Submitted by Paul Fain on January 28, 2014 - 3:00am
Several holding companies of major for-profit chains announced Monday that they have received letters of inquiry from attorneys general in a group of states, usually a dozen or so. The investigations center on business practices, such as the recruitment of students, graduate placement statistics and student lending activities, according to corporate filings. The companies include Career Education Corporation, ITT Educational Services Inc. and Corinthian Colleges Inc. The investigations have been in the works for years, and feature a growing number of for-profits.
Submitted by Paul Fain on January 28, 2014 - 3:00am
Citing a "very difficult financial situation," National Hispanic University has stopped enrolling new students, according to the San Jose Mercury News. Laureate Education, a large for-profit chain, bought the San Jose-based university in 2010, announcing plans for it to grow to 8,000 students, many of them attending online. The university was struggling before the purchase, and has failed to right itself in the last few years. Its enrollment stands at just 600 students. And last year the U.S. Department of Education withdrew federal financial eligibility for the university's liberal arts programs, straining its finances.
Submitted by Paul Fain on January 22, 2014 - 3:00am
Rasmussen College on Tuesday announced it had changed its corporate status to that of a Public Benefit Corporation, which essentially means the for-profit chain will donate more employee and facility usage time to its local communities. The college will not have a different tax status, however.
Rasmussen is a mid-sized higher education chain with 24 campuses in the Midwest and Florida. Kristi Waite, its president, said the college was making the shift -- which is rare in higher education -- to send a message. She said Rasmussen would lose some money because of the change.
The Consumer Financial Protection Bureau has told Corinthian Colleges, Inc. that the agency's enforcement office may urge the CFPB to "take legal action" against the for-profit higher education provider for possible violations of federal law, Corinthian announced in a federal tax filing Monday. In its statement, the for-profit education provider said that the consumer bureau had informed it in December that its enforcement staff plans to charge the company with violating the Consumer Financial Protection Act of 2010. The consumer bureau may seek "injunctive and monetary relief" against Corinthian, the agency told the company.
Corinthian officials said that they would respond to the agency's notice and that they believe the company's "acts and practices relating to student loans — financing that is essential to preserving our students’ access to post-secondary education — are lawful."
ITT Educational Services, Inc. announced having received a similar warning from the CFPB last month.
Submitted by Paul Fain on December 19, 2013 - 3:00am
California's Legislative Analyst's Office (LAO) wants the state's government to devise criteria for determining which for-profit institutions are most at risk for having questionable business practices. In a newly released report, the agency said state regulators should exempt most for-profits that hold regional accreditation from their reviews, freeing up resources to conduct targeted oversight. Possible factors that could be used to determine which institutions need extra scrutiny could include "school ownership, types of programs offered, track record of operation in state and performance criteria," the report said.
Submitted by Paul Fain on December 18, 2013 - 3:00am
The Apollo Education Group's global division is buying 70 percent of Open Colleges Australia for $99 million, with additional payments of up to $48 million, the for-profit chain announced Tuesday in a news release. Founded in 1910, Open Colleges offers more than 130 online courses. Company officials hope the Australian institution "provides a platform for Apollo Global to operate and expand in other areas of the region.”
In the fall of 2011, Career Education Corporation (CECO) revealed that a significant number of its schools had cooked the books on the job placement rates they were disclosing to prospective students and regulators. Now investors in the giant for-profit higher education company are about to earn a nice profit for these misdeeds.
A federal judge has given his preliminary approval to a $27.5 million settlement that CECO has reached with shareholders to put an end to a lawsuit they brought accusing the company of deceiving them about its record of placing graduates into jobs. In contrast, most of the students who were the direct victims of this deception – with the exception of students from New York State who attended CECO’s campuses – are unlikely to receive any relief for these abuses. Instead, students who enrolled in these schools based on false promises will be stuck paying off loans they took out to pay for these programs for years.
