The problem with for-profit colleges

ALRIGHT... so it’s a given that I’m not so a fond of our education system, I LOVE education and learning and teachers, I just hate the system and the ridiculous tuition that goes along with it.

Harvard currently has a $36 bn endowment. Enough to pay for tuition, room, and books for their 22,000 students for about 50 - 70 years. Disclaimer, plenty of Ivy league schools (and other schools) are generous to hand out financial aid to those that make less than $65,000 in household income. Furthermore, tuition prices aren’t expensive IN COMPARISON (keyword there) to for profit schools.

I think nothing grinds my gears more than when an institution is more so concerned about just taking your money, up selling you an education that costs more than a 4 year college degree. That same amount of money could have been better spent GOING TO A 4 YEAR COLLEGE. In fact, the education provided from for-profit schools can usually be found in a community college, which is even more cheaper than attending a 4 year college if that seems a bit out of budget for you.

You’ve seen the ads before, you’ve heard their names, these schools are no other than Strayer, DeVry, Phoenix, UTI, ITT Tech, Grand canyon… there are many more, but these are the ones that stand out. In this article I’ll be taking most of my shots at UTI (since I work at an auto shop) ITT tech, UTI, and Strayer university. (and UTI.)

Price

For-profit schools are not cheap, it’s in the name, they are for-profit. Yes, you do get the education needed for your future career path, but the price tag on it is not worth it since the same education can be found for less at a community college. It’s how Kay Jewelers, Zales, and Helzberg diamonds all hire salespeople and not actual jewelers, you still get the jewelry, but you were up-charged something expensive where you could have gotten it somewhere cheaper.

The Universal Technical Institute in Pennsylvania costs $43,000 and that’s only for in-state students. The courses usually last for one year. With such price tag, you could have easily paid two - three full years in a 4 year college if not, paid your associates degree in entirety.

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The price varies from the type of degree you’d like to attain and the amount of time it takes for the course to be completed. The sheet above is taken from UTI’s catalog.

The loans you pull out

According to the DOE (that’s Department of Education) for-profit schools account for 33% of federal student loan defaults and accounts for 26% of all borrowers in 2013. From a long term perspective, 52% of borrowers defaulted on their loans since 2003. In comparison to 25% of community college students in the same time frame.

What does this mean? Well, it means that for-profit schools are loading kids up with A LOT of debt and they are entering entry level jobs that simply cannot pay off their large balance or not finding a job period.

Graduation rate

Their graduation rate is TRASH for for-profit schools. The national graduation rate average for 4 year public colleges is 59% and 66% for private colleges. While, yeah, those percentages are an “F” it beats 23% by a landslide for for-profit schools.

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ITT Tech

The DOE back in 2016 prohibited ITT tech from enrolling any new students utilizing any pelt grants and federal student loans and asked for the for-profit school to increase their collateral assets by $120 million in case they needed to pay back the government for any loans. ITT has a long list of legal issues and scrutiny. From credit bureaus, students, and the SEC… wait… the SEC?

The schools are publicly traded companies

Most of these schools are listed on the stock market, yeah, they can be listed on the New York Stock Exchange or the NASDAQ and investors can place money into these schools. At this point, for-profit schools only want their shareholders and investors to reap the benefits of the school charging high tuition costs to students and not really care about the students education.

For-profit schools have been either losing money or have seen declining revenues, and not many of their investors are making any returns on their cash since this type of business is both highly regulated and no one seems to be going to for-profit institutions. With the exception of some schools.

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Like in the case of Strayer universities parent company Strategic education, which owns another for-profit school that has been thriving well since 2013 but has not reached their previous high of $213 per share since 2010. Their revenues and profit have been declining year over year, and the share price does not justify the company’s… I mean… schools valuation.

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And Grand Canyon education ($LOPE) to name a few schools that have thrived somewhat. Most of their share prices peaked during the financial crisis and fell or peaked in 2010 and fell, the lawsuits against ITT Tech and the institution closing all had an effect on how investors saw the future for for-profit schools. Some schools merged together in order to avoid a potential downfall.

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Community college

The cheaper, however, a bit longer alternative in terms of the amount of hours you put in the classroom, is attending community college that teaches what most for-profit institutions teach. To each their own however, if you feel that an accredited school is a better higher education option for you, that’s more than fine. If you’re on the fence about it, take this with a grain of salt and do some more research in terms of where you would like to receive your education.