Under fire, for-profit colleges see enrollment slide
Some of the nation's largest for-profit colleges are suffering steep declines in enrollment amid growing competition, new regulation and government pressure that led to the collapse this month of one of the industry's biggest players, ITT Technical Institute.
The industry has been losing students for the past six years, but the crisis appears to be deepening with alarming speed. In their latest corporate filings, some schools reported a pronounced drop.
Enrollment at the University of Phoenix chain fell 22 percent this year, to 171,000 students, marking a 70 percent loss since 2010. DeVry University reported a 23 percent drop this year, to just under 26,500. Hondros College, a chain of nursing schools, slid 14 percent.
Meanwhile, community colleges are reaping the benefits.
In Columbus, Ohio, Beth Kulp withdrew from ITT Tech when she heard it was in trouble. She considered other nearby for-profit colleges but feared they might close, too, so she transferred to Columbus State Community College.
"I didn't want to waste any time or money just to end up where the students at ITT ended up — with nothing," said Kulp, 34, who is studying to become a nurse.
For-profit colleges underwent years of rapid growth before seeing their fortunes change. With jobs more plentiful, fewer adults are going back to school, experts say. Traditional universities have lured students away with new online programs.
And the Obama administration has cracked down on for-profit colleges amid allegations many were using aggressive recruiting tactics, lying about the success of their students, pushing them into risky loans and leaving them saddled with heavy debt and few job prospects.
Officials at many of these companies had no comment. But Steve Gunderson, president of Career Education Colleges and Universities, an industry lobbying group in Washington, said some schools are in danger of collapsing, in part because of "the incredible eight-year regulatory, ideological assault by the administration and their allies."
Under the updated federal rules, schools can no longer pay recruiters bonuses based on the number of students they enroll. The government has vowed to cut funding to academic programs if their graduates don't find jobs that pay well. And a new proposal would force colleges to repay student debt if they're found guilty of fraud.
Last month, the Education Department barred ITT Tech from enrolling new students on federal financial aid and ordered it to put up $152 million as a kind of insurance in case it went out of business. The money was to be used to cover student refunds and other liabilities.
ITT reacted by closing all 130 of its campuses in 35 states, leaving 35,000 students in the lurch and throwing 8,000 people out of work.
It was the second major chain to topple under government pressure. The 72,000-student Corinthian Colleges group agreed to sell or close its more than 100 campuses in 2014 amid fraud allegations.
Other chains have been accused of deception in scores of lawsuits and investigations, including DeVry and the University of Phoenix. One effect: The University of Phoenix saw the number of new students fall 38 percent this year.
Some schools say enrollment has also been hurt by a dispute that could cause hundreds of for-profit schools to lose their accreditation — and with it, their eligibility for federal financial aid.
Federal education officials are considering whether to cut ties with the Accrediting Council of Independent Colleges and Schools, which is accused of overlooking misconduct at some colleges.
To cope with the drop-off in enrollment, some for-profit chains are scaling back. Since 2014, DeVry has closed 39 campuses and plans to shutter more in the upcoming year.
But some are starting to take cues from traditional universities, offering more scholarship money and focusing on improving their graduation rates, said Kevin Kinser, an education professor at Pennsylvania State University who studies the industry.
"What they're doing is investing in students so that students have positive outcomes," he said. "Before, they were focused on lobbying their way out of the problem."