In January, President Obama announced an initiative to make two years of community college free for students who maintain good grades and stay on course to graduate. The proposal, which could extend to as many as 9 million students nationwide, reflects a growing awareness that a four-year liberal arts education, with its high price tag and uncertain job prospects, is impractical for millions of young people. The proposal also demonstrates the Obama administration’s continued coolness to another higher-education alternative: for-profit colleges, which were not included in the free-tuition plan and which many education-policy analysts believe will be hard-hit by new federal accountability measures taking effect this summer. For-profits have provided their critics with some ammunition: national data show that students at such schools default on their loans at high rates, and the institutions themselves have been scored for everything from deceptive marketing to poor quality to low graduation ratios. In a 2012 report, Senator Tom Harkin declared that “abysmal student outcomes” were “the norm” among for-profit colleges, and called the industry a “racket.”
And yet, there is more to the for-profit story. When properly administered and regulated, these kind of schools can offer a valuable educational alternative, especially for lower-income and minority students, providing a gateway to the working world. In New York State, where for-profit enrollment has doubled over the last 30 years, a sensible regulatory regime has helped foster a number of successful schools. A solid percentage of them boast above-average student outcomes, with graduation rates outpacing any other higher-education sector. New York’s example—especially in New York City, where the for-profit sector has flourished for years—should serve as a national model.
New York’s first for-profit colleges were business institutes offering practical workplace training, including bookkeeping and office management. Some, such as Bryant & Stratton College (founded in 1854), Jamestown Business College (1886), and Utica School of Commerce (1896), still operate today. Starting in the 1970s, the New York State Board of Regents allowed these and other business schools to become for-profit degree-granting institutions. By 2010, 55,000 students were enrolled in 40 for-profit colleges across New York. This figure pales in comparison with enrollments in the City University of New York (CUNY) system (263,000 students), the State University of New York (SUNY) system (246,000), and the total enrollment of New York’s private nonprofit colleges (485,000). Some for-profits, like Wood Tobé-Coburn School in Manhattan, offer associate’s degrees only, as part of a wide range of training programs, while others provide two- and four-year degrees. New York is also home to about 500 for-profit schools that don’t offer degrees. These schools—which an estimated 200,000 students attended in 2013—generally offer certificates in niche fields such as cosmetology, culinary arts, and personal fitness training.
Students at for-profit colleges tend to be considerably older than their peers at nonprofit schools, and they’re more likely to be minorities, female, and financially independent. For the most part, they look to obtain career training, not a liberal arts education. Many are working their way through school and find online courses, which the for-profit colleges offer in abundance, appealing. Rebecca, a health administration major who transferred to Berkeley College from a four-year nonprofit private college that “wasn’t a good fit,” says that the for-profit’s mix of online and in-person courses, offered at its campuses in New York City and Westchester, as well as in New Jersey, “allows me to be flexible.” She took most of the courses for her major online. Like the University of Phoenix and some other for-profits, Berkeley also lets students enroll on a quarterly basis, so that they can finish their degrees at their own pace. “If you have the drive, you can really make it,” says Angela Harrington, Berkeley’s vice president for communications.
Student motivation may help explain why, in 2013, New York State’s two-year degree-granting for-profits graduated a larger percentage of their full-time associate’s degree students than any other higher-education sector, including private nonprofit colleges. Even when controlling for students’ high school GPAs, degree-granting for-profits’ superior record in graduating students in short-term programs holds up against CUNY and SUNY schools. Though New York’s four-year degree-granting for-profit schools have seen less dramatic success than their two-year counterparts, they, too, outperform CUNY’s four-year graduation rate, though they lag behind SUNY and private nonprofit institutions. New York State’s two-year degree-granting for-profits can also take pride in their success with African-American and Hispanic students, who graduate at higher rates than their peers attending traditional two-year colleges.
When evaluated against national averages, these schools’ numbers fare somewhat worse, though their performance remains respectable. Of New York State’s two- and four-year degree-granting for-profit colleges for which the federal government has collected full graduation and loan repayment rates, 18 percent have three-year default rates below the national average and graduation rates above the national average for students in traditional institutions. Moreover, of the 118 for-profit schools in New York—degree- and non-degree-granting alike—for which the federal government has full data, 36 percent exhibit similarly good statistics, a performance rate topping that of for-profits in other large states, such as Illinois, Texas, and California, as well as that of neighboring states such as New Jersey and Pennsylvania.
New York’s for-profit colleges seek to connect students to the world of work. LIM College, located on East 53rd Street near Fifth Avenue, offers an education in “the business of fashion.” Students there praised the school’s relentless focus on career training, which requires them to complete 130 hours of internships in both their freshman and sophomore years—first on the retail side, then on the corporate side. Like many for-profits, the school helps students obtain internships with its “industry partners”—well-known companies such as Bloomingdale’s, Versace, and the Gap. Many of these positions turn into full-time, career-path jobs after graduation. “Leaving with a full résumé is a huge perk,” says Shannon, a senior. Moreover, students say, their work experience enabled them to formulate career goals. “The internships implanted in our brains what to look for,” says Nicole, a junior—in her case, a desire to work in wholesale fashion.
