"It never occurred to [Congress] that, as billions of dollars get attached to the recognition process, the process would get corrupted," says Nassirian. "When you say yes, you gain membership dues. After all, you're living off these dues."

Yet even bargain-bin accreditation takes several years. So the investors behind for-profit colleges found a way around this by purchasing small, failing schools to snatch up preowned accreditation.

Take Bridgepoint Education. Its majority stockholder is Warburg Pincus, a New York private-equity firm. When it needed accreditation for Ashford University, it bought the 85-year-old Franciscan University of the Prairies, a struggling, 300-student religious college in Clinton, Iowa. Overnight, it was transformed into the online powerhouse Ashford.

Barmak Nassirian, former official with the American Association of Collegiate Registrars and Admissions Officers: “Over-advertise, oversell, overcharge and under deliver. They found a system where the pitch goes to one guy and the bill to someone else.”
Courtesy Barmak Nassirian
Barmak Nassirian, former official with the American Association of Collegiate Registrars and Admissions Officers: “Over-advertise, oversell, overcharge and under deliver. They found a system where the pitch goes to one guy and the bill to someone else.”
According to Suzannne Lawrence, who worked as a recruiter at Argosy University’s online division, the pressure to recruit students prompted all sorts of illicit shenanigans, including falsifying documents.
Courtesy Suzanne Lawrence
According to Suzannne Lawrence, who worked as a recruiter at Argosy University’s online division, the pressure to recruit students prompted all sorts of illicit shenanigans, including falsifying documents.

Bridgepoint, which also owns the University of the Rockies, grew from just 12,623 students in 2007 to 77,892 in 2010. Its profits also exploded, going from just $4 million to more than $216 million annually. About 85 percent of its revenue comes directly from the federal treasury.

But if Bridgeport and Warburg Pincus are billing top dollar, they're unrepentant misers when it comes to educating kids. In 2009, Bridgepoint spent less than $700 per student on actual instruction. By comparison, the nearby University of Iowa spends seventeen times that figure.

What Bridgeport doesn't short is its marketing, spending $2,714 per student to keep the turnstiles spinning. Overall, the fifteen largest for-profit colleges spend nearly $13 billion a year on recruiting and marketing.

Needless to say, it's a terrific business if you don't have to worry about educating kids. Nearly 80 percent won't complete their program within six years — almost double the failure rate at traditional schools.

The tactics have become so brazen that even accreditors are taking notice. Last month, Ashford conceded that the Western Association of Schools & Colleges had denied its accreditation renewal, noting that the school had just 50 full-time faculty members to teach 90,000 online students. Within a week, Bridgepoint's stock price had plunged 50 percent.

It's not the only so-called "for-profit education provider" that has seen its market value plummet. Over the past year the stock price of Sanford-Brown's Career Education Corporation has dropped from $24 to its current trading price of just over $3 per share.

In an earnings call last week, CEC's president Steve Lesnik acknowledged that the company has made a few "missteps" while continuing to trumpet the merits of for-profit colleges amid the backlash.

"It's a year of transition as we and others in the private sector education deal with public criticism, as well as regulatory initiatives aimed at limiting the sector's growth in providing post-secondary education in America," said Lesnik.

In 2010 slightly more than 85 percent of CEC's revenue came from federal educational funds, according to a Senate study. The same Senate report found that the company spent 26 percent ($477 million) of its 2009 revenue on marketing and recruitment. Meanwhile, 53 percent of students enrolled in CEC schools in 2008 and 2009 withdrew before completing their degree.

"It's basically consumer fraud rendered to a business model," says Nassirian of the for-profit business model. "Over-advertise, oversell, overcharge and under deliver. They found a system where the pitch goes to one guy and the bill to someone else."


Failure at a Luxury Price

For-profit colleges like to place their alarming failure rates in charitable terms. They claim to disproportionately serve low-income students who struggle in school.

But if they're serving people of lesser means, why are they charging so much money?

