October 29, 2015

McCain Lashes Out At Durbin, Defends Veteran-Abusing For-Profit Colleges


Senator John McCain (R-AZ), in a speech on the Senate floor yesterday afternoon, charged that fellow Senator Dick Durbin (D-IL) has “orchestrated” a “shameful … vendetta against for-profit universities.” McCain upped the ante by asserting that Durbin has a “well-known record of not supporting the men and women who are serving in the military.” Alleging a larger conspiracy, McCain repeated accusations in a recent Wall Street Journal editorial that “the Obama Administration’s military tribunal is punishing” the biggest for-profit college, the University of Phoenix “for being a target of the political left” and that “General Durbin has commanded the Education Department and Department of Veterans Affairs to ‘take appropriate action’ against the company. Bombs away.”

In fact, it is McCain, by using his power as chairman of the Senate Armed Services Committee to pressure the Department of Defense to back off a legitimate investigation of the University of Phoenix, who is doing a disservice to service members and veterans, who deserve to be protected against deceptive recruiting, poor quality programs, and other predatory practices.

In his own floor speech yesterday, Durbin encouraged the Pentagon to continue its investigation. Durbin noted that Paul Rieckhoff,  founder and CEO of Iraq and Afghanistan Veterans of America, said that the University of Phoenix was the “worst by far” for-profit college in terms of taking advantage of the vets who are members of his organization.

Remarkably, McCain, in his speech, defended not only his home state-based University of Phoenix but also the disgraced, collapsed Corinthian Colleges. Even some for-profit college executives stopped defending Corinthian after it shut down; they started saying Corinthian was the one bad apple in the bunch. But McCain repeated the Wall Street Journal claim that the U.S. Department of Education, the Consumer Financial Protection Bureau, and California attorney general Kamala Harris “mounted a coordinated campaign that drove for-profit Corinthian College out of business.” McCain claimed these agencies acted “without any proof of misconduct.”

Poor, poor Corinthian Colleges, which, before it shut down earlier this year, had been receiving as much as $1.4 billion a year in taxpayer dollars. Twenty state attorneys general, Democrats and Republicans, along with the Department of Education, the CFPB, the Securities and Exchange Commission, and the Justice Department, have all been investigating or have sued Corinthian for fraud and other misconduct.

And poor, poor University of Phoenix, which has been receiving as much as $3.7 billion a year in our tax dollars. Four state attorneys general, Democrats and Republicans, along with the Department of Education, the CFPB, the Securities and Exchange Commission, and the Federal Trade Commission, as well as the Pentagon, have all been investigating or have sued Phoenix for fraud and other misconduct.

Yet, according to McCain, “it is obvious what this is really all about. This is all about the constant attacks on for-profit colleges, which is an anathema to some.”

All of those professional law enforcement staffers must be spending all those hours in pursuit of some ideological agenda, at the behest of the political left. Really?

Maybe instead it’s about evidence developed by all those many law enforcement agencies.

McCain correctly pointed out in his remarks that investigations, allegations, and lawsuits are not proof of guilt. But high-priced corporate lawyers for this wealthy industry have been expert at fighting criminal and civil actions tooth and nail. Where the proof of guilt is strong, they will settle with prosecutors for some cash and promises to do better, but always demand that the settlement include no admission whatsoever of wrongdoing. Short-handed government lawyers tend to accept those terms.

Nevertheless, there is plenty of evidence — from congressional investigations, media reports, and student accounts — of abuses by the University of Phoenix, Corinthian, and other big industry players like ITT, EDMC, Kaplan, Career Education Corp., Bridgepoint, and CollegeAmerica — all of them now also facing multiple law enforcement probes.

After years of ignoring the abuses, law enforcement agencies and overseers like the Pentagon, VA, and Department of Education are stepping up to protect students, and that’s a good thing.

And, notwithstanding what McCain said in his Wednesday speech, a day earlier a federal district court in Chicago did make findings that Corinthian had engaged in unlawful acts. The judge, Gary Feinerman, granted the CFPB’s motion for a default judgment in its lawsuit against Corinthian, which decided to stop defending itself.

Judge Feinerman reviewed the CFPB’s evidence and concluded that Corinthian violated the Consumer Financial Protection Act of 2010 “by misrepresenting career prospects and career services available to Corinthian students and prospective students in order to induce them to enter into Genesis Loans” — private student loans created and marketed by Corinthian. The court further found that Corinthian had violated the law by “by causing substantial injury to Genesis Loan borrowers by barring or pulling them from class, withholding educational resources, and otherwise preventing them from gaining access to educational courses or materials for which they had already paid, in order to pressure them to pay their Genesis Loans” and “by engaging in harassing, oppressive, or abusive conduct against Genesis Loan borrowers in connection with the collection of debts from the Genesis Loans.”

The judge ordered Corinthian to pay $531 million in restitution to the students. Of course, Corinthian, despite the $1.4 billion per year in our tax money, is in bankruptcy court and says it has no money.

With more than $30 billion a year in Department of Education, Pentagon, and VA money going to these for-profit colleges, and, more importantly, with the futures of U.S. students on the line, government authorities have every right to demand accountability, integrity, and good performance from the schools.  The companies cannot have a presumptive, permanent entitlement to take our money and to enroll these students, many of them service members, returning veterans, single parents, students of color, immigrants, and others struggling to build better futures. The presumption, instead, should be that the government seal of approval, and money, should only go to schools that truly are earning it.

