The High Price of For-Profit Colleges

The media and policy makers are taking notice of the low graduation rates, high debt loads, and deceptive recruiting practices at many for-profit colleges.
By Barry Yeoman

After Joshua Pruyn earned his undergraduate degree, he looked for a job as a college admissions officer. “I was captain of my hockey team, so I had recruiting responsibilities,” he says. “I thought maybe that would translate into doing some sort of admissions work.” Through a friend of a friend, he was hired by Westwood College, a privately held chain of schools that promises to train busy adults for up-and-coming careers. Pruyn worked for five months at Westwood’s Denver call center. His job was to dial scores of prospective students each day from a list of telemarketing leads and entice them to enroll in the company’s online learning program.

Westwood is part of the growing sector of “proprietary” schools—for-profit career colleges that market to students who want practical rather than liberal arts educations. It operates seventeen campuses in six states in addition to its online program, with associate’s and bachelor’s degrees in fields like web design, criminal justice, game-software development, construction management, automotive technology, and medical assisting. It also offers a master’s degree in business administration.

As the company’s newest hire in 2007, Pruyn quickly discovered his job was to hook as many prospective students as possible with a pitch so persuasive that they’d risk taking on five-figure debt. (Bachelor’s programs run between $58,016 and $76,020.) “It’s more of an emotional thing than it is about the facts,” he says. “If you’re good at it, you can really make them dwell on how crappy their lives are and then envision this life where they’re making five times what they make now in a dream career.” Recruiters who made high enrollment numbers were rewarded with pizza parties and Cancun trips; poor sellers were threatened with dismissal.

The emotional manipulation and “boiler-room” sales environment were only part of what disquieted Pruyn. “The culture of lying was pervasive,” he says. “There simply were no boundaries.” Recruiters misrepresented teacher qualifications, placement statistics, and whether credits would transfer, he says. They invented stories about which companies hired Westwood graduates and how much they paid. “A lot of the times, when you’re lying, you don’t even realize it,” he says. “You get information from another rep or your director and you assume that it’s true.”

The most egregious example for Pruyn was the glowing picture he was told to paint of the job market for video-game developers. Pruyn says he initially trusted his colleagues when they told him graduates commanded exorbitant starting salaries—in one case more than $200,000. When he checked with the company’s career center, he says, he learned that the claim was a flat-out fabrication. Yet some of the prospects he was calling believed his spiel, just as he had believed his coworkers. “There were a lot of kids only a couple of years out of high school,” he says. “It was really easy to pump a student up about the gaming program. And once they get excited, I guess their guard gets let down, and they don’t think about things all the way through. That was probably the saddest part of it all.”

A Potemkin Degree

Amanda Turcheck was one of the students who was drawn in by a recruiter’s pitch. She was floundering at a public college in Denver when an acquaintance recommended Westwood. Turcheck and her future husband were intrigued by the school’s computer-aided design and architectural drafting program. “Both of us are hands-on,” she says. “We both like building things in a computer from the floor up.” Westwood offered only an associate’s degree, but the admissions representative assured the couple that it was all they needed. “They told us, ‘You’d get jobs before you’d even graduate,’” she says. “They told us the job market was really big in Colorado—we have a lot of construction all the time.” Not only was Westwood’s name highly valued, she recalls the recruiter saying, but the school’s career center would work tirelessly for them.

Besides, Turcheck says she was told, if she and her boyfriend wanted to finish their undergraduate degrees later, their credits would transfer to any school that offered equivalent courses.

The couple graduated in 2009. “Once we got out, we realized that the value of our degree was nothing,” says Turcheck, who is now twenty-six. Employers weren’t hiring applicants without bachelor’s degrees. The school’s failure to deliver a promised internship in the field meant their résumés were thin. “No one even looked twice at our applications,” she says. Finishing their bachelor’s degrees elsewhere would mean starting from scratch because public and private nonprofit schools typically don’t accept Westwood credits. Many proprietary colleges receive accreditation from “national” agencies, which use quantitative criteria like completion and job-placement rates. Liberal arts  colleges and universities use “regional” accreditors, which consider factors like shared governance and academic freedom. Because the criteria are different, the credits rarely transfer.

