In February, Patricia Ann Bowers told ThinkProgress that she owed about $57,000 in student-loan debt. The now-54-year-old mother was a student at Everest College—one of several institutions owned by the for-profit operation, Corinthian College. During her time there, Bowers’s son committed suicide. When she asked about taking time off, she was strongly discouraged and was assured that if she failed her current classes, she could retake them for free. But that wasn’t true, and after Bowers paid to repeat coursework, the school shut down leaving her with a mountain of debt, no degree, and near her federal borrowing limit.
Bowers is only one of the more than 10,000 Corinthian students asking the government to discharge their student loans in the wake of the school’s closure. So far, they have been somewhat successful, with the Department of Education agreeing to erase the debt of about 3,000 former students in the first wave of loan forgiveness. Together, all of the school’s students owe more than $3 billion.
Bowers’s story and the implosion of Corinthian are extreme examples of how the for-profit college system can fail its customers. But they’re symptoms of a more systemic problem with the way these schools approach financing education and the promises they make about the success of their students after graduation.
A new report from the Brookings Institution shows that for-profit colleges aren’t just part of the student-loan crisis—they’re a disproportionately large segment, and one that has swelled in recent years. Between 2000 and 2014, the number of students holding education debt doubled to 42 million, their total debt outstanding quadrupling to over $1 trillion. In 2000, there was only one for-profit institution among the 25 colleges and universities where students held the most student-loan debt. In 2014, there were 13, and University of Phoenix topped the list. The amount of debt owed by those attending for-profit colleges has grown from $39 billion in 2000 to $229 billion in 2014—which is more attributable to increases in the rate of borrowing at those schools than to increases in enrollment.
For-profit colleges, through savvy marketing, promise a second chance for those who’ve gotten off track, a brighter future for those stuck in a rut, and at the very least, a college education tailored to those who don’t have the time, money, or ability to attend a local college or university. During the recession, when jobs were particularly hard to come by these promises carried extraordinary appeal, especially for those with only a high-school education. Between 2000 and 2011, enrollment at for-profit colleges grew from 3 percent of total fall enrollment to 9 percent of total fall enrollment.
But the type of potential student that for-profit colleges tend to court can be particularly vulnerable. Attendees of for-profit colleges are likely to be older and have lower incomes. They’re more likely to be considered financially independent, which means they qualify to borrow more, even if they have little family support. These students are less likely to complete their degrees, have a higher risk of living in poverty, and have difficulty finding jobs after school.
All too often, these schools have been shown to inflate their job placement statistics and they can be stubbornly inflexible when it comes to allowing students time off, even for emergencies ( keeping students in school keeps loan money flowing and boosts student retention figures). Sometimes the promises made during recruitment, such as the ability to transfer credits from and to other schools, are empty ones that can leave students shelling out even more money for additional coursework.
All this is worrying because of just how large the share of students of for-profit colleges account for when looking at all college students taking out loans. After the recession, loans to non-traditional students—those attending for-profit or two-year colleges—grew to account for about half of all student loans, with for-profit students making up the majority of those borrowers. What’s more, these students are also much more likely to default on those loans. Of students who started repaying their federal student loans in 2011, only 8 percent of students who went to four-year schools defaulted within two years. For those who attended non-traditional colleges, the default rate was almost three times as high. ( Defaults can lead to a host of other financial problems, including wage garnishment, damaged credit, and an inability to secure financing in the future for things such as cars, credit cards, or a home.)
But it’s not just about default. The authors of the Brookings report, Adam Looney of the U.S. Treasury Department, and Constantine Yannelis, of Stanford, actually anticipate that the default rate among for-profit borrowers will subside as the economy improves. But that still won’t solve the problem of students taking on significant debt loads for institutions that consistently fail to help students complete degrees or or get jobs. Seventy percent of those who attend four-year public or private universities complete their degrees, whereas only 49 percent of students at for-profit schools do. Similarly wide gaps exist when it comes to unemployment rate and average earnings for these groups of students.
The Corinthian College website currently displays a notice about the school’s closure and defends the school’s mission: “We believe that we have attempted to do everything within our power to provide a quality education and an opportunity for a better future for our students,” says Jack Massimino, the school’s CEO. “Colleges like ours fill an important role in the broader education system and address a critical need that remains largely unmet by community colleges and other public sector schools.“
But, as the numbers suggest, for-profit institutions aren’t the ones filling that role. For many students they fail to deliver on the most critical promises of college—a diploma and a better career—while forcing students to rack up sums of debt that they are ill-equipped to repay. The result is often an individual who is left in the same position as when they enrolled—except they’re a whole lot poorer.