Leaked Document Proves How For-Profit Colleges Are Dependent on Taxpayer Dollars

By Annie Wood
This post originally appeared on the Generation Progress blog.

The whole concept of “for-profit” schools sort of implies that an educational company is operating to generate its own profit to return to its owners. That name may be misleading, since for-profit colleges are actually making, in many cases, over 90 percent of their revenue from taxpayer dollars.

Just last week, the Center for Investigative Reporting obtained and brought to light an internal Department of Education analysis that revealed more than 100 for-profit colleges have become frighteningly dependent on taxpayer funds. In fact, all of these colleges would be violating a law set in place to prevent proprietary or for-profit schools from profiteering from taxpayer dollars, but a loophole excludes GI Bill funds and Department of Defense tuition assistance for active military.

How can for-profit companies be funded nearly entirely by the public? Legally, there is a 90/10 limit, where for-profit schools are banned from getting federal funding if they draw more than 90 percent of their revenue from federal student aid programs. As is, this law does not include veteran and military aid, so many for-profit schools are taking in far more than 90 percent in taxpayer dollars. In fact, the leaked Department of Education document showed that while 133 for-profit colleges were clearly taking in more than 90 percent of their profit from taxpayer funds, 292 others were teetering on the edge of the 90/10 line, according to audits of the companies.

The fact that veteran and active military funds do not count toward the 90 percent of federal money for-profit colleges can take in has led to heavy, oftentimes misleading recruitmentof students with military backgrounds. This has led some organizations, like the Student Veterans of America, to raise awareness to the many bad actors in for-profit higher education, like Corinthian Colleges, which have been spiraling downward and plans to close to most of its campuses.

For-profit colleges have also widely been found to recruit low-income students who rely on loans to fund their education, as they are almost certain to bring in federal student aid.

What the Center for Investigative Reporting found was pretty alarming: The cost of for-profit education to taxpayers in a single year is $9.5 billion. In one year, the notorious University of Phoenix took in $3.7 billion in taxpayer money alone.

While some legislators, including Representatives Susan Davis and Mark Takano of California moved to close the 90/10 loophole in July, Representative John Kline of Minnesota killed the bill within minutes. Rep. Kline became the chairman of the House Committee on Education and the Workforce in 2011, and apparently at the time, the parent company that owns the University of Phoenix, Apollo Education Group, was his largest campaign contributor.

Last month, Last Week Tonight’s John Oliver pointed out that while for-profit colleges account for 31 percent of federal student loans, they account for only 13 percent of all college students. It has also recently come to light that for-profit college diplomas don’t fare as well in the job market as diplomas from public colleges and universities. With national student debt topping $1.2 billion, this leaked analysis from the Department of Education clearly reinforces what we already knew: students are not the priority at for-profit colleges, and they have become increasingly creative to make even more of their profit from unsuspecting taxpayers.

Annie Wood is a Student Debt Reporter at Generation Progress. Follow her on Twitter @anniewood28.

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