The College Caste System and Crushing Student Debt

It is not at all surprising that many well-intentioned folks concerned with the costs of higher education today have turned to technology in hopes of reducing costs and limiting tuition increases.  After all, when students are at home in their pajamas and the professor (maybe in his pajamas, too) is connected via the web (in real time or asynchronously) from anywhere in the world, and no one is using physical classroom space with maintenance costs, utility costs, and parking problems, how great could that be?  Pretty great, particularly if you are a large public university dealing with shrinking shares of public funds while trying to compete for top students, pay the football coach, stock libraries, run research facilities, and hire quality faculty.

After all, if you can put a good chunk of classes online for students who can't afford to drive in or live on campus, and hire some of those ultra-cheap academic sharecroppers to teach them at about $3K per class, maybe you can build that new health club just across from Fraternity Row or that new living/seminar center for the gifted students.  One adjunct for the poor, then, can teach ten sections a year for $30,000, with no benefits/retirement costs for the university.  That's what I call efficiency.

The University of Maryland, University College is a great example of this kind of lucrative college caste system, whereby those who are in most need of a nurturing learning experience are plugged in from afar.  UMUC has 90,000 students worldwide hooked up to its virtual campus, and UMUC has people waiting to help you fill out those federal loan forms.  Want to guess the graduation rate in Maryland?  6 percent. From WaPo in 2011:

Can it be that a university in the vaunted Maryland state university system has a 6 percent graduation rate? Well, yes and no. UMUC is a contemporary model of the traditional night school, an institution designed for adults returning to higher education. Much like the for-profits, University College tends to take students who have been in and out of the collegiate revolving door. Thus, its federal graduation rate is based on a comparatively low number of full-time, first-time students. But no one at UMUC is claiming the school’s true completion rate is vastly higher than 6 percent. Their point is more that a traditional graduation-rate analysis simply does not work at the Adelphi campus.

Now if you are a for-profit "university" with the price points studied and worked out by the best bean counters that millions of Pell Grants can buy, the deal gets even sweeter.  Take the University of Phoenix, for instance, with its 328,000 students and about 17,000 professor, 95% of whom are adjunct or part-time.  That's right--fewer than a thousand full-time faculty for 328,000 students, and that includes "doctoral" programs.

How sweet does make the bottom line for the UofP?  Last year net profits were $572,000,000 on revenue of $4. 71 billion!!

But wait, something is happening, for this fiscal year profits are down by 21 percent to a mere $422,000,000 on revenue of $4.25 billion.  And analysts predict 2013 to be lower still.  What has happened?  Has the public finally caught on to the scam, after numerous accounts of shady recruiting practices?  My favorite was the one involving recruiters down at the homeless missions with federal loan forms and Pell Grant paperwork, looking for future Phoenixes to sign up.

And how about their completion rates?  9 percent nationally. From the NYTimes in 2010:

A new report on graduation rates at for-profit colleges by a nonprofit research and advocacy group charges that such colleges deliver “little more than crippling debt,” citing federal data that suggests only 9 percent of the first-time, full-time bachelor’s degree students at the University of Phoenix, the nation’s largest for-profit college, graduate within six years.

The report, “Subprime Opportunity,” by the Education Trust, found that in 2008, only 22 percent of the first-time, full-time bachelor’s degree students at for-profit colleges over all graduate within six years, compared with 55 percent at public institutions and 65 percent at private nonprofit colleges.

Among Phoenix’s online students, only 5 percent graduated within six years, and at the campuses in Cleveland and Wichita, Kan., only 4 percent graduated within six years.

“For-profits proudly claim to be models of access in higher education because they willingly open their doors to disadvantaged, underprepared students.” said José L. Cruz, a vice president for the trust. “But we must ask the question, ‘Access to what?’ ”

Meanwhile, the debt for the 90+ percent of poor students who never finish continues to pile up, along with the federal debt from Pell Grants to fund these rapacious diploma mills.  And what is U of Phoenix doing about it?  They are moving all in on online, choosing to concentrate their resources where there is the most profit and the least likelihood that students will graduate.  Story from the NYTimes:

The University of Phoenix, the nation’s largest for-profit university, is closing 115 of its brick-and-mortar locations, including 25 main campuses and 90 smaller satellite learning centers. The closings will affect some 13,000 students, about 4 percent of its student body of 328,000. 

It is also laying off about 800 employees out of a staff of 17,000, according to Mark Brenner, senior vice president for communications at the Apollo Group, which owns the university. 

After the closings, which are to be completed next year, the University of Phoenix will be left with a nationwide network of 112 locations and a physical presence in 36 states, the District of Columbia and Puerto Rico. 

Apollo stock closed Wednesday at $21.40, down $6.09, a 22 percent decline.

Enrollments at the University of Phoenix and in the for-profit sector over all have been declining in the last two years, partly because of growing competition from other online providers, including nonprofit and public universities, and a steady drumroll of negative publicity about the sector’s recruiting abuses, low graduation rates and high default rates. 

Late last month, Kaplan Higher Education, a division of the Washington Post Company, announced that it was closing nine of its campuses and consolidating four others into nearby locations. The company did not give a reason, but in an August filing with the Securities and Exchange Commission it disclosed that an accrediting commission had warned that its campuses in Baltimore, Indianapolis and Dayton could lose their accreditation — and with it, eligibility for the federal student aid that makes up more than 80 percent of Kaplan’s revenues — for failure to meet student achievement requirements.

As the negative publicity about for-profits mounted — including many charges that the schools enrolled students who had almost no chance of succeeding, to get their federal student aid — both Kaplan and the University of Phoenix announced new programs, offering some form of free trial, to ensure that they enrolled only students who had a reasonable likelihood of success. Those programs cut substantially into their enrollment numbers. 

“We’ve said publicly that about 20 percent of the students in our free three-week online orientation program either don’t complete the program or don’t enroll,” said Mr. Brenner. . . .

To help boost enrollment, the University of Phoenix last week announced a tuition freeze for students who remain consistently enrolled.. . .