On average, a four-year degree from a for-profit runs twice what in-state tuition costs at a public school, according to the U.S. Department of Education. When it comes to two-year programs, the disparity widens: For-profits charge three to four times the rates of their public counterparts. Yet they've still managed to lull the political class into believing their competition is driving down tuition.

During the Republican primary Mitt Romney praised a major donor and co-chairman of his Florida fundraising team — Bill Heavener, owner of Full Sail University — for helping to "hold down the cost of education." What Romney failed to mention is that a 21-month degree in video-game art at Full Sail costs over $80,000. And that's not unusual.

A four-year bachelor's degree in business from Indiana-based ITT Tech costs almost $89,000. That's more than twice the in-state tuition at more venerated Indiana University.

Worse, subprime degrees from places like ITT and Full Sail are typically held in such low regard that it's difficult for grads to find jobs that pay enough to cover their loans. Nearly one in four for-profit students default on their loans within three years of leaving school, more than double the rate of public-school students.

But there's nothing like advertising to paper over your shortcomings. So for-profits carpet-bomb the airwaves to make earning a degree seem as easy as downloading an app. Who hasn't seen those late-night TV ads for "college in your PJs," or the Education Connection commercial featuring that rapping, dancing waitress? These ads drive viewers to websites that generate leads for schools' sales staffs, prompting an unending stream of solicitations. And when those leads are exhausted, schools buy lists from companies such as the California-based marketing firm QuinStreet, which made its name providing leads to subprime-mortgage brokers.

In June, QuinStreet reached a settlement with attorneys general from twenty states, including Missouri, who'd accused it of fraud for operating gibill.com. The website was made to look as if it were run by the government to help veterans, but it was actually just a lead generator for for-profit colleges.

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17 comments
voxleo
voxleo

Good.   God.  No wonder Jesus wept.  It HAS to stop.  NOW.  Okay people?  Please argue when faced with idiocy and ignorance.  It won't go away on its own.   I'd rather step on toes and be considered rude and crass than allow the erosion of civilization for the sake of being polite or popular.  It ends NOW or it ends when we do.   

Nomoreliberals
Nomoreliberals

Awwww. Screwed by your uber-liberal college or university?

That's so sad!

maggief317
maggief317

This article raises some good questions that have concerned me for some time.  However, I'm a bit skeptical about the story of the 8th grade boy who was able to register, get textbooks and financial aid without his parents assistance.  The writer claims that the "debt" has been passed onto the boy -- yet since he is a minor and not legally able to enter into a financial contract the debt would revert back to the school.  

 

More research, and more actual stories of actual students (and more elaboration on the questionable story of the 8th grade boy) would have given this piece the necessary weight to make a real impact.  

bookkeepingbabe
bookkeepingbabe

JD13:  I am going to address both of your posts in one response.  Use some real details instead of making nebulous comments!  Which for profit school was he hired at?  Was it Sanford Brown?  ITT Tech? AI?  Phoenix?  Ashford?  In what department?  What is his bachelors in?  What is his associates in? 

 

Ashford is an accredited school and therefore subject to certain regulations about their teachers.  Most of the teachers I had at Ashford were accountants employed in one or another sectors and teaching for extra money.  The two worse instructors I had were full time professors at other schools.  One of them I would be willing to make a bet had zero real world experience the other was old and set in his ways and frankly behind the times.

 

As for your sister what is her degree in?  There are certain degrees that regardless of where you went they are not going to net you anything other than a $9 or $10 an hour job!  Frankly a bachelors in english or history is really not going to give you a leg up in a business world.  However there are plenty of jobs where a bachelors in anything will help.  With a young child at home she may be better off to stay home regardless!  But you might suggest that your sister check into NARA, they often have jobs listed that only require a bachelors degree, any bachelors degree. 

