For-Profits See Opportunity in Texas Higher Ed Woes

For-profit institutions see opportunities in the declining state support for public institutions, disappointing graduation rates, and questions about productivity and efficiency.

Such schools, often referred to as career colleges, have their own well-publicized problems, including steeper price tags than some public schools, higher student loan default rates than other sectors and lingering suspicions about quality. It’s not uncommon to see an exposé questioning a for-profit college on the evening news.

But many stakeholders in Texas’ higher education ranks believe those schools will play an even greater role in the state’s future. And career college leaders are mobilizing to make the case that they offer an education that is both high quality and efficient.

Nationally, students at for-profit institutions represent 12 percent of the total in higher education. They also represent 26 percent of all student loans and, according to the U.S. Department of Education, 46 percent of all student loan dollars in default. In Texas, the numbers have been increasing steadily. Officials at the Texas Higher Education Coordinating Board say, however, that a 30,000-student increase in the last year is, in part, due to an increase in the number of schools actually reporting their data.

“They’re going to play an essential part in meeting the workforce needs of the future,” Bill Hammond, president of the Texas Association of Business, recently told The Texas Tribune. “We can’t meet our goals without them.”

Hammond’s organization recently hosted a daylong higher education summit in Austin. One of the speakers was El Paso businessman and Texas Business Leadership Council chairman Woody Hunt, who laid out those goals.

To compete globally by the year 2030, Hunt, a former member of the University of Texas System Board of Regents, said the state must, despite widespread budget cuts, produce 4.1 million graduates with associate and bachelor’s degrees. Included in that figure are 600,183 additional degrees to “non-traditional aged adults.”

That segment is particularly attractive to career colleges, whose students have an average age roughly six years older than the typical community college student.

Jerry Valdez, executive director of the Career Colleges and Schools of Texas, told the Tribune that the most common misconception about the institutions he represents is that they cost too much.

While the student's costs may be higher than those at a comparable public institution, Valdez wrote that students might be willing to pay a higher price for “the flexibility of multiple annual start times, the choice of five-day classes, the acceleration and guarantee of sequencing a course of study, the inclusion of books, fees and materials, and the connection with employers who hire the program graduates.”

Joe Fisher, president of for-profit Hallmark College, acknowledged that a student could pay $15,000 more to get a degree from his institution than nearby University of Texas at San Antonio. But at the public university, he said, more total money would be spent from a variety of sources to get that student to graduation. “It’s very costly to deliver an education,” he said. “But we’re far more efficient than the state. So, that’s true cost.”

Valdez pointed to a major financial difference between private and public institutions. “There are no public subsidies for buildings and equipment, no state allocation to pay for faculty and administration, and in fact, these entities pay taxes on their physical infrastructure and on their profits.”

His organization recently commissioned a study by the Perryman Group, an economics consultancy, which found that for every student who obtains an education through a career college, the state saves approximately $1,800.

In part, that means those students shoulder more of the costs themselves. Fisher said that burden could be reduced if some federal regulations were removed, including one that caps at 90 percent the amount of revenue a career college can derive from grants and loans.

Fueled by questions about misleading practices at some schools and concern about ballooning debt, the trend at both the federal and state level has been to put more regulations and monitoring mechanisms in place for career colleges.

In the most recent Texas legislative session, state Sen. Judith Zaffirini, D-Laredo, introduced a measure that would increase scrutiny by requiring career colleges offering associate's degrees or higher to be subject to the state’s higher education accountability system. Ultimately it was incorporated into a bill of Plano Republican state Sen. Florence Shapiro's and passed.

Fischer said for-profit colleges are not concerned about the new reporting rules, which will require them to post more information about their education outcomes, because their graduation rates and employment rates tend to be significantly higher than those at community colleges. He is more concerned with new federal regulations that require schools to have certain levels of loan repayment by their graduates, a factor Fisher said is mostly tied to demographics and is largely beyond the schools' control.

Higher education in Texas would benefit, Fisher said, from an increase in mechanisms that allow students “total mobility” to transfer seamlessly from career colleges to other institutions. He blamed what he called a misguided view that the regional accreditors of traditional institutions are superior to the national accreditors of for-profit institutions.

A small group of Texas lawmakers is particularly sympathetic to the role of career colleges because they have personal experience with them. State Rep. Dan Huberty, R-Humble, received his MBA from the University of Phoenix and later served as an instructor for the fast-growing, largely online school. “I want my degree to be as valuable as it would be if I went to UT or some other place,” he said.

Huberty said he was aware that some for-profit institutions may have taken students for a ride or operated as mere diploma mills. He stressed the importance of monitoring such entities.

“Nothing should be given to these schools. They should have to earn it, and they are earning it,” he said. “In my opinion, they’re viewed as a very solid competitor and have a lot of great ideas on how to provide that level of education and quality of education to people and to meet their needs.”

Texas Higher Education Commissioner Raymund Paredes said the state monitors the quality of career colleges carefully and has had few complaints about the larger, better-known schools.

He said the contribution of career colleges go beyond training workers. “I think people underestimate the role career and technical colleges play in pushing innovation in higher education,” he said.

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