Students also like for-profits’ ability to add courses relevant to today’s job market. Unlike nonprofit schools, which are typically constrained by administrative bureaucracy and tenured faculty, for-profit colleges can readily change their curricula to meet demand. One study found that for-profit colleges across the country added degree programs in popular fields such as nursing and laboratory technology at a much faster rate than did their nonprofit peers. Liz Marcuse, LIM’s president, constantly asks the industry professionals on her advisory board whether LIM is offering “current skills” and capitalizing on “emerging technologies.” LIM administrators recently added an elective in application design because “it’s such a big trend now.”
Courses have a distinctly practical bent, and many for-profits hire industry practitioners as faculty, to give students a better understanding of workplace dynamics and to connect them to particular industries. In his “Principles of Management” course at Berkeley College, Chris Christiansen, who previously worked as a manager at Empire Blue Cross / Blue Shield, draws on his experience to prepare students for the working world. The lecture I attended at Berkeley’s Midtown East campus—“The Steps in Human Resources Management”—focused on how major companies hire employees. “This will help you because in two years you’ll be looking for a job,” Christiansen told his classroom of about 40 students. “Some of the things I’m going to say you’re not going to like. But I’m going to be real with you. I’m going to tell you what today’s employer is looking for.” Christiansen outlined the technical steps of the hiring process, explaining how human-resources departments work, and described the three components of a job application: application form, résumé, and interview. He devoted most of the lecture, though, to “soft” skills, which he defined as the “cluster of personal qualities, habits, and social graces that make someone a good employee.” Potential employers, Christiansen argued, will distinguish between “the best of the best” on the basis of such skills. He urged students to stop using “filler” words such as “kinda” and “like” and stressed the importance of treating receptionists courteously, making eye contact, and dressing conservatively (dark suits, no facial hair).
To drive these points home, Christiansen mock-interviewed a student volunteer and asked the class to evaluate his performance. They were unsparing, noting that the student kept his hands in his pockets when he entered the room, looked away while greeting the “interviewer,” and offered only vague answers to some questions. Christiansen, in turn, criticized the student’s self-deflating response to a question about his biggest weakness. “You never tell them anything bad!” Christiansen exclaimed. “Why say something that you don’t need to say?” Instead, he advised the interviewee, offer truthful but self-promoting responses, such as “I don’t have major experience, but I’d like to join your company to gain it,” or “I haven’t used Excel in a few months, but I’d be able to brush up on it.”
For many working professionals with experience interviewing for jobs, pointers like these may seem obvious. But it’s precisely because many lower-income students lack experience—and the professional networks that would help fill the gaps—that they choose for-profit colleges, which familiarize them with the otherwise inaccessible norms of corporate America.
Talking to many alumni of New York’s for-profit colleges gives a sense of the possibilities that these schools can open for determined students. Selina Suarez credits her career success to the education she received at Monroe College, on Jerome Avenue in the Bronx. A 2005 graduate of the school, Suarez grew up in Coney Island—“not a great neighborhood”—and dropped out of high school in 11th grade to have a baby. After languishing in an alternative school, she enrolled at Monroe when she was 19. The first in her family to attend any kind of college, Suarez appreciated Monroe’s robust support system. Staff discussed career goals with her “from day one” and helped her understand the rules of federal financial aid, which provides $4,159 in grants and $6,015 in loans to the typical federal aid–receiving New York for-profit student. Professors told her to “keep an eye on the job market” by browsing Monster.com and Bureau of Labor Statistics job projections. Seeing that information-technology professionals were in high demand, she studied HTML coding. Later, after obtaining an MBA at St. John’s University, she started a company that helps nonprofit organizations manage their own databases. She’s now an “evangelist” for Monroe, especially when she speaks to prospective students from low-income minority communities. “The population that attends for-profits wants a degree that makes them immediately marketable,” Suarez told me. “We can’t afford to just get a degree in psychology and not have a job.”
Sean O’Connor chose a for-profit college, too, but not because he grew up in a rough neighborhood. A product of the Upper West Side and St. Agnes Boys High School, O’Connor was drawn to Berkeley College for its promise of connecting students to “real-world businesses.” A self-described “average” student, O’Connor was excited by the school’s internship opportunities as well as by the chance to take courses with industry practitioners. O’Connor’s business classes taught him real-world skills, such as how to make presentations and resolve workplace conflicts. And he gained work experience through a Berkeley-arranged internship with Madison Square Garden’s building operations that led to a full-time offer. He would have accepted the position had not a Berkeley admissions counselor, who knew of his interest in basketball, steered him to an even more attractive job—working as a membership coordinator at the National Basketball Association’s retired players’ association.
Through his NBA connections, O’Connor later helped start Force Brands, a company that works with food and beverage companies like Vita Coco, Patrón Tequila, and Illy Coffee to hire talent at all levels. The six-year-old company has 38 employees. “Berkeley is so close to the real world, so close to opportunity,” says O’Connor, who graduated in 2006.
