From NBC's Ali Weinberg
As the Obama administration works to boost college graduation rates during an economic downturn, a liberal nonprofit organization is recommending that sometimes controversial for-profit colleges like the University of Phoenix and DeVry Universities be recognized as viable alternatives to traditional institutions like state and community colleges.
Michael J. Wilson, the director of the organization Americans for Democratic Action, said today that for-profit colleges are a good fit for both first-time and returning college students, especially those in underserved communities, and should not be overlooked in the hierarchy of higher education institutions.
"We don't believe we can use the same narrow bands of universities that we traditionally use, and we believe we need to use every arrow in our quiver," Wilson told reporters in a conference call today. Citing the rising, often prohibitive costs of traditional colleges Wilson said "education is unequal depending on where you are from, and we need to give more opportunites" to low-income people seeking further education and training.
For-profit colleges are owned by publicly traded companies and do not rely directly on taxpayer money like state and community institutions, which Wilson said is a "wonderful two-fer" for students and taxpayers that "really fit the current fiscal system." He added, "These schools provide increased access and more flexibility for adults. They are not taking tax money to pay for themselves, but are paying back taxes."
By some accounts, however, the funding structure of for-profit colleges is problematic. Because the schools attract a high number of low-income students, many take out loans like federal Pell Grants. Last year, 24% of the government's record $18.3 billion Pell Grant program went to for-profit colleges, a recent AP study found. But the study also concluded that nearly one quarter of students at for-profits default on their loans within four yearse, more than double the rate of other kinds of schools.
Some for-profit instutions have also recently come under fire for their recruiting practices. Last week, Bloomberg reported that Apollo Group Inc., which owns Phoenix University, paid $78.5 million to settle a whistleblower lawsuit over allegations that recruiters were compensated based on the number of students enrolled.