive out of state with idiotic ideas such as raising the taxes on those who are paying the bulk of them already. And you people wonder why the state is broke?

  • ShadrachSmith

    Collect the data and correlate federal spending with student performance.

    There is a lesson there for those who will learn.

  • libsrclowns

    Right, marketable skills like ethnic/gender/racist studies. LOL