Report: New York For-Profit Colleges Falling Short

New York’s for-profit colleges leave students with huge debt and have little impact on earning potential, according to a new report published by The Century Foundation.

The foundation, a New York City-based public policy think tank, compared student outcomes at 427 colleges and universities, including 112 public, 196 nonprofit and 119 for-profit institutions.

The report, “Grading New York’s Colleges,” argues that for-profit schools display a pattern of failing to meaningfully serve their students, especially African-Americans and first-generation students.

Yan Cao, a fellow at The Century Foundation

Many for-profit schools show high default rates on student loans. For example, 47 percent of for-profit school students default on their federal student loans within 12 years. By contrast, 11 percent at public institutions and 10 percent at nonprofit colleges default. The report further notes that 72 percent of African-American students at for-profit colleges default versus a 25-percent default rate among Black students at public and nonprofit institutions.

The report’s author, foundation fellow Yan Cao, said having data that stretches across 12-years provides fresh perspective. The data comes from a longitudinal survey by the National Center for Education Statistics (NCES). Some previous data measured only students who graduated. Other data measured students who took loans, which didn’t give an accurate comparison to students at community colleges, many of who had Pell Grants and did not take loans.

“Students starting at for-profit schools are defaulting at 47 percent,” said Cao, “which is such a devastating financial situation for anyone who experiences it. A lot of the data that was looked at before was three-year default data.”

Three-years of data, she noted, doesn’t paint an accurate picture because students can defer or request an economic forbearance on loan payments for three years.

“When you shift from three years to 12 years, that’s when you really see the extent of the impact,” Cao said. “It’s so clearly not setting people up to succeed.”

New York State provides approximately $300 million per year in college scholarships to private colleges, which is more than any other state in the U.S. In the 2015-16 school year, approximately $68 million of that went to for-profit schools.

Cao also used data on tuition from the Integrated Postsecondary Education Data System (IPEDS), a federal database for higher education information, and cross-referenced that with New York’s tuition assistance program.

“I analyzed the data by cross-referencing those two sets so that we could see what schools are getting a lot of New York state aid that are coming out with these really poor results,” said Cao. “I’m hoping this will set the framework for there to be more investigation.”

Another crucial statistic refers to income. A significant reason for attending college is to increase earning potential, but a majority of students at 38 percent of New York’s for-profit schools earn less than an average high school graduate – an average $25,000 a year. By contrast, a majority of students who receive aid at 100 percent of public institutions and 87 percent of nonprofits earn more than the average high school diploma-holder.

“The value just isn’t there in terms of looking at tuition and looking at what students are actually getting in terms of educational investment,” said Cao.

For-profit colleges typically target low-income minority students in their marketing and then blame those students for poor outcomes, said Cao, who added that for-profit schools tend to have low graduation rates while their advertising promotes fast-tracks to degree completion.

“The reality is that students at for-profit schools take much longer to graduate if they do graduate, but that’s not the way that it’s framed in a marketing pitch that emphasizes scheduling flexibility,” said Cao.

The report notes that for-profit schools charge more but do not invest in teaching. For every $1 of tuition revenue, for-profit schools spend 41 cents on instruction compared to 85 cents at nonprofits and $2.15 at public institutions.

“We need more tools to be able to access information on for-profits,” Cao said. “We can see some of it for the publicly held organizations, but a lot of the schools in New York are privately held corporations.”

The research in the report examined the entire state of New York, which is quite diverse — ranging from densely populated New York City to rural areas upstate. There appeared to be issues with for-profit institutions all over the state.

Moving forward, Cao said that she would like to do more geographical analysis.

“One of the things that I’m most interested in is focusing on the equity implications of this research,” said Cao. “We need more information, more investigation, more tools around looking at the advertising and misleading statements in the advertising to figure out how we as a state make sure that our dollars are going to schools that are helping to set students up for success rather than setting them up for financial distress.”

The foundation will connect with educational advocates to create better access and outcomes to quality higher education.

“New York is willing to make an investment in education,” Cao said, “so the question is: How do we better invest New York’s higher education dollars to support high quality degrees and more equitable outcomes?”