Online Short-Term Pell Could Open the Floodgates to Predatory Actors

Blog Post
Dec. 14, 2022

Much has been said about the equity concerns of enacting short-term Pell given the low earnings and poor employment rates of existing short-term programs, as well as potential newly eligible ones. However, there is more to worry about as there is an effort not only to allow very-short-term job training programs—programs only 8-15 weeks long—access to Pell Grants, but also to extend that to entirely online programs of the same length. Very short online job training programs should be approached with skepticism due to many quality issues, but there is also the risk of abuse by predatory actors.

No one is surprised that the large online institutions like Western Governors University, Southern New Hampshire University, and Purdue University Global have joined members of industry and other schools with large online offerings urging Congress to remove the prohibition on online programs in the short-term Pell proposal under consideration, one of the few guardrails in the legislation. The ability of those institutions to build these programs quickly given their size and economies of scale is concerning, especially with their unknown outcomes, but they aren’t the only problem because there is also a serious risk of abuse by predatory industry actors.

Recent iterations of the main short-term Pell proposal under consideration have excluded for-profit colleges from gaining access—an important, though insufficient guardrail given the long history of predatory behavior and poor student outcomes in the sector. For now, that provision has held, even as the for-profit college industry has lobbied Congress numerous times to be included, especially since these schools are the main competitors for the large non-profits. But even if the for-profit exclusion sticks, it won’t be enough to protect students and taxpayers.

In recent years, a number of for-profit schools have “converted” (or attempted to convert) to non-profit status in order to avoid accountability policies. One of the schools mentioned as advocating for online short-term Pell is actually one example. Purdue University Global is the former for-profit college known as Kaplan University. While regulations have been put into place to try to avoid a conversion loophole, the availability of Pell Grant funding only incentivizes more to do so.

Other industry players are chomping at the bit to get their share of these Pell dollars, including the typically for-profit Online Program Managers (OPMs) that contract with institutions to stand up online courses and programs as colleges try to increase enrollment and revenue. Many OPMs also recruit and admit students, often taking a share of the tuition revenue generated by a student’s enrollment. In some cases, these contracts are exploitative and hardly advantageous for institutions.

These companies are basically salivating for their chance to profit from this expansion given the massive amount of funds available from the Pell program. While OPMs have primarily focused most on graduate degree programs, often loading students up with substantial amounts of debt, many are also betting big on short-term programs as an opportunity to increase revenue. In fact, according to one estimate, non-degree programs make up 36 percent of the types of programs offered by OPMS, compared to master’s at 45 percent and bachelor’s at 15 percent. Colleges are already partnering with them to create short-term programs, including coding bootcamps.

And that’s before short-term Pell is even a reality. No wonder OPMs are pushing Congress to include online programs. Once they have access to Pell funds, OPMs won’t hesitate to enroll more students and create more and more programs. And given how quickly OPMs can stand up a program as short as 8 weeks, it won’t take long for these companies to saturate the market with programs of questionable value. Worse, some OPMs are known for also pushing predatory private student debt products, like income share agreements. There is a substantial risk that they will set tuition prices in a way to expend the Pell Grant dollars, soak taxpayer money up, and then direct students to private debt.

Beyond OPMs and for-profit colleges, some are advocating for opening up eligibility for all federal student aid programs to unaccredited “alternative” providers, including online short-term programs. This op-ed makes that case and highlights 12-week online coding bootcamps as one example (it’s worth noting that those programs cost more than a whole year of tuition at most public universities and that the author is the founder and chair of a company that partners with for-profit colleges and would likely love access to federal student aid).

The Pell Grant program was created so that all students could pursue higher education regardless of their families finances. But rather than opening the door to the middle-class, short-term Pell risks steering low-income individuals away from the degrees and credentials that hold value in the labor market, to short-term programs that will lead to less financial security and future economic growth. Expanding it to include online programs amplifies that risk and could just lure students with the promise of flexibility and quality, instead wasting their time and precious Pell dollars just to line the pockets of profit-seeking actors.

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Federal Education Legislation Higher Education Funding and Financial Aid Higher Education Accountability & Consumer Protection Higher Education Access and Affordability