Don't Blow Up All For-Profit Colleges, Just The Bad Ones

Earlier this week, Corinthian Colleges, a major for-profit college company, announced plans to shut down its 28 remaining campuses. This decision, prompted by federal Department of Education sanctions, will leave 16,000 students stranded. It's safe to say that Corinthian is the most prominent casualty of the Obama administration's campaign against for-profit colleges.

Now, Corinthian certainly deserved these sanctions. Like many big chain for-profit colleges, it has a well-documented history of using deceptive recruitment tactics and providing substandard course offerings. Its outcomes, measured in graduation and loan default rates, were awful. And it failed to address Department of Education allegations that it had falsified job placement data.

Corinthian's demise therefore isn't terribly tragic. But it's also important not to demonize the entire for-profit college industry.

For-profit colleges do a better job than their traditional peers in recruiting minorities, women, older, and poorer students. Since for-profit college administrators generally aren't held captive by tenured faculty or trustees, they can quickly change course offerings to adapt to labor market demand. Students who attend two-year programs at for-profits, moreover, graduate at higher rates than students attending similar programs at non-profit private or public colleges.

The Obama administration has not seen fit to capitalize on these advantages. Instead, it's gone after the for-profit college industry by proposing "gainful employment" regulations that would make for-profits whose graduates failed to meet a certain debt-to-earnings ratio ineligible for federal student financial aid.

While we should applaud attempts to make federal financial aid disbursements contingent on student outcomes, it doesn't make sense to single out for-profit colleges. It's true that for-profit college students have the least post-graduation success, as evidenced by a New America Foundation study showing that 20 percent of them would fail the "gainful employment" test. But a significant percentage of non-profit public and private colleges — 4 percent and 8 percent, respectively — would also fail.

Policymakers seem to believe that since for-profit colleges are higher education's worst performers, no other sector deserves similar scrutiny. But if they're truly interested in helping students get a good return on their investment in higher education, they should care equally about the quality of education in other sectors. In particular, they should devote more attention to the community college sector, which has the highest student loan default rates, lowest completion rates, and largest recent drop in completion rates.

Moreover, policymakers should try to maximize the promise of the for-profit college sector. They can take their cues from states like New York, which both makes it difficult for large for-profit chains with bad records to operate, and to promote the work of high-performing for-profit colleges. They can also encourage students to graduate sooner by limiting the time they're eligible for certain student loans.

Finally, they can foster partnerships between for-profit colleges and local employers.

While the federal government should sanction for-profit colleges that waste federal aid dollars, policymakers shouldn't try to undermine the entire sector. To succeed in the global economy, American students need a wide range of educational opportunities. For-profit colleges remain a crucial option.

This piece originally appeared in Washington Examiner