If you don’t want to go to school, can you just pay us? (How for-profit colleges rip you off)

The late-night ad is pretty straightforward.  It’s appeal (to the pride of a minority audience) is no coincidence.  Like everything else at the “college,” the advertisement has a purpose.  That purpose (as we shall see) has little to do with providing an education.  With phrases like,

“Hey ladies, they expect YOU to take care of the house and pay the rent
“You can make it better for yourself
“I made all of those excuses myself
“I did it. You can do it, too!

The message is clear – Enroll in school today and change your life!  Make it all better.  Unfortunately, the only thing for-profit colleges excel in is the ability to sign people up to pay back loads of debt. Helping you get a degree is not their main concern.

That commercial is from the late 90’s and serves as an ironic reminder of how the product never works as well as it does on TV.  As it turns out, these “colleges” are more concerned with making money than actually educating students.  These programs were designed to lead potential students into a series of bad decisions that left them worse off than if they had just changed the channel. The advertisements promised a post-degree life that involved a dream job, financial independence and the ability to get your life under control.  What they were really selling was the chance to sign up for overwhelming debt, a deeper financial hole than the one that made you say “enough is enough” and a decade of garnishments.

Public/Private? It’s all college right?

As we’ll see there’s a big difference between “college” that we associate with post-high school education and their for-profit counterparts.  College as tradition has it refers to a non-profit institution that has the mission of educating students and preparing them for life with a post-high school degree.  Most often they are public (think: “state school”).  Many times they are private, but the non-profit versions have missions that require them to consider the students first.   As we will see whether a college is operating for a profit (or not for a profit) makes a huge difference in how they treat students.

Difference #1: For-profit colleges are much more expensive.

This seems strange, especially since for-profit colleges market themselves as THE alternative for folks who have day-jobs.  But, it’s true.  Your dollar will get you many more hours in class if you go to a non-profit college.  Since for-profits are in business to make money, that is their focus.  They (many times) have shareholders; staff who work on commission; CEO’s whose job is to work the system to make it more profitable and bottom lines that serve as the most important numbers in all of their reports.  For-profit colleges can be up to twice as expensive as their non-profit counterparts.

2013 Average costs of college degrees

4-year degree from a for-profit college    .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . $15,130
4-year degree from a non-profit college  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . $8,890
2-year degree from non-profit college     .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  .  . $3,264
(According to the College Board’s Trends in College Pricing)

It’s true that non-profit colleges are concerned with bringing money in the front door, as well.  But since they rely on sizable donations from rich alumni they actually TRY to care about students.

Difference #2: What does it matter how much it costs? I’ll pay my bills with that great new job I get, right?………right?

This is the rubber-meets-the-road moment for any student – will she get a job with that fancy new degree that she worked so hard for?  Not surprisingly, getting a BETTER job is the factoid that is hammered home the most in those late-night commercials.  None of them say “Hey, come to our school so you can round out your education! Take some electives and be a hit at parties dropping tid-bits of college-type knowledge!”

What they all say is “Make your life better… or “Get yourself out of that go-nowhere job…  So, it stands to reason that the world would Loooove for-profit degrees.  Unfortunately, having a degree from places like Corinthian, ITT Tech, or DeVry doesn’t unlock as many doors as you would think. In fact, having one of those places on your resume will actually get more doors slammed in your face.  How many more?  According to one study,  if you have a for-profit college on your resume, employers are 25% LESS likely to call you back. (Try putting that on a brochure: “Come study here and be guaranteed to be turned down for a job 25% MORE times than our competition’s grads!”)

Sadly, that’s not the most outrageous thing about the employment prospects from these so-called colleges. Everest College (part of the Corinthian empire) actually found a way to trick their grads into thinking that they had a job.  They paid local employers to hire their grads for 30 days so they could pretend to have better after-graduation employment rates.  (better employment rates qualify a school for more federal student loan money).  Everest was paying local employers $2,000 to hire their grads and then fire them after 30 days.  (if you were giving Everest a report card you would say “Shows initiative.  But, lacks a certain ethical understanding”)

Difference #3: Students first! (Well…money first…THEN students first)

In 2012, a Senate committee published a report on the for-profit college industry.  It was not pretty, if you were hoping for a positive spin on for-profit colleges.  It was also not “short.”  (The report was over a thousand pages and gave our computer the equivalent of a digital asthma attack when we tried to download it)  There were quite a few details about how the for-profit college industry was set up to make money at the expense of all other missions.  One interesting fact about the number of staff they employ?  Of the 30 largest companies that own for-profit colleges, here is the breakdown of two categories of their employees:

• 35,000 recruiters;
• 3,500 employees working in career services

That’s a 10:1 ratio.  For every employee these places have who was hired to help you find a job when you graduate, there are 10 (TEN!) trying to get new students to come to school there.  The implication is clear – once you’re there; once you’ve signed up for the loan, nobody cares what happens to you.

How do we know all of this?

