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The For-Profit College Racket -- Bill Moyers and Company

Business  (tags: abuse, americans, business, colleges, consumers, corporate, corruption, dishonesty, education scam, government, investments, money, politics, society )

- 2080 days ago -
The for-profit college industry is known to most Americans by its commercials and billboards promising potential students new skills, job training and exciting career paths. The reality is far more sinister, as Senator Tom Harkin's new report, released->

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Kit B (276)
Saturday August 11, 2012, 10:30 am
(Photo: Textbook of Money via Shutterstock)

The for-profit college industry is known to most Americans by its commercials and billboards promising potential students new skills, job training and exciting career paths. The reality is far more sinister, as Senator Tom Harkin’s new report, released last week, reveals.

“In this report, you will find overwhelming documentation of exorbitant tuition, aggressive recruiting practices, abysmal student outcomes, taxpayer dollars spent on marketing and pocketed as profit, and regulatory evasion and manipulation,” Mr. Harkin, an Iowa Democrat who is chairman of the Senate Health, Education, Labor and Pensions Committee, said in a statement… “These practices are not the exception — they are the norm. They are systemic throughout the industry, with very few individual exceptions.”

According to Harkin’s findings, for-profit colleges take in about $33 billion each year from taxpayers (in the form of student loans), making up 85 to 90 percent of their revenues, yet they spend the large majority of that money on marketing, recruiting and executive salaries – CEOs took home an average of $7.3 million a year. Not surprisingly, this business model fails their students: 54 percent of the students who enrolled in the 30 biggest for-profit schools examined by Harkin in 2008-09 left institutions without a degree.

Looking to maximize profits, these schools target those most likely to receive lots of federal student loans: low-income students, immigrants, students of color and other nontraditional types of students. Perhaps most predatorily, they have sought to enroll veterans of the recent wars in Afghanistan and Iraq. Student loans from the G.I. Bill count as private money, not federal loans, helping for-profits stay below an imposed 90 percent threshold for revenue from the federal government while maximizing profits. It got so bad that earlier this year President Obama penned an executive order to protect U.S. troops from recruiters, saying that these schools are “trying to swindle and hoodwink you.”

Last week, Harkin held a press conference with some colleagues sharing his findings. One of the speakers was a former for-profit college recruiter who described the techniques she used to convince potential students to apply:

“The pain funnel was used to ‘demoralize potential applicants by discussing their life’s shortcomings in order to have them enroll, where their life would improve.’ Such techniques are both ‘predatory’ and ‘very successful,’ she said. Students would enroll with the ‘expectation that if they spend enough money, whether through savings or students loans, their problems would be solved,’ Brozek said. ‘For a large percentage of students who enrolled, this was simply not the case.’”

Another was a former Army captain who denounced the treatment of veterans saying that if hospitals behaved like these schools, their executives would be in jail.

The examples of abuses are shocking. Take this recent story from a report by The Village Voice’s Chris Parker, in which a recruiter from Ashford University encouraged 14-year-old Bobby Ruffin Jr. to enroll for classes without telling his parents and to let the school lie for him on his financial aid forms. Parker writes, “Bobby took online classes for almost a year. …”

“Of course, it’s illegal for kids Bobby’s age to receive financial aid…. But when [Bobby] wouldn’t endorse Ashford [University]’s lying on his financial-aid forms, administrators miraculously discovered that he was under 18. Since this left him ineligible for federal aid, Ashford was forced to return his loan money to the feds. The school wouldn’t be eating those costs. Bobby would. Ashford, which declined interview requests for this story, sent him a bill for $13,000.”

Examples like this abound.

How are for-profit schools getting away with this behavior? The same way most companies get what they want in this country: with millions of dollars in lobbying federal lawmakers, pricey lawyers and strategic campaign contributions.

