Colleges that profit, students who don’t
Published: Wednesday, April 6, 2011
Updated: Saturday, April 9, 2011 15:04
To paraphrase Steely Dan, the five years at the college didn't turn out like she planned.
In 2002, Marianne Hicks - bored with her accounts-receivable job and part-time work as a cook, and eager to reinvent herself as an industrial designer - was wooed by a recruiter for the Art Institute of Philadelphia with assurances of job help once she got a degree.
Today, Hicks says, her diploma is about the only thing that she can cling to. Often unemployed since graduating from the for-profit career college in 2007, she's under the gun from collection agencies for more than $90,000 in student loans that she can't repay. She's staying with a brother because she can't afford her own place, and a sister is mad at her because she co-signed one of the delinquent loans.
"I was just excited I was going back to school - of course they painted a pretty picture," said the now 44-year-old Hicks, who admits she didn't know that her loan balance would grow so high and didn't grasp the problem that her Art Institute credits mostly can't be transferred to other schools.
But she faults the Philadelphia college for teaching outdated skills, and she said that job-placement help amounted largely to forwarding some ads from Craigslist.
And she's not alone: Her classmate Taryn Zychal, with similar complaints, says she owes close to $150,000 and is working in a convenience store when not selling her artwork.
Advocates say that the remarkable thing is that horror stories like those aren't that unusual. Thousands of middle-income students who've rushed to for-profit career colleges in recent years have been overwhelmed by aggressive recruitment, loose admission policies, overhyped academic programs, a crippled U.S. economy with few jobs - and, finally, their massive taxpayer-funded student debt, with little hope of repayment.
At the same time that enrollment at for-profit colleges - many now owned by large, publicly traded firms backed by big banks and investment houses - has soared to 11 percent of U.S. higher education, statistics show that these schools now account for a mind-boggling 48 percent of all defaults on federal student loans.
"Like any sector, what Wall Street rewards is quarterly numbers," said Pauline Abernathy, a former aide in Philadelphia Mayor Michael Nutter's administration who's now vice president of the Institute for College Access and Success, a nonprofit seeking a clamp-down on abuses by for-profit colleges. "There's pressure on these schools to increase their ‘new starts' " - newly enrolled students - "regardless of whether the students are qualified, or can repay their loans."
The front line in the skirmish over for-profit colleges has shifted to Washington, where the Obama administration's Education Department - backed by a coalition of civil rights groups such as the NAACP and the National Council of La Raza - is seeking tough new regulations. The proposed rules would restrict or even block federal student aid to for-profit colleges that aren't training enough students for "gainful employment" - that is, jobs in which they'll earn enough to repay their loans.
Such a rule could not only help future students avoid unmanageable debts but it also has the potential to save U.S. taxpayers billions of dollars, since federal student aid - such as Pell grants and military benefits - is as much as 90 percent or more of the dollars that some for-profit colleges take in, amounting to $26.5 billion annually. So, you would think that GOP lawmakers, who swept the 2010 election with promises of massive cost-cutting, would be down with that.
Instead, legislation aimed at blocking the Obama administration from imposing the rules passed the House with overwhelming Republican support back in February, and although the measure's prospects seem dim in the Democratic-controlled Senate, the final outcome remains very much in doubt. The industry has spent hundreds of thousands of dollars on big-name lobbyists, like former Philadelphia congressman Bill Gray, in a bid to sway the debate.
The leading industry group for the career colleges, the Coalition for Educational Success, argues that the high default rates don't reflect bad faith on the part of the schools but rather their efforts to take a chance on training more poor and working-class students. Officials with the coalition cite studies showing high loan default rates at traditional nonprofit colleges - who would not be affected by the proposed rules - when students from similar economic backgrounds are singled out.
"Who are the students that are going to our schools?" asked the coalition president, Penny Lee, a former communications chief for former Pennsylvania Gov. Ed Rendell. "Most are the nontraditional, military or minority students that community colleges or other institutions aren't serving."
Perhaps because of its large blue-collar population, Philadelphia is something of a hotbed of career-college education, which tends to offer degrees in job-oriented skills such as photography, computer programming and auto mechanics.
Among the major companies in career-college education:
-The University of Phoenix, the nation's largest for-profit higher education firm and a publicly traded company
-Kaplan University, owned by the Washington Post Corp. (whose flagship newspaper editorializes enthusiastically against stricter federal rules).
-The Art Institute of Philadelphia is owned by the Pittsburgh-based Education Management Corp., or EDMC, which has increasingly been embroiled in the controversy over the industry's practices since the Wall Street behemoth Goldman Sachs helped take the company public and took a 38 percent ownership stake in the late 2000s. Goldman recently paid a $550 million civil penalty over its role in the subprime mortgage crisis but smelled money in the career-college business.