 

Frankly I find your statements about the tuition at Ashford unbelievable.  My tuition at Ashford was just $100 more per credit hour then my daughter's at a public university!  And significantly less than hers if you added in her room and board!  My books were no more expensive then any other college's books, and Ashford stresses that you are free to buy your books from wherever, just make sure that you are getting the right book!  I chose to buy my books from Ashford's bookstore out of convenience, and frankly my book bill was only slightly higher then my son's, and he attends a local community college!

JD13
JD13

I love how these schools will tell you that their instructors have "real world experience" in the field they're teaching.  I know of one person that was hired to teach at one of these for profit schools and only had a bachelors degree NOT in the field he was hired to teach in and had just recently completed only an associate's degree in the same field he was hired at this school to teach...and from another for profit school.   He had never worked a single day in his life at an actual paid job doing what he was hired to teach.  It had only before that been a hobby and he frankly wasn't that good at it.  But somehow, this person with only an associates degree in that field that he'd just received and zero real world experience was hired by this for profit as an instructor at a supposed "college" level.     

rwilliams
rwilliams

For-profit colleges offer free market solutions to the stranglehold that the cabal of elite universities has had on higher education for decades.  The fact that investors actually make money from the for-profits infuriates liberals like Dick Durbin and produces yet another tiresome screed against Corporate America in The Riverfront Times.  Are there abuses in the system from some of the less reputable players?  Of course there are, just like in any industry.  Yet you insist on letting the consumer let off the hook for his or her own bad choices.  But, really, are the marketing shenanigans at a handful of for-profits any worse than the high pressure put on incoming freshmen by guidance counselors at state and private universities, whose mission is to pump up the enrollment within their particular department through dubious promises of high-paying and rewarding careers?

  A student with a degree in project management or medical technology from a local for-profit will get more bang for the buck than one with a degree in, say, French poetry from a Rutgers or an NYU.  The country does face a crisis in student loan defaults, but the problem lies not with the for-profits.  Rather, let’s put the blame where it truly belongs:  on vote-hungry politicians who dole out federal money to support the “right” to a higher education, and on the elite institutions who have no incentive to correct inefficiencies, and whose tuition has shot up three times the rate of inflation in the past twenty years.

bookkeepingbabe
bookkeepingbabe

Someone needs to research their facts before printing stories.   Ashford University is accredited by The Higher Learning Commission and a member of the North Central Association (www.ncahlc.org).  They failed to qualify for accreditation at this time from the "western" equivalent of the same organization.  They were attempting to move their accreditation since much of the online functions of the school are run from offices in California with a few functions remaining at the Clinton Iowa campus.

 

Ashford University unlike many of the other schools discussed in the story actually has a regular brick and mortar campus in Clinton Iowa.  That school has grown in the past few years since the small franicscan school was purchased by the current owners.  Ashford has actually sport teams and all of the other functions that go along with a ground campus.  Ashford also refuses to offer some programs online as they are next to impossible to complete without  one on one student/professor interaction.

 

I completed my Bachelors in Accounting just this month.  My final class ended Monday.  This has been an excellent experience for me.  Many of my classes were very easy for me, however I have worked in the accounting industry for the last twelve years.  Some of my classes were quite difficult.  At Ashford you actually use honest to goodness textbooks, you dont just "do it all online".  If I had a complaint about my classes the complaint would be that there were students in some of my classes that could not write a complete sentence.  However I noticed as we progressed to upper level classes many of those students fell away. 

 

When one fills out one's financial aid forms a screen comes up on the government website that reveals yoru schools graduation and retention rates.  Both of those rates were around 35% for Ashford.  Which I admit does seem low to me but when I look at some of the people I started with I can well understand why. 

 

As for the 14 year old, I am not condoning what Ashford did, but where the hell were his parents?  Responsible parents do not allow their child to spend hours on the internet without knowing what he was doing.  And how did he order his books etc?  Up until about four months ago you could not use your financial aid to pay for your textbooks.  You had to have a credit card to pay for them.  So who issued this child a credit card?  Or did he use his parents credit card?  This story cites the one example and does not talk about current reality with Ashford. 

