Mitt Romney's Rationale On For-Profit Colleges At Odds With Reality

Along the campaign trail during the past month, Mitt Romney has been offering up his answer to the soaring costs of higher education and student debt: competition from for-profit colleges.

Among other benefits, Romney said, "they hold down the cost of their education" by virtue of being in competition with other universities, according to a New York Times article on Sunday.

Yet Romney's free-market views on higher education collide with reality. Although tuition is rising across higher education -- particularly at public universities, which have been strangled by state budget cuts -- students are not flocking to for-profit schools such as the University of Phoenix or ITT Technical Institute because the price point is lower.

Indeed, the average tuition at for-profit colleges is nearly twice that of public four-year universities, and nearly five times as much as public community colleges, according to Department of Education data analyzed by the College Board.

But many community college systems are struggling in the face of surging enrollment combined with diminished financial support from cash-strapped states. A recent investigation by The Huffington Post found that many students who attend for-profit colleges are there only because of their frustration after being shut out of oversubscribed classes at much cheaper local community college programs. The public programs typically leave students with much smaller debt loads and a greater likelihood of being employed after college, according to a recent study by Harvard researchers.

And despite the considerable cost, federal data show that for-profit colleges on average devote less than a third of the money that public universities do toward student instruction, and less than a fifth of the money spent on students by private non-profit institutions.

Much of the money is instead going toward marketing and recruiting new students, and to executive compensation and profits. According to securities filings for some of the larger publicly traded corporations that own for-profit schools, more than 30 percent of revenues are being redirected toward marketing efforts and administrative costs.

The chief executive of Education Management Corp., Todd S. Nelson, received total compensation of more than $13 million last year, according to company filings. His company, which owns the Art Institutes chain of schools and Argosy University, is being sued by the Justice Department over allegations of fraudulent recruiting practices.

By contrast, the highest-paid Ivy League president, Richard C. Levin of Yale University, received $1.6 million in compensation, according to the school's most recent federal tax returns.

According to the Times, Romney also suggested that supporting for-profit schools could be a solution to growing student debt.

"You're going to find students saying, 'You know what? That's not a bad deal. I'm not willing to come out of college with a hundred thousand dollars in debt,'" Romney said, according to the Times.

But student debt is one of the most significant question marks facing for-profit higher education, a problem that prompted the Obama administration to pass new regulations last year meant to track whether students at such schools are able to secure jobs that will allow them to repay their loans.

Only about 12 percent of college students nationwide attend for-profit schools, but the sector is responsible for more than 45 percent of federal student loan defaults. While only about one in five students at community colleges takes out loans to finance their tuition, four of five students at for-profit two- and four-year schools sign off on loans, according to Department of Education data.

And the loans at for-profit schools are hefty. Based on an analysis of federal data by the College Board, more than half of students attending four-year for-profit colleges will emerge with debt of more than $30,000, compared to less than a quarter of students at private non-profit colleges and 12 percent of students at public universities.

Comments

[SimianNation]

02:52 PM on 04/28/2012

"Mitt Romney encouraged a group of several hundred college students at a small liberal arts school here Friday to pursue their educational and career ambitions — even if it means asking their parents for money if they need a hand in doing so."
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This is the problem with Mitt. He just cannot understand and see what the majority of Americans know up front. The majority of students ALREADY have to get loans to go to college. And as far as asking their parents for a loan to start a business, he assumes that the parent s have money as well. His underlying view of the world, is that everyone has money, and that it is the fault of the government, or their own laziness and lack of ambition, if they do not.

Mitt never likes to talk about all the money he got for Bain from the government. Money that he used to buy businesses, and in most cases, he fired the employees, and broke up and sold the business.

On a side note, "Otterbein has only one tuition rate, and offers no discount for students who are in-state residents. For the 2010-2011 school year, tuition was set at $28,413, with room and board at $3,996 and $3,891, respectively." Yea, what a way to fight for student tuition rates, and show a connection to typical students, at a nice and small, expensive private school.