Westwood’s career center promised it would forward the Turchecks weekly job leads, she says. It did send periodic e-mails—announcing openings that “had nothing to do with our field,” Turcheck says. “We’d get leads for a part-time bank teller position. Or when the circus was in town, there were some temporary positions helping out.” The mailings included a few jobs in their field, but those required bachelor’s degrees.

Eventually, the couple gave up looking for relevant work. Turcheck kept her old job at a tool store. Her husband, Justin, enlisted in the military. Last year they moved to Abilene, Texas, where Justin works in munitions storage at Dyess Air Force Base. She found a job as a cashier at a Hallmark store. The Turchecks are paying off almost $90,000 in student loans. In retrospect, she says, “I would have been able to go to a community college for a heck of a lot less and learned the same stuff.”

A Lifetime of Debt

These stories are not anomalies, according to many scholars, lawmakers, and consumer advocates. Critics say that for-profit career colleges—which, according to industry figures, enrolled 3.2 million students in the United States in 2009—have been plagued by deceptive recruiting practices that lure students into programs they could find elsewhere for much less money. Students often borrow tens of thousands of dollars to attend these schools—only to discover later that their degrees are worthless and their credits won’t transfer. Having racked up enormous debts, they can’t return to school for useful training. Thus, they are caught in a spiral, owing more than they can afford to repay, unable to change that equation, and at risk of garnished wages, ruined credit, and seizure of their income-tax refunds.

“Many for-profit colleges view students as no more than cogs in the profit-making machine, with little concern for their education or success,” said US senator Tom Harkin, Iowa Democrat and chair of the Health, Education, Labor, and Pensions Committee, in a statement last fall. “As many students face a lifetime of debt with no diploma, these schools are enjoying profit margins that place them among the most successful companies in America—profits derived from taxpayer dollars intended to serve as an investment in American students.”

“These schools offer the false hope of being born again as an educated person,” says former St. Louis mayor Clarence Harmon, the ex-president of one such institution, Sanford-Brown College in Hazelwood, Missouri. “But they’re throwing students to the wolves—graduating people who are not competent in fields that may not exist in three or four years.”

Officials at Westwood and similar schools reject these criticisms. They consider stories like Turcheck’s and Pruyn’s part of a “smear campaign” against their industry. They say their institutions deliver an education that is more attuned to the twenty-first-century job market than do public and nonprofit institutions. “Traditional four-year colleges just aren’t keeping pace with the changing needs of a new economy,” says Kristina Yarrington, Westwood’s vice president of marketing. “There is a need for a specialized workforce that’s trained in very specific skills, and that’s exactly what career colleges such as Westwood provide.” She says her company prides itself on small classes, professionally developed curricula, proactive career counselors—and honest talk from recruiters. “Transparency is at the core of who are. We want to be sure that when a student steps into that classroom, they know exactly what they’re getting.”

Still, in 2009, Westwood’s parent company paid the government $7 million to settle a whistle-blower lawsuit claiming that some of its Texas recruiters had inflated job-placement rates and misled students about whether an interior-design program would qualify them to take a state licensing test. (The company admitted no wrongdoing.) Last year it was sanctioned by both state regulators and one of its accreditors.

For Amanda Turcheck, Westwood’s assurances of transparency are as empty as the recruiter’s promises of a booming market. “I feel like an idiot for going to school there,” she says. “It turned out to be such a waste of time and money. I wish I would have never even set foot into that office.”

For-Profits’ “Moon Shot”

With the economy in shambles, it’s no surprise that more Americans are enrolling in for-profit career colleges, which blitz the airwaves with promises of fast, focused, hands-on training. The schools offer testimonials from former students—or actors playing former students—who claim to have turned their lives around after attending proprietary schools.

According to Harris Miller, president of the Association of Private Sector Colleges and Universities (the for-profit sector’s trade group), his industry is in “hyperdrive,” with growth rates some years approaching 25 percent. Proprietary schools conferred 84,000 bachelor’s degrees in 2009, up from 49,000 four years earlier. The number of graduate degrees they awarded almost doubled, too, from 36,700 to 67,200. Miller says the for-profit sector is crucial to meeting President Barack Obama’s goal, articulated in his 2009 State of the Union address, of making the United States the global leader in the percentage of adults with college degrees by 2020. “We were very excited with President Obama’s call to arms—his equivalent to the Jack Kennedy moon shot,” Miller says. “Well, how do you get there? You’re talking about, in most cases, figuring out a way to bring in students who have traditionally not been a part of higher education. Community colleges don’t have the financial resources to expand. The career-college sector does have the capacity, the capital, and the nimbleness to create new programs that are tailored to students—not tailored to faculty—and tailored to the marketplace.”

