Jon Burkart (PO ’24)
If the past 6 months have proved anything, it’s that nothing is wholly immune to COVID-19. Institutions of higher education (IHE) are certainly no exception. On October 15th, National Student Clearinghouse reported that average undergraduate enrollment for the fall 2020 semester is down 4%, and overall enrollment is down 3% compared to last year. This trend has hit four-year institutions hard, and community colleges even harder. But despite a poor track record for student success, one type of institution has enjoyed an uptick in enrollment: for-profit colleges.
This appears to be indicative of a broader trend across the US economy. Big-tech companies that developed the technology keeping us connected are booming as COVID-19 numbers continue to rise. Last quarter, companies like Amazon, Apple, Google, and Facebook amassed a collective $38 billion in profits. Similarly, for-profit institutions have latched on to the current crisis to promote their flexible, online options: Strayer University, a for-profit institution, touted that 93% of their classes were already online, thus making them uniquely-poised to educate during the pandemic.
The surge in students seeking online learning options may very well find protection from the virus, but will they be protected from such a troubled industry?
History 101
For-profit colleges have existed in some form for the past 200 years. In the past, they were small programs that focused on niche skills, like penmanship for Atlantic traders. However, by the 20th century, for-profit institutions had broadened their scope to cater to a variety of trades and groups of people not hitherto served by higher education. After WWII, for-profits institutions had a massive incentive to continue expanding: GI Bill benefits could be used at for-profit institutions. Still, many institutions only offered vocational training and certificates: in 1972, for-profit institutions enrolled just 0.2% of students seeking degrees in the United States.
That very same year, Congress took decisive action that drastically changed these figures. The 1972 Amendments to the Higher Education Act (HEA) are most well known for provisions like Title IX, which prohibits discrimination on the basis of sex for institutions receiving federal funding. Also of great importance is how the Amendments altered certain definitions in the HEA. Under the 1972 Amendments, the definition of an institution of higher education (IHE) that applies to participation in the Title IV Federal Student Aid program was amended to include for-profit institutions. Now, for-profit colleges could access funding from the federal government, like through the multi-billion dollar Pell Grant program.
As for-profit companies looked to bring in the most federal money–and thereby more profits–enrollment at their institutions boomed, as students now had access to federal financial aid. The US Department of Education found that between 1970 and 1975, enrollment at for-profit institutions more than doubled. But more Federal money didn’t necessarily mean more Federal regulation. A Boston Globe investigative report in 1974 found that ITT Technical Institute, a for-profit institution, “used misleading advertising” and had a “dismal record of training students for careers.” That same ITT Tech declared bankruptcy and closed its 137 locations 42 years later, only after nearly two-dozen state Attorney’s General sued ITT Tech for defrauding hundreds of thousands of students.
Ascent of the Accreditors
Why exactly can institutions like ITT Tech exist for decades, defrauding students for profit? It all comes down to the current regulatory scheme, one that sounds much more powerful than it is. “The triad,” as it is dubbed, consists of the Federal government, states, and accrediting agencies. Dividing the regulatory responsibility amongst three institutions naturally arose from each institution’s unique power. But of all three, one sticks out from the rest: accrediting agencies, which are independent, non-profit agencies.
Accreditors originally served as a voluntary way for IHE to distinguish themselves from other schools by proving compliance with predetermined standards of educational quality. In the wake of a 1951 Government Accounting Office report that found nearly 1.7 million veterans were using GI bill benefits yet only 20% were graduating, states were tasked with either creating their own lists of approved colleges or resorting to the existing private-sector accreditation. They chose the latter. Bringing accrediting agencies into the fold began the dual-duty of accreditation: to serve as a stamp of quality, but also as a gatekeeper to federal funding. This duality has sprouted a few glaring contradictions.
The most glaring contradiction arises when considering accreditation’s role in gatekeeping enormous federal aid programs. The Federal Student Aid program under Title IV was responsible for around $120 billion this year alone. To lack accreditation is to lack access to extremely lucrative federal funding. As such, colleges exert their influence over the accreditation process in any way they can. Strikingly, their collusion is the least bit covert; a 2016 Manhattan Institute study found that of the 332 commissioners that sit on the nation’s 15 accrediting agencies, 221 were employed at an institution they were tasked with accrediting. Accreditation cannot, and will not, regulate the institutions that stand to benefit from it.
Even more concerning is the colleges against which accreditors (seldom) take action. A 2014 Government Accountability Office report detailed that accreditors were much more likely to issue probation or sanctions to institutions that were financially weaker. On the other hand, they were no more likely to sanction schools if they had weaker student outcomes than those with stronger student outcomes. This is all to say that the financial state of an IHE is far more important to accreditors than the outcomes of its students. To this end, for-profit institutions have an incentive to perpetuate their well-documented predatory recruitment tactics and over-spending on advertising. If they stay profitable, they remain accredited.
Institutional Reform
The poor track-record of for-profit colleges has recently come to the forefront of educational policy issues. During an administration that has unequivocally betrayed the trust of students, Education Secretary Betsy Devos’ deregulatory regime has eroded the palatability of the institutions she wished to promote. Even in their failures, she refused to offer loan forgiveness to students that attended for-profit Corinthian Colleges. Corinthian was shuttered after an Obama-era rule prevented institutions from receiving Federal funding if they couldn’t prove “gainful employment” for their graduates, a rule she later repealed.
As for accreditation, she has taken divergent approaches. She appeared to care not that her Education Department continued to give federal funding to a for-profit institution after it both lost accreditation, and failed to inform its students. But she hasn’t completely disregarded accreditation, either. Her department saved an accrediting agency that accredited the likes of ITT Tech, Corinthian Colleges, and even an institution with no students or staff. While the inherent contradictions within accreditation are no fault of her own, Secretary Devos has failed to maintain any substantive check on accreditors, or due diligence of her own. The results speak for themselves.
Thankfully though, these regulatory failures have been matched with equal calls for reform. In July of this year, then-Senator Kamala Harris issued a joint statement with fellow Senate Democrats opposing a bailout of for-profit colleges and calling for more regulation. With the election of Joe Biden and Kamala Harris, these demands are much more likely to come to fruition. It’s unclear if this would mean anything for accreditation — some have suggested sweeping reforms like breaking the current regional monopoly or a phased system of accreditation — but it is a logical way for Joe Biden to fulfill his promise to “stop for-profit education programs from profiteering off of students.” Clearly, the regulators must be regulated. There is much to be learned from these past four years, and equally as much to be done.