What accounts for this disparity? The answer is that investors in for-profit colleges have access to the courts for filing their grievances, while most of the sector’s students do not.
Mandatory arbitration agreements – which have become increasingly common in all sorts of consumer contracts, including those for credit cards and private student loans – put students with legitimate grievances at an extreme disadvantage compared with pursuing their cases in court.
For one thing, for-profit colleges select the third-party arbitration company that is going to hear the case, creating an incentive for arbiters to go easy on companies in order to get repeat business. Binding arbitration clauses tend to bar class actions, forcing each student who has been harmed to bring his or her individual case against the schools. Industry officials know that many students are unlikely to pursue their cases because of the cost of doing so. In addition, discovery is often limited in arbitration cases, making it difficult for students to gather evidence of wrongdoing. And arbitration decisions generally cannot be appealed.
Although many for-profit college companies have included mandatory arbitration requirements in enrollment agreements for years, these clauses were not always ironclad. Some states, like California, have long had consumer protection laws that frown on the use of binding arbitration requirements banning class actions and jury trials. Courts in those states have previously allowed students scammed by unscrupulous schools to move ahead with legal challenges.
However, in 2011, the Supreme Court changed the rules of the game. In the case AT&T Mobility LLC v. Concepcion, the nation’s highest court ruled that states can’t reject arbitration clauses as “unconscionable” solely because they bar class action lawsuits and jury trials. That decision has shut down access to the courts for most for-profit college students, as well as for consumers of most financial products.
Even judges sympathetic to students’ complaints say their hands are tied as a result of the Supreme Court’s ruling. In his opinion in a case that students brought against Westwood College accusing the company of major recruiting abuses, Judge William J. Martinez of the U.S. District Court in Denver wrote in 2011 that he regretted having to require the plaintiffs to settle their dispute through arbitration. “There is no doubt that Concepcion was a serious blow to consumer class actions and likely foreclosed the possibility of any recovery for many wronged individuals,” he stated.
Students aren’t entirely out of luck. The U.S. Department of Education will, under very limited circumstances, discharge the loans of students who have been defrauded. Students may also benefit from settlements that the U.S. Department of Justice or state attorneys general reach with for-profit college companies, although the restitution provided in these cases is seldom sufficient to cover students’ full debt loads. For instance, students from New York who attended Career Education Corporation campuses in recent years and have not found employment in their fields of study will receive some compensation, as a result of a settlement that the New York Attorney General reached this summer with the company over its faulty job placement rate claims. Students in other states who were similarly misled, however, are out of luck.
Congress should eliminate this injustice by barring colleges that participate in the federal student aid programs from including binding arbitration clauses in enrollment agreements, just as Democratic Senators Tom Harkin of Iowa and Al Franken of Minnesota proposed last year. As they wrote, “Colleges and universities should not be able to insulate themselves from liability by forcing students to preemptively give up their right to be protected by our nation’s laws.”
Students who have been harmed by institutions should not have fewer legal rights than investors in these companies. The real victims of abuse deserve to have their day in court too.
Stephen Burd is senior policy analyst at the New America Foundation.
Submitted by Paul Fain on December 17, 2013 - 3:00am
An Everest College campus located near Atlanta paid employers to hire its graduates for short periods of time in a maneuver designed in part to boost the for-profit college's job placement rate, reported the Huffington Post. The now-defunct Decatur campus in 2011 shelled out $2,000 for each graduate hired, according to company documents the website published. In most cases those employees were let go one month later, sometimes after pushing a broom around for 40 hours a week.
The practice was not limited to Everest's Decatur campus. Two California campuses of the chain, which is owned by Corinthian Colleges Inc., paid temp agencies to hire graduates, the Huffington Post reported, citing a lawsuit filed by California's attorney general. As in Georgia, the practice was aimed at keeping job placement rates above minimum standards set by accreditors. Everest's holding company defended its career services and said the job placement program did not violate any regulatory or accreditation standards.