The Pentagon thus acted entirely appropriately in temporarily halting its Tuition Assistance payments for service members to enroll as new students at the University of Phoenix, and banning the school’s recruiters from military bases, pending a review of evidence of deceptive recruiting and violations of regulations exposed by the respected Center for Investigative Reporting (CIR). (McCain, in his speech, sniffed that CIR is “an outfit that none have ever heard of.”) The Pentagon’s October 7 letter also cited the ongoing investigations of the school by the FTC and California attorney general Harris, and it called the University of Phoenix’s alleged violations of the rules “disconcerting.”

The CIR report found that the University of Phoenix paid the military for exclusive access to bases, held resume workshops for troops that actually served as efforts to recruit them to the school, and, without permission, included military insignias on “challenge coins” that recruiters gave to service members.

As noted, government funding to the University of Phoenix is not a minor matter. In fiscal 2012, the school’s parent company, Apollo Education Group, received $3.7 billion in taxpayer-funded student aid: $3.4 billion from the Department of Education, $32 million from DoD, and $206 million from the Department of Veterans Affairs. This amounts to more than 80 percent of the company’s revenue. Apollo has been the largest recipient of DoD student aid of any higher education institution in the U.S.

And while some students report they are satisfied with the education they received at the University of Phoenix, the overall record is weak.  Department of Education data has shown that the University of Phoenix’s graduation rate is less than 15 percent, and about 25 percent of its students default on their loans within three years of leaving school. The school spends about 27 percent of its revenue on marketing and recruiting.  A 2012 Senate report found that the University of Phoenix spent $892 per student on instruction in 2009, compared to $2,225 per student on marketing, and $2,535 per student on profit.

Meanwhile, the price tag is high. Tuition for an associate’s degree in business at the University of Phoenix Online is $24,500, while the same degree costs $4,087 at Phoenix College in the Maricopa Community College system in Arizona. A bachelor’s in business at the University of Phoenix costs $74,575, while the University of Arizona charges $44,200 for the same degree.

A letter sent on Tuesday to Secretary of Defense Carter from a coalition of organizations (in which I participate), signed by more than thirty groups, including the Air Force Sergeants Association, the Association of the U.S. Navy, Blue Star Families, Iraq and Afghanistan Veterans of America, Paralyzed Veterans of America, Student Veterans of America, Veterans Education Success, Veterans for Common Sense, Veterans Student Loan Relief Fund, VetJobs, VetsFirst, and Vietnam Veterans of America, as well as the Leadership Conference on Civil and Human Rights, League of United Latin American Citizens, and many others, supported the Pentagon’s investigation of the University of Phoenix and cited, as support, the complaints of hundreds service members and veterans “who experienced deceptive recruiting” by the University of Phoenix.  The letter says that the experience of these men and women

over the past decade, and through 2015, demonstrate a pattern consistent with the allegations made by current law enforcement investigations. Service members’ complaints regarding the University of Phoenix tend to fall into three categories: (1) service members who were signed up for loans without their knowledge or permission, after being promised they would incur no loans; (2) service members who were misled about the cost and tuition increases at University of Phoenix; and (3) service members who were misled about the accreditation and transferability of University of Phoenix credits.

Despite this dismal record, last week, McCain, along with Republican Senators Jeff Flake (AZ) and Lamar Alexander (TN), chair of the Senate education committee, wrote to Secretary of Defense Ashton Carter calling on him to “reconsider” the Department’s action. Their letter — bearing the signatures of the two powerful Senate committee chairmen — demands that the Pentagon provide a trove of answers and documents justifying its action.

But given all the evidence that for-profit colleges are ripping off students and taxpayers, what, to borrow Senator McCain’s words, is this really all about? Do Senator Durbin and other critics of predatory for-profit colleges actually have some sort of ideological bias against a certain kind of college?  Why would we?  Or is the hidden agenda on the other side?

With many big for-profit colleges getting 90 percent or more of their revenue from federal taxpayers, the industry has an enormous incentive to keep the money flowing. And given their apparent need to use deceptive marketing and recruiting to sell overpriced, poor-value programs, the predatory schools want that money to come without any real accountability requirements. So they have every incentive to use campaign contributions to buy friends in Washington, and that’s exactly what they do.

McCain and his letter co-authors Flake and Alexander all have received significant campaign contributions from Apollo executives. Indeed, the company is the largest donor in the 2016 election cycle to both Flake and Alexander.

Apollo also pays an army of DC lobbyists to work its will on Capitol Hill.

And, of course, the University of Phoenix is a big employer in McCain’s home state, with a loud presence symbolized by its ownership of the name of the stadium where the NFL Arizona Cardinals play football.

Meanwhile, the Wall Street Journal editorialists have long boosted the for-profit college sector, especially as big banks like Goldman Sachs and Wells Fargo, and wealthy private equity firms took major ownership stakes.

Why, really, would small-government conservatives like Senator McCain and the WSJ editorial page want to defend the record of Phoenix and other bad actors — weak performance at high price, plus evidence of fraud and abuse, costing taxpayers billions each year, and ruining the career prospects and financial futures of our veterans and countless others?

Senator McCain, what is this really all about?

UPDATE [10-29-15 1:20 pm]: Senator Durbin’s response on the Senate floor today:

UPDATE [10-29-15 3:40 pm] Durbin and ten other Senators — Tammy Baldwin (D-WI), Richard Blumenthal (D-CT), Barbara Boxer (D-CA), Sherrod Brown (D-OH), Tom Carper (D-D-DE), Chris Coons (D-DE), Al Franken (D-MN), Ed Markey (D-MA), Chris Murphy (D-CT), and Elizabeth Warren (D-MA) — wrote to Secretary Carter today asking him to “remain steadfast” in the University of Phoenix investigation and in protecting service members and vets generally from bad actors in higher education.

This article also appears on Huffington Post.