[Khoi Nguyen]

02:14 PM on 01/18/2012

This guys is already worth more than $190 Millions. How much more does he need by peddling these stuff... how do these guys sleep at night?

[Peter Everts]

11:24 AM on 01/18/2012

Agreed that the private institution poobahs are obscenely compensated, but a public U prez getting more than a million bucks and the football coach getting even more are just as obscene.

[Dr Danno]

06:49 PM on 01/17/2012

I pressed my cousin,a retired major unversity prof,about his online position @ Phoenix U. He says it allows some students to get a diploma that otherwise wouldnt.,but adds'but I wouldnt hire any of these folks'.So much for a quality education.

[Don Glenn]

01:41 PM on 01/17/2012

Free market schools cut training to keep profits and keep teacher salaries low to increase profits. I don't think I want my kids going there.

[mjtaylor22]

11:15 AM on 01/17/2012

For profit schools cost way more. And tend to leave student massive debt and without degrees because two semesters in you have 40, 000 worth of debt. my son had a full Pell grant and still had to take two loans to pay for one dam semester of school....we moved him to the community college with a bigger facility and a better program and the Pell grant covers it all.............thanks for knowing nothing Mittens

[william 123]

10:54 AM on 01/17/2012

Romney"s comments about for-profit schools is a reflection of his dense, mindless defense of one of the worst trends in US education. It doesn't surprise me since he belongs to that class of people in the US who believes you can "make a buck" off everything, even the misery of people you are suppose to be helping. For-profit schools, suddenly a darling of Wall Street, using government loans and grants, are the worst way to get an education today. Their record of outcomes, as measured by total student loan debt, instructional investment, job success upon graduation and a host of student satisfaction measurements, are abyssmal. The fact that so many enrollees fail to graduate, yet are stuck with very high loan debt, that can't even be discharged in bankruptcy, speaks to the corrosive misery for-profit schools leave in their wake. This kind of "free market capitalism" where essential services, like education and health care, without regulation, are priced out of the reach of millions, is what will be the downfall of this Nation. I predict student loan debt will be the next financial crisis we'll have to deal with.

[Jeff Parfitt]

09:54 AM on 01/17/2012

Incredible statistics, but no surprise Romney isn't aware of them. It's that tricky little "deny reality" thing again.

One of the best options for recent grads is to get into a non-profit organization that offers a loan forgiveness program. Often you can find a job that will forgive 50% of your loans after 10 years. In that amount of time, if you play your cards right, you should have paid off a good amount already, and the forgiveness will knock of most of what's left.

Of course, that all relies on you finding that job. The problem is that for-profit education is a falacy, from grade school on up. It takes the emphasis away from quality, just like corporate profit takes the emphasis away from quality products and services. In the end, a strong public education system is the institution with the best possible outcomes for education, bar none. GOP/TPers like Romney will be facing the statistical music before long, I hope.

[StopTeaGOP]

07:18 AM on 01/17/2012

Everything Romney will do as a president will be in the best interest of corporations. People should not be fooled by him and stay with Obama, because he's been fighting for them. Party affiliation should not matter; Romney should be denied the presidency, because he's unworthy of that office. His GOP rivals have been warning us not to trust him.

[l78lancer]

02:41 AM on 01/17/2012

Almost invariably when shareholders are involved the priority is to profit - not to the employees, not to the product, and not necessarily to the organization. There are some corporate colleges and universities that do work well. Others are mediocre. But as anything grows and profit become more of an issue, it become the only issue.

These models have been tried with the privatization of k-12 schools across the country. The results have ranged from fair to dismal, with very little to report in the good or outsanding category. The emphasis on revenue has slowed educational improvement in these schools. Why should anything different be expected from corporatizing colleges?

It is all of very little use to the actual educational process.

[l78lancer]

02:29 AM on 01/17/2012

Why doesn't Mitt's idea go so far as to came the Princetons and Dartmouths more competitive cost-wise, too? Would the Mitts of companies like Bain or companies on Wall Street accept the degrees from the so-called for profit schools as readily as they would the NYUs, Whartons, Harvards, etc.? If not then he needs to scrap the idea.

