For-Profit Schools: Not Business as Usual

For-profit schools are gaining “market share,” and as they do it brings changes to some of the fundamental aspects of college attendance.  These schools often serve non-traditional students, because they are adept at bringing school to these students.  Their campuses usually have parking so that people can get to class quickly.  They have classes at night.  Their online distance courses go one step further, making it possible for busy adults to attend school while working around a job and family responsibilities. These factors explain why the largest post-secondary institution, as measured by student population, is the University of Phoenix.

These schools depend on external funding to pay tuition. That funding comes largely through a combination of Pell Grants and student loans.

• 61 percent of students at for-profit institutions use Pell Grants.
• Perhaps two-thirds of students at for-profit institutions could be characterized as low-income.
• While more are borrowing at for-profits, they are not running up the same debt loads.  Cumulative debt is lower at four-year private for-profits than four-year private not-for-profits.  NPSAS found that average student debt, upon exiting from school, was $17,162 at the former and  a little more than $26,000 at the latter.  By contrast, students graduating from public four years are leaving with an average debt load of $16,369.*
• Oddly enough, the exiting debt load at 2-year private for-profits is more than the debt load upon exit from a four-year private for-profit: $17,310.
• More than 93 percent of students at private for-profits used student loans.  Only 37 percent of community college students took out student loans.
• More than 21 percent of students at private for-profit schools defaulted on their student debt within two years of exit in the US Department of Education‘s last cohort.

Community colleges are more likely to have a greater share of their students taking one class or less than half-time.  For-profits enroll students with the intention of getting a degree.  The lower use of debt is a product of several factors.  In some states, community colleges are preventing from using federal student loans.  Cost is also a factor.  In the instance of community college students that can meet the attendance and need criteria for Pell Grants, it is unlikely that they would need to borrow much to pay the remaining share of their costs.

*does not include PLUS loans, where the debt is assumed by parents.