Corporate, Domestic, Ethics, For-Profit, Investors, Legislation, Recruitment, Required, Retention Rates, Student Loans, University & College - Written by Eleni Glader on Thursday, October 6, 2011 7:00 - 0 Comments
Has The Bubble Popped Or Is There A Coming College Loan Crisis?
For-profit schools have clearly thrived on U.S. taxpayer dollars. And that has led to a plethora of schools and a rush to profits. Have the new Department of Education rules curbed abuses and greed in the industry? Or has it merely sidelined them temporarily? Donna Cooper writes about the phenomenon in The Philadelphia Inquirer. She suggests the funding apparatus for college loans could be in jeopardy:
Since 2006, 130 for-profit schools have opened their doors, while 69 public and private nonprofit schools have been shuttered. In other words, for every nonprofit college that closes, two for-profit schools are opening. If the student loan default trend continues to head upward, it won’t be long before the viability of federally backed student loans is called into question.
We learned after the mortgage market debacle that if regulators had heeded early warning signals, a meltdown could have been avoided. The federal government’s failure to control bad actors who are exploiting the availability of government-backed student loans is threatening to make those loans an expensive relic of the past. And that’s a threat to the future prosperity of millions of young people and America’s place in the global economy.
The U.S. Department of Education’s added new regulations to oversee for-profit schools and their eligibility to receive financial aid. With that added pressure, leading for-profit lobbying group Coalition for Educational Success has changed its tack. In an effort to stave off stricter rules in the near future, CES took preemptive measures to serve as its own “watch-dog.” Last month the coalition introduced its own code of conduct, reiterating federal law requirements.
The industry group’s own news release, however, noted that only 17 percent of for-profit schools agreed to sign on to the code of conduct. Conspicuously absent from the list were two of the coalition’s largest founding members, ITT Educational Services and Education Management Corp. The latter’s absence is no surprise; the federal government and four states have sued it for allegedly receiving billions of dollars in financial aid that it was not eligible for.
Meanwhile, for-profit enrollment is growing each year. “Between fiscal year 2009 and 2010 alone, one doubled its profits from $119 million to $241 million,” the Senate Health, Education, Labor and Pensions Committee reported last year, “while a second went from $235 million to $411 million.”
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