 

Ashford will no allow a student under the age of 24 to enroll for online programs unless there are special circumstances. Also the first two classes younger students must take at Ashford would require a certain amount of Life Experience to complete, life experience a 14 year old would not have.  So who helped him to complete those assignments?

egolterman
egolterman topcommenter

Equally detrimental:  the hundreds of millions a year in tax write-offs and public money that pour into tax-sheltered  institutions of learning. A great deal of this is 'business' driven, 'business' controlled, and profits businesses. Capital projects and special projects. Taxpayers should get a cut of

this revenue.

aces
aces

The author could have written ten more pages about this. I would have liked to have heard more from students that attended these schools and the horror stories they have to share. I know a girl that attended Missouri College and wow is she regretting it. I always knew there was something wrong with these schools, but to hear that many of them have direct ties to Wall Street firms and investment banks makes it all the more disgusting. What a racket!! siphen money from Federal Student loan programs through unsuspecting students so that they are on the hook to repay it. Then use that money to make the rich even richer. What a country!!

anthonyp23
anthonyp23

The story has some real vague details.  An under 18 student would be considered "dependent" which would require his parents to assist him with filling out his Financial Aid application.  Financial aid will not be disbursed without the application being completed by the dependent student and legal guardian.  Education is an investment in yourself.  You get out what you put in.  The story seems very one sided with a bias point of view. 

ivyh
ivyh

Thank God someone had the nerve to write about this.  This issue needs to be handled, asap!!!!

bookkeepingbabe
bookkeepingbabe

 @maggief317

 Exactly my point.  The "boy" in question committed several crimes not the least of which is falsifying federal documents (Financial Aid App), that is unless he had help from his parents.  In which case the parents need to be prosecuted for their role in this. 

 

Frankly I find that part of the story fantastic at best.  When I applied to Ashford I had to sign authorizations for them to get my highschool and college transcripts.  (Which they did). 

 

Also they boy was too young to enter into a contract so who signed his financial agreement?  If he himself did then he committed fraud because it clearly states "I am of legal age" etc etc etc. 

JD13
JD13

 @bookkeepingbabe So how long has Ashford been paying you to do PR?  I stand by EVERY word I said.  

JD13
JD13

 @bookkeepingbabe My sister just got a degree from Ashford.  I laughed at her when she told me how much she was paying a year for a degree she will probably never be able to find work with and if she does it will be at a pay around minimum wage for that type of job.  The price of the books was outrageous, even more than buying books at a regular college.  I paid less than she paid with my scholarship a year to go to a real brick and mortar highly respected private college and that includes my room and board.   Now she's in debt up to her eyeballs and unable to find a job that pays more than about $9 an hour and not in her field.  Since she has a child now, she's found that it is actually cheaper for her to stay home and just live off her husband's meager income than to take an $8 or $9 an hour job and pay most of it for child care and to pay off her student loans (which of course her husband is paying off now which is throwing money down the toilet and nothing to show for that B.A. she now has.  If it was worth anything she could find a job where SHE could afford to pay off her own loans, child care, and still bring in some income.)  She could have gone to a local state university for much less money and gotten a degree in a field she could actually find work in and a degree that would be far more respected by potential employers.  

JD13
JD13

 @aces I've never attended a for profit college and never will but I did sit in on a class an acquaintance of mine was teaching (and he only had a B.A.) at a for profit tech school.  It was horrible.  Half the students were surfing the internet and not paying attention and he did and said nothing to them.  The reason they were doing that though could have been because of how horrid of an instructor he was.  Disorganized, didn't seem to know what he was talking about, he'd say something then go to give a demonstration on the computer and it wouldn't work the way he said it should, people would ask questions and he would seem confused or didn't know how to answer the question...it was truly bad.  

Toid
Toid

Very true.  This is extrememly one sided.  They never once mention the successes, the well prepared and employed students. Leave it to a journalist to know their "business" - write stories that grab readers attention, get more copies in circulation so advertisers will spend more money in their publication.  Open your eyes people.....geesh

 
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