Utah's for-profit colleges brace for new regulations

SALT LAKE CITY — In April 2004, officials from Utah-based Stevens-Henager College flew a delegation to the South Pacific island nation of Tonga.

A week later, after meetings with the royal family, they returned with commitments from at least 100 Tongans to come to Utah to study at the for-profit school. The bottom line for Stevens-Henager: $30,000 per student, or $3 million in revenue.

This "Polynesian Program," which also included a plan to create a campus specifically for Pacific Islanders at the Porter Rockwell Center in Bluffdale, fell apart without ever being fully implemented and has been part of a legal dispute between Stevens-Henager and one of its rivals ever since. But it's an indication of how creative for-profit colleges have been as they seek an edge in an increasingly competitive and cluttered market.

Utah has dozens of for-profit colleges that offer alternatives to traditional higher education and work with employers to meet the local labor market's demand. Ranging from beauty school to business school, it's impossible to paint all for-profits with one brush.

And they lay claim to successes: The locally-based Eagle Gate College Group reports that 92 percent of its graduates are placed in jobs, and the colleges say they are ahead of traditional schools in measuring what their students actually learn.

But the growing sector has come under intense scrutiny in recent months over concerns that too many students default on their loans while for-profit schools cash in on federal subsidies. This summer, congressional committees held hearings and the U.S. Department of Education proposed new regulations.

According to figures released recently by the Education Department, Utah's overall default rate for all college students is 4.3 percent, below the national average of 7 percent. But 20 percent of the Utah students who started paying back federal student loans in 2007 to attend for-profit colleges defaulted within three years, compared to just 4.5 percent at nonprofit schools. Nationally, students at for-profit colleges — about 10 percent of the total student population — accounted for 26 percent of borrowers but 43 percent of defaulters.

"While for-profit schools have profited and prospered thanks to federal dollars, some of their students have not," Education Secretary Arne Duncan said in a statement. "Far too many for-profit schools are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use."