http://online.wsj.com/article/SB10001424053111904279004576524660236401644.html?mod=googlenews_wsjParty Ends at For-Profit Schools
By MELISSA KORN
For-profit colleges are facing a tough test: getting new students to enroll.
New-student enrollments have plunged—in some cases by more than 45%—in recent months, reflecting two factors: Companies have pulled back on aggressive recruiting practices amid criticism over their high student-loan default rates. And many would-be students are questioning the potential pay-off for degrees that can cost considerably more than what's available at local community colleges.
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Education stocks dived as reports of dropping enrollments at for-profit schools emerged. Many students are re-considering their options, including attending community colleges, Melissa Korn reports on the Markets Hub.
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Enrollment at for-profit colleges soared during the recession, amid heavy advertising that appealed to suddenly jobless people needing new skills. But while the advertising continues, a number of for-profit schools including Corinthian, Apollo Group Inc. and others have tamped down aggressive recruiting. They've cut back on recruiter bonuses based on factors such as how many students make it past their first term. Apollo, operator of the University of Phoenix chain, has been criticized for targeting injured veterans and homeless adults to fill seats.
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The specter of a hefty debt load dissuaded Jason Tomlinson from enrolling to study business at Berkeley College, a for-profit school with locations in New York and New Jersey. Mr. Tomlinson, now 25, said he would have had to pay more than $20,000 per year, for four years, for that school's bachelor's degree program.
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Earlier this month, the Justice Department and four states sued Education Management Corp., alleging the company's compensation system for its admissions personnel violates the federal Higher Education Act because admissions employees had been paid based on how many students they recruit.
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It looks like some are waking up to the scam of these colleges. They are primarily money-making machines for the private corporations through tuition and for the banks through high-interest debt that most of these students will carry for the rest of their lives.