How the For-Profit College Can Destroy Your Life

“The first person to sound the warning of the coming of the Down-and-Out Man in academia was the seventeenth-century political philosopher [Gaspard de] Réal de Curban. He foresaw that, if the aristocratic social structure were shattered and a new one created wherein everyone would be in the race for social status and prestige, then society would be filled with tensions, frustrations, and violence. This, he explained, would happen because in an open society the failed man would have no one to blame for his failure but himself; whereas in a structured society where status and prestige were predetermined by birth, a man could attribute his failure to his birth, and the wounds to his pride and ego would be thus assuaged. This is of paramount importance in the Down-and-Out colleges today where so many are stretched beyond their ability and where in theory the institutions are democratic but in reality remain aristocratic.” -Ben Morreale, Down and Out in Academia, 1972.

By “Down-and-Out colleges,” the author of those remarks meant the “lower-tier” state schools and community colleges where he himself taught; the subtlety and elegance of his book undercuts the thesis a bit, for if there were professors like him running around such schools, anyone should have counted himself lucky to attend them. In any case, Prof. Morreale’s wiglet would certainly have been blown substantially higher had he lived to see the latest revelations in the ongoing scandal of today’s “Down-and-Out-colleges,” the so-called for-profit universities.

The General Accounting Office reported on August 4th on an undercover investigation that revealed the widespread fleecing of students in order to grab a staggering amount of Federal money: $24 billion in loans and grants provided by the Department of Education in 2009 alone. (I know-the GAO has undercover investigators?-yes!)

According to Frank Donoghue’s book, The Last Professors, fully one-third of American two- and four-year colleges were for-profit by 2003. The University of Phoenix alone currently enrolls over 440,000 students, making it the second-largest higher-education system in the country after SUNY. In 2008, when Donoghue’s book was published, the seven biggest public companies running these schools had a combined market cap of over $22 billion and enrolled nearly 700,000 students-nearly seven percent of all college students enrolled in U.S. colleges and universities that year. Total for-profit enrollment had ballooned to over a million by the time of the GAO investigation.

Instruction at for-profit schools is provided exclusively by employees of these companies, rather than by professors-there’s no such thing as research or tenure at a for-profit “university”-and accreditations are relatively shakier than at traditional schools. Donohue reports that the University of Phoenix never even applied for accreditation from the most prestigious agency for business schools, the Association to Advance Collegiate Schools of Business, for example. Only 26 percent of their instructors have been with the University of Phoenix for four or more years. Classes are shorter-24 hours of instructor time for a class, compared to 40 hours at a traditional school.

Given all that, you’d think it would be less expensive to attend a for-profit “university.” That would be no. For-profit schools, despite their lower-tier credentialing and the complete absence of tenured faculty, fine libraries and other perquisites of traditional schools, are pretty insanely expensive.

One student was told that the $14,000 she’d have to pay for a certificate in massage therapy would be a good deal, but GAO investigators found that a local community college offered the same certificate program for $520. A medical assisting certificate was about $12,000 at another for-profit college, $9,307 at a nearby private nonprofit college, and $3,990 at a local public college. A web design certificate in Pennsylvania would cost a student at one for-profit $21,250, versus $4,750 at a local private nonprofit college and $2,037 at a local public college.

On average, for the five colleges visited by GAO, it cost between 6 and 13 times more to obtain an associate’s degree at a for-profit than at a public college.

Even more shocking: the attrition rate. The University of Phoenix reports that under thirty percent of its two-year students graduate, according to a recent Marketplace exposé:

[...] many students saddled with debt don’t finish their degrees. The for-profit industry says about 60 percent of its students graduate from two-year programs. The University of Phoenix says its rate is less than half that. But whether students drop out or graduate, they still leave school burdened with debt. And it’s debt they can’t escape.

BARMAK NASSIRIAN: It is very important to understand, student loans are the most collectible obligation in the United States.

Barmak Nassirian is with the American Association of Collegiate Registrars and Admissions Officers.

NASSIRIAN: Students who default on their student loans have their Social Security benefits intercepted, have their tax returns intercepted, have their wages garnished. They are ruined for life.

