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The Biggest Fraud in Higher Education: Whose Fault?

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Author: dianeravitch

The biggest scam in higher education was perpetrated by Corinthian Colleges, a for-profit corporation that once enrolled more than 120,000 students at 120 campuses. Corinthian collapsed recently, leaving tens of thousands of students saddled with debt and worthless degrees.

 

The recruiters focused on minorities, the poor, and veterans, making false promises about future employment and costs. The bottom line was always the same: profits. Not education.

 

The linked article is the inside story of the decline and fall of Corinthian, its predatory practices, its lies to students, and the inaction of the DOE.

 

“In lawsuits, official complaints to state and federal regulators, sworn declarations submitted in Corinthian’s bankruptcy proceeding, and conversations with The Huffington Post, dozens of former Corinthian students and several former Corinthian employees said that Corinthian drowned students in debt and sent them off with meaningless diplomas that did not help — and sometimes even harmed — their job prospects. It illegally padded job placement statistics and gave students college credit for “externships” at fast-food restaurants. It charged students up to 10 times what a comparable community college degree would cost. More than 1 in 4 Corinthian graduates defaulted on their student loans, according to Education Department data. And for years, the Education Department not only failed to recognize the depths of the abuse, but effectively funded Corinthian’s business model, sending the company billions of dollars in financial aid to help cover students’ bills.”

 

Why did the U.S. Department of Education allow this fraud to continue for so long? One might well ask why the U.S. Department of Education has been silent about the growth of predatory for-profit K-12 schools, both virtual and brick-and-mortar. For the first time in history, the U.S. ED just doesn’t see privatization and profit-making as a problem.

 

“In 2008, Tasha Courtright visited the Everest College campus in Ontario, California, with a friend. She was not looking to pursue higher education. “The recruiter said, ‘How about you? Do you want to go to school?’” Courtright recalled.

 

“I said I can’t afford it, I can’t do loans,” she remembered, noting that she was working a minimum-wage job at a gas station when Corinthian first recruited her. “They said, ‘Let us do the numbers.’ They said I qualified for Cal Grants and Pell Grants, and I wouldn’t have to pay anything.”

 

“The recruiter called Courtright repeatedly for two days, pressuring her to make a decision. “They said classes were starting and ‘If you don’t do it now, you never will.’ So I went down again and signed up.” Courtright spent four years at Everest, earning a bachelor’s degree in applied business management. She said recruiters promised she wouldn’t pay a dime; she ended up with $41,000 in student debt.

 

“High-pressure sales tactics like that were deliberately targeted at vulnerable demographic groups, including single mothers and the unemployed, according to Lueck, the former Corinthian manager. Recruits were often the first in their families to attend college. Almost anyone could qualify.

 

“Laurie McDonnell, a librarian at the Everest-Ontario Metro campus, resigned after learning that her school had enrolled a man who read at a third-grade level.

 

“The goal was simple: profits. Smaller chains like Lincoln Tech or DeVry used to dominate the for-profit college industry. But toward the end of the last decade, larger, publicly traded companies took over. By 2009, three-quarters of all U.S. students enrolled in for-profit colleges were at schools owned by a corporate conglomerate or private equity firm. Goldman Sachs owns around 40 percent of Education Management Corporation, another operator of for-profit colleges.

 

“Many for-profit college companies own multiple university brands. Corinthian, which traded on Nasdaq, ran Everest, Wyotech and Heald Colleges. The consolidation of the industry changed how for-profit schools operated, argues Elizabeth Baylor, senior investigator on a landmark 2012 Senate Health, Education, Labor and Pensions Committee study of for-profits. “Student success was not the primary focus of the entity. It was returning investor value,” Baylor, who now works at the Center for American Progress, told HuffPost.

 

“One-quarter of the average for-profit college budget goes to marketing and recruitment, Baylor said. The goal is to capture and retain students, and squeeze as much money out of them as possible. The 2012 Senate report found that Corinthian’s students defaulted on their loans at a rate that was “by far the highest of any publicly traded company” that investigators scrutinized.”

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