Flush with taxpayer cash, for-profit schools seek to quash oversight

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Armed with billions of taxpayer dollars, a consortium of for-profit colleges has managed to stymie a regulation aimed at protecting students and taxpayers from the colleges' predatory loan practices and false advertisement.

Civil rights organizations, unions, student and consumer protection groups are mounting a counter-campaign in favor of the government's regulation. New Department of Education data backed their claims that better oversight is necessary.

Called the "gainful employment" rule, its development came out of Education Department's 2009-10 regulation review. It would require for-profit higher learning programs (and possibly low-performing public and non profit ones) to prove they prepare students for "gainful employment in a recognized occupation." The battle is how to measure it. The Dept of Ed proposes one measure as the student loan default rate. If there is a high default rate, then graduates have not found successful jobs and are unable to pay back the loans., according to department studies.

The rule would come with levels of enforcement, from warning labels to loss of federal aid for unsuccessful programs (not necessarily the entire school).

Reports show an alarmingly high default rate among for-profit school students, and these businesses fear they will lose their federal gravy train if oversight is implemented.

For-profit schools, like the University of Phoenix, Everest College, Kaplan, and Devry University, account for 48 percent of all federal loan defaults, according to Ed. Dept. statistics, while only enrolling 9 percent of the nation's post-secondary education students. These profit mills receive 25 percent of all higher education federal aid, while producing a  25 percent loan default rate for 2008. This rate was significantly above the 10.8 percent rate at public colleges and a rate at private nonprofit colleges of 7.6 percent.

Students are often lured to the for-profit schools by TV ads and other promises of well-paying careers and easy access to government grants and loans. Education, after all, is the only way to get ahead in life, they are told. Many believe if the federal government is providing aid, then the certificates or degrees are widely viewed among employers and other learning institutions as acceptable or "accredited." But accreditation is a complicated process, and there are many schools that claim it, and yet the accreditations are flimsy and mean nothing to employers.

Like the banks' subprime mortgage scam, which preyed upon millions of people, especially lower income, seniors and people of color, and triggered the 2008 financial meltdown, these schools knowingly prey upon ambitious and hard-working people looking to get ahead. At the same time, CEOs and stockholders enrich themselves with millions of taxpayer dollars.

Martine Leveque went to Everest College's Licensed Vocational Nursing program  after her film-industry job moved overseas. Before enrolling she was promised a program that included hands-on-training in state-of-the-art labs and rotations at UCLA Medical Center. She was told she'd enter a field that makes $28-$35 an hour. The school rushed through the paperwork, and in all too typical a fashion, did not fully inform Leveque of the loan terms.

Everest's promises didn't match reality. According to the Washington Monthly report, the instructors were inexperienced, the labs littered with broken equipment and instead of a rotation at UCLA, Leveque dispensed pills at a nursing home. She wound up becoming a home health care aid, a job that pays nowhere near $28-$35 an hour,  and is saddled with $32,000 in debt. She said she made one mistake and now has to pay for it the rest of her life.

Everest College is owned by Corinthian Colleges Inc., a for-profit school with revenues more than $1 billion annually, 89 percent of which came from taxpayers through Pell Grants and federally subsidized student loans. It posted $71 million in profits in 2009 and paid its CEO that year $4.5 million. It spent $295 million in advertising and recruiting students.

"They are by and large a marketing operation," said Sen. Dick Durbin in a September 2010 speech to the U.S. Senate, "bring the students in, sign em up, bring in the federal dollars" and repeat.

Corinthian's student loan default rate was 39.3 percent in 2008. Corinthian is one of the corporations that spent millions against the "gainful employment" rule, which would curb these predatory practices. And, by extension, threatens their ill-gotten profits.

Community colleges, on the other hand, provide many of these same certificate and degree programs as the for-profit schools for a fraction of the cost. And contrary to the for-profit school generated myth, many community colleges are not full or over-capacity. Some are not even at 50 percent.

Durbin said Olive Harvey College, part of the City Colleges of Chicago, is at 50 percent capacity and can absorb many more students in its programs at a much lower tuition rate.

But community colleges spend only 2 percent of their revenue on advertising, going up against the marketing operations of the for-profit schools, which on average, spend 25 percent of their taxpayer-subsidized revenues on advertising.

At Everest College in Skokie, Ill.,  the average cost for a degree or certificate runs students $14,000, but just a few miles down the road, Oakton Community College offers many of the same courses at a much lower cost. For example, Durbin said, a certificate in medical billing costs $10,000 at Everest and only $1,000 at Oakton.

The American Federation of Teachers, Leadership Conference on Civil Rights and many others have called on Education Secretary Arne Duncan to "issue a strong gainful employment rule that would crack down on programs that fail to prepare their students for a better future."

Photo: From Everest College website.

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  • No mention of religious zealots taking money for their private religious schools, usually non-taxed? Many of those who run these extremist conservative Christian schools believe and teach that America is a Christian nation and because their god has been silenced in public schools, they believe the rest of us should pay taxes so they can take them away from public schools, destroying public schools and in turn, supporting their message about the need for private religious schools to be funded with public funds so they can rewrite history in their teaching, creating future generations of people who believe the USA is indeed a Christian nation and the bible should rule the land; no other religions are welcome, kill gays, woman forced to stay home and be baby making machines and being in a holy war with the world. Think I am joking? Look into the 'Rapture', where these people believe, bible supported, that Jesus is coming back, and for this to happen, Christians must destroy all those who are their "enemies"...meaning; non-Christian. Only the elimination of all conservative Christians will allow all Americans to be free and the world to no longer have to live in fear of the U.S.A.'s imperialist, terrorist holy war. The conservative ideology has never helped mankind in any way, it has not only never helped mankind in anyway, it has oppressed, murdered, raped and killed all those in it's way to gain power. History shows us this. Fact shows us this. James Madison, the "Father of the U.S. Constitution", along with many founders of this country, regardless of their religious or non-religious affiliations, knew keeping politics and religion separate not only preserves each, but helps them flourish: "The number, the industry, and the morality of the Priesthood and the devotion of the people have been manifestly increased by the total separation of the Church and the State."

    Posted by Corey Mondello, 02/19/2011 4:49pm (4 years ago)

  • In the central valley of CA (Fresno, Modesto, Bakersfield) the for profit schools are taking full advantage of students who can't get into the community colleges or CA state universities. Ironic isn't it that the federal monies can't be channeled to state/comm colleges but sucked up by for profit schools

    Posted by gerry, 02/11/2011 9:47am (4 years ago)

  • These scams start early and often through "charter" schools and then really ratchet up when young adults/adults look to chase the "American Dream," which means that these "schools" turn a tidy profit while - maybe - offering a worthless piece of paper at the finish line to go along with loads of bills as the prize.

    Posted by RDC, 02/09/2011 5:39pm (4 years ago)

  • PW editors continue to amaze me by knowing what's important and what's not. I'm grateful for this contribution.

    Posted by jim lane, 02/09/2011 11:59am (4 years ago)

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