Scathing report on for-profit colleges hitting Career Ed, DeVry in wallet
BY FRANCINE KNOWLES Business Reporter firstname.lastname@example.org July 31, 2012 7:00PM
Exterior of DeVry University. | Al Podgorski~Chicago Sun-Times
Updated: September 2, 2012 6:17AM
Local for-profit colleges DeVry Inc. and Career Education Corp. are expected to see continuing declining enrollment along with others in the industry in the wake of a Senate report released this week that blasted the sector for widespread problems, including higher tuition costs and dropout rates.
The report said Downers Grove-based DeVry Inc. had among the highest bachelor’s degree dropout rates at 56 percent. Schaumburg-based Career Education’s was among the worst performing associate degree programs with a dropout rate of 62 percent.
“There has been a whole series of investigations into this industry,” attracting negative headlines, said Robert W. Baird analyst Jeffrey Meuler, who added that can create “reputational damage,” in the minds of prospective students and employers.
There’s going to be “smaller demand in the marketplace, and there’s going to be higher costs in order to not only attract those students but retain them teach them, service them and help them get jobs,” said Morningstar Inc. senior analyst Peter Wahlstrom. “That could turn into lower profits down the road.”
That already appears to be happening. After the markets closed Tuesday, Career Education reported a net loss of $100.2 million in the second quarter and said new student starts plunged 40 percent from a year earlier and that its total student population fell 24 percent.
Last week, while reporting earnings, DeVry said new enrollments fell nearly 20 percent in the spring term and are expected to fall 15 to 17 percent in the summer term.
The Senate report, the culmination of a two-year investigation by the U.S. Senate Health, Education, Labor and Pensions committee that looked at 30 for-profit higher education companies, found that of students that enrolled in 2008 and 2009, more than half withdrew by mid-2010. For associate degree students, 64 percent left with no degree.
More than 80 percent of the revenues of the 30 for-profit higher education companies examined in the report come from taxpayers, the report found.
In 2009-2010, the sector received $32 billion, including 25 percent of education student aid funds, 37 percent of post-9/11 GI bill benefits and 50 percent of Department of Defense tuition assistance funds.
The report revealed on average bachelor of arts programs cost 20 percent more than analogous programs at flagship public universities, and associate programs and that certificate programs cost more than at community colleges — four times and four-and-a-half times respectively.
It also found:
♦ Predatory recruitment practices that have misled students on the cost of the programs, time to complete them, completion rates of other students, transferability of credits and the success of other students in finding jobs.
♦ The average CEO salary was $7.3 million in 2009, more than seven times the average salary of large public university presidents and more than twice the average at non-profit colleges and universities.
The Association of Private Sector Colleges and Universities labeled the report is part of “continued political attacks” on the industry.
“While this process has identified some problems that must be addressed, many of these issues, including improving graduation rates, ensuring ethical recruiting practices, reducing student debt and addressing the educational needs of underserved populations requires the whole of higher education’s attention and action,” DeVry said in an email.
“We are committed to being part of the solution to the various challenges affecting all postsecondary institutions and their students,” Career Education spokesman Mark Spencer said in an email. “The Committee staff’s report regrettably and notably fails to acknowledge that commitment, represent our clear progress and reflect our active engagement, communication and support of our students.”