But the sector has also been dogged by media reports, lawsuits, and government investigations that sound a common theme: aggressive recruitment techniques bait students with false promises and then leave them on the hook for loan payments they can’t afford. What’s more, federal statistics call into question the quality of a career-college education. Six-year graduation rates for first-time students in bachelor’s-level programs are markedly low, according to a 2010 report by the US Department of Education: 25 percent at proprietary schools, compared with 55 percent at private nonprofit colleges and universities and 64 percent at public ones. The same report said proprietary schools spend considerably less on instruction than traditional institutions, both in dollars per student and as a percentage of their budgets.

Moreover, student-loan default rates—a reasonable measure of whether alumni have landed decent-paying employment—are dramatically higher at for-profit career colleges. According to 2009 federal data, 24 percent of all proprietary schools that participate in the federal student-loan program have three-year default rates of 30 percent or higher. Only 1 percent of private nonprofits are in the category of 30 percent or higher default rates. Virtually no public four-year institutions are in that category. Overall, the three-year default rate for for-profit colleges is 22 percent, according to figures released by the Department of Education in April 2011. This compares to 7 percent at private nonprofits and 10 percent at public institutions.

“I’m not given to exaggeration, but I kid you not: this is a buyer-beware, nobody’s-looking-over-your-shoulders kind of environment,” says Barmak Nassirian, associate executive director of the American Association of Collegiate Registrars and Admissions Officers (whose members include proprietary schools). “These entities are basically marketing machines. They’re not really educational providers. In an earlier time, they’d be selling Bibles door-to-door, vacuum cleaners door-to-door. Today, because of the availability of federal money”—$24 billion in federal student loans and grants in 2008–09—“they now peddle so-called education.”

For those buyers who are not savvy enough to beware, the results can be ruinous. “We’re stuck with $40,000 in debt for the next twenty-five years of our life—for nothing,” says Sherri Akers, thirty-three, who took medical-assisting courses at the Melbourne campus of the for-profit Florida Metropolitan University. Her husband, Sean, took pharmacy-assistant classes there. In 2007, parent company Corinthian Colleges paid $99,900 to settle an inquiry over practices at its ten FMU campuses. According to the Florida attorney general’s office, FMU encouraged its recruiters to “sell the dream” without disclosing the low percentage of students who graduate and find better-paying jobs. Nor did the school clearly explain that, because of its national accreditation, traditional schools rarely accept its credits. (“You can go to Harvard with these credits,” FMU’s head recruiter had told the Akerses, she says.) The company admitted no wrongdoing and renamed the school Everest College that same year.

After earning their associate’s degrees, Sherri and her husband had to start from scratch at another school, where they studied radiology. “We make okay money as X-ray techs,” she says. “But we pay $600 a month in student-loan debts, so we really didn’t get anywhere.” Worse, she can’t afford the additional loans she’d need to become a physician’s assistant— her real dream.

“I think every day,” she says, “about what I could have accomplished.”

Cutting Hair For $250,000 a Year

While shabby trade schools have gotten periodic attention since the 1980s, the spotlight during the past year has been particularly harsh. In June 2010, the Senate Health, Education, Labor, and Pensions Committee released a study noting that eight publicly traded career-college chains spent 31 percent of their budgets on recruiting and marketing—and a falling share on instruction. A follow-up report in September analyzed sixteen for-profit chains and found that 57 percent of the students who enrolled between July 2008 and June 2009 had already dropped out. Over a three-year span, 1.9 million students had withdrawn from those same colleges—“most with nothing to show for their time in a for-profit school but student-loan debt.” This record of failure, the authors noted, was underwritten by US taxpayers: the same companies received 87 percent of their 2009 revenues from federal student aid, which either originates from or is guaranteed by the government.

