Going for Broke

For-profit colleges have been accused of preying on poor students, loading them with debt and pocketing their government loans. But lawmakers are finally fighting back

  • Photograph by Jeff Wilson for TIME

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    Stories like Rothrock's are not unusual. Anecdote by anecdote, a firestorm has been building around for-profit education for some time. But it was a scornful Government Accountability Office report released last summer that revealed a portrait of a predatory industry. The report, which questioned the higher tuition fees of for-profits compared with those of traditional schools, included outrageous undercover video footage of recruiters appearing to encourage students to omit required financial information or to claim nonexistent dependents on the Free Application for Federal Student Aid. Since for-profit colleges get huge amounts of government money--they enroll about 11% of all higher-education students yet receive nearly a quarter of all federal financial aid, for a total of $24.6 billion in loans and $7.5 billion in Pell Grants last year--many lawmakers see the situation as tantamount to massive fraud at the expense of taxpayers. "The more I've looked into this in the past year, the more it's become clear that this is an open spigot of taxpayers' money into private pockets," says Iowa Democratic Senator Tom Harkin, chairman of the Health, Education, Labor and Pensions Committee. "It's got to be slowed down, and in some cases turned off."

    Harkin is leading a Senate inquiry into for-profit education. In July, a batch of 13 new regulations issued by the Department of Education will take effect. They will prevent for-profits from compensating recruiters on the basis of their enrollment numbers and will require states to monitor schools more closely--a rule that might have protected people like Rothrock who unknowingly enrolled in unlicensed programs.

    Critics contend that for-profits have gone after federal dollars with abandon by targeting people who have too often been left out of the traditional higher-ed equation: older students, parents, career switchers, high school dropouts, veterans, the learning disabled and the homeless. Supporters say for-profits are giving people opportunities where there were none, and history bears this out.

    For-profit education can be traced back to before the Industrial Revolution, when there was a demand for agricultural-studies programs that weren't being offered by traditional schools. Career-oriented for-profits began to thrive after World War II, when they could enroll veterans taking advantage of the GI Bill. DeVry University was one of the first approved under the bill; Westwood emerged in 1953. For many occupations, from auto mechanic to chef, stenographer to beautician, for-profit education became the norm. Another growth spurt occurred after 1972 with the advent of the Federal Pell Grant program, which subsidized tuition for low-income Americans. In 1976 the University of Phoenix was founded by John Sperling, then a humanities professor at San Jose State University, who saw the opportunity and began building an education empire.

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