February 4, 2013

As Mass. AG Probes Vanished For-Profit College, Senators Call for Broad Review

Maryland's Senators, Benjamin Cardin and Barbara Mikulski, are asking  the Dept. of Education how a college could collapse before our eyes.
Maryland’s Senators, Benjamin Cardin and Barbara Mikulski, are asking the Dept. of Education how a college could collapse before our eyes.

Massachusetts Attorney General Martha Coakley says she’s expanded her investigation of whether for-profit colleges have deceived students in her state about their prices, graduation rates, and job placement records. “The more we look, the more we see it as a real problem,” Coakley told the Boston Globe. Coakley identified one school she’s probing — American Career Institute (ACI), which suddenly closed all eight of its campuses in Massachusetts and Maryland last month, leaving students out in the cold, their futures uncertain.

Republic Report previously wrote about the abrupt shuttering of ACI, which featured programs in web design, gaming design, computer network administration, and medical and dental assisting.  We interviewed the school’s CEO, Andree Fontaine, who defended the quality of her school and blamed its demise on the weak economy and unfair actions by her creditors.

At least four other for-profit college businesses — much bigger than ACI, indeed some of the largest in the country — have also received demands from Coakley’s office for information about their practices: the University of Phoenix, part of the Apollo Group; Education Management Corp., 41 percent owned by Goldman Sachs; Everest Institute, part of Corinthian Colleges Inc.; and Kaplan, a subsidiary of the Washington Post Co.

As Coakley pursues ACI and other schools, Maryland’s two U.S. Senators, Barbara Mikulski and Benjamin Cardin, sent a letter to Secretary of Education Arne Duncan on January 31 calling on him to examine how federal and state authorities, as well as private accrediting bodies, failed to detect the problems that undermined ACI. They also asked Duncan to provide Congress with recommendations “to prevent such unexpected closures in the future.”

The Globe reports that Massachusetts launched its probe of ACI late last year and has received more than 300 complaints about the school. Coakley compared the for-profit college situation to the subprime mortgages crisis: “This has potential to be a predatory business.” Coakley is one of 30 state attorneys general working together on probes of the for-profit college sector.

As the Mikulski-Cardin letter suggests, ACI’s abrupt demise seems to demonstrate how lax government oversight of the for-profit college industry can harm students and taxpayers. ACI, like many for-profit colleges large and small, grew rapidly under a federal system that offers a seemingly endless flow of taxpayer-funded financial aid dollars with few accountability standards. ACI  had revenues from federal financial aid that grew four-fold in a single year, from $6.5 million in 2009-10 o $26.9 million in 2010-11. And while Fontaine has said her school is more reasonably priced than many for-profits, tuition was high, for example $15,000 for a 9-month medical assistant certificate, prices that could leave students with more loans than they could handle.

Many companies in the for-profit college sector essentially ran amok for a decade, racking up big profits at taxpayer expense while wrecking the lives of countless students who ended up with insurmountable debt whether they graduated or, in many cases, dropped out. But when the industry refused to accept needed reforms and instead waged a brutal lobbying fight against reasonable accountability standards proposed by the Obama Administration, it came under much greater public and media scrutiny.

The facts about these schools — deceptive recruiting, poor quality programs, dismal job placement results — have at last reached the vulnerable populations that made up much of the student enrollment: low-income people, veterans, students of color, single mothers, immigrants, parolees. And these potential recruits are now voting with their feet, putting this once swaggering, arrogant, entitled industry on the ropes. As Goldie Blumenstyk summarized yesterday in the Chronicle of Higher Education:

[C]ontraction has been a major theme over the past two years. Career Education Corporation announced the closing of a quarter of its 90 campuses and a reduction of 900 positions; Corinthian Colleges took steps to sell or close nine campuses; DeVry announced plans to cut its employee count by 570; and Capella Education planned a reduction of 185. Last month the University of Phoenix and its parent company, the Apollo Group, began the elimination of 115 of its 227 campuses and learning centers, and 800 jobs, in addition to the 700 positions it cut two years ago.

The Members of Congress who have blocked reforms of this industry while accepting their campaign cash, and the numerous Washington lobbyists, Republicans and Democrats, who have taken big bucks from the for-profit education sector to spin disinformation, have done a tremendous disservice to the country and particularly to millions of students. It’s well past time to put in place reforms that protect students and taxpayers against these predatory institutions.

I reached American Career Institute’s CEO, Andree Fontaine, by phone again this afternoon and asked her for an update. She was tied up but pledged to get back to me. When she does, I’ll report.

This article also appears on Huffington Post.