ASA College, one of New York City’s largest for-profit universities, this week issued a $110,000 to settle allegations that its ads misled consumers and targeted immigrants and students in need of financial assistance. I agreed to pay a civil penalty of $2,500.
In a recent episode of “Influencers and Andy Sarwer,” U.S. Secretary of Education Miguel Cardona commented on the trend of for-profit universities targeting more vulnerable Americans.
“Most of the cases in which we have had to intervene do not really see our students as future students, but as prey that can be used to sell dreams and incur debt. It’s a for-profit institution that’s working, and it doesn’t deliver,” Cardona told Yahoo Finance editor-in-chief.
For-profit school students often take out significantly more loans than non-profit school students. In the 2019-2020 school year, students at such schools took out about $8,000 in loans, according to National Education Center statistics. This is in contrast to about $4,700 for a two-year community college and about $7,000 for a four-year public university.
For-profit college students in four-year schools are also more likely to be unable to repay their loans. In a study published in April, the Journal of Financial Economics found that four years of her enrollment in a for-profit school increased his chances of defaulting on student loans by 11 percentage points. This is almost double the baseline probability of default of 6.95%.
Such schools don’t necessarily produce better outcomes, according to a 2020 study of 453 schools by Third Way, a Washington, DC think tank. In over 60% of these schools, low-income graduates earn less than the average high school graduate within 10 years of enrollment.
“A lot of the work we’ve done is regulation to ensure that commercial institutions don’t profit from first-generation college students who are misunderstood or lied to,” Cardona said. “I don’t want to paint with a rough brush, but a lot of the work we do is aimed at some of the for-profit institutions that actually use students.”
Over the past decade, for-profit schools have been subject to varying levels of scrutiny by the US government. In 2010, the Obama administration ended funding for-profit college programs that consistently left alumni heavily in debt. He also created the College Scorecard to increase transparency and publish student data from higher education institutions.
When the Trump administration took over, it reversed many Obama-era initiatives and held them accountable for good. For example, we removed the “Gainful Employment” rule that required for-profit colleges to prove they graduated with the skills needed to pay off student loans.
Cardona says the Biden administration is once again pursuing tighter regulation of for-profit schools. For example, we recently proposed measures to limit the revenue such schools make from enrolling veterans. He also removed ACICS (the Accreditation Council of Independent Colleges and Schools) federal status for the accreditation of the ITT Technical Institute and Corinthian Colleges.
“It’s our job to make college affordable and accessible, which means getting rid of the bad guys who are taking advantage of our students,” Cardona said.
Before becoming Secretary of Education in March 2021, Cardona served as Commissioner of the Connecticut Department of Education from 2019-2021. He earned his doctorate in education from the University of Connecticut and started his career as a fourth grade teacher.
Dylan Croll is a reporter and researcher at Yahoo Finance. Follow him on Twitter. @CrollonPatrol.
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