This is an industry that is by and large exploitative to its students and useless to the public good. But business seems to be going just fine – for-profit universities have an average profit margin of 19.7 percent. They just won’t tell you that those profits are coming from our taxes – and at the expense of some of the most vulnerable among us.

By Suzanne Merkelson, Moyers & Company | News Analysis | Truthout |

Jason S (50)
Saturday August 11, 2012, 11:48 am
Never go to a for profit school

Antonia Windham (6)
Saturday August 11, 2012, 2:03 pm
Bobby Ruffin shouldn't have to pay, I'd think - he's just a kid and I've no recollection of any law that says children can enter into contracts on their own (when I was a teenager I couldn't even sign up for a book club by myself and my mother had to sign). Leeches and sharks, I'd call those at that school, except that'd be way too insulting to leeches and sharks.

I'd have no quarrel with for-profit schools - if they were being honest with students and the government. But I've read too much about what goes on with so many and it's a damned shame for the students and taxpayers they cheat.

Kit B (276)
Saturday August 11, 2012, 2:36 pm

This is about profit and not education. Worse, far worse this is about SCAMS, and rather then the government stopping this they are allowing these "schools" (and I am using the word loosely) that are assisting people in getting government backed loans that are for nothing, zero, zilch. A waste of tax money, waste of time, and no bright shining future at the end of the debt scam.
This is not directed at those few schools that are legitimate local community colleges that do have limited online programs.

Yumana Yunes (197)
Saturday August 11, 2012, 2:37 pm
"The Racket", it just goes on and on. You educate yourself to be competitive in the job market, to compete for a better salary, to compete for a better house, to compete for greener grass than the Joneses!

Compete, compete, compete. Maybe Darwin shall come from the dead and explain it again to all of us, cause at this stage of "his" evolution we're clearly destroying ourselves, our earth, and there may soon come the moment we cannot reverse it.

Louise D (44)
Saturday August 11, 2012, 4:00 pm
The predatory nature of these courses, online courses are the worst with out of date or nonexistent courses is a scandal as many do not give the students any support. The most disgusting are the ones that prey on unemployed people with fake job offers.

Sunday August 12, 2012, 11:47 am
`Caveat emptor,` Is the rule to go by!

Mary Donnelly (47)
Sunday August 12, 2012, 4:18 pm
Thanks Kit--sad post.

. (0)
Sunday August 12, 2012, 6:10 pm
I think this article is a little slanted. Overreaching generalizations are not truth as they crack away when investigated more closely. I don't know about many of the for-profit online institutions, but not all for-profit institutions are bad. Where I work we have a placement rate of 85-90% for our students. The companies around us always praise the instruction and skills the students have received at our school. Many have hired a large part of their workforce from our school. As an instructor, we care a great deal for our students. We are their instructor, counselor and tutor. We help them make a better life for themselves and often keep in touch after they have left.

Kit B (276)
Sunday August 12, 2012, 7:13 pm

Hugh, as said before this article and others on this topic are directed at the many SCAMS pretending to offer education.

Paula M (39)
Monday August 13, 2012, 1:10 pm
Kit B.,in the article you quote Tom Harkin says "These practices are not the exception — they are the norm. They are systemic throughout the industry, with very few individual exceptions.” That is painting with a broad brush.

But I think it is the accusations that may be overbroad. I went to a public university in the 90s and there is nothing that Senator Harkin says against private colleges that could not also be said with at least as much accuracy against public universities.


Michael T (82)
Monday August 13, 2012, 7:42 pm
For those in doubt about this article and who find the extent of it hard to believe there is nothing that anyone can do or say to change your minds.

I had a friend however, who worked for such a for-profit school called Corinthian Colleges. Years ago I did some online research and found lots of information that supports this. Also, the recent investigations that have occurred because of veterans who have fallen prey to this certainly point to the numbers being perhaps more pervasive than some would be willing to acknowledge.

