Article — From the October 2011 issue
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Article — From the October 2011 issue
Phoenix is the largest for-profit educator in the United States, and the country’s second-largest university system of any kind, behind the State University of New York. Founded thirty-five years ago by a former San Jose State University humanities professor named John Sperling, the company went public in 1994. Now ninety, Sperling still sits on the company’s board, but occupies himself with other causes, such as drug legalization and immortality. He reportedly spent $20 million trying to clone his girlfriend’s dog.
Since 2000, enrollment at America’s roughly 3,000 for-profit colleges and universities has risen from 365,000 to 1.8 million. With revenues last year of $4.5 billion and half a million students, the University of Phoenix is one of many big players in the “proprietary education” market. Education Management Corporation operates Argosy University, Brown Mackie College, and other schools in thirty-two states, with a total enrollment of about 158,000; DeVry, in addition to its better-known technical schools, runs degree-granting universities with a total student body of 71,000; the Washington Post Company–owned Kaplan University has about 65,000 students, most of them studying online. These schools differ in many ways, but they have two traits in common: they mainly serve lower-income students, and they get the majority of their revenue from the federal government.
 In Phoenix’s case 88 percent, which is about the industry average.
Federal funding for higher education still follows the pattern set by the G.I. Bill, which Congress passed in 1944. The law’s emphasis on “veteran’s choice” meant that there were few restrictions on which institutions students could enroll in with government grants, and hundreds of proprietary schools—many transparently suspect—sprang up to take advantage of the policy. (Before this time, schools run to provide their owners or shareholders with profit had been a rarity.) Student choice remained the model for subsequent legislation that established the current financial-aid regimes (administered under Title IV of the Higher Education Act), and for most purposes federal education policy distinguishes institutions on the basis of accreditation, not profit model. Currently, proprietary institutions educate about one in ten American college students while taking in nearly a quarter of all Title IV funding—$4 billion in Pell Grants and $20 billion in guaranteed loans in 2009.
All this government funding is notable because enrolling at for-profit colleges turns out to be a terrible deal for most students. Almost three fifths drop out without a degree within a year, and virtually all take on debt to help pay for their education. They default on their loans at about twice the rate of students at public colleges and universities and three times the rate of students at private ones. Those who graduate often wind up in low-paying jobs, doing tasks with minimal connection to their degrees.
Last summer, Senator Tom Harkin initiated hearings on proprietary schools, and the Government Accountability Office delivered a damning report on the industry’s recruitment policies. The GAO sent undercover investigators to apply for admission to fifteen for-profit colleges, Phoenix among them, and found that all fifteen made “deceptive or otherwise questionable statements.” Applicants were encouraged to falsify their federal financial-aid forms and pressured to sign enrollment contracts on the spot. Admissions counselors misled applicants about costs, time commitment, and graduation rates, and overstated salary potential for graduates. One common sleight of hand was to calculate a program’s duration on the basis of year-round study while calculating annual tuition on the basis of a nine-month academic year.
But if for-profits have been unscrupulous, the federal government has remained an enthusiastic partner in their growth. In his very first speech before Congress as president, Barack Obama declared that by 2020 America would once again lead the world in the percentage of adults with college degrees. Obama has restated this intention in every major education speech he’s made since then.
 During the recent debt-ceiling crisis, Obama showed a willingness to cut almost every government social program—Medicare, Social Security, unemployment insurance. The one exception was Pell Grants. The chief aim of the compromise struck with Republicans in the House and Senate, according to the administration, was “to protect crucial investments like aid to college students.”
About 40 percent of American adults have degrees today; Russia has the world’s highest rate at 54 percent. Beating Russia means producing an additional 40,000,000 college graduates over the next decade. There has been little explanation of why the bachelor’s degree, for most of its existence one credential among many, should be the default pathway to success, but again and again our leaders have pointed to it as an intrinsic good. “I’m absolutely committed,” Obama said in a speech at the University of Texas at Austin last August, “to making sure that here in America nobody is denied a college education, nobody is denied a chance to pursue their dreams, nobody is denied a chance to make the most of their lives.” Obama’s target might prove impossible to meet, but if it is going to happen it will mean educating a lot more students at schools like Phoenix.
Christopher R. Beha is an associate editor of Harper’s Magazine. His previous article for the magazine, “Supernumerary,” appeared in the March 2011 issue. His first novel will be published next year by Tin House Books.
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