Weeds amidst the ivy

By Chadwick Matlin
September 19, 2013

On the first day of the Association of Private Sector Colleges and Universities annual convention, a storm worked its way towards the convention center. More than a thousand people milled inside Rosen Shingle Creek, one of the golf resort/convention centers that are endemic to central Florida. The attendees had come for the annual congress of for-profit colleges, hosted by the sector’s trade association and central lobbyist. Its theme: “Opportunity for all.”

That night, a self-described “futurist and demographer” took the stage to deliver the keynote address. Kenneth Gronbach is a big man with a bigger voice, going after laughs more than longitudinal studies. Gronbach calls himself a “generational marketing expert,” and has written a book called The Age Curve. Subtitle: “How to Profit from the Coming Demographic Storm.”

Gronbach’s presentation began with a joke: “How many people are really excited to listen to a demographer for an hour?” A little manic, Gronbach paced the stage, taking audible sniffs as he caught his breath and delivered the next slide. “We’re going to concentrate not on money and stuff, but on people,” he said. But for Gronbach people are opportunity, and opportunity is money.

Gronbach spoke for nearly an hour, touching on everything from Honda motorcycles to how Generation Y requires “transparency, integrity, sense of green, humanitarian, fairness, cyber, and empathy” in the workplace. At one point he said, “I don’t think we could invent a better immigrant than a Latino.”

APSCU had brought Gronbach to the convention to try and help its member schools — all for-profit colleges that cater to 13 percent of American higher education students — better understand their target audience. Who were these students that needed vocational certificates and degrees? How best to get them to enroll, and how best to get them to graduate? As Gronbach promised, “Generation Y is going to change everything. They are going to change your lives.”

For the people in charge of for-profit schools, they already have. They’ve made them very rich. Between 1998 and 2008, for-profit enrollment increased 225 percent by one count, nearly eight times the rate of the rest of higher education. During the bleakest days of the Great Recession, stock prices soared as students went back to school in a bad job market. In 2009, publicly traded for-profits were $3.2 billion in the black, before taxes. But now for various reasons — a rebounding economy, harsh media coverage of the sector’s abuses, and tighter federal regulation — enrollment is down across the sector. A talk like Gronbach’s was meant to pep up morale.

“The antiquated college system is a rotary phone,” Gronbach said before lauding the private sector schools for being more nimble than traditional schools. That’s where their advantage lay, he said. “If you do it right, you’ll be wearing diamonds as big as radishes.”

Soon, a loud hiss started to drown him out, working its way across the room. It was the rain, moving across the thin roof, pounding, hissing, pleading to be let in. The storm had come.

If you care about understanding the country’s student loan situation, the best place to start is with for-profit colleges. For the past ten years there has been no sector that’s relied on student loans more than for-profit schools, and no sector that’s used them more to its advantage.

For-profits include brands you’ve heard of — University of Phoenix, Kaplan, DeVry — and small mom-and-pop outfits you haven’t — Fountainhead College of Technology, National Tractor Trailer School, and Spartan College of Aeronautics and Technology. Overall, it’s estimated over 4 million students attend for-profits annually.

In a more innocent time we called these schools career colleges; their express purpose is to prepare people to take on a job they wouldn’t have been able to get otherwise. They offer certificates, associate’s, bachelor’s and grad degrees, like any other school, just with more of a focus on the outcome than the process. It is all about school equating to a job. In that sense for-profits are the rare party in higher education that acknowledge what college has become: a commodity.

Take, for instance, Corinthian Colleges, Inc., a network of over 100 for-profit schools across the country. Founded in 1995 and IPO’d in 1999, Corinthian has grown by purchasing other schools and creating its own campuses where it sees demand. Unlike many for-profits, Corinthian focuses on campus-based learning, with three main brands spread across the country: WyoTech, Heald, and Everest, each with its own specialties. WyoTech has a host of automotive repair courses. Heald offers associate’s degrees in business administration. Everest’s medical assistant certificates are very popular, at around $16,000 a pop. About 90,000 students attend one of the Corinthian schools.

The people signing up for the courses are, by and large, the ones for whom a traditional college setting isn’t ideal. They’re usually older, poorer, busier, or some combination of the three. And yet they’re spending more money on college. By some counts, 96 percent of for-profit students take out loans, and nearly all of them are drawing from federal financial aid. In comparison, only 13 percent of students going to community college take out loans, because community colleges are a fraction of the cost.

