Durbin looking into costs at for-profit colleges

September 22, 2010
By: Wendell Hutson

Michelle Zuver knows too well the price of an education.
Zuver attended Westwood College, a for-profit school with four campuses in Illinois including one in Chicago, after watching a commercial that touted its law enforcement program.
But after three years the 24-year-old racked up $86,000 in government-issued loans and had no degree.

“I had no other way to finance my education. The school’s financial aid office recommended that I take out loans since I did not qualify for any scholarships or grants. They told me as long as I was in school I did not have to repay the loans back so I kept going until I realized I was over my head in debt,” she said.

Zuver was one of several former college students who spoke at a recent forum in Chicago sponsored by U.S. Sen. Dick Durbin who was looking into how for-profit schools may be using federal education funds – including grants and loans – to make money while potentially leaving students in debt and without a college degree. Some students told about how they later found out that their school was either not accredited or courses could not be transferred to traditional four-year colleges.

Unlike some traditional four-year colleges and universities that have stringent admission requirements, most for-profit colleges require only a high school diploma or GED for admission, Zuver added.

Durbin’s probe looked at institutions like Kaplan University, DeVry University, Le Cordon Bleu Academy and the University of Phoenix, which are institutions run by private, profit-seeking companies or organizations.

He sponsored the forum to address what he described as “predatory lending” targeting college students.

According to Durbin, there has been an increase in federal funds going to for-profit schools even though many students, especially minorities, end up owing thousands of dollars in loans without earning a degree or certificate.

“We’re talking about students taking out $54,000 in loans to attend culinary schools to become a chef,” Durbin told the Defender. “Many students never land that ‘good’ paying job and end up defaulting on their loans. Student loans cannot be discharged through bankruptcy so these students are stuck with this debt for life. And the bulk of these students come from low-income households.”

Durbin allowed that not all for-profit colleges have “questionable exploitive practices.”

“There are some good for-profit schools but there are a lot more that are terrible,” he said.

Despite concerns over their costs and the validity of their degrees, for-profit colleges continue to grow, in part, because they can offer flexible schedules and online coursework to students. For-profit colleges only enrolled 10 percent of all students in higher education in 2009, but received 25 percent of all federal financial aid, according to Durbin.

Last year for-profit colleges received $20 billion in student loans and $4 billion in Pell grants from the government, Durbin said. The vast majority of for-profit colleges get 75 percent to 90 percent of their revenues from the federal government, he explained. Two years ago 1.4 million students were enrolled in 14 publicly-traded for-profit colleges, which was a 225 percent increase over the past 10 years, according to the U.S. Department of Education.

For-profit colleges are the only type of school where the majority of students are unable to repay their loans, according to the Department of Education. Furthermore, the Department of Education estimates that only 36 percent of former for-profit college students are on a repayment plan.

Last year the annual cost for full-time, undergraduate students at ITT Technical Institute, a for-profit college with three suburban campuses near Chicago, was around $17,000, Kevin Modany, chairman and CEO for ITT, told the Defender.

Modany said while he welcomes ways to improve the for-profit industry he disagrees that for-profit colleges are targeting minorities and shortchanging students.

“For-profit colleges exist to provide additional educational opportunities to students,” he said. “ITT does not target any one ethnic group. We recruit across the board and have a diversified student population.”

In 2009 Blacks accounted for 24 percent and Hispanics 16 percent of the students at ITT. Whites made up 49 percent.

But the annual tuition at ITT exceeds annual tuition at state colleges, such as Chicago State University, whose annual tuition (not including housing) for full-time, undergraduate students is less than $13,000 a year.

Modany said public colleges and universities receive state funding to supplement their costs and the annual tuition at ITT is about the same as most private colleges.