I signed up for Kaplan and told them I could not afford any out-of-pocket until after I had graduated and was working. I was assured I wouldn’t be paying anything that my Grant and Student loan would pay for everything. At the END of the second quarter I received a bill saying my student account was past due. Apparently I owed Kaplan money so they blocked me from my student account. Now I owe Chase Bank nearly $7000 (with interest) and Kaplan (Pinnacle Financial now) $684 and I had a Pell Grant. I couldn’t graduate because I couldn’t afford $300+ a quarter (as I explained to them in the beginning). They even waived the $95 fee to sign up because I couldn’t afford it! Their classes were borderline robotic and they put me in for Corporate Law when I wanted Family Law.
— Testimonial from a student at for-profit Kaplan University, June 26, 2009, Kaplan Kaplan University
I recently visited the website Billionairesexchange.com, but I didn’t see any of our public colleges and universities up for auction. The first online auction and trade site for luxury items for the fantastically rich doesn’t offer them, not yet anyway. However, while members of The Xchange are able to buy, sell, bid-on, auction, and/or exchange luxury items all around the world, the economic meltdown in America signaling the transfer of public wealth to private troughs through ‘bailouts’ or ‘rescue plans’, and deregulation and re-regulation when necessary, goes on unabated.
What often goes unnoticed by the corporate media in the bail-out fervor is the role of for-profit colleges and the devastating implications of their practices on the public citizenry, public institutions, the economy and of course the students they victimize. What the public might also have missed in the collage of economic downturns and dire prognostications has been the incredible fraud in the federal student loan programs tied to for-profit colleges and universities. Also what is under-reported are the student pay-day loan practices of private banks (bailed-out with stimulus monies and flush with cash) that charge high interest rates and in most cases require co-signers for students to attend these same institutions. Most notoriously, however, what is missing is coverage of the unscrupulous practices of the proprietary colleges, or for-profit colleges, that financially mug students, largely from working and low income families, leaving them burdened and battered with life-long debt in an economy and society bereft of jobs and largely becoming increasingly more militarized. This four part series will look critically at these issues, their history and their implications.
The Department of Education under George W. Bush and Rod Paige, used government deregulation in an effort to help create a system of debt peonage for students while offering larger business opportunities to their friends, the proprietary colleges. ((Danny Weil, “A Neo-liberal Arts Education,” Counterpunch.))
The costs for the private educational programs run as high as $86,000 for a Homeland Security Degree or $51,000 thousand for a Criminal Justice degree. At Kaplan, a proprietary college owned by the Washington Post, the cost for a “credit” is $325. When I asked what the word ‘credit’ meant, I was told by a recruiter for the college that it was simply a semantic difference; the word “unit” was so yesterday. For all of the colleges I talked to, “semesters” were now also ‘yesterday’; now the language used is “term”. And the definition for a term can vary institution by institution but the sole idea is to offer as many terms as the college can within a years time. The changes in the language are hardly a case of semantics; they reflect the internal architecture, discourse and culture of these institutions and they serve as signifiers for the robust business these colleges are doing.
At Walden, another online proprietary college, the cost was $300 per credit but in order to complete the degree in criminal justice, which I told the recruiter I wanted to pursue, he told me that 181 credit hours were needed. At Post University, another proprietary online school, I was told that the same degree would cost me $425 per credit but only 120 credits were needed to complete the degree. When I asked how much the total would be, the recruiter laughed and told me she did not like to state the entire lump sum cost for it is intimidating to students, but she did say that the cost would be $51,000.
When I asked the recruiter at Post University why I should consider Post as a school of choice over other similar schools, she told me that Post University had been established since 1890 and that it was a brick and mortar school as well as an online college. When I asked the significance of this I was told that because Post was a brick and mortar school, my degree would be issued without the word ‘online’ on the diploma and that this would be much more recognized and favorable for the job market.
The implication was that no one would know I did the degree online. She told me other schools that are not brick and mortar must state on the diploma they issue, that the degree was purchased ‘online.’ “Do you really want an online degree stated on your diploma”, I was asked. ((Interview with Post University recruiter, 11/14/2009.)) Yet when I interviewed a recruiter at Walden, I was told that even though they were not a brick and mortar school the word ‘online’ would never appear on my diploma. ((Interview 11/25/2009 with Walden recruiter.)) “No one will ever know”, he said. ((Interview with Walden recruiter 11/23/2009.))
