Why Do Students At For-Profit Colleges Get So Much Federal Aid?

The rising cost of college, student loans and student loan debt: These topics often seem in danger of overshadowing discussion of what students are actually studying in college. On Thursday, the Department of Education released its annual report,†The Condition of Education: 2012. The report provides information about enrollment, graduation rates, financial aid, fields of study, institutional expenses and revenues and faculty compensation. Notably, the number of students receiving federal aid to attend for-profit colleges increased.

As the cost of college has increased in a time a recession, students have been receiving more financial aid, says the Chronicle of Higher Education. Between 2006-7 and 2009-10, the number of students receiving financial aid increased from 75 to 85 percent. While 7 percent more students at public universities now receive financial aid (a total of 82 percent), 92 percent of students at for-profit colleges received financial aid in 2009-10, up from 55 percent in 2006-7:

Much of that aid comes in the form of student loans, a heavily debated topic in Washington as Congress†battles over setting interest rates on them. According to the new federal report, students’ average amount of loan aid was highest at for-profit institutions: $9,641. Eighty-six percent of students at four-year for-profit colleges took out student loans in 2009-10, compared with 63 percent of students at four-year private nonprofit colleges and 50 percent of students at four-year public institutions.

But balance that amount of federal aid going to students at for-profit institutions like the University of Phoenix with the low graduation rates: Only 28 percent of students at such schools graduates, in contrast to 65 percent at private, nonprofit institutions.

Case Study: ITT Educational Services

Floyd Norris of the New York Times takes a closer look at†ITT Educational Services, one of the larger†for-profit colleges. ITT Educational has 148 locations in 48 states and 71,000 students; it expects to open four new locations later this year.†Norris found that†tuition for a two-year diploma is about $48,000 plus fees. Credits earned from its ITT Technical Institute are “unlikely to transfer,” whereas some credits from community colleges and other public and private nonprofits can generally be transferred among institutions.

The company, says Norris, did not offer overall graduation figures, so he turned to a government Web site with information about graduation rates:

Some of ITT Techís campuses had no information available, but the headquarters location in Indianapolis said that 16 percent of students who entered the school in 2004 earned degrees within three years of enrolling in associate degree programs or six years of enrolling in bachelorís degree programs. In the fall of 2010, the Indianapolis campus had 7,619 undergraduate students. By the end of that school year, it had awarded 538 associateís and 336 bachelorís degrees.

16 percent graduated?

Norris also notes that ITT Educational’s revenue last year was†$1.5 billion, 89 percent of which came from the federal †government through grants and loans.†Faculty at private two-year for-profit colleges have the lowest salaries, at $40,100; faculty at private doctoral universities have the highest, at†$95,000 — revenue dollars aren’t going into for-profit college professors’ pockets.

For-profit schools and their supporters argue that they are providing educational programs that are what students want for the careers they are seeking. Critics contend many of (the few) students who graduate from for-profit colleges are among the least able to pay back their loans and the most likely to default.†Small wonder that the Obama administration is in the process of writing “rules that would stop loans going to students at the most exploitative of the schools.” The Department of Education is expected to announce these rules in a few weeks, but they will still have little immediate effect as the earliest a school might lose financing is 2014.

College is worth it; the Department of Education’s report found that, in 2010, those aged 25 to 34 with bachelor’s degrees earned 114 percent more than did those without high-school diplomas. But where you get your diploma — and where federal loans are applied — truly matters.


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Photo by Tax Credits


ERIKA S1 years ago


Linda C.
Linda C5 years ago

No, not "Thanks Barack"-- "Thanks lobbyists for for-profit institutions, the Supreme Court's 'Citizens United' decision, and our obscene system of election to the highest bidder." The Obama administration was trying to fight these guys but the lobbyists for the for-profit institutions were too much. As far as who owns these institutions--the 1%, again, who use all kinds of means, fair and foul, to get people to sign up for the courses even when those courses are essentially useless.

Dee D.
De D5 years ago

wonder who "owns" all these for-profit colleges, and pockets the profits, since the money isn't going to their instructors.

Nessie Benjamin
Nessie B5 years ago

"College is worth it; the Department of Education’s report found that, in 2010, those aged 25 to 34 with bachelor’s degrees earned 114 percent more than did those without high-school diplomas."

Duh! There is a huge gap in how much a person can earn with a high school diploma or without! The comparison with having a college degree is misplaced. Not everyone needs a college degree - or deserves one. Look at how many idiots have a college degree.
Look at all the people who have college degrees who still work at low paying jobs because their "degree" is worthless.
Think twice before taking out a loan to pay for a college education - it's not always worth it. And Yes, you do have to pay it back. Part of the U.S. deficit is created by student loans!!!

Sue Matheson
Sue Matheson5 years ago


Angela N.
Angela N5 years ago

thanks :)

Shawn O.
Shawn O' Malley5 years ago

Education USA is a SCAM! Another Big Business, like WAR, and PRISONS. Education is a Human Right, FREE University Now like in Europe and Cuba. Vulture Capitalism is doomed, as the greedy banks, wall street crooks and Mega vampire Corporations squeeze the last drop of blood from the working poor, the elderly, the destitute and dispossessed.

Lost Account
Past Member 5 years ago

Not surprised.

Barbara S.

I used to work at a prestigious university. The credit card companies were on campus all the time, luring these financially deficient children into taking out loans and high-rate credit cards. These kids are usually NOT wise enough at their young ages to make the proper decisions about credit cards and student loan debts. Get the credit card purveyors OFF CAMPUSES, and teach your soon-to-be college student about interest rates on loans.

Troy G.
Troy Grant5 years ago

My son graduated from a private college with 90 thousand in student loans. He pays 800 dollars monthly from his low paid service job, but his loan has gone up to 100 thousand. Conservatives are killing our kids.