After the Senate report, some of the government watchdog agencies took notice and began investigations of their own.  Luckily for us, when the government sues, the documents they uncover become public.  Many lawsuits ensued – the FTC has sued DeVry University and Ashworth College, and the CFPB has sued Corinthian college

The documents mother lode, however, came from a suit brought by the Attorney General for California.  Although it’s been a few years since these lawsuits started, the California documents have just been made public.  The good folks at Pro Publica were kind enough to go through the documents from the California suit and publish their findings.

What did they find?

Unspeakably shameful stuff.  That’s what.  The information about how Corinthian College operated was cover-your-eyes shameful.  For instance:

In one case, Corinthian recruited homeless students and then helped them get federal loans they couldn’t pay back.  They recruited a homeless couple that was camped out near the school; sold them the idea of FINALLY making their lives better; signed them up for loans; let them stay on campus to start school; kicked them off of campus for not having a place to stay and then started chasing them for the more than $30,000 in student loans they were talked into.

“That sounds like the work of a rogue salesperson!” you say.  Actually, this story follows their written business model for how to attract new students.  How do we know?  Here is a screen shot of the training manual at Corinthian College.

 

Corinthian model students

Remember, their training manual was not given to a psychology grad-student who was hired to help them diagnose issues among the incoming student population.  It was distributed to the salespeople to help them convince MORE people to sign up for their college and borrow MORE money.  What are some of the other transgressions that the California Attorney General sued Corinthian for?

  • They advertised curriculum options that didn’t exist
    • “Sure we have classes that’ll help you get a degree in underwater welding!”
  • They lied about placement outcomes
    • “Of course, you’ll be able to get a job when you leave here.  Almost 90% of the people who get degrees from here are working within 6 months!”
  • They steered students to borrow money from a bank that Corinthian had ties to
    • “We have the perfect bank for you.  They have the best interest rates and won’t turn anybody down.”

Now where have we seen this before? 

  • A company hires salespeople to sell loans to a bunch of borrowers by misleading them about how the loans are going to make their lives better;
  • Salespeople are taught how to take advantage of the borrowers’ personalities and life-struggles;
  • Salespeople are paid based on how many loans are signed;
  • The company that employs the salespeople owns a piece of the bank lending the money so they can get cash when the borrower buys their product AND make money when the loan the used to buy it goes to collections;
  • The company doctors the loans to fool the government into thinking they are performing better than they actually are;
  • Since it takes the government years to get wise and shut them down, the company makes loads of cash, while ruining the borrowers’ lives;
  • Advocates gnash their teeth watching it unfold, helplessly

If you’re guessing that this looks a lot like the mortgage foreclosure crisis, give yourself a star.  Instead of empty houses, the for-profit college boom led to massive student debt.  How massive?  Of the 25 Universities whose students owed the most money in 2000, only one of them was a for-profit college.  By the year 2014,  over HALF of the top 25 schools that had saddled their students with the most debt in the entire country were for-profit colleges.  That’s quite a growth curve – from being non-existent to owning the most student debt in just 14 years.

Where NP students owe money

Editor’s note: the cynics among us might point to the fact that the two highest growth years for for-profit college debt occurred in 2007 & 2008 (which was just after the subprime mortgage market imploded) and think that this is where all of the out-of-work mortgage brokers went.

But, aren’t the students at most of the top 25 schools listed above getting degrees and better lives? (like in our ad) Not hardly.  In the 2013 academic year, students enrolled in for-profit colleges accounted for 10% of the total enrollment nationwide, but nearly 40% of the total student loan defaults.  Suddenly the whole thing is beginning to smell like potato salad that’s been left out at the family picnic for about an hour too long.

How do you watch out for this?

If you are thinking about going to college, spend a lot of time worrying about how much it is going to cost.  Approach it like any other loan (like home repair or a car loan): check & repair your credit for about 6 months beforehand; go to a bank yourself (rather than let the place you’re going to buy the item from suggest a lender); say no to extras and do tons of research.

Ask whoever is trying to sell you the idea of a degree (or the money to pay for it) these questions – and get the answers in writing.  If they refuse to answer so many questions or to give you written answers, think about it this way – you’re going to spend the next 4 years getting this degree and the next 10 years paying for it, the salesperson better be willing to spend the time to talk with you and answer all of your questions.

  • How many of your students graduate?
  • How many of your students have BETTER jobs one year after they graduate?
  • Have you or the company that owns this school ever been sued by the government?
    • Ask for these names in writing so you can ask Mr. Google yourself
  • How many teachers at this school are full-time faculty? How many are part-time?
    • A large number of part-time faculty is a red flag.
  • Does this school have shareholders?
    • Shareholders mean that there are people yelling at the people in charge to make money any way they can. This is bad for students.
  • Is this school a non-profit organization? (Prove it to me)

Everybody wants to improve themselves.  Some people join a health-club.  Some people stop smoking or pick up a musical instrument.  Some people go to college.  If you pick the college option, remember: there is a salesperson at a for-profit college who has the same plan as you.  Only the plan HE has to improve himself sounds like this:

“Convince somebody to go to a college that is really expensive but won’t get him a better job.  Put the commission I get for putting him into a bad loan into the bank.  Feel better off because of the sweet money I’m making”

Posted by: Mark Wiseman (Who had trouble finding the ad at the beginning of this post, because there are so many parody ads on You-tube for the same college.)