Kaplan University told me that I could transfer 75% of the units I had already taken at another school and e-books would be included in the costs of tuition. Walden told me I could transfer less previously completed units than Kaplan and they informed me that I needed to buy textbooks above and beyond the cost of tuition.
Helping students receive an education certainly should be the role for any decent government, but we are not talking about a decent government here, we are talking about the specific function and role of a government bought and paid for, one that pursues rigorous neo-liberal policies that in this case, if allowed to continue, will assure the destruction of public education in favor of for-profit centers of insemination. In this role, the government policies of guaranteeing student loans at proprietary colleges is aiding and abetting these same schools in capitalizing on real student needs by allowing them to offer hollow, if not outright phony, educational programs to students with the main intent being the maximization of profits for the proprietary school and their owners or shareholders. The deregulation of the rules and laws governing these colleges under the Bush years can only be called criminal, but of course they are not. Within the system of capitalism they are legitimate government functions and this is the point. This should not only be prohibited, but many of the for-profit cyber diploma mills should actually be shut down or subjected to criminal investigation, along with the racketeers who run them. The fact is they‘re not; instead we as taxpayers continue to subsidize them through government policy, just as we subsidize the paid bonuses to Goldman Sach’s executives and AIG executives. This is no different. These schools are simply preying on the one of the most disaffected sectors of our citizens, unemployed youth with little public options, while our public institutions starve and the billionaires buy and sell Rolls Royces and Caviar on line.
Exactly what is a Proprietary School?
The definition of a proprietary school is one that is privately owned and whose net earnings can benefit a shareholder or individual. It is a for-profit institution that owes a fiduciary duty to its owners or shareholders, what ever the case may be. Some of them are well known and heavily traded on the stock market — DeVry (ticker: DV) Grand Canyon Education (LOPE) as Apollo Group (APOL), ITT Educational Services (ESI) and Strayer Education (STRA). There are literally thousands of these schools in existence and most are now online schools with office fronts that act as administration centers for the whole operation.
Under Title IV of the Higher Education Act, any school can receive federal taxpayer funds in the form of student aid if it offers courses of study such as certificates, associate degrees, bachelor degrees, graduate degrees or professional degree programs. Proprietary schools offer a small percentage of bachelor degrees but a substantial percentage of certificate degrees. Overall, the proprietary sector receives the smallest percentage of Title IV funds, 19%, as compared with the public and non-profit, which is 48% and 33%, respectively. Although the majority of enrollees in these colleges are in four-year programs, the two year proprietary schools account for a significant percentage of the proprietary customer base.
With the current economic devastation sweeping the nation like locusts, more and more students, through visible high level marketing, are being seduced to attend for-profit colleges. The words to the song are always the same: you need an education, we offer the best-buy in online degrees, you can do the work at your home, times are tough, to get ahead additional and high paying work skills are needed to thwart off individual economic collapse, and on and on. The message is very clear; there is no systemic economic problem under the current economic regime that cannot be staunched with a good, for-profit education. Insipid individualism and the commodification of education itself are now joined in a fervent embrace. All of this creates the opening for the predatory, proprietary college system, while it leaves in its wake an economic devastation for public institutions. Take California for example, always a bellwether state. As Peter Phillips from Project Censored reported:
Higher education has been cut in twenty-eight states in the 2009-10 school year and further, even more drastic cuts, are likely in the years ahead. California State University (CSU) system is planning to reduce enrollments by 40,000 students in the fall of 2010. The CSU Trustees have imposed steep tuition hikes and forced faculty and staff to take non-paid furlough days equal to 10% of salaries. Our current budget crisis in California and the rest of the country has been artificially created by cutting taxes on the wealthiest people and corporations. The corporate elites in the US, the top 1%, who own close to half the wealth, are the beneficiaries of massive tax cuts over the past few decades. While at the same time working people are paying more through increased sales and use taxes and higher public college tuition. ((Peter Phillips, “The Higher Education Fiscal Crisis Protects the Wealthy,” November 22, 2009.))