In December, Senator Harkin’s committee released the most damning of its reports, charging that proprietary schools were draining the Post-9/11 GI Bill benefits of service members and veterans without delivering an adequate education. The report noted that educational benefits flowing to for-profit career colleges from the Departments of Defense and Veterans Affairs increased sevenfold between 2006 and 2010—some $521 million last year alone. “Outcomes at the for-profit schools receiving the most military educational benefit revenue are questionable,” the report said. Those schools had high withdrawal and low loan-repayment rates.

And last summer, the US Government Accountability Office (GAO) released the results of a special audit of the for-profit sector. The GAO sent undercover investigators to fifteen schools and surreptitiously videotaped the conversations. Recruiters at all fifteen provided “deceptive” information about issues like graduation rates, starting salaries, and tuition costs. (A Washington, DC, recruiter told one investigator he could make up to $250,000 a year cutting hair.) At four schools, admissions representatives urged investigators to commit fraud—for example, by claiming nonexistent dependents on their financial-aid forms. “It certainly appeared a little bit like the Wild, Wild West out there,” Gregory Kutz, managing director of the GAO’s Office of Forensic Audits and Special Investigations, testified at an August Senate hearing.

This is not the first time the federal government has examined the academic Wild West. In 1992, Congress passed several measures designed to curb some of the worst abuses by for-profit career colleges. One of them was a ban on commissions and bonuses for admissions staffers “based directly or indirectly on success in securing enrollments.” The goal was to remove the financial incentive for recruiters to use deception or manipulation.

Under President George W. Bush, though, the Department of Education created twelve loopholes, or “safe harbors,” for colleges wanting to reward successful recruiters. The 2002 rule said that colleges could raise or lower recruiters’ salaries twice a year, as long as “any adjustment is not based solely on the number of students recruited.” (Emphasis added.) As long as 1 percent of a decision is based on factors like “judgment” and “communication skills,” the schools have considered themselves in the clear. “Each one of those safe harbors chipped away at the law’s ability to be enforced,” David Hawkins, director of public policy and research at the National Association for College Admission Counseling, told the Senate last summer.

Still, schools occasionally got in trouble. In 2009, the Apollo Group, the $4-billion-a-year company that owns the University of Phoenix, agreed to pay $67.5 million to the federal government, plus $11 million in attorney’s fees, to settle a whistle-blower lawsuit alleging that recruiters were paid solely based on how many students they enrolled. The lawsuit followed a 2003 Department of Education investigation that reached the same conclusion. Officially, the investigation said, Apollo used a “matrix” of factors to determine salaries. But employees called that formula “a smokescreen” and “a joke.” “More than one recruiter said that managers simply falsified the numbers on the various factors to make the overall evaluation match the enrollment number,” the report said. Apollo officials admitted no fault and said they settled the case to avoid ongoing litigation.

For-profit schools may soon find themselves with considerably less wiggle room. In October, the Obama administration adopted a new regulation eliminating the twelve Bush-era “safe harbors.” Starting July 1, for-profits will no longer be able to consider enrollment figures in how they pay recruiters. Other new rules require career colleges to disclose their graduation and job-placement rates and give the government more authority to crack down on deceptive practices. As this issue went to press, the Obama administration was finalizing—and the industry was battling— another rule that would tie schools’ federal student-aid eligibility to both loan-repayment rates and the income-to-debt ratio of their graduates. In February, the US House passed an amendment designed to block this rule. The Senate had not taken up the measure as of late March.

Barmak Nassirian of the American Association of Collegiate Registrars and Admissions Officers warns that implementing these new rules “will not really result in a clean system.” Still, they should eliminate some of the most outrageous abuses. “They’re trying to incentivize the sector to do a little more teaching,” he says, “and a little less raping and pillaging.”

Barry Yeoman is a freelance magazine journalist and radio documentarian based in Durham, North Carolina. He writes for AARP: The Magazine, Audubon, Good Housekeeping, OnEarth, and O: The Oprah Magazine. His website, which contains his articles and contact information, is www.barryyeoman.com.

 


Comments:

To the Editor of ACADEME:

Once again, after reading the May-June 2011 edition of ACADEME, it seems imperative to me that the professoriate must take control of two words: “college” and “university.”  This would not only prevent sleazy institutions, whether for profit or not, from misusing these words in their names and thereby bringing the entire secondary education enterprise into disrepute, but also to give at least a minimum of legal support to the entire notion of shared governance.

