HARI SREENIVASAN: This has been a tough fall in the world of for-profit colleges, and for some of the students who attend them. The latest case, the bankruptcy and abrupt shutdown of ITT, one of the largest for-profit technical schools.
Its 130 campuses were closed last month after the Department of Education said it could no longer enroll new students who relied on federal loans and grants to attend. The Obama administration cited problems with its accreditation and concerns that it was misleading students. That has left about 35,000 students up in the air over their future.
And it is the subject of our weekly segment on education, Making the Grade.
Paul Fain of the news site Inside Higher Ed joins me now.
So, tell us, first of all, why is ITT shutting down? How important are they in the pantheon of the for-profit school system?
PAUL FAIN, Inside Higher Ed: They’re one of the biggest, one of the oldest, most-established for-profit companies, with campuses in 38 states. They used to have campuses in 38 states, so definitely one of the most important players.
Year — several tough years, hemorrhaging students and revenue. And then they got hit with several investigations and lawsuits, federal and state, some serious charges, the Consumer Financial Protection Bureau, the SEC both pursuing them legally.
And then you had an accreditor raising questions about their record-keeping, and the Fed finally said, too much risk for those students and taxpayers. And there were just several sanctions that were really the end for the company.
HARI SREENIVASAN: But what about those 35,000 students? What do they do?
PAUL FAIN: They are in a real tough bind. They have two major choices. First, they can elect to have their debt forgiven.
They can — all the aid that they had received, the loans, they can have forgiven by the federal government. But, if they do that, their credits don’t transfer. If they seek to continue their program somewhere else, which might be tough as is, they might not be able to find an option or a similar program nearby, those credits won’t count, if they take the payoff.
HARI SREENIVASAN: And who is the demographic that goes to these schools?
PAUL FAIN: Well, you’re looking at working adults, basically, often the first in their family to go to college, many veterans at ITT and some other for-profits, and really just working adults looking to advance themselves, maybe to break into a career, maybe to get a credential, so they can get out of a low-pay job, folks who are working at night, weekends to try to really advance themselves.
HARI SREENIVASAN: So, it wasn’t easy for them to try to get this route. And now they have put in all this time. And if the credits don’t transfer, they might be back at square one.
PAUL FAIN: Absolutely.
No matter what you think of ITT, you have to feel sorry or really concerned about these students, because a lot of them are really just trying to get ahead to really advance themselves.
HARI SREENIVASAN: OK. And put this in context. This isn’t the first school. This is just the latest school in the for-profit world that’s had problems. We heard about Corinthian a while back. And there’s been other schools as well.
PAUL FAIN: Correct.
Corinthian was even larger, 72,000 students. A couple years ago, it shut down. Now what remains of it in a different owner’s hands is only about 10,000 students. A few years ago, about one in 10 students in America were at for-profit institutions. That’s declined to about 6 percent of the total, so really an existential crisis for these companies.
And there’s a lot of reasons for that. But it’s not clear what the future is for for-profit higher education.
HARI SREENIVASAN: Is it the business model? Is that working anymore? You see — you used to see ads nonstop on TV at late night. And it was competitive. It was DeVry and ITT and Phoenix Online.
PAUL FAIN: Right.
HARI SREENIVASAN: And there were so many different opportunities.
PAUL FAIN: And they were booming.
You had massive growth coming right after the recession, as folks dropped out of the economy and were really trying to retool themselves, and these schools reached out to them. They tended to be better than their competitors when it comes to advertising, because they had the money to do that.
But several factors have hit them. I mean, first of all, the recovery has recovered a little bit. So, you have fewer folks looking to go back to school to try to find a job. You have just waves of bad publicity, investigations, criticism by the media, by lawmakers, primarily Democrats, which I think has taken a toll.
I think the word for-profit has a bit of a stigma. And that’s the companies themselves who will say that. And I just think it’s a harder sell. A lot of them are a little bit more expensive than community colleges. They say they offer more services to help students, but it’s a little harder to get someone to pay $15,000 or more to go to one of these programs.
HARI SREENIVASAN: But what do the executives at these companies say about their plight and how the environment has changed?
PAUL FAIN: Well, first of all, they say they have been treated unfairly, that this administration and Senate Democrats have cracked down on them more than the rest of higher education.
There are questions about all of higher education’s return on investment, the value of a degree. I think it’s quite clear that the best way to get a job is to get a degree. But people are concerned about student debt on the whole. But for-profit higher education has really received, I think, the first wave of aggressive federal policy to try to make sure students are getting what they pay for.
HARI SREENIVASAN: Paul Fain of the news site Inside Higher Ed, thanks for joining us.
PAUL FAIN: Thanks for having me.
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