March 29, 2020

Beware: For-Profit College Scammers Will Exploit the COVID-19 Crisis

Beware: For-Profit College Scammers Will Exploit the COVID-19 Crisis


With thousands of people dying or imperiled by the global COVID-19 pandemic, and millions losing their jobs and their businesses across the country, it’s difficult to keep track of all the challenges our society faces. But one that Republic Report will keep focusing on is consumer scams: dishonest operators who will seek to profit from the pandemic by fleecing others. In particular, we will be watching the predatory college industry, for-profit schools that thrive in desperate times, when jobs are scarce and lower-income people see the availability of federal student grants and loans for college as a source of hope. For-profit college scammers see this federal aid as a source of easy money, courtesy of U.S. taxpayers as well as struggling students.

Plainly, COVID-19 requires education programs at all levels to switch, for now, to online classes, which will be a challenge for many schools and students. And online is an area that many for-profit schools have emphasized. But a look back at the last national economic crisis provides ample reason to be wary of the for-profit college industry as we face the current crisis.

The last great boom in the industry began during the George W. Bush years, first after the Bush administration and Congress loosened regulations on for-profit and online colleges, but especially when the Great Recession took hold. With people out of work and seeking to improve their future options, enrollment at for-profit colleges expanded heavily, to the point that the industry had ten percent of all U.S. college students — and a full 25 percent of all federal student aid. At its 2010-11 peak, the industry was getting a remarkable $32 billion a year from U.S. taxpayers, with some companies getting close to 90 percent, or more, of their revenue from the federal government.

All of that would have been okay, though, if the quality of programs was good — if students enrolling to study information technology, medical assisting, air conditioner repair, cosmetology, and other career courses were getting the training they needed to obtain jobs — and if the costs for tuition were set low enough to enable graduates to pay back their loans on their starting salaries. Unfortunately, while there were and remain some quality, fair-priced programs in the for-profit space, many schools in the industry, big or small, have offered low-quality programs, sky-high prices, or, often, both.

Much better deals on career training programs have long been available at America’s community colleges, but those schools were filled to the brim during the last recession and, starved by declining state budgets, did little to encourage enrollment; in fact, some were forced to turn students away.

Meanwhile, the for-profit schools saw expanding enrollment as a license to print money and would accept nearly every student who applied. Worse, many of these schools — whether owned by strip mall hustlers, elite private equity firms, or Wall Street giants — employed deceptive advertising on TV, radio, and online to get students in the door. They contracted with shady “lead generation” websites that promised jobs, food stamps, or advice for veterans but instead existed only to entice people to surrender their phone numbers so for-profit college recruiters could call them relentlessly.

One-on-one with prospects, these recruiters, under pressure from their bosses to get “asses in classes,”  lied about the selectivity of programs, the urgency of enrolling before spots were filled, their job placement rates, and likely starting salaries. The for-profit recruiters also used coercion — aggressively shaming and scaring students into believing they were failing themselves and their families unless they enrolled.

The students targeted by these for-profit schools — low-income, single mothers, people of color, immigrants, veterans, military troops and spouses — were often the first in their family to pursue higher education and thus no match for the sophisticated recruiting scams of the for-profit college industry. The students were tricked into believing they had found the key to a better future, and, whether they graduated or dropped out, they often ended up deep in debt, owing $20,000, $50,000, or even $120,000, but back at their old jobs at Office Depot and CVS. Studies found that many for-profit college students actually earned less after leaving school than they did before enrolling.

The whole scheme has been recounted in detail many places — including a comprehensive 2012 report by the Senate HELP committee, Tressie McMillan Cottom’s book Lower Ed (2017), the documentary Fail State (2017), the Miami Herald‘s 2015 series Higher Ed Hustle and in numerous other media exposes (including on this website and my 2014 e-book called Stealing America’s Future).

These scams were not new. Over many decades, the government has allowed federal aid to fund tuition at predatory for-profit schools, which has led to massive abuses of students and taxpayers, which in turn has led to scandals and regulation, and then the cycle repeated again.