[l78lancer]

02:24 AM on 01/17/2012

Another case of of the out-of-touch Mitt.

[Scurvydog74]

12:05 AM on 01/17/2012

CEO's have to learn to feel comfortable being hated by the majority of the workers they rule over. A President Romney would know from experience that a low approval in the polls simply meant he was doing an outstanding job for his investors, the one percent. This man can not be allowed to become our ruler...

[l78lancer]

02:30 AM on 01/17/2012

"...our ruler."

Well since you put it like that...

[scottsdalebubbe]

11:41 PM on 01/16/2012

University of Phoenix' parent company is owned and operated by a Mormon family dynasty. It's just another example of the Mormon tradition to "bleed the beast" -- that is, take everything they can from the "Gentile" -- non Mormons to enrich their own community. It has been cited several times by the Feds for sales practices that are less than ethical and for favoring Mormon employees over others.

Bain Capital is another example. The story that everyone is missing is that Bain raided the retirement funds and then the agency that insured such funds with taxpayer money had to pony up to make the retirees only partially whole. That, truly, is vulture capitalism.

Watch out if Romney gets elected: he will do the same thing to the rest of us.

[drkazmd65]

12:39 AM on 01/17/2012

Yep,...

[statementOfIncensed]

02:23 AM on 01/17/2012

I thought your post was some kind of baseless bigotry, but U of P was indeed forced to pay ~$2 million for bias against non-mormons.

This is getting very, very weird.

[Ashok Hegde]

11:16 PM on 01/16/2012

People need to remember that these universities are oriented for 'student's which other (reputable) institutions do not want. They are not prepared for a real university, in the traditional sense.

And, we're talking about universities who advertise on tv, the internet, late at night, and again orient themselves for people outside the normal college path.

Do we allow this as a society? Is it buyer beware? This is no different than a check cashing business, or a liquor store in a poor neighborhood. Minimum regulation would require these private universities to take some stake in the loan. The public can't just give them tuition money, so that these students are ultimately underserved, and overloaded with debt.

[maternatura]

12:09 AM on 01/17/2012

I used to work for a small, fully accredited, for-profit college. I thought they were wonderful. They were a college catering to working adults. All of the dedicated professors had to have a lot of experience in the field that they taught in. Students got credit for classroom (theory) and practical (on the job). Classes were evenings or all day Saturday and you focused on one intense six week course at a time. Depending on what each student came in with, the student could finish his Batchelor's degree in 18 months. Many of our students went on beyond our school to major universities to acquire their master's degrees. It was great and I gained a great deal of respect for them. This is not to say many of the other advertised schools aren't cheating their students. I believe that many are, but we must not make the mistake of lumping them all together. We just need to weed out the bad ones.

[drkazmd65]

12:45 AM on 01/17/2012

Agreed with almost everything you said maternatura,

My Dad is a graduate of (midlife retraining) a for-profit college circa ~1985. It was a great place, that taught useful skills/classes, and where most of the teachers seemed to care what the students did. He had a couple of small loans, but the tuition was also low enough at the time that it wasn't necessary to HAVE to take out loans.

Problem is - back then - the for profit colleges served a niche need and within that need did a commendable job.

Now - they are essentially diploma mills (at least the ones that get all the press and most of the students) who attempt to churn through students (and their tuition) fast so they can skim the profits off. AND we the people are backstopping a lot of the loans that their students have to take out in order to get through their systems. If they get throught their systesms.

[Connie997]

06:37 AM on 01/17/2012

This is the problem -- a lack of regulation. Obama tried to work on it but the for-profits rounded up a possee of lobbyists and hit back hard. The result is that Congress surrendered to the big guns. At issue was legislation requiring the for-profit to charge tuition that is in line with the salary that the student will earn from the program. Does it make sense to charge $15-20,000 for a diploma in medical assisting so that the student can go out and earn $10 an hour? No! Once again, big biz triumphs over the people that Congress is supposed to serve. The regulation for these types of colleges is laughable and close to non-existent.