My friend told of how when she first began teaching there, she learned through her experiences that the classes were being run on a near coloring book grade school level. None of the students were used to even cracking a book. The instructors lectured, and basically gave away the exam answers so that their stats would look good with the number students who were passing their courses. The school was constantly under investigation by the accrediting agency they had filed under. No single local community college or university would give any credits for courses taken at these schools even though the course was touted as an associate degree.

Local doctors’ offices would have to be arm wrestled into giving a student from these schools even an externship, let alone a job afterwards.

Michael T (82)
Monday August 13, 2012, 8:01 pm
Local doctors’ offices would have to be arm wrestled into giving a student from these schools even an externship, let alone a job afterwards. All of their schools had very high rates of attrition. In a 10 year period Corinthian began a massive campaign to gobble up as many existing schools as they could nearly doubling their campuses from 90 to 150 during that period in the US alone. They also were engaged in making purchases in Canada as well.

The school opened up and started a surgical assisting program, which could not get an accrediting body to authorize. Meanwhile, without the authorization, they filled the classes and took the money. In the original documents a student signed when signing up for this program was an binding arbitration agreement meaning the students could not sue the school later. Most of these kids didn’t have a clue what that meant or why they had to sign it. Most thought it was normal procedure. The corporation that owned the school knew that it had gotten away with this in California a year or two earlier. It had intentionally started a new program in another state knowing none of these kids would know about the debacle in California. Meaning, the students learned their diplomas/degrees wouldn’t be recognized by either other schools or employers, but would gain this knowledge after they had obtained loans, the school of course was paid, and they tried to find work after graduating.

As a result of the arbitration all these people could get back was a smidgen of what they now owed in subsidized and unsubsidized student loans.

Michael T (82)
Monday August 13, 2012, 8:01 pm
The schools of some 15 different for-profit corporations are and have been probed in regard to their practices.
Senator Durbin says For-Profit Colleges Own Every Lobbyist in DC.

Kit B (276)
Monday August 13, 2012, 8:14 pm

I would suggest that you Paula do some actual research on these SCAMS and then tell me how unfair this article might be. As I said earlier, this address the many online SCAMS that are doing nothing less then stealing from the students and taxpayers. Watch the Frontline Special on PBS. Learn about the many buildings on the campus of places like Phoenix University, that are filled with servers and not students. Michael has offered even more information.

Or are you complaining that when you attend the university campus there was no one there? This is not addressing REAL colleges only the SCAMS, though they are many.

Kit B (276)
Monday August 13, 2012, 8:17 pm

Never mind Paula, I now know who you are.

Paula M (39)
Tuesday August 14, 2012, 10:29 am
Who am I, Kit B?

My objection, like Hugh W.'s, was to the overgeneral nature of the charges. It is one thing to point out some shady private colleges, such as the one referenced by Michael G. It is another thing to say, as your article does, that it is endemic to private colleges. And it is no defense to say that you are speaking about some smaller subset of colleges if the article you cite attacks private colleges as a whole.

Michael T (82)
Tuesday August 14, 2012, 11:23 am
Paula if you had spent a little time looking at some of the sites I shared you would begin to see that it is in fact endemic. Not that I would expect you to do anything like check it out or anything. I know from experience that you are beyond and above that.

Paula M (39)
Tuesday August 14, 2012, 1:05 pm
Michael G., I don't know why you expect people to read your links when you disdain to read links posted by others. However, I did review the sites you shared, and am not convinced from what I have read that this behavior is endemic to private colleges .

marie C (163)
Tuesday August 14, 2012, 5:18 pm
I enjoy your threads so much Kit even though I am from UK and am not so knowledgeable on a lot of the USA
political leaders or even USA politics We often hear a different story over here
Thank you for posting most enlightening

Kit B (276)
Tuesday August 14, 2012, 9:06 pm

Thanks Marie.

Nancy C (806)
Friday August 17, 2012, 4:01 pm
Such a sad scenario for so many. Thanx Kit for your finds. Glad that Obama has mentioned it.
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