Through its two higher-education oversight bodies—the Board of Regents and the State Education Department—New York has encouraged for-profit schools without overindulging them, an approach that doubtless helps explain the schools’ generally good record. Every eight years, the Board of Regents develops New York’s Statewide Plan for Higher Education. The most recent plan praises the sector for recruiting nontraditional students and for using online education to cut costs. The plan suggests that since one of the state’s priorities is preparing students for the workforce, “the resources of institutions such as proprietary colleges and their business partners should be called upon.” Accordingly, the plan proposes clarifying requirements and investing in new technology to ease the approval process for for-profit degree programs. It also calls for a “statewide campaign” to promote institutions offering relevant career education. “On the local level, there’s been support for the for-profit sector,” observes Gbubemi Okotieuro, Berkeley College’s vice president for government relations. “We’re part of the fabric.”
But in part to guard against the spread of predatory institutions, New York also maintains strict requirements on for-profit entities wishing to establish degree-granting colleges. The state Office of College and University Administration (OCUE)’s protocol for opening a degree-granting college in any sector involves four steps: submitting a self-study, undergoing an external review, responding to an OCUE questionnaire, and receiving OCUE approval for all proposed programs. For-profit colleges, however, must take extra steps. First, they must apply for licensing as a non-degree-granting institution and exhibit “successful operation” for two years in that capacity. They can then apply to the Board of Regents for the “provisional authority” to grant degrees. They’re required to demonstrate that they can manage a school in accordance with state and federal law, that they have the financial wherewithal and experience to run degree programs, and that they have no history of “fraudulent or deceptive practices.” Likewise, non-degree-granting for-profit schools cannot receive licenses to operate from the state without disclosing their owners’ past experience running schools as well as any previous incidents of fraud and “crime involving the operation of any educational or training program.” New York attorney general Eric Schneiderman has sought to penalize for-profit colleges that promote misleading placement statistics in advertisements.
In New York, part-time students at for-profit degree-granting universities are ineligible for the Tuition Assistance Program (TAP), the state’s largest grant program, and the state provides no direct state aid to for-profit schools—reducing taxpayer liability. Students at certain degree-granting for-profits are eligible for other grant programs, however, including TAP (for full-time students) and Aid for Part-Time Study. Still, students at two-year degree-granting for-profits receive less aid than their SUNY and CUNY peers, and students at four-year degree-granting for-profits receive less aid than their peers in every other sector. OCUE director Leslie Templeman insists, though, that New York’s approach to for-profit colleges is strictly neutral. The state, she said, simply “evaluates for-profit colleges within the structure of our regulations. . . . To the extent that we have quality for-profit schools in New York State, we’re supportive of those entities.”
New York’s for-profit college administrators don’t appear to be concerned about the extra hoops through which they must jump. The requirements “were designed to prevent predators from coming into the state,” says Liz Marcuse of LIM. “They make sure fly-by-night schools can’t operate.” Monroe College executive vice president Marc Jerome praises New York’s “tight, effective” regulatory system. Of course, existing organizations tend to benefit from regulatory barriers to new entrants, but the state’s mix of encouragement and extra scrutiny has seemingly worked to produce a competitive for-profit higher-education sector.
Ample room exists, though, for improving these schools. A 2013 audit by the New York state comptroller’s office found that many of the state’s for-profit non-degree-granting career schools are unlicensed and avoid reporting requirements on employment and graduation rates. The state education department should increase scrutiny of these schools to ensure that students don’t fall prey to fraud and should continue to monitor for-profits that inflate employment statistics. The Board of Regents should also exercise its authority to sanction substandard schools and, if necessary, revoke their licenses. Policymakers could also cut off the flow of grant dollars to poorly performing institutions.
The federal government, which has tremendous leverage over for-profit schools in the form of the student-aid dollars that guarantee many of the schools’ continued existence, should also step in—and follow New York’s example of encouraging good institutions and discouraging bad ones. To that end, the Department of Education should increase available student aid at for-profit colleges with proven records of success and reduce it for low-performing schools. The Obama administration clearly prefers community colleges, as its new initiative makes clear, and it is threatening to revoke for-profit colleges’ eligibility for student aid if students exhibit low debt-to-earnings or discretionary-income ratios. But policymakers should also encourage schools that provide an innovative educational model to underserved student populations. In particular, since two-year for-profit programs have had success in New York and—unevenly—nationwide, Washington should want students to enroll in them. Rewarding high-performing for-profit colleges will encourage subpar institutions to improve or get out of the market.
Given the disparate needs of today’s college students, it’s a mistake to write off the for-profit college industry. More states—especially those like Texas and New Jersey, whose entry requirements for for-profit colleges are relatively lax—could look to New York, which has achieved solid results. Along with the federal government, New York should continue working to improve student outcomes at these schools. As New York’s record shows, for-profit colleges offer poor and minority students opportunities they’re hard-pressed to find elsewhere. That’s an outcome that policymakers at the state and national levels ought to applaud—and support.