The scam playbook of deceptive and coercive recruiting in the last cycle was mirrored in another sham school that was unaccredited and thus not eligible for federal aid but still managed to rake in millions directly from students. It was called Trump University.

Just as Donald Trump ultimately paid out $25 million to victims of his shuttered scam real estate school, many actors in the for-profit college industry faced, near the end of the Obama administration, a reckoning.  There were law enforcement actions, by both federal agencies and state attorneys general, for deceptive and illegal conduct, and settlement payments were extracted. Some for-profits, including major chains — Corinthian Colleges, ITT Tech, EDMC/Dream Center — ultimately collapsed under the weight of their own misconduct and sanctions imposed by private accrediting agencies, states, and the U.S. Department of Education.

In addition, the Obama administration took important steps to remedy and reduce abuses. It issued the gainful employment rule, which aimed to end federal funding of for-profit and career college programs that year after year leave students with debt they cannot afford to repay. It also issued the borrower defense rule, which created standards and a process for students ripped off by their federally-blessed colleges to have their federal loan debt cancelled, and barred colleges from using mandatory arbitration clauses to prevent students from suing them.

Under Obama, the Department of Education also created an enforcement unit to crack down on predatory abusers, and it built cooperation on for-profit college issues with other federal agencies. It ended recognition of ACICS, the accreditor of many of the worst schools. It refused to recognize the predatory Center for Excellence in Higher Education chains of schools as non-profits, after concluding the shady conversion from for-profit to non-profit benefited only the former for-profit owner.

These Obama-era reforms would have saved taxpayers billions and helped students by weeding out poorly-performing programs.

But Donald Trump’s education secretary, Betsy DeVos, has cancelled all these pro-student, pro-taxpayer reforms and more. In doing so, DeVos has been guided by two top aides, Diane Auer Jones, who is a former senior executive at the predatory for-profit college chain Career Education Corporation, and Robert Eitel, a former top official at both that chain and the equally bad Bridgepoint Education, which ran Ashford University.

And while some of the worst for-profit schools were already dead and buried by the time DeVos came to the industry’s rescue, many bad actors remain, peddling low-quality programs and run by some of the same ethically-challenged executives responsible for the recent scandals. Some of the remaining bad operations include:

(1) Career Education Corporation, recently renamed Perdoceo, operator of American Intercontinental University and Colorado Tech;

(2) Ashford University, now seeking conversion to a non-profit in a troubling transaction but still operated by a for-profit company, Bridegpoint, now renamed Zovio; Zovio announced this week that it wants to hire more than 200 new “enrollment advisors,” i.e. recruiters, saying the company’s “services meet an especially critical need during this time of social distancing and self-quarantine… as Unemployment Soars in Wake of Coronavirus Pandemic.”

(3) the Center for Excellence in Higher Education‘s faux non-profit schools CollegeAmerica, Stevens-Henager, and Independence University;

(4) Kaplan University, now acquired by Indiana state school Purdue and calling itself Purdue University Global but still operated in most respects by Graham Holdings, the corporation responsible for Kaplan’s extensive bad behavior; and

(5) pioneering for-profit giants the University of Phoenix and DeVry University, both now under private equity ownership.

Some of these companies, such as Perdoceo, appeared to have revived somewhat, financially speaking, in the new permissive DeVos environment, but others have struggled as low unemployment has suppressed the applicant pool.

But while the pandemic is bringing unspeakable suffering to many Americans, it may deliver to the for-profit college industry what Donald Trump might call an incredible opportunity.

Aided by DeVos’s regulatory abandonment, including on rules about online education, and aware that shutting down campuses and in-person instruction produces higher profit margins, many of these for-profit chains had already migrated most or all of their programs to online-only, even before COVID-19 emerged.

That, and their sophisticated advertising and boiler room recruiting operations, make them ready to capitalize on a pandemic that leaves many Americans out of work, stuck at home, and worried for their futures.