November 19th, 2009 California Community Colleges Chancellor Jack Scott delivered the keynote speech at the opening session of the Community Colleges League of California Annual Convention and Partnership Conference in Burlingame, California. Chancellor Scott’s speech, Living in Difficult Times, addressed the issue of the growing numbers of students crowding into community colleges and how in these lean financial times, college leaders must find creative ways to do more with less funding. Focusing on the irony of the situation, Chancellor Scott noted, “At the same time our funds have been reduced, our enrollments have surged.”
This fall, statewide enrollment increased at the California Community Colleges by more than 3 percent while the funding was cut by eight percent. Colleges reported at the time of fall registration, 95 percent of course sections were completely filled, with many students on waiting lists and some turned away with no classes available.
Countless numbers of Californians are flocking to the community colleges for job-retraining after losing their jobs in the economic downturn. Community colleges are also becoming increasingly popular because the California State University and University of California campuses are full, more veterans are utilizing the GI Bill benefits and, the economy is forcing many to look for affordable higher education options. ((Paige Marlatt Dorr, Director of Communications, California Community Colleges.))
When public social institutions like colleges and universities collapse and when veterans return with GI Bills and no public institutions to attend, this is all good news for the predatory colleges, their owners and shareholders. For as public colleges turn away students in droves due to financial collapse, it means more and more students will flock to the for-profit college centers in hopes of receiving an education and this of course means that like vampires, the schools can get their hands on more public monies; like the GI Bill funds; all this while public institutions starve. Ah, the beauty of privatization, the free market. But it’s hardly free; not with the large default rates in the billions that are shouldered by hard working Americans who are forced to pay them; the only thing that is free is the public funds transferred to private coffers. The proprietary schools are now like privatized pike in a public lake.
The Department of Education as an enabler or privatization and neo-liberal economics
The Department of Education makes loans to students in an effort to help them pay for the cost of higher education, which like everything else, is spiraling out of control. The loans to students are provided by the federal government through monies collected from citizen taxation. These loans are given to students not simply to attend public colleges and universities (that is one category of colleges), but they can also be used to pay for education at private, non-profit school (the second category) and “proprietary schools” (GAO), or colleges for-profit, the third tier of the triad. It is the latter category, the for-profit proprietary schools, where default rates on student loans is not only alarming, but growing exponentially, adding to the public debt while privileging a few entrepreneurs and shareholders. The growth of these proprietary colleges parallels the decline in public opportunities for students to attend public educational institutions.
In a letter sent to the Government Accountability Office (GAO), Ruben Hinojosa, Chairman of the Subcommittee on Higher Education, Lifelong Learning and Competitiveness, the GAO noted that in the 2007-2008 school yet alone, over 2,000 proprietary colleges received over $16 billion dollars in loan monies and grants and campus based aid under Title IV of the Higher Education Act. The GAO in its own report goes on to note that this figure represents a whopping increase of 164% since 2001-2002. ((United States Government Accountability Office, Proprietary Schools: Stronger Department of Education Oversight needed to help ensure only eligible students receive financial aid, August 2009.)) Not only is this cruel fact a reality, but the GAO also finds that this handover of public funds to private for-profit colleges has outpaced disbursements of Title IV funds to public and private, non-profit sectors of higher education. This means public funds now more regularly go to private, proprietary colleges, thereby representing a disinvestment in the public realm. Perhaps the more disturbing news is that the proprietary schools are now poised to receive more billions in additional Title IV funds under the new ‘stimulus’ package, officially known as the American Recovery and Reinvestment Act of 2009.
According to an article in Business Week, a website that covers the rapidly declining state of public education:
Career-oriented schools such as the University of Phoenix, a unit of publicly traded Apollo Group (APOL), have been benefiting from lean times as adults scramble for credentials they hope will help them find work. The stimulus enacted last month will accelerate this trend by providing an additional $15 billion in Pell Grants for students over the next two years. Apollo, which received more than three-quarters of its $3.1 billion in revenue from federal student aid in the fiscal year that ended Aug. 31, is well positioned to take advantage of the stimulus. Its Phoenix unit already is the biggest recipient of government student aid. In its most recent quarter, which ended Nov. 30, Phoenix boosted ad spending by 24%, to $88 million. Its enrollment rose in the quarter by 18%, to 385,000 students, who study at campuses in 39 states as well as online. ((Ben Elgin and Jessica Silver Greenberg, “For-Profit Colleges: Scooping Up the Stimulus,” Business Week, March 12, 2009.))
