Financial aid application on a desk. Student loan.

Education Funding Should Go Towards Educating

It’s common knowledge that public tax dollars fund public colleges – but did you know that many private, for-profit, colleges take taxpayer funds too?  

According to recent reports, federal student aid is the primary source of revenue for many for-profit colleges – In fact, 12 percent of all federal student aid goes to private colleges.  Generally that’s in the form of loans, but it also includes grant money and work-study dollars.  Students are supposed to pay loans back after graduation, of course, but that’s not a sure thing:  while for-profit colleges enroll just 8 percent of students in the U.S., those students account for 30 percent of student-loan defaults.  Historically, almost 1 in 5 students at for-profit colleges ended up defaulting on their loans.  

Which means that taxpayers are serving as a loan guarantee for some risky clients in the best case, and directly subsidizing private colleges in the worst.  

What are you paying for? Well, according to Data for Progress, for-profit colleges spend just 26 cents per dollar on actually teaching their students.  In fact, some of the for-profit colleges that get the most public money spend less than 20 percent of that revenue on educating their students.  What do they spend it on instead?  Marketing and owner profits.  

Which means that significant amounts of tax dollars are going towards schools that spend very little of that money on their students, and pocket it instead.

Public colleges, on the other hand, spend an average of $1.13 for every dollar of public funds they receive on educating their students.  That’s right:  they actually spend more on educating students than they take in from the taxpayers.  The rest comes primarily from tuition, which also goes to things like building upkeep and non-academic staff.  

Recent polling suggests that the public prefers the way public colleges spend their money.  A new survey of likely voters shows that:

  • 73% believe that colleges should be required to spend public money on educating their students;
  • 55% believe that for-profit colleges whose students don’t make enough money to pay back their student loans shouldn’t be receiving federal aid;  and
  • 68% believe that for-profit colleges should be prohibited from using public funds for advertising and marketing

Those are pretty good ideas.  Nobody is saying that for-profit colleges shouldn’t exist – just that if they’re going to be taking public money for education, it ought to be spent educating.  

For-profit colleges, however, also fill a niche that public universities so far haven’t.  Career focused, nimble with the development of new programs, and innovative with the use of new technologies.  There’s nothing wrong with this: on the contrary, it’s what a lot of people are looking for.  The problem isn’t what many for-profit are promising, it’s how little they’re delivering.  

The public college system should be finding ways to offer this too, and get it right.  Many community colleges are in the lead, and Calbright is a new experiment in how the public system can do this well.  

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