Thursday, October 7th, 2010
39

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.

39 Comments / Post A Comment

petejayhawk (#1,249)

As a former "admissions counselor" (read: sales rep) at a for-profit college, I am eminently qualified to say this is excellent work.

What a horrible racket the entire industry is.

Tyler Coates (#451)

Ditto. I just left a position at a for-profit university (which is owned by the Washington Post, which recently published an op-ed piece railing against the proposed gainful employment regulations).

If they actually lied on FAFSA applications, what all this is positively shrieking for is a False Claims Act suit brought by the government or (perhaps even likelier) a qui tam suit brought on the government's behalf. That shit ain't no joke!

petejayhawk (#1,249)

Generally what happens is they lose their DOE certification (or whatever it's called) and the school is no longer able to offer federal financial aid. That in itself is a pretty big hit to the schools, but you're right – they should do more.

Morbo (#1,288)

And what happens to the individuals that lied on the FAFSA? Its like the sub-prime crisis- all these people claiming to be duped, but not doing their own homework.

If you can't do simple research on these places on-line, or be bothered to call around to your community college and price the programs yourself….well, I have no sympathy.

r&rkd (#1,719)

You may lack sympathy, but, assuming you are a U.S. taxpayer, you do share in liability for the government-backed student loans those individuals cannot repay!

C_Webb (#855)

Qui tam suits were all over the runways this season. Wear with stripes and/or handcuffs!

Morbo (#1,288)

I am for the proposed Obama legislation. This is an industry that needs to be regulated. It strikes me as hilarious that these for-profit schools rail against the traditional university system, but still try to take advantage of the same subsidies. Also, you do not find many Phoenix grads in their management structure.

What I am against is the constant drumbeat that people are ALWAYS being taken advantage of, when in truth, they are complicit in the lies.

The ads that folks respond to are the same. They want a quick diploma, taking the courses they want to take, and not deal with those pesky English and history courses other institutions make them take.

These are people that are constantly looking for shortcuts…and learning the lesson that there is no such thing.

barnhouse (#1,326)

@Morbo Okay, but if you're without a lot of resources to begin with, and someone comes along purporting to help you out?–surely there should be some caveat vendor to go with your caveat emptor?

Morbo (#1,288)

Caveat Venditor, if we want to split hairs.

If we start draining the for-profit system of no-strings-attached government money, seller will indeed begin to beware, and will fight over the best qualified students to keep their stats up.

Right now, you have a system where they seller does not have any punishment for doing bad. There is NO reputational risk in the marketplace. They are poorly regulated. This is what needs to change, through a combination of regulation and free-market action.

We can argue about what resources they have available to them (public libaries have internet access where one can Google "University of Phoenix Fraud" and get all minds of credible results, and community college feeders can be found at every high school and at job fairs)…

What I would like to see a standardized form saying THIS is how much you pay, and a government report given out to prospective students with defined statistics on gainful employment at a one, three, and five year interval.

If you submit a FAFSA, you need to also submit a signed copy that indicates you have reviewed these statistics. This form would have to be accounted for if a student goes to UoP, Greendale Community College, Central Idaho, or Brown.

barnhouse (#1,326)

We DO want to split hairs! (thank you for correction)

Am all for your standardized form idea (like the mortgage one!) Neat. If you know of any legislative action on this please post here so we can call congressmen & offer support.

Morbo (#1,288)

There won't be any legislation on this anytime soon….mostly because the student loan industry is dead set against standardization of any form, and they have a very generous lobby. And with Boehner set to become Speaker (he's been a big recipient over the years), any reform legislation will be dead for two years.

Any such move, and student loan processors scream about how the Obama administration is trying to cut jobs in a private industry AND squelch those that just seek to better themselves.

For a nice read on how bipartisan the lobbying trough is on this issue:

http://www.newamerica.net/blog/higher-ed-watch/2009/sallie-maes-influence-peddling-13759

barnhouse (#1,326)

Ugh! Why am I not surprised.

Smitros (#5,315)

Judging by the ads I see on the DC Metro, more than a few of these places seem to going after the dollars of members of the armed forces. Classy.

Miles Klee (#3,657)

They certainly ain't going after people with dollars to spare.

keisertroll (#1,117)

And the University of Phoenix's football team DOESN'T EVEN PLAY AT UNIVERSITY OF PHOENIX STADIUM!!! WHAT IS UP WITH THAT?!!!

Morbo (#1,288)

I bet their would beat the Cardinals.

C_Webb (#855)

Is it an online stadium?

eff (#7,782)

If I think about it rationally, the basics of this article aren't anything I didn't know already (for-profit universities are awful)–but I don't want to think about it rationally, I just want to go AAAAAAAAAAAAAAAAAAAAAAAAAAAAHHHHHHHHHHHHHHHHH a lot.

