Last month Oregon joined a class action lawsuit against a for-profit college, the University of Phoenix. The suit is an attempt by Oregon’s Attorney General and State Treasurer to recover $10 million for losses in the Oregon Public Retirement Fund due to the school’s alleged misrepresentations to investors and other fraudulent practices. The University of Phoenix’s parent company, the Apollo Group, saw its stock plummet by nearly 50 percent between October 2009 and August this year.
Though the scope of the state’s lawsuit is narrowly focused on recovering investment losses, it comes when pressure is mounting (pdf) at the federal level to tighten regulations on for-profit higher ed institutions’ financial, recruiting and marketing practices. Last Thursday, the U.S. Department of Education issued new rules to strengthen federal student financial aid programs to protect students and taxpayers. The rules put an emphasis on for-profit institutions by highlighting their rapid growth of enrollment, debt load and default rates in recent years, which were factors that prompted the Obama administration to seek regulatory overhaul.
For-profit colleges may have taken a public relations hit lately, but for many Americans, they are a non-traditional opportunity for higher education that might otherwise be unattainable. According to the U.S. Department of Education, students at for-profit institutions represent 11 percent of all higher education students, 26 percent of all student loans and 43 percent of all loan defaulters. The median federal student loan debt carried by students earning associate degrees at for-profit institutions was $14,000, while the majority of students at community colleges do not borrow. More than a quarter of for-profit institutions receive 80 percent of their revenues from taxpayer financed federal student aid.
Have you attended a for-profit college? Have you been a teacher at one? Are you a shareholder of a for-profit higher ed company? What is your experience like?