For-profit schools are struggling

University of Phoenix

TEXT OF STORY

Kai Ryssdal: If you saw the BCS national championship game last night, you couldn't have missed all the product placement in the middle of that show. The game was played at University of Phoenix Stadium after all, one of the biggest for-profit colleges in the country.

For years, schools like the University of Phoenix have been tremendously profitable. Not so these days. New regulations that are cracking down on recruiting practices and high student-loan burdens -- not to mention a ton of bad publicity -- are keeping students away by the thousands.

Marketplace's Jennifer Collins reports.


Jennifer Collins: The University of Phoenix says new student enrollment was down more than 40 percent in the fall. This quarter isn't expected to get any better. Strayer University, another for-profit, says its new student enrollment is down 20 percent. Part of the fall-off may have to do with changes in the way recruiters are paid.

Amy Junker: Some of those enrollment counselors, as you might expect, have become less productive.

Less productive, says analyst Amy Junker because they no longer get commission. They earn a flat salary no matter how many students they bring in. The University of Phoenix has also added a three-week mandatory orientation program, so it can weed out students who aren't prepared for university-level courses. Brandon Dobell is with investment firm William Blair.

Brandon Dobell: I think the students in a large majority of online programs go into it with an incomplete view of how tough it is.

And many of them end up saddled with debt. New regulations may mean for-profit programs would lose access to federal student aid if too many of their graduates don't earn enough to pay off their loans. Dobell says these rules may force a shake-out among for-profit schools.

Dobell: I think what you're going to end up seeing is a lot of small schools are going to go out of business.

He says the larger schools are making the kinds of changes that will allow them to keep earning a profit. OK, maybe a more modest one.

I'm Jennifer Collins for Marketplace.

About the author

Jennifer Collins is a reporter for the Marketplace portfolio of programs. She is based in Los Angeles, where she covers media, retail, the entertainment industry and the West Coast.

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