As a parent who has taken time off from my career to raise my kids, I’ve often thought about going back to school. But the question always lingers: where should I go, and what should I study? The advertisements for schools like the University of Phoenix are particularly enticing, showcasing smiling students engaged in learning. Honestly, I love the idea of education and would happily be a lifelong learner if I could. However, the location of my studies could significantly impact my family’s financial future.
For-profit colleges, like the University of Phoenix, are notorious for leading students into a cycle of debt and unemployment. A recent report from the Brookings Institution, authored by experts Adam Anderson and Tiffany Yannelis, highlights alarming trends. Over the past 15 years, the amount of student debt from these institutions has skyrocketed.
Gina White, writing for The Atlantic, notes that in 2000, only one for-profit college made the list of institutions with the highest student debt. By 2014, that number surged to 13, with the University of Phoenix at the top. Debt from for-profit colleges soared from $39 billion in 2000 to a staggering $229 billion in 2014, primarily due to increased borrowing rates rather than rising enrollment.
The statistics are even more sobering when you look at loan defaults. White reports that only 8% of students who attended four-year colleges defaulted on their federal loans within two years of repayment, while nearly three times that amount—about 24%—of students from for-profit institutions found themselves in default.
What Contributes to This Disparity?
For starters, credits from for-profit colleges often don’t transfer easily, forcing students to retake courses and, consequently, take on more debt. Additionally, these schools typically have rigid schedules that don’t accommodate students who wish to take breaks to work. Alarmingly, graduation rates are also lower; while around 70% of students at traditional four-year colleges complete their degrees, only 49% at for-profit colleges do.
The reality is grim: if a for-profit college goes under before a student graduates, they are left with substantial debt and no degree. Libby Johnson from Vox reports that unemployment rates for graduates of for-profit colleges reached as high as 21%, while those from community colleges faced a 17% unemployment rate. Even when they do find jobs, the pay is often dismal, with for-profit college graduates earning an average of just under $21,000 a year.
In tough economic times, college enrollment tends to rise, which may lead to more defaults. As the economy improves, default rates are likely to decline.
For my own education, I think I’ll satisfy my yearning for learning with a few select classes here and there. But when it comes to my children, the lesson is clear: steer them toward traditional four-year colleges and away from the allure of for-profit institutions.
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Summary
For-profit colleges can lead students into significant debt with low graduation rates and high unemployment. It’s essential for parents to guide their children toward more stable educational paths to secure their financial futures.
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