Fall of a For-Profit

For years, Westwood College fought off allegations of deceptive marketing and recruitment practices.

The for-profit institution, based in Colorado under the privately held Alta Colleges company, announced last month that it would stop enrolling new students. That decision came after the college made an agreement with the Illinois attorney general's office to wipe out $15 million in student loans. (Note: This article has been updated from an earlier version to clarify the arrangement between Westwood and Illinois.)

It wasn't the first such agreement the college, which has a chain of 14 campus locations, has made. In 2012, Westwood settled with the attorney general of Colorado for $4.5 million, also for deceptive marketing. In 2009, the college agreed to a $7 million settlement with the U.S. Department of Justice related to a complaint about filing false claims for federal student aid.

But perhaps more responsible for Westwood's downfall than any of the settlements was the fact that the college had become a prime target of U.S. Senator Dick Durbin of Illinois -- one of the for-profit sector's most vehement critics. It was the stories from former students and employees, as well as the college's advertisements, that brought the ire of Durbin.

"It was the deception of Westwood College that started me on this journey to investigate for-profit schools," Durbin said in an interview with Inside Higher Ed. "They were one of the most outrageous examples of for-profit schools, and their victims, sadly, were idealistic young people who didn't realize that Westwood was a phony university. I'm glad they're going out of business. Now I hope we can bring some relief to their victims."

Inside Higher Ed reached out to Westwood College officials but did not receive a response.

In a statement last month the college said, "We are proud of our tradition dating back to 1953 of helping nearly 40,000 graduates reach their education and career goals. Westwood College has been through an extended period of declining enrollments due to market shifts and changes in the regulatory environment. Now Westwood College has made the difficult decision to discontinue all new student enrollments as of today. We are working diligently to continue to provide a quality academic experience for our current students at each of our campuses and our online school. Campus services will continue to be available to students and graduates throughout this process."

Durbin tells the story of a young woman from the Chicago suburbs who spent five years at Westwood pursuing a law enforcement degree and accumulating more than $80,000 in debt.

"When she finally graduated, she found out the diploma was worthless," he said. "She ended up returning to live with her parents. Her father came out of retirement to help pay off her student loans. Her life was changed forever. That was not the only instance of exploitation by Westwood. Over and over again we found that they were continuing to exploit young people."

Alta Colleges, Westwood's parent company, was one of the 30 for-profit education companies investigated in former Iowa Senator Tom Harkin's critical report to the Senate Health, Education, Labor and Pensions Committee in 2012. That report labeled Alta as one of the most expensive institutions examined by the committee. A bachelor's degree in business administration would cost a student more than $80,000 and an associate degree in information technology carried a price tag of more than $48,000, according to the report. Alta also carried a high student loan default rate -- 24 percent for students defaulting within three years. That rate is lower at the college's Chicago campus, at 15 percent for 2012, according to the Education Department's most recent data.

Elizabeth Baylor, the director of postsecondary education at the Center for American Progress, served as a senior investigator on the Senate's HELP committee under Harkin. She said the piling on of lawsuits against for-profits isn't an effective strategy for stopping abusive practices at for-profit colleges.

"Enforcement and lawsuits are one of the routes of remedy we have, but it's not the best route we have to stop abusive practices. It's better to change the incentives and rules, so colleges don't skirt up close to the line," she said. "The best practice is to curb things early on … $15 million is a lot of money to an individual, but in 2009 [Westwood] earned $33 million in profit at the operating organization."

That $33 million could've been better spent helping students succeed, she said.

Compared to much larger for-profits, especially those that are publicly traded, like the now defunct Corinthian Colleges, Westwood is a much smaller actor, but the students who were affected by their actions will still have to deal with the ramifications of attending the institute.

"They've announced they're freezing enrollment, so they're no longer bringing in new students, but as long as they continue to offer existing programs those students are on the hook for the money they've borrowed," Baylor said.

Durbin said he's concerned for those students, not just at Westwood but at other for-profits that have been found to be bad actors. Westwood plans to continue its programs for students who are already enrolled, according to the statement from the college.

"It's really hard for these students. We've had law on the books for many years that says these loans can't be discharged in bankruptcy, so students are facing debt that can haunt them for a lifetime. Some are so deep in debt, they'll never get out," he said. "The federal government has to answer for some of this deception. We recognized the accreditation of these fly-by-night schools. We sent Pell Grants and government loans to the students, giving our tacit approval to their curriculum, and it wasn't until the students were in over their heads with a worthless diploma or dropping out that they realized that they had been defrauded."

Durbin, along with Democratic Senators Chris Murphy of Connecticut, Elizabeth Warren of Massachusetts and Sherrod Brown of Ohio, introduced legislation in September that would give the Education Department more power to hold the executives of for-profit colleges accountable for the fraud committed by their institutions. The executives would be held personally liable for any federal student aid funds that would be required to be returned to the government.

"The first obligation is congressional. We need to change the laws to protect students and their families from the deception of for-profit schools. By allowing them to demand arbitration clauses, for example, it's a guarantee they will not be held accountable for much of their misconduct," Durbin said.

But Durbin credits the attorneys general, like those in Illinois and Colorado, who have moved ahead with holding for-profits like Westwood accountable for their actions instead of waiting for the federal interagency task force or Congress.

Still, the settlements don't do much to help students with federal loans, because in the case of Education Management Corporation last month and Westwood, they aren't a formal admission of guilt or wrongdoing, Baylor said.

"I'm sorry it's taken so many years to reach accountability," Durbin said, referring to Westwood. "Unfortunately there are victims every year of these for-profit schools. We are on the cusp of a game-changing event. If the gainful employment rule comes through next year and these schools are held accountable and lose accreditation from the federal government, it's going to change this industry dramatically. If you look at the record, over the last 10 years, you see a dramatic decline in enrollment at for-profit colleges and universities and a dramatic decline in stock value. The public is catching up with this fraudulent enterprise."

Language like that gives ammunition to those who view Durbin and the tactics of the state attorneys general as less like attempts to remove bad for-profit companies and more like a way to eliminate the entire sector. Republican senators have questioned the White House's interagency task force and accused the eight federal agencies that make up the group of "unfair targeting" of for-profits.

"It is an ideological war against the private sector's delivery of postsecondary education. They feel all schools are bad and nothing further," said Steve Gunderson, president and chief executive officer of the Association of Private Sector Colleges and Universities. "The vast majority of our schools have a long history of people and families engaged in career education and their dreams."