“I didn’t realize just how many students we were expected to recruit,” says the former enrollment counselor. “They used to tell us, you know, ‘Dig deep. Get to their pain. Get to what’s bothering them. So, that way, you can convince them that a college degree is going to solve all their problems.'” (Source)
What is scandalous is not recruiting from populations that desperately need education. What is scandalous is not delivering. According to US Dept of Education statistics few students at for-profit colleges ever graduate. For example, at Univ of Phoenix, the largest for-profit college, only 16% of students graduate overall, and only 4% of “online” students graduate.
Class Of 2011 Have Most Debt Of All Time: Congratulations, graduating class of 2011. You’ve pulled all-nighters, subsisted on ramen for weeks, and worn pajamas to class, all to achieve the beautiful shining goal of a college degree. Add to that another distinction, one that probably won’t be mentioned during too many commencement speeches. You’re also graduating with the highest debt of all time, an average of $22,000 a person. Hope that business about a degree giving you a higher earning potential is true, because you’re gonna need it. (Source)
Join me and say, “I do not condone this, I do not consent.”
Keep reading to learn how the student loan scam works . . .
The student loan market has now become another sub-prime loan market in crisis–a multi-billion dollar scam benefiting so-called “entrepreneurs” who snare students and use them as a method of siphoning off federal financial aid dollars–it’s The Student Loan Swindle.
How bad is the problem? Bad. According to USA Today: “Student loan debt exceeds credit card debt in USA“. Federal aid to for-profit colleges has jumped to $26.5 billion in 2009 from $4.6 billion in 2000, according to the US Department of Education. (Source: Business Week)
What’s wrong? As former students at the largest for-profit college put it:
University of Phoenix has created a system that victimizes those who come to them for the purpose of enriching its owners. It is quite clear from the evidence that the primary purpose of UOP is not to educate, but to extract money by violating the sacred trust that educators have with the public. What universities of this type are doing is equivalent to quack medicine. Instead of raising its students up, UOP drives most of them down further. (Source)
Students come out with $20,000 to $100,000 in debt and a degree that has little or no market value. The schools’ promoters don’t care. The government is on the hook for the loans. Sound familiar? (Source)
Jessica Rosales was 17 when she enrolled at Westwood’s Inland Empire campus near Los Angeles. She dropped out after one term and was later told she owed Westwood around $18,000 — nearly half in interest and collection fees. . . . Rosales said she wishes she had listened to her mother, who found Westwood’s recruiters pushy and only reluctantly let her daughter attend the school. (Source)
The “new” for-profit colleges recruit the homeless, the unprepared, or anyone with a pulse–knowing that 4 out of 5 will never be able to repay the government-backed loans.
Drake College, [which spins recruiting the homeless as reaching out to the disadvantaged], raised tuition to $15,700 this year from $4,000 in 2007-2008. Shelter workers told Bloomberg they feared the school was preying on the homeless to get access to financial aid money, leaving them to default on student loans. (Source: Business Week) See also: Frontline’s expose’ on the for-profit industry, College, Inc.
A former staffer at a California-based for-profit university who says she was under pressure to sign up growing numbers of new students. “I didn’t realize just how many students we were expected to recruit,” says the former enrollment counselor. “They used to tell us, you know, ‘Dig deep. Get to their pain. Get to what’s bothering them. So, that way, you can convince them that a college degree is going to solve all their problems.'” (Source)
The Washington Post Tries To Sidestep Its Kaplan University Problem
On Friday (2/11/2011), the Washington Post reported that 25 percent — 1 out of every 4 — of students at commercial colleges like Kaplan University and the University of Phoenix can’t pay back their loans. Talk about awkward. The much-lauded Washington Post actually owns Kaplan University, one of the largest for-profit college chains out there.
Kaplan, which generated 58 percent of the Post company’s revenue in 2009 ($1.5 billion), has been in the spotlight recently for its unethical billing practices, aggressive recruitment of low-income and military students, and jaw-droppingly high rates of student debt. How has the Washington Post responded? By avoiding the issue completely — and tarnishing its stellar reputation in the process. (Source)
Here’s how the for-profit student loan scam works:
A highly profitable business model based on fraud . . .
- A so-called “entrepreneur” buys a bankrupt University and then . . .
