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June 25, 2012 6:46 PM The Financial Future of For-profit Colleges

By Daniel Luzer

For-profit colleges might need to rethink their financial strategies, says the president of the Association of Private Sector Colleges and Universities, the for-profit colleges’ trade group.

According to an article by Paul Fain at Inside Higher Ed:

Federal budget woes will dominate the ongoing policy debate over for-profit colleges, said Steven Gunderson, president of the Association of Private Sector Colleges and Universities, the industry’s primary trade group. And as a result, he said, for-profit institutions should reduce their reliance on revenue from federal financial aid.
“There’s not enough money,” said Gunderson, who was speaking here at the association’s annual meeting. “We can’t survive on Title IV funding in an era of deficit reduction.”

Gunderson, former Republican congressman from Wisconsin, is bringing up a very important point here. For-profit colleges, after all, are heavily dependent on the federal government for their profit. They earn up to 90 percent of their income from federal grants and loans.

This is one of the more honest, and interesting, points I’ve heard expressed by the association of career colleges. That being said, it’s not really clear where this new money will come from. According to the article, Gunderson said “some for-profits should build partnerships with nonprofits that enable them to become less reliant on revenue from federal sources.”

That might help a little, but if the economy and political opposition force a dramatic reduction in federal funds “building partnerships” isn’t going to be much help; many of these schools are just going to have to go out of business.

Daniel Luzer is the news editor at Governing Magazine and former web editor of the Washington Monthly. Find him on Twitter: @Daniel_Luzer