America's Worst Educators

America’s worst colleges
How badly are for-profit schools serving young people? Corinthian Colleges embodies the industry's worst trends
BY ANDREW LEONARD
Salon.com
JUN 5, 2012

In the fall of 2010, three former students at Everest College, a for-profit career school in Salt Lake City, sued their school’s parent company, Corinthian Colleges...

A 13-page affidavit filed in the case by a former admissions officer, Shayler White, described a high-pressure recruitment process in which prospective students were barraged by phone calls multiple times a day and hustled through financial aid paperwork. With his employment contingent on meeting a strict enrollment quota, White made as many as 600 calls a month, and was, he said, instructed by his superiors to use bullying psychological tactics, to ask questions “designed at putting down the prospective student” and “making them feel hopeless.”

“The ultimate goal was to essentially make them wallow in their grief, feel that pain of having accomplished nothing in life, and then use that pain as their ‘reasons’ to compel the leads to schedule an in-person meeting with an Everest admissions representative.” ...Kent Jenkins, Corinthian’s current vice president for public affairs, deflected a question asking if White’s account accurately represented Corinthian’s recruitment process by noting that there has been no final disposition of the Utah suit. “There have been absolutely no court rulings that support any allegations” in the affidavit, he wrote in an email...

But generally speaking, there’s little question that an obsessive focus on constantly boosting enrollment is crucial to survival in the for-profit college world. Sky-high withdrawal rates plague the industry. It’s not uncommon for the biggest for-profits to enroll as many new students during the course of a single year as originally signed up for classes at the beginning of the year, a phenomenon referred to as “enrollment churn.” For example, Corinthian had 71,246 students in July 2008, enrolled 120,638 new students during the following year, but ended up with only 89,479 by June 30, 2009. Recruiting all those new bodies costs a lot of money. In 2009, Corinthian spent almost a quarter of its $1.3 billion in revenues on advertising and recruitment.

“They are, by and large, a marketing operation,” Sen. Dick Durbin, D-Ill., said in a speech on the Senate floor last September. “Bring the students in, sign them up, bring in the federal dollars; bring in more students, sign them up, bring in more federal dollars.”

Corinthian Colleges, in that respect, is no different from any other career school. But in an industry where bottom-line considerations often trump devotion to educational achievement, Corinthian invites scrutiny. Over the course of its 17-year history, the company has attracted numerous lawsuits. Corinthian schools have recorded some of the highest default rates on student loans in the country, a worrisome fact for a company that derives nearly 90 percent of its revenues from government loans and grants. If you want to understand why the Obama administration has been so steadfast in its efforts to crack down on the for-profit industry, Corinthian is as good a place as any to start.

Founded in Irvine, Calif., in 1995 by five veterans of the vocational school business, Corinthian’s strategy from the beginning was to purchase already existing schools and aggressively boost enrollment. The business plan was simple: grow, grow, grow....

Corinthian generates almost as much bad press as profit.

In 2004 former students filed three separate lawsuits in Florida alleging credit transfer fraud, claiming that Corinthian misled students as to whether their credits would be accepted by other educational institutions.

In 2005, Corinthian paid the Department of Education $776,241 for violations of student aid procedures at California’s Bryman College.

In 2007, reported the O.C. Register, Corinthian paid the state of California $6.5 million to settle charges of false advertising relating to allegedly overstating “the percentage of its students who obtained employment via its courses.”

Just three weeks ago, Corinthian revealed in a regulatory filing that the Consumer Financial Protection Bureau is investigating the company to “determine whether for-profit postsecondary companies, student loan origination and servicing providers, or other unnamed persons, have engaged or are engaging in unlawful acts or practices relating to the advertising, marketing or origination of private student loans.”

But perhaps the most embarrassing twist in Corinthian’s recent history came earlier this year in California. In 2012, a new state law came into effect that denied colleges access to the state’s Cal Grants financial aid program if the three-year student loan default rate at an institution exceeded 24.6 percent. Of the state’s 165 for-profit schools, 67 failed the test. Eighteen of those 67 schools are owned by Corinthian. In fact, some of Corinthian’s schools exhibited default rates of over 40 percent. None of California’s public schools failed.

...The high costs, withdrawal and student loan default rates all help explain why the Obama administration pushed last year to institute new “gainful employment” rules that would require for-profit schools to prove that acceptable percentages of their graduates were paying down their debt after graduation. However, even those rules were extremely watered down, say higher education watchers, after extraordinary lobbying efforts from the for-profit sector, including Corinthian Colleges.

That’s right: Corinthian spent money generated from taxpayer-funded student loans to pay for lobbying efforts aimed to weaken rules designed to ensure that students get a good education and taxpayers get their money’s worth. If that doesn’t send you screaming to your nearest publicly funded community college, nothing will.

How For-Profit College Lobbyists Bought Congress

How For-Profit College Lobbyists Bought Congress
By Don Bauder
San Diego Reader
December 10, 2011

The New York Times today (Dec. 10) has a story on how the for-profit college industry spent $16 million to soften government plans to rein in industry corruption. The lobbyists won, as usual. This means another debt crisis is coming. This year, student loans will total $1 trillion -- more than the total of credit card debt outstanding. For-profit colleges have 10% of students but account for 44% of loan defaults. Ashford University, which accounts for almost all the students at San Diego's Bridgepoint Education, has a dropout rate of 84% in its two-year program and 63% at its four-year programs. When the Department of Education proposed tougher rules to thwart boiler room-type abuses at the for-profit colleges, the lobbyists, such as former House majority leader Richard Gephardt, assaulted the White House, Department of Education, and the White House, reports the Times.

The Times didn't touch on one of the most interesting angles: how much money was accumulated by investors in for-profit college stocks. Throughout this year, I was saying that while Bridgepoint was a disgusting boiler room draining money from the federal government, its stock would go up. First, more than half its stock was short -- that is, the majority of investment money was hoping the stock would go down. This meant that if there was any good news -- such as the softening of proposed reforms -- the shorts would rush to cover, or buy Bridgepoint stock. That happened. The stock zoomed. How many Washington insiders raked in fat profits, knowing the rules would be emasculated and the stocks would soar? Plenty, I would bet. The manna is probably tucked away in an offshore, tax and privacy haven.