The growth of the for-profit education sector — which offers more flexible schedules and online classes than community colleges, at far higher tuition — has been nothing short of explosive.
The University of Phoenix has more than 450,000 students, for example, and the Education Management Corporation, DeVry, Corinthian Colleges, the Career Education Corporation and Kaplan enroll more than 100,000 each.
All these schools get most of their revenue from federal student aid. Kaplan Higher Education, for example, gets 91.5 percent of its revenue from the federal government, through Pell grants, Stafford loans, military and veterans benefits and other aid.
On average, for-profit colleges spend about 30 percent of their revenue on advertising and marketing.
Lawmakers and Department of Education officials have become increasingly concerned that too much of the $26.5 billion in federal student aid that went to for-profit colleges last year enriched shareholders and company executives, rather than helping students.
Such schools enroll about 11 percent of the nation’s college students, and get a quarter of all federal student aid. But their students account for 43 percent of those defaulting on student loans.
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But over the last few months, Kaplan and other for-profit education companies have come under intense scrutiny from Congress, amid growing concerns that the industry leaves too many students mired in debt, and with credentials that provide little help in finding jobs.
Reports of students who leave such schools with heavy debt, only to work in low-paying jobs, have prompted the Department of Education to propose regulations that would cut off federal financing to programs whose graduates have high debt-to-income ratios and low repayment rates.