Following Federal Aid Dollars

Nov 30, 2009

Students who are feeling the effects of the economic recession have turned to vocational schools and for-profit institutions like Kaplan and Phoenix. Because federal financial aid like Pell Grants and subsidized Stafford loans follow the student, a major portion of these recently boosted federal aid programs have gone to for-profit schools.

Students and Financial Aid

Grant Money Goes to For-Profit Colleges

The Associated Press (AP) just released an analysis of where the money from recently expanded federal financial aid programs has been going. They found that in the last couple of years, for-profit or 'proprietary' colleges have seen a major increase in government dollars, particularly from the low-income Pell Grant program. Last year, the federal government handed out a record $18.3 billion in Pell Grants, with a total of $4.3 billion going to propriety colleges. The five schools that received the most Pell Grant funds were all for-profit institutions. This group got over $1 billion between them, which is two and a half times what they received from the Pell program just two years earlier. Although complete data isn't available yet for this year, early reports suggest that this upward trend is continuing. In the first quarter of the current academic year, proprietary colleges received $1.65 billion from the Pell Grant program, which is 67% more than the same period last year.

Pell Grant Distribution Over Last Decade

For-profit schools are also seeing an increase in the amount of money they're collecting from federally subsidized student loan programs because they're seeing an increase in the enrollment of the low-income students. They received $7 billion in subsidized Stafford loan funds last year, about 1.5 times more than they got two years before. Although for-profit schools only enroll about 10% of the total number of American students in higher education, the number of Pell Grant recipients studying at for-profit institutions has gone up 50% in the last two years. Many experts attribute this increase to the economic recession, which has led to overcrowding at community colleges and public universities. For-profit schools are taking the overflow, and they'll only be needed more in the coming years. The Obama administration has set the goal of bringing the U.S.'s college graduation rate up to number one in the world by 2020, which will require the participation of the private sector.

Proprietary schools offer two other major draws for low-income students besides space: Convenience and vocational training. Many students are seeking the kind of focused job training offered by for-profit career colleges such as beauty or cooking schools. Working professionals who are seeking education and training to move up in their careers make up another major part of the population at proprietary schools. These students benefit from conveniently located campuses, night classes and an emphasis on e-books, which allow students to use their laptops to study anytime and anyplace.


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