- Lays off most of the full-time faculty–keeping a few “distinguished” professors as “window dressing,”
- Cuts pay for everyone left,
- Hires low-pay, part-time, “adjunct” teachers to teach classes–95% of the classes at the largest for-profit college are taught by adjuncts (Source); 80% of adjuncts earn less than $20,000 per year (Source),
- Twists the arm of accreditation bodies, who grant “Accredited” status to keep getting their fees (just like Wall St credit rating agencies awarded AAA ratings to sub-prime mortgages in order to keep getting fees),
- Raises tuition to $2000 – $4000 per student per class and increase class sizes to 25-50 students per class — generating $50,000 to $100,000 gross margin profit per class (free cash flow for the entrepreneur),
- Hires a team of high pressure sales people on commission, called “student financial aid counselors,” to recruit anyone they can find into taking out government-backed “nothing-down” student loans to enroll in and pay for classes–including “high school drop-outs, mentally ill, and homeless people” (Source 1, Source 2), and the “naive and the unprepared” (Source),
- Grants college credit for “life experience” to broaden recruiting to more potential students,
- Maintains an always-open recruiting presence (which public universities cannot afford to do),
- Sells students on the idea that the only work they do will be in the classroom (i.e., no homework and no outside readings),
- Bribes students with a small cash stipend to show up at 80% of their classes (as at Drake, for example), thus keeping up appearances of legitimacy and, more importantly, keeping students eligible for more student loans to continue taking more classes–knowing that even small cash bribes also serve to as a powerful incentive to the destitute and unemployed,
- Lowers standards in the classes so low that almost everyone passes with high grades–thus keeping students “qualified” to continue borrowing even more student loans to continue taking more classes,
- Doesn’t worry that few actual skills are imparted to students because the goal is NOT to impart learning, the goal is to keep getting students’ fees, even if this requires faculty to dumb down the classes to “retain” students (many of whom were largely unprepared for college when they were suckered recruited),
- According to US Dept of Education statistics most students enrolling at for-profit colleges eventually drop out, but even among the “graduates” few get jobs,
- Graduates who cannot find a job (which is most of them in today’s job competitive market) are encouraged to repeat the process by getting an MBA or other graduate degrees, requiring even more student loans,
- The so-called “entrepreneur” can clear over a million dollars or more per quarter, as long as the government backs the loans then the entrepreneur does not care that the loans are not paid back, yielding huge profits for the entrepreneur,
- Students are responsible to pay back their loans–even if they drop out or can’t get a job,
- Federal bankruptcy law makes it nearly impossible to discharge student loan debts, and interest continues to pile up every month payments are missed,
- Nothing-down student loan scam is worse than the nothing-down real estate loan business–while real estate loans are routinely discharged in bankruptcy, student loans are not,
- Unpaid student loans are turned over to aggressive loan collection firms who routinely attach wages, or seize bank accounts, for the rest of the student’s life, until the loans plus interest are repaid (see video clip below),
- Many student borrowers become debtors for the rest of their lives–debt slaves actually,
- Given the many “exposes” of the scandal of the nothing-down student loan scam, perhaps government rules will be changed. (See: For-Profit Schools, Tested Again)
The University of Phoenix is not an educational institution of repute. University of Phoenix is a barely legal scam that exists to shovel absolutely obscene amounts of money into the pockets of its owners by victimizing their students. The way that this so-called “University” conducts itself is just obscene. There is no other word that is equal to what they do. (Source)
The US Federal GAO (Government Accounting Office) found incredible amounts of fraud when they sent undercover agents to investigate for-profit colleges:
Same accreditation as Harvard? Barbers can earn up to $150,000 to $250,000 a year? . . . Many of the for-profit colleges derive 90 to 100 percent of their income because of federal student loans. Students are lured in with late night commercials or aggressive sales teams that simply do not care about the actual education a student will receive. It is all about churning sales and suckering people into a false mantra. “Every person should have a college degree” which rings eerily similar to “every person should own a home.” At what cost? The only reason this is happening is because of Wall Street and government backed loans. Thanks to this new model, the for-profits are operating in the new world of subprime colleges. Yet there is no walking away from student loan debt which puts an albatross on an entire generation of college students. (Source)
Lobbying For Profit
The gravy train will probably continue. (Source) Why? Apparently for-profit colleges have a good measure of “protection” in the US Senate. Here is a list of political “donations” to US Senators from the largest for-profit colleges:
Apollo Group Inc. $560,000
Corinthian Colleges Inc. $460,000
DeVry Inc. $460,000
Career Education Corp. $360,000
Bridgepoint Education $270,000
Education Management Corp. $270,000
Career College Association $250,000
American Public University System $240,000
Kaplan Inc. $200,000
Capella University $60,000
ITT Educational Services Inc. $30,000
Concorde Career Colleges Inc. $20,000
A handful of extremely right-wing Senators are trying to block implementation of rules designed to curtail deceptive marketing and recruiting by for-profit colleges. Senators Jim Risch (ID), Tom Coburn (OK), Jim DeMint (SC), Ron Johnson (WI), and Mike Lee (UT) are all seemingly fine with taxpayer dollars, in the form of federal student loans, lining the pockets of these profiting colleges that aren’t delivering on education. (Source)
Information About Financial Aid
Ask a high school counselor or a college financial aid administrator for sources of free information. Here are some you can try:
There is no fee to file the Free Application for Federal Student Aid (FAFSA). But there are a number of websites that charge you money to do it. Many people try to find application on-line with the wrong terms: fasfa com, fasfa edu, fasfa gov, fasfa gov edu, FASA, fasa com, fasa edu, fasa gov, fasa gov edu. They can wind up on a website that asks you to pay a fee to file the form, and sometimes, to file the wrong form.
The correct website is: http://www.fafsa.ed.gov/#.
The existing social and financial order is crumbling because it is unsustainable on multiple levels. The central state is not the Millennials’ friend, it is their oppressor.
- For-profit colleges prosper from student loans
- The Subprime College Crisis
- article by Mish: http://globaleconomicanalysis.blogspot.com/2010/06/subprime-goes-to-college-students.html
- presentation by Eisman: http://www.slideshare.net/pkedrosky/eisman-ira-sohn-conference-slides-and-speech52610 http://studentloanjustice.org/
- Are For-Profit Colleges A Government Loan Scam? (crushable.com)
- Never Pay a Penny to the University of Phoenix [Higher Learning] (gawker.com)
- For-Profit College Graduation Rate: 22 Percent (huffingtonpost.com)
- For-Profit Colleges Cashing In On Veterans (huffingtonpost.com)
- For-Profit College Loan Fail (alternet.org)
- For-Profit Colleges Charge More While Doing Less (businessweek.com)
- Student Loan Reform and For-Profit Colleges (studentloans.net)
- University Of Phoenix Enrollment Plunges 42% (huffingtonpost.com)
- EDUCATION: For-Profits, Not Students (ynative77.wordpress.com)