Never mind that many of the industry’s target students don’t have the preparation to thrive in online programs;  that many don’t even have a laptop or a broadband connection, just mobile phones; and that some career training programs, such as culinary or welding, seem ill-suited to online instruction.

While online education holds promise for increasing educational opportunity over the long term, even some non-profit and state colleges may also end up lowering quality, and integrity, especially by teaming with some of the mercenary for-profit companies that specialize in selling online programs. But it’s the for-profit college industry, which generally targets the most vulnerable and offers the worst outcomes, that raises the deepest concerns.

Despite all the recruiting and financial aid scandals, despite all the law enforcement cases and settlement agreements, and in the face of claims of shameless industry spokesmen that the career college industry has now cleaned up its act, I continue to get emails and phone calls from recruiters at big operations, describing ongoing pressure from their supervisors to sign up as many students as possible, whatever it takes, whether the programs are right for these students or not. These recruiters feel awful for the students they are misleading, but they won’t go on the record about the misconduct because they fear losing their jobs, especially in the mounting recession.

The deceptions extend across the web. If you google “best online colleges” or similar phrase, you will find, among more legitimate offerings, a number of pay-to-play websites that purport to rank online schools, but the rankings actually reflect who is paying them to list their schools: Purdue Global, Ashford, and other low-quality schools will rank high. (That particular linked website acknowledges its pay-to-play status, but only in euphemistic fine print; it’s a concession that may be the result of legal concerns due to diligent efforts by the Federal Trade Commission to crack down on such scams. But the site is still misleading.)

The kind of pitches that may be coming in the wake of COVID-19 is reflected in an ad that Regent University, a non-profit Christian school founded by televangelist Pat Robertson, is now running on Facebook: “Study online with a Social Distancing Scholarship™.” The “scholarship” turns out to be a $250 bookstore coupon for people who enroll in programs that can cost $40,000 or more, but it’s heartwarming to know that during this global crisis, Regent was working hard to grab that trademark.

Beware: For-Profit College Scammers Will Exploit the COVID-19 Crisis


Aggressive online deceptions will be matched by aggressive lobbying to get the predatory schools what they want. For-profit colleges have long recognized that the path to big earnings runs through Washington, so they’ve used some of their taxpayer-funded revenues to hire the most expensive, connected lobbyists and lawyers in order to fight regulations and laws that could slow the torrent of taxpayer cash.

As Congress debated the $2 trillion pandemic relief bill, lobbyists for the industry again swung into action; they didn’t get every possible advantage, but the bill does ensure that for-profit colleges will share in the coming round of new federal aid.

Industry lobbyists also recently tried, but failed, to block a bipartisan resolution in Congress that would overturn DeVos’s trashing of the Obama borrower defense rule — a rare defeat for the industry on Capitol Hill, because of a rare instance of some Republicans joining Democrats to aid victimized, broke student loan borrowers. But expect the for-profits to now try to pressure Trump to veto the resolution. If Trump does veto, scammed former students, buried under debt, will face an even tougher road ahead in the new recession.

The industry also will try to upset a potential bipartisan deal to strengthen the federal “90-10” rule in order to reduce predatory abuses against U.S. veterans and service members. And expect that their lobbyists will try to reverse recent decisions by the Department of Veterans Affairs to stop sending VA tuition aid to for-profits American Intercontinental, Colorado Tech, and University of Phoenix, decisions based on deceptive practices settlements entered into by those schools with the FTC.

With the pandemic creating the kind of pressures that drive people into the arms of scam artists, it would be great if the Trump Administration at last stood up to protect students and taxpayers from these kinds of predatory abuses. But it’s unlikely that Trump and DeVos will change course now.  So it will be up to Congress, the courts, state law enforcement, the media, veterans and student advocacy groups, and students themselves to educate on these issues and crack down on misconduct.

In this troubling era, struggling Americans deserve access to quality, affordable educations to train them for the future. The last thing they need is to be scammed and left deeper in debt by crooked colleges.