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State lawmakers in New York for the first time agreed to extend the state's tuition-free scholarships to for-profit institutions as part of a fiscal 2019 budget deal reached Friday.
After the removal of "not-for-profit" from legislative definitions, private for-profit colleges can now participate in the state's Enhanced Tuition Award. The scholarship provides up to $6,000 in financial assistance to residents attending a participating private college in the state.
"All along we felt for our students," said Donna Gurnett, president and chief executive officer of the Association of Proprietary Colleges, which represents 12 for-profit institutions in New York. "We want to keep tuition low and student loan debt low."
In December, New York governor Andrew Cuomo vetoed legislation that would have extended the tuition-free scholarships to the for-profits. Critics of for-profit institutions applauded the decision then and cited the default rates of students who attend for-profit colleges in the state compared to those who attend nonprofits.
"In extending New York's enhanced tuition awards to for-profit colleges without any meaningful protections from predatory schools, the budget bill raises serious red flags for students, consumers and taxpayers in the Empire State," Yan Cao, a fellow at the Century Foundation, said in an email. "Prior to this budget, New York already leads the nation in funding for-profit schools -- $68 million in 2015, exceeding the next-closest state by nearly 60 percent. Now, by allowing enhanced tuition awards to go to for-profits, taxpayers are further subsidizing sham schools that leave students with poor instruction, depressed wages, crippling debt, and high rates of default."
That $68 million comes from funds given to students through the New York Tuition Assistance Program.
Cao points to a Century Foundation report that was released last week that showed nearly half of all students at for-profits in New York default on their federal student loans within 12 years. The report also found that a majority of students at 25 of 65 for-profit institutions had earnings below those of the average high-school graduate -- roughly $25,000 a year after 10 years. The Century Foundation examined 119 for-profit institutions in the state.
"It's not theoretical. When California eliminated [scholarship] eligibility for over 100 for-profits with extremely high default rates, the student loan defaults went down," said Tom Hilliard, a senior fellow for economic opportunity with the Center for an Urban Future, a New York-based nonpartisan policy organization, which has been opposed to expanding ETA to New York's for-profit colleges. "New York should have a system similar to the federal gainful-employment system or similar to the California system that screens out the most underperforming colleges."
New York isn't the first state to provide tuition grant aid to for-profit colleges. Cao said a 2015 review showed that 23 states do not provide grant aid to for-profit colleges, while 27 states do and they sometimes publish lists of eligible for-profit schools and keep the "worst actors among for-profit schools" from receiving state aid.
Hilliard said with the Education Department and the Trump administration seeking to roll back oversight of for-profit colleges, now is the time for states to step up regulations in the sector.
"New York State should actually be strengthening oversight of for-profit colleges and the funding it provides to prepare for that potential surge of unethical business activity that we have reason to think is coming our way," he said.
But Gurnett said critics of for-profit colleges are unaware of and uninformed about how the institutions work in New York.
"The state has a long history of treating all sectors equally and we all have an equal seat at the table," she said. "We're all held to the same high standards, and there is strict oversight here in New York State."
Gurnett said among the 12 APC member colleges, which serve more than 35,000 students, the on-time graduation rate for associate degrees is 26.8 percent -- higher than the State University of New York system's 13 percent, independent nonprofit colleges' 18 percent, and the City University of New York system's 4.8 percent.
The cohort default rate among the 12 APC colleges is 10.9 percent compared to the 11.5 percent national default rate, Gurnett said.
"On average our students graduate with $21,000 in student loan debt," she said. "We really have strong outcomes and our members are committed to focusing on our students."
In a statement on the state budget, Mary Beth Labate, the president of the Commission on Independent Colleges and Universities in New York, applauded the governor for providing funding to students at private, not-for-profit colleges in the budget, but she didn't address the inclusion of for-profit colleges.
A representative from CICU declined to comment on the issue.