That's not really an effective way to approach the situation.

Omar Little (#7,834)

I think articles like these are one of the reason people turn away from the government and the media. This article is rude and its seems like the author is bias. The university of phoenix has has done its best to offer an honest education. I am a alumni and student at UOP and I decided not to be a democrat this party is make things worse on education. I am a perspective business student at UOP and the university of phoenix has the same business accreditation as some public universities including Cal state Dominguez hills. My suggestion is for this author to do better research before making judgement. Its not the for-profit industry making people live hell its the government and the stupidity of the media bringing hell into people lives.

Morbo (#1,288)

A critical writing program graduate from UOP, I gather?

scrooge (#2,697)

Omar, I'm sorry to say you couldn't be more eloquent, if unwittingly, on the quality of the education at the "university" of "phoenix". With this kind of English, you'll never get a decent job in the corporate world and it's a waste of time and money for you to take UOP's business program. You need to go to a community college and get basic English skills first. How much debt will you have racked up by the time you get a business degree that won't get you a job?

Mindpowered (#948)

Dear Omar.

I don't know what business skills they teach there, but circumlocution should not be one of them.

shawtyhaggins (#6,921)

@Morbo @Mindpowered: You guys are nothing but smug elitist pricks. Omar obviously feels like he needs to defend UoP. As a student currently attending UoP, he has a better grasp on the quality of the education he is getting than either of you or the author of this feckless article. Your replies are nothing but ad hominem swipes, so typical of computer chair cowards. Do your thing, Omar.

GoGoGojira (#2,871)

This is adorable.

american_scumbag (#5,204)

Well yes, an underfunded CSU system right now IS hell. However (and I may be "is bias"), the media's job is to point out these functional errors in both business and government. I learned this in fourth grade.

Br. Seamus (#217)

@Mp: I thought he was fairly clear – they teach perspective business, the business of making the small look huge.

barnhouse (#1,326)

@Omar Parker (Maria here) Hi, and thank you for posting. If there are any errors in this article please, point them out, I'm all ears. I'm very interested in learning the truth about these issues.

american_scumbag (#5,204)

GAO = Government Accountability Office, now

terrific article. god, and i just saw "college inc" last night. yeesh. depressing.

would love to see more on this issue though, and less advice like this:
http://moscater.wordpress.com/2010/06/14/why-you-should-go-back-to-school-to-move-forward/

Perry Simm (#7,851)

Great piece about some trusts in need of busting. Light is shed on the "values" of the UOP's John Sperling by his mad publishing endeavor.

Back in 2004, Thomas Frank hilariously devoted a New York Times piece to savaging Sperling's book "Metro vs. Retro." "MVR" was to be Sperling's "Dianetics," a world view self-published at enormous expense. It was advertised ambitiously and forgotten instantly.

The thing looked like a first-year college textbook. You page through colorful illustrations and graphs, you admire the nice binding, you marvel at the research staff Sperling had hired to push his convictions.

The central idea was that most of America were idiot rubes and the Democrats must give up on them.

No, seriously.

On one page, Sperling claims, as if simply stating the atomic weight of carbon, that those urban Americans he dubs "Metro" spend time at the opera, while those in "Retro" zones attend monster truck rallies. (This is helpfully illustrated with photos.)

This guy is really gross.

barnhouse (#1,326)

Here's the Thomas Frank review. Just … whoa.

David Hart (#7,877)

I have decades of experience in the sector – most recently as a CEO. My industry has become a massive scam paid for by taxpayers.

Like everything else these days, this has become hostage to lobbyists and political contributions. Both parties share responsibility for this debacle.

barnhouse (#1,326)

Fair enough (like what isn't?) But the fact that at the moment only Democrats are fighting it is also worthy of note.

Tbd (#7,903)

Why dont students sue? Answer is that the outcome is unclear.
A group of students lose 2003 lawsuit against for profit 'college', stating they need to prove "reliance" on the schools misrepresentation. Its easier said than done, Believe me! The following case is currently in appeal….

http://www.bizjournals.com/eastbay/stories/2008/04/28/story5.html

Omar, here is your above comment, edited for correct English:

'I think articles like these are one of the reasons people turn away from the government and the media. This article is rude and it seems like the author is biased. The University of Phoenix has done its best to offer an honest education. I am an alumnus and student at UOP, and I have decided not to be a Democrat. This party is making the educational situation worse. I am a prospective business student at UOP. The University of Phoenix has the same business accreditation as some public universities, including California State Dominguez Hills. I suggest that the author improve her research before making a judgment. It is not the for-profit industry making people's lives hell, it is the government and the stupidity of the media.

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