To take such ownership, a two step process appears appropriate.  First, “college” and “University” must once again be defined along historical lines as an institution of higher learning whose faculty consists to a very large extent of scholars recognized as such by the possession of a terminal degree in their field.  Although its implications are far more wide ranging, such a simple definition can probably be obtained by means of a ruling by the Federal Trade Commission.  Preventing many institutions from mislabeling themselves as colleges or universities is basically no different from preventing a fish merchant from labeling tilapia as orange roughy.  Just as tilapia has its legitimate place in the human diet, so do many of the pseudo-college and pseudo-universities, provided that they operate under a proper label.

Second, having achieved the above, it must become a matter of law to protect the ancient privilege: academic degrees, such as Bachelor’s, Master’s, or Doctoral, are legitimate only if conferred by the faculty of a college or university pursuant to completion of a course of study set by that faculty.  This would, of course, prevent the ostensible conferral of such degrees by persons or groups who do not have the perquisite standing to do so among the body of scholars.  Furthermore, and importantly, such a requirement embodied in law will give faculties of colleges and universities leverage for insistence on shared governance: no shared governance, no degrees.

I realize that it will be difficult to obtain legal standing for these two propositions but with a united effort by the American professoriate, under the leadership of the AAUP, this change is attainable.

W. H.


We worked with freelance reporter Barry Yeoman nearly two years ago on a similar piece that he wrote for Good Housekeeping. That piece was based on a similar piece he did several years earlier for yet another publication. For the piece he submitted to Academe, I have outlined several key mistakes that merit a clarification at the very least:

--Yeoman never interviewed or asked Westwood College for comment for the Academe piece. He relied on an interview we gave him in 2009. He did not call us to update any of our quotes or developments.

--Yeoman relied on comments from a former Westwood admissions representative. Since we spoke to Yeoman in 2009, this representative’s comments have been publically disputed. This former Westwood representative also has publically admitted that he is working closely with a law firm that has filed a suit against Westwood College. Furthermore, we have pulled voice recordings by this former employee with prospective students and they do not support any of his claims.

--Westwood College resolved its issues with the state of Colorado and its accreditor last year, well before the publication of this piece.

--Westwood does not offer incentives, trips or otherwise, to its admissions staff nor has Westwood for some time. They are compensated on a variety of factors, none of which are tied to enrolling students.

--We were not asked to fact-check any information regarding the Westwood students the interviewed. We could have clarified the misleading claims that the students were $90,000 in debt to Westwood and provided clear documentation that the students were fully aware of our Westwood’s national accreditation and difficulty transferring credits.

As you know, there are many challenges in higher education today without sensationalizing or misrepresenting the facts. The private college sector provides a unique need for a distinct demographic of students not served by community colleges or traditional colleges.

— Kristina Yarrington, Westwood College


While researching Westwood College, I reviewed hundreds of student complaints, along with lawsuits, accreditor and state regulatory actions, and news clippings. I interviewed former students, former recruiters, an attorney representing former students, and an investigator working for the same law firm. I interviewed Kristina Yarrington in 2010 (not 2009), and had extensive correspondence with a PR professional hired by Westwood. The lengthy interview with Yarrington covered all the points I wrote about in the Academe article. I asked Yarrington about consistent patterns of allegations rather than specific cases.

In her letter, Yarrington refers to "key mistakes" but then doesn't cite any factual errors. To clarify some of her points:

--Joshua Pruyn, the former admissions representative, testified before a Senate committee last year about his experiences with Westwood. An attorney for Westwood later disputed some of Pruyn's comments and asked the committee to strike his testimony. The committee declined.

--Pruyn has served as a witness for a Florida law firm representing former Westwood students. He receives no compensation.

--In 2010 Westwood’s accreditor put the Denver North campus on probation. Colorado regulators followed suit for all campuses statewide. Both probations remained in effect until early 2011.

--In 2009, Westwood settled a whistle-blower lawsuit alleging the school “set specific performance standards tied directly to the number of students recruited, with corresponding raises/decreases in compensation.” It did not admit wrongdoing. I interviewed two former recruiters who corroborated this salary scheme.

--Westwood offered trips and other incentives to recruiters when Pruyn worked there in 2007-2008.

All of these points are consistent with what Academe reported.

— Barry Yeoman

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