As a mom who’s been out of the workforce for a while, I’ve found myself contemplating the idea of going back to school. The question is, where should I go, and what should I study? Those flashy ads on the subway can be quite enticing, particularly for institutions like the University of Phoenix, showcasing smiling students engaging in exciting online activities. I have a soft spot for education and would happily be a lifelong learner if I could. Yet, the choice of institution could have significant implications for our family’s financial future.
For-profit colleges, like the University of Phoenix, are often mired in issues related to debt and unemployment, as highlighted in a recent report from the Brookings Institution. Researchers Adam Looney and Mia Wright gathered data that reveals a dramatic increase in the amount of student loans taken out for these institutions over the past 15 years.
Gina Roberts, writing for The Daily Chronicle, details this alarming trend: “In 2000, only one for-profit college made the list of the 25 institutions with the highest student-loan debt. By 2014, that number had jumped to 13, with the University of Phoenix leading the pack. The total debt incurred by students at for-profit colleges ballooned from $39 billion in 2000 to a staggering $229 billion in 2014, largely due to rising borrowing rates rather than an increase in enrollment.”
The figures are indeed startling. Students attending for-profit and community colleges face a significantly higher risk of defaulting on their student loans when compared to those at traditional four-year colleges. Roberts states, “Among students who began repaying their federal loans in 2011, only 8% from four-year schools defaulted within two years. This rate skyrocketed to nearly three times that for those attending non-traditional institutions.”
The challenges are multifaceted. For one, for-profit colleges often provide dubious information about credit transfers, leading students to incur additional costs for classes that may not even count towards their degrees. Furthermore, these institutions rarely offer flexibility for students wishing to take a break to work or manage personal matters. Alarmingly, fewer students graduate from these schools—only 49% compared to 70% for those in four-year public or private universities.
Perhaps most concerning is when for-profit colleges inflate their job placement statistics. Graduates may find it far more challenging to secure well-paying jobs than they anticipated, making loan repayment a daunting task. As noted by Emma Collins in her article for Health and Education News, “Unemployment rates for students from for-profit colleges have soared to 21%, while community college students are at 17%. Even when they do find jobs, their earnings are often dismal, with for-profit graduates averaging just under $21,000 annually.”
And if a for-profit institution goes out of business before a student graduates, they’re left with a mountain of debt and no diploma.
On a brighter note, college enrollment typically rises during economic downturns, according to Collins. As the economy improves, we can hope that default rates will decline.
As for me, I think I’ll satisfy my educational cravings with a few classes here and there. But for my kids—who will be navigating the college landscape sooner than I’d like to admit—the lesson is clear: prioritize traditional four-year institutions over for-profit colleges.
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In summary, while the allure of for-profit colleges may appear strong, the long-term consequences can be detrimental. As a parent, prioritize your child’s future by encouraging them to seek out established four-year colleges that offer a better chance for success.