With student loan debt topping $1 trillion in the U.S., greater scrutiny is being paid to for-profit colleges. They have been accused of false recruiting with spurious promises of employments, encouraging people to assume more debt than they can reasonably repay, and allowing anyone who can pay pursue ultimately questionable degrees. After years of examinations by state and federal regulators over their job placement statistics and loan practices, one of the big for-profit college operators, Corinthian Colleges, is shutting its doors and displacing current students after federal regulators have taken action.
The U.S. Department of Education as well as state regulators have long questioned the accuracy of Corinthian’s job placement statistics and loan practices. This began the slow unraveling of the company, which operated vocational-oriented colleges under a variety of names, including Everest College, Heald College and WyoTech, in the U.S. and Canada. Another for-profit college operator, ECMC Group, is buying more than 50 of the campuses.
Meanwhile, the federal government hit Corinthian Colleges with a $30 million fine for misrepresentation. It also announced that Corinthian Colleges students will be forgiven $480 million in loans because the school used “bogus” job prospects to convince enrollees to use expensive private loans to pay their tuition bills. The CFPB has indicated that tens of thousands of students received loans, so it is unclear at this time who will benefit from the forgiveness.
Corinthian Colleges charged as much as $75,000 for a bachelor’s degree, according to the Consumer Financial Protection Bureau (CFPB). They also pushed students into private loans with interest rates of roughly 15 percent. Television host/comedian John Oliver recently noted in a segment on for-profit schools, “Incoming college freshman can probably count on paying for their education for the rest of their lives.” In fact, over 60 percent of Corinthian Colleges students with loans defaulted on them within three years after being subject to difficulty finding employment combines with interest rates double those for federal loans.
Corinthian maintained that regulators targeted them unfairly targeted them and that they serve to educate students who are under-served by traditional colleges. Other for-profit colleges have also been accused of exorbitant pricing and taking advantage of vulnerable, low-income students. As Oliver cited, “Only 27 out of 115 people enrolled in one ITT engineering program graduated.” He also noted that only 11.3 percent wound up working in the field studied.
Most of the for-profit schools target unconventional students who would not otherwise be attending college at above-average tuition rates comparable to some private universities. They recruit working parents to returning veterans aggressively.
The federal government is trying various methods to address the situation. The U.S. Department of Education is reportedly developing a so-called “gainful employment” rule that will require colleges to prove that a set number of graduates at a school are able to find gainful employment. In addition, President Obama wants to eliminate a loophole in the “90-10 Rule”—a federal law that bars these schools from receiving over 90 percent of their revenues through federal student aid. The loophole excludes funding for veterans through the GI Bill and the Department of Defense tuition-assistance program, which has encouraged the schools to aggressively recruit veterans. Additionally, they are threatening the accreditation of institutions such as for-profit law schools, whose students notoriously have trouble passing the bar.
The announcement that for-profit Corinthian Colleges is selling its campuses and shutting its doors after years of criticism and increased government scrutiny will probably be followed by other changes. The student debt problem heavily involved those schools, but changes are likely across the board. In addition, other for-profit higher-education institutions will have to make changes to meet the job prospect thresholds.
By Dyanne Weiss