Americans owe close to a trillion dollars in student loan debt.
Changing Gears has been reporting on that debt, a lot of which comes from attending private, for-profit schools. They’re the fastest growing part of higher education, popular for non-degree technical training. Call them career colleges, technical schools or trade schools - just don’t call them cheap.
- Fact: For-profit schools cost more than community colleges.
- Fact: For-profit students borrow more, then default more than students from public colleges.
- Fact: All this explains why I ended up at the strip club in Detroit.
So I’m at Cobra’s the Grind, eyes-avoiding-buttocks, walking up dimly lit stairs to meet the manager.
Steve is a big guy; he started here as a bouncer. He lays his gun down next to us as we talk. He had different life plans after graduating high school in 2006.
“Not this,” he says. “I mean, I don’t mind it now but I didn’t think I’d be here. I thought I would’ve been in a shop, turning a wrench.”
He wanted to work on cars.
So he got a diploma in automotive technology at Lincoln College of Technology in Indianapolis. It’s part of a big for-profit chain. The program was about a year and roughly $25,000, not including housing. An associate’s degree from community college would’ve cost less than ten grand.
“My mom was actually talking to me about it, but I wouldn’t listen, I was stubborn,” he says. “Whoever takes their mom’s advice, until you f*** up? I regret it.”
He didn’t find a car job, but he says he did rack up about $30,000 in debt.
Victor Gregory taught Steve’s auto class back at Dearborn High School. He also teaches at the local community college. That’s partly why the cost of for-profit training worries him. He’s actually barred some schools’ recruiters from his classroom if they can’t demonstrate good student results.
“I do not want my students going out in the field and becoming balled and chained to a bank. And having to park the whole idea of having a better life, just so they can pay their debts,” he says.
The big question is return on investment: What do students get for the cost? The private, for-profit sector of higher education is so broad, it can be hard to generalize.
But take the big, publicly traded company Universal Technical Institute Inc., or UTI. It has a campus outside Chicago.
The median cost of its 15 month auto tech certificate program is $30,000.
According to the school, the median federal loan debt for that program is about $14,000.
Tom Riggs is Senior Vice President of Operations for UTI. He says its graduation rates are drastically better than at many community colleges.
“Wegraduate in the high 60%, sometimes 70% of our students who start, graduate,” he says. “If you look at community college programs and certificate programs, a lot of their numbers are in the low 20s.”
Some students are drawn to short intense training. They get their hands on metal, and then they can start earning money. Riggs says employment rates coming out of school are also high.
“There are students out there who four year university isn’t the right thing for them,” he says. “And they have tremendous talent and passion around the things that we do, and we are the right place for them.”
One reason yearly tuition is lower at public schools is they get public support. But David Deming of Harvard’s Graduate School of Education says for-profits get a different kind of public support. Their revenues come overwhelmingly from federal financial aid dollars.
In other words, from student grants and loans.
“For-profit schools are not allowed to take any more than 90% of their total revenue from federal financial aid. That’s the maximum and quite a few schools are relatively close to the maximum,” he says.
For-profit students later default on their federal loans more often than those who attended public schools or private schools that are not-for-profit.
Still, it’s not hard to find technical school graduates who are employed and paying back those taxpayer dollars. I just went down the street to Suburban Chevrolet of Ann Arbor, where Andrew Marihugh works.
He recently graduated from UTI.
“I was told it was one of the best in the country,” he says.
He’s repaying $25,000 in loan debt from his training there.
“It was worth it,” he says. “I think it was worth it. There’s a lot of people that went to school there and there’s a lot of them that didn’t know how to even change oil.”
Marihugh is now an oil change technician, also called a lube tech. That’s the most entry level position here. He’ll work his way up. And in ten years, he’ll have worked off his debt.