To clarify: even if you go bankrupt, your student loan obligations don’t go away. The government, which guarantees these loans, will vacuum every last bean off you to satisfy those debts, and for the duration; whatever you can’t pay back, the taxpayer is on the hook for. Pew Trusts reported some chilling figures from 2009:

The new data show nearly 400,000 students who entered repayment in 2007 had defaulted by 2009, representing 12 percent of all students who entered repayment that year. Nearly half of these borrowers (44 percent) attended for-profit schools, even though only 1 in 14 students (7 percent) attend such schools.

So, many of these students are getting a low-quality education, overpaying for it and then they get into monumental debt and quit, never getting to benefit from having earned even a low-quality degree.

Some for-profits have entrance exam requirements, but in order to attend the University of Phoenix all you really need is a GED or high school diploma-any diploma, regardless of GPA. The GAO investigation shows that high-pressure sales tactics are routinely employed at for-profit schools to get people to enroll, and they help make sure you have all the money you will need in order to do so in the form of federal loans and grants which they will kindly aid you to procure. They snaffle the cash, and off you go into an allegedly glorious future.

The online degree courses offered by schools such as the University of Phoenix, DeVry and ITT are widely advertised on television and radio. It’s quite clear from these advertisements that what you’ll be paying for if you attend is not an education, but a degree that you can show a prospective employer. This trade-school mindset really throws the whole idea of higher education into some question. What do employers really think they are getting from a college-educated employee? Is there a difference between a certificate in cosmetology and a B.A. in English literature, and if so, what is it? Or rather, what is it with respect to the job market? There’s a current of thought out there that may suggest that the cosmetology certificate is more immediately valuable, because it will lead directly to a paying job. In this climate, maybe quite a lot of people would agree with that assessment.

Richard Hofstadter wrote, “Americans have shown an intense, almost touching faith in both the personal and civic uses of education; but this faith has not been accompanied by an equally profound understanding of the cultural content of education.” To which we might add, a clear understanding of the dangers of commodifying higher education is not only a matter of “understanding cultural content.” Maybe we should also be identifying the practical and urgent need for maintaining high, and fair, standards for the “personal and civic uses of education.”

JOHN SPERLING HAS YOUR MONEYJohn Sperling, the founder of the University of Phoenix, has been widely quoted as having said, “This is a corporation… coming here is not a rite of passage. We are not trying to develop value systems or go in for that ‘expand their minds’ bullshit.'”

(Point taken!)

Just … would it be too much to suggest that the man who sneers at “value systems” might be the same man who is willing to rip people off in order to grow very very rich at the public trough?

(On the other hand, how weird is it that John Sperling is himself a graduate of Reed College, UC Berkeley and Cambridge University? Maybe the “value systems” thing really is a little overrated.)

The GAO investigated fifteen schools, all chosen because at least 89 percent of their revenues came directly from federal aid, among other factors. The report makes for jaw-dropping reading.

The undercover investigators posed as prospective applicants. Some financial aid counselors and admissions representatives were helpful and gave accurate information, but the investigators also had many (many!) less-agreeable adventures. Here are just a few:

They were offered a free MP3 player, a “rolling backpack” or gift cards to local stores if they recruited new students;

They were told to lie on FAFSA forms, about everything from numbers of dependents to the amount of savings they had in the bank;

One was told that barbers can earn up to $250,000 a year (even though 90 percent of barbers make less than $43,000 a year);

They were falsely guaranteed or “virtually guaranteed” employment upon completion of various programs;

Six colleges in four states told undercover applicants that they could not speak with financial aid reps at all until after enrollment; one was “scolded” for refusing to enroll before speaking with financial aid;

One was coached on an entrance exam by the test proctor;

Information on graduation rates was refused at several schools; this information was unavailable to some prospective students either during in-person visits or on school websites.

According to new rules (the so-called “gainful employment rules”) proposed by the Obama administration, “for-profit colleges would not be eligible to receive federal student aid if their graduates’ debt load was too high to be repaid, over 10 years, with 8 percent of their starting salary.”

That’s an average figure, but just for comparison, for a $50,000 starting salary, you’d be able to offer a debt load of about $27,000.

Also for comparison: John Sperling’s 2009 compensation package (options and bonuses plus a base salary of $850,000) was over $6.4 million, a modest increase over his 2008 compensation of $6.24 million. Rather a big jump from 2007’s paltry $3.35 million. Sperling’s Apollo stock at today’s price is worth around $870 million. Now that’s what I call gainful.

