'We are aggressively recruiting right now': How for-profit colleges are preparing for next semester

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Coronavirus has dramatically changed college for millions of students, as schools have been forced to close their physical campuses and move classes online.

Now, many are anticipating that enrollment will be down at traditional non-profit four-year colleges next semester.

"I know there've been some students that have already withdrawn from next year because they're worried about not getting the same type of on-campus experience that they wanted," Jeremy Alder, founder and managing editor of College Consensus, tells CNBC Make It. 

"I wouldn't be surprised to see enrollment in residential college programs drop by roughly 10% or so in the fall," Michael Horn, co-founder of the Clayton Christensen Institute, a nonprofit, nonpartisan think tank that researches disruptive innovation tells CNBC Make It. "On the flip side, I think we will see enrollments in online programs rise quite a bit, driven by adult learners — many of whom have been recently laid off — looking to wait out the recession and use their time productively by skilling up."

Among these online programs are for-profit universities such as DeVry University and Capella University that often offer both online and in-person classes.

Here's how for-profit and non-profit colleges are thinking about the coming academic year: 


While many traditional non-profit colleges predict that enrollment will be lower next semester, Elise Awwad, vice president of strategic enrollment for the for-profit DeVry University, has different expectations. 

"For DeVry University, because we've been in the online space for years, we are expecting somewhat similar levels of enrollment," she tells CNBC Make It. "But we are also anticipating additional concerns, which is why we're really focused on providing proactive care and making sure that we're addressing those concerns and that students are making an informed decision before attending." 

DeVry is not alone in its enrollment projections. 

During a March 31 earnings call for Strategic Education, the company that owns for-profit colleges Strayer University and Capella University, executive chairman Robert Silberman said "as fully online universities, both institutions are uniquely prepared to operate successfully in a pandemic-affected world."

"To date we have not seen higher levels of students dropping, withdrawing from classes, failing to reregister for upcoming terms beyond what we would normally expect to see during this time of a quarter," said Strategic Education's president and CEO Karl McDonnell during the call, adding that he expects new enrollment to grow by 17% and total enrollment to grow by up to 4%.

The DeVry College of New York, part of DeVry University
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Clinton Gardner, president of the University of the Potomac, says his school is hoping to recruit domestic students to offset the number of international students who will no longer be able to attend. The for-profit college offers classes online as well as on campuses in Virginia and Washington, D.C., and offers associate, bachelor, master's and doctorate degrees, specializing in information technology. 

"For the past several years we have enrolled a sizable number of international students either at our Washington, D.C. or Virginia campus," he says. "But with the current pandemic and with F1 visas basically being closed down right now, it will impact that group of students and we're focused on increasing the number of domestic students that enroll in our programs."

To do so, the school is using social media to attract a wide range of students. 

"We are aggressively recruiting right now through a number of social media sites," emphasizes Gardner, adding that the school has expanded their outreach efforts "to include students that traditionally go off to four-year residential colleges that may decide to stay at home for a variety of reasons in the fall."

He continues, "We're also looking at the opportunity to have conversations with currently unemployed individuals and those who are looking to change careers."

Other for-profit schools have stepped up recruiting as well. 

In mid-April, Capella University released two advertisements tying the school's nursing program to the nurses combating the coronavirus pandemic. "At Capella University, over 14,000 of our students and alumni are nurses," reads the ad. 

The ads came just days before a federal class-action lawsuit against Capella University was announced. The lawsuit claims Capella made misleading statements about the time to completion and the cost of doctoral degree programs through recruiters and marketing materials. 

"Only 10% of the people that enroll in Capella's doctoral program ever get their doctorates," says Joseph Peiffer, the prosecuting attorney in the lawsuit against Capella. 

Representatives for Capella University did not immediately respond to questions about the lawsuit or the school's graduation rates. 

Costs and graduation rates

Some experts fear what an increase in enrollment at for-profit colleges with high costs and low graduation rates might mean for students. According to the National Center for Education Statistics, just 21% of students at for-profit colleges graduate within six years. That rate is roughly four times higher at non-profit colleges and universities on average.

And even among the minority of students who do manage to graduate from for-profit programs, research suggests they earn 11% less compared to graduates of public universities. 

According to the Brookings Institution, roughly half of students who take on debt to study at a for-profit college default on their loans, compared to 19% borrowers at non-profit private colleges and 18% of borrowers at non-profit public colleges.

To be sure, there is a wide range in the costs and graduation rates of for-profit universities. 

For instance, at DeVry University the average net cost (including tuition, fees, living expenses and scholarships) is between $20,000 and $33,000 per year for full-time, first-time students who qualify for financial aid. The percentage of students who graduate in eight years (known as the 8-year graduation rate) is reportedly between 17% and 26%. 

According to the Department of Education's figures, roughly 11% of Capella University students graduate within eight years and annual costs are closer to $7,000 per year. 

The 8-year graduation rate is 29% at the University of the Potomac's Washington D.C. campus and 40% at its Virginia campus. Costs at the school are around $27,000 per year, according to the Department of Education's figures.

Gardner claims costs at the University of the Potomac are actually significantly lower because the Department of Education's calculations takes factors such as living expenses into account. "At the undergraduate level, our tuition cost is $240 per credit hour and expanded over a 120-hour program, the total cost of the degree itself is $33,000," for domestic students, he says.

He stresses that not all for-profit schools are created equal, noting that the average class size at his institution is around 10 students per class and emphasizing the University of Potomac's accreditation status, which allows students to transfer their credits to other accredited schools if they wish. 

"Every school has its own great attributes, but not every school is for every single student, the key is to do the research," he says. "And if students do have to plan on taking courses online, they should look at number one: affordability."

For-profit concerns 

But people like Peiffer allege that bad actors will take advantage of students and taxpayers.

"I think [Capella] is anticipating enrollment going straight up. We've seen this playbook before during the Great Recession: they spent a ton and ton of money on marketing in order to sop up as many federal dollars through the [federal student] loan or GI program as they could," says Peiffer.

For-profit colleges have long come under fire for taking advantage of government-subsidized education programs such as GI benefits for veterans and subsidized federal student loans. 

According to student loan expert Mark Kantrowitz, the for-profit college sector takes in around 15% of the government's financial aid each year. And a third of the colleges — of which there are some 7,000 around the country — derive almost all of their revenue from federal sources.

In October 2019, Democrats introduced a bill to the Senate that would ban the U.S. Department of Education from sending its federal grants and loans to for-profit colleges for this reason. 

"I worry that the for-profits will take advantage of this moment in time when people are not working, they need to do something, they're looking for professional development and personal development," says Lynn Pasquerella, president of the Association of American Colleges and Universities.

Pasquerella says the financial pressures of the economic recession will disproportionately force low-income students, students of color, international students, working students and undocumented students to drop out of their schools. She adds that "open-access schools" — public colleges and universities that admit at least 80% of applicants such as community colleges — that often educate underserved communities such as these, as well as small colleges with limited endowments, will be hit the hardest. 

Pasquerella says she is concerned about the possibility that students who face the biggest challenges right now, such as students of color and low-income students, will turn to expensive for-profit providers that have historically had low completion rates. 

"The risk is that students [at for-profits] will end up not completing their curriculum, and they're left with debt burdens that they can't pay back because they're still unemployable as a result of not having a college degree."

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