For-Profit Diploma Mills Drain Away Cash and Hope

Sunday's New York Times had a revealing piece on the leeches and bottom feeders in the for-profit college business who prey on the poorest and most vulnerable. By making big promises and delivering nothing of value in return, these diploma mills drain students' Pell Grant funds, and students are left in debt with no job prospects. A clip:

. . . .The stakes are enormous: For-profit schools have long derived the bulk of their revenue from federal loans and grants, and the percentages have been climbing sharply.

The Career Education Corporation, a publicly traded global giant, last year reported revenue of $1.84 billion. Roughly 80 percent came from federal loans and grants, according to BMO Capital Markets, a research and trading firm. That was up from 63 percent in 2007.

The Apollo Group — which owns the for-profit University of Phoenix — derived 86 percent of its revenue from federal student aid last fiscal year, according to BMO. Two years earlier, it was 69 percent.

For-profit schools have proved adept at capturing Pell grants, which are a centerpiece of the Obama administration’s efforts to make higher education more affordable. The administration increased financing for Pell grants by $17 billion for 2009 and 2010 as part of its $787 billion stimulus package.

Two years ago, students at for-profit trade schools received $3.2 billion in Pell grants, according to the Department of Education, less than went to students at two-year public institutions. By the 2011-12 school year, the administration now estimates, students at for-profit schools should receive more than $10 billion in Pell grants, more than their public counterparts. (Those anticipated increases may shrink, depending on the outcome of wrangling in Congress over health care and student lending.)

Enrollment at for-profit trade schools expanded about 20 percent a year the last two years, more than double the pace from 2001-7, according to the Career College Association.. . . .