But anyway, guess who is fighting the sensible safeguards offered by the gainful employment rules tooth and claw? Ding ding ding! Republicans! Scary Bush-era Education Secretary Margaret Spellings, now a lobbyist for the for-profit owners of these for-profit schools, wrote in the Washington Post that the bad Democrats are trying to “restrict access to a full range of education providers,” which, if we are talking about “education providers” who really just want access to oodles of government cash, then please, yes, let’s restrict access to those! After all, aren’t these the same Republicans who have been screaming about the profligacy of Democrats and the urgency of reducing the deficit? (One of these “education providers,” by the way, Kaplan University, is owned by the Washington Post.)

Despite all the money they’ve spent on advertising and PR to combat the bad press, the cracks in the for-profit education business are really starting to show. Led by Senator Harkin, the Committee on Health, Education, Labor and Pensions held hearings; the Times reported that the committee “is doggedly amassing a small mountain of data to support its case that the colleges are helping themselves, at the students’ expense.” John McCain stayed just long enough to quote a Huffington Post article by for-profit “advisor” Lanny Davis accusing the government of elitism and a seeming “distaste for profits” and whatnot before walking out.

Also at the hearing, a career adviser at Education Management Corporation, a large for-profit company, testified that she had been shown by a colleague how to manufacture fake e-mails from graduates and to falsify earnings data.

The adviser, Kathleen Bittel, said she reported those practices to her supervisor, but instead of disciplinary action, the colleague won the company’s “North Star” award. She also testified that part of her job was persuading graduates that their jobs used their training. That meant persuading a graduate who took on $100,000 in student debt for a bachelor’s degree in game art and design, that he had a job in his field, when he was earning $8.90 an hour in the video game department at Toys “R” Us.

In the wake of the GAO report, Apollo shareholders scrambled to file a class-action lawsuit, which was filed on September 28th.

Lead plaintiff John Fitch claims the Apollo Group falsely reported “strong financial performance and forecasted stable and predictable revenue growth,” and attributed this to “competent management,” though the “defendants had propped up the company’s results by fraudulently inducing students to enroll in Apollo’s scholastic and educational programs.”

The class claims Apollo’s misrepresentations and omissions included failing to report that it had participated in “illicit and improper recruiting activities.”

Six officers are also named as defendants, including John Sperling of Apollo Group.

The for-profiteers are not done on the lobbying front. Far from it.

In a report released Monday, a marketing firm working for the Coalition for Educational Success, an advocacy group for several privately held for-profit companies, argues that community colleges engage in “unsavory recruitment practices” and offer students “poorer-than-expected academic quality, course availability, class scheduling, job placement and personal attention.”

This is absurd, as I can personally attest, since at least half a dozen really bright (and not well-off) kids known to me have taken advantage of local community colleges in order to prepare for transfer to the UCs and other four-year colleges and universities, thereby saving themselves a packet. Hell, I have taken really excellent French classes at local community colleges myself-classes easily comparable to the UC ones I took when dinosaurs roamed the earth. Only these cost about fifty bucks each.

The Coalition For Educational Success conveniently released its report the day before Tuesday’s White House summit on community colleges.

The document’s release just ahead of today’s summit is intended to tarnish the event’s luster and the praise for community colleges that will come from President Obama and others, and it emerges amid the for-profit sector’s aggressive lobbying, advertising and rallying against the U.S. Department of Education’s proposed regulations on “gainful employment” and a Senate panel’s investigation of the sector.

[...] David S. Baime, senior vice president of government relations and research at the American Association of Community Colleges, characterized the report as “garbage” and said it was yet another attempt by the for-profit sector to fight scrutiny from the Obama administration and those on Capitol Hill. “It probably makes sense as a sort of PR strategy to try to run us down and sort of boost themselves,” he said.

Yeah. Good luck with that.

What this thing is positively shrieking for is a class-action suit filed on behalf of people who were misled about their prospects and forced into debt-a very substantial number of whom should not be at all difficult to assemble. Lawyers! Attorneys General! Get cracking!

Maria Bustillos is the author of Dorkismo: The Macho of the Dork and Act Like a Gentleman, Think Like a Woman.