As Business Week went on to note, one college under fire, which stands to gain humongously from the new federal bail out monies, is the notorious Phoenix Institute, owned by the Apollo Group, which has in the past settled $10 million in claims regarding their illegal recruiting activities, although without claiming or admitting wrongdoing, of course. But you can see all the allegations and corrupt practices in a report put out by the United States Department of Education in 2003. Yet Phoenix and their parent corporation pay their nuisance fees in the form of irregularly imposed fines with your federal tax dollars, the monies they receive for doing business. It’s your money, so what’s the big deal to brush over a few irregularities with small briefcases full of cash for the government revenue agents. Yet they proceed unbridled.
Phoenix is not unlike many other proprietary schools. It employs more than 6,000 enrollment staff members. They get the names of prospective students which they suck-up from online ads, boiler room phone call inquiries and phony “job fairs” where students are then funneled to recruiters who pose as ‘admission counselors’. The employees of these proprietary schools then strive to convert each lead into a debt mule, from which they derive their profits. In one office I visited the college had a locked room with teams of recruiters ‘working the cold cards’, and hammering prospective ‘clients’ like any typical boiler room would. In light of all this, according to Business Week:
Phoenix unit already is the biggest recipient of government student aid. In its most recent quarter, which ended Nov. 30, {2009} Phoenix boosted ad spending by 24%, to $88 million. Its enrollment rose in the quarter by 18%, to 385,000 students, who study at campuses in 39 states as well as online. ((Ben Elgin and Jessica Silver Greenberg, “For-Profit Colleges: Scooping Up the Stimulus,” Business Week, March 12, 2009.))
Consumers Digest also raised questions about for-profit online universities in a report issued on March, 3, 2009. They estimated that Internet-based schools, which the majority of proprietary schools are, constitute a $6.2 billion industry with 620,000 students. The magazine went on to declare that its research suggests that the institutions exaggerate the value of their degrees and mislead students on costs. ((Consumers Digest, March 3, 2009.))
In preparing for this article, I spoke on several occasions extensively with Barmak Nassirian, Associate Executive Director for External Relations for the American Associate of Collegiate Registrars and Admissions Officers (AACRAO). They are a non-profit association of more than ten thousand higher education and admission and registration professionals who represent 2,500 institutions through the United States. They serve as moral gatekeepers in the never ending fight to assure integrity for institutional admissions and for the awarding of academic credit and credentials. With the levels of deregulation under the Bush regime it has proven to be a horrid battle. Nassirian has worked for years combating deregulation of this industry and struggling for more oversight than under-bite.
In a letter sent to the Federal Trade Commission on October 16, 2009 Nassirian echoed what he had told me:
While consumer fraud by unaccredited providers constitutes a significant problem, our members are also concerned about waste, fraud and abuse by accredited institutions that participate in the Department of Education’s student financial aid programs. We have urged the Department to take stronger steps to improve program integrity, but would encourage the Commission to also play a more active role in protecting consumers from questionable practices of the Title IV-participating institutions over which it has jurisdiction. Particular attention should be paid to deceptive advertising, high pressure sales tactics, mis-representation regarding transferability of credit and withdrawals and false claims regarding dropped placement rates, potential earnings and total charges. Especially because these institutions are eligible for federal financial aid, we believe the Commission should mandate specific disclosures regarding borrowing levels and actual lifetime default rates. ((AACRAO letter to Federal Trade Commission, October 16, 2009.))
He also noted that:
These schools are clearly attempting to capitalize on the financial difficulties that families face. ((Ben Elgin and Jessica Silver Greenberg, “For-Profit Colleges: Scooping Up the Stimulus,” Business Week, March 12, 2009.))
To begin to understand the enormity of the level of fraud that is rife within this privatized system based on public funds, it is important to understand the system that has been drafted and built through decades of deregulation and neo-liberal policies. I will concentrate on this issue in part two.