Why You Should Think Twice Before Your Kid Applies to a For-Profit College

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Like many parents who took a break from work, I’ve been toying with the idea of going back to school. But where should I go? And what should I study? Those ads on the subway can be super enticing, especially from schools like the University of Phoenix, showcasing cheerful students having the time of their lives at their computers. If I had my way, I’d be a lifelong student—I just love learning. But the choice of school could be a game-changer for our finances.

For-profit colleges, like the University of Phoenix, can be a debt trap. A recent report from the Brookings Institution, authored by researchers Adam Parker and Mia Thompson, highlights the growing problem of student loans in the for-profit sector. Over the past 15 years, the amount of student debt tied to these institutions has skyrocketed.

Gina L. Martin from The Daily Review notes the shocking rise in for-profit student loan debt: “In 2000, there was just one for-profit college among the top 25 institutions for student loan debt. By 2014, that number jumped to 13, with the University of Phoenix leading the pack. The debt burden for those attending for-profit colleges surged from $39 billion in 2000 to a staggering $229 billion in 2014, mainly due to the increased borrowing rates at these schools rather than more students enrolling.”

It’s a scary thought. Graduates from for-profit and community colleges are significantly more likely to default on their loans compared to those from traditional four-year institutions. Gina reports, “Among students who started repaying their federal loans in 2011, only 8% from four-year colleges defaulted within two years. In contrast, students from for-profit colleges faced nearly three times that rate.”

There are various reasons behind this alarming statistic. For-profit colleges often mislead students about credit transfer policies, leading to extra courses—and extra costs. They also typically don’t allow breaks, so if your child needs to take a semester off to work, that’s often not an option. Plus, these institutions have lower graduation rates. As Gina points out, “Only 49% of students at for-profit schools complete their degrees, whereas 70% do at four-year colleges.”

And here’s the kicker: If a for-profit college goes under before your child finishes their degree, they’re left with a pile of debt and no diploma. Libby Johnson from Growth Report highlights that unemployment rates for graduates from for-profit colleges can reach as high as 21%. Even if they do find work, it may not pay well—those graduates often earn around $21,000 per year.

The good news? Enrollment in colleges tends to rise during economic downturns, so as the economy improves, defaults might decrease.

As for me, I’ll probably satisfy my academic cravings with a few classes here and there. But when it comes to my kids, the message is clear: steer them toward four-year colleges and avoid the temptation of for-profit institutions. If you want to learn more about making informed choices in this area, check out this helpful post about home insemination. And if you’re looking for reliable resources, Make A Mom offers a great selection on the topic.

Summary

In summary, for-profit colleges present significant risks in terms of debt and lower job prospects. The statistics show a stark contrast in loan default rates and graduation rates compared to traditional four-year institutions. As parents, it’s crucial to guide our children toward more stable educational paths.