So why go to for-profits? Because they offer the luxuries of convenience and efficiency. Matthew Mastrogiovanni, a 44-year-old logistics administrator went to an Everest campus in South Plainfield, New Jersey to change his career and get certified in its 9-month electrician program. Mastrogiovanni’s whole family had been to Everest — his wife completed the Medical Insurance Billing and Coding program, and she only went because she was so impressed with the sales pitch when she brought their son in to register for a pharmacy technician program. For Mastrogiovanni, who works night shifts but wanted a career change, it was their testimonial plus Everest’s “very flexible schedule,” that appealed. He said Everest had told him the electrician field was booming with jobs — “and it is booming if you’re 18 and you’re living at home with mom and dad,” he said. He faults Everest for not specifying that the jobs wouldn’t pay him what he needed as a middle-aged guy with a family. Since graduating almost a year ago, he’s had only one job interview, and he found it on his own. He still works in logistics for a stock room company. His electrician program cost more than $19,000. He’s had to put his loans in deferral as he pays off the Everest loans for the rest of his family.

The schools justify their extra cost by offering accelerated programs and more robust distance-learning options that can accommodate a more demanding lifestyle. This, they’ve determined, is what the rest of higher education isn’t offering — and it’s what’s worth at least an extra $10,000.

This is all made possible because the federal government has made it possible with its financial aid program. For-profits long ago realized that the most sustainable business model is the one that feeds off of the government’s largesse. Going up against community colleges is a lot easier than going up against Harvard, especially when the federal government can foot a large part of the bill. The market has confirmed their suspicions. By one count, the sector burned through $32 billion of federal funds in 2009-2010, a quarter of the DOE’s student aid allotment. In 2010, the federal government spent $509.3 million in Pell grants just for Corinthian’s 113,818 students. But Pell grants don’t have to be paid back; the sector’s $32 billion is comprised largely of loans. Ultimately, it’s students who are on the hook.

The readily available funding from student grants and loans has created an entire industry — and one that many now consider a predator against the very population that the loans were meant to empower. It’s an unintended consequence of legislation: our ideals demanded we provide loans so people can afford to go to school before they can actually afford to go to school, but the market’s demands created an opportunity to profit.

Without federal financing, the for-profit sector would be a fraction of the size and its students would be much less in debt. But far fewer Americans would have diplomas. It’s a trade-off: If we as a country want to ensure there’s a path to upward mobility, we have to help finance the way. But financing comes with risk, and some students are going to be left behind rather than thrust ahead.

This is what makes the political debate over for-profits’ role in higher education so warped. Here’s a sector that should be a liberal cause. It serves America’s neediest population, and uses tens of billions in public funds to do it. But its emphasis on the private over the public sector and its unabashed interest in pursuing profit aligns it with Republican orthodoxy. In a different Washington this would lead to bipartisanship. In our Washington it leads to scorched earth campaigns.

As a case study, take Senator Tom Harkin’s crusade against for-profit colleges. For two years he and his staff worked on a report on for-profit colleges’ questionable practices and heavily indebted students. It is the most comprehensive third-party report available on the sector, and much of the preceding data comes out of their work.

Harkin’s team found that for-profit students carry a lot of debt, and aren’t good at paying it off. An executive summary:

  • “Independent students,” the report says, “leave for-profit schools with a median debt of $32,700, but leave public colleges with median debt of $20,000, and private non-profit colleges with a median debt of $24,600.”
  • The “Department [of Education] estimates that 46.3 percent of all dollars lent to for-profit students who entered repayment in 2008 will default. The comparable number for 2-year public and non-profit colleges is 31.1 percent.”
  • To cap it off, the report found that somewhere between 50 and 70 percent of students left school without getting a diploma. Going into debt but not getting a degree is probably the worst outcome for any college student — the student assumes much of the cost without attaining most of the benefit.

Since 2012, that Harkin report has been a scarlet letter for the industry, which is why for-profits treat it like it’s Nathaniel Hawthorne’s Scarlet Letter and think it ought to be banned. Steve Gunderson, APSCU’s chief executive and thus the industry’s chief promoter, described it as “ideology drives reality.”

Gunderson and others I spoke with think Harkin and his team are opposed to the very idea of for-profit higher education, and so trying to change their minds is futile. They think Harkin’s report manipulates data, composes an incomplete snapshot, and uses select cases of malfeasance to build an overly-broad narrative about the industry. Chief among the criticisms is that opponents don’t take into account that for-profits are serving students far more likely to drop out of school or have trouble repaying debts, because they come from disadvantaged backgrounds. It is difficult for high schools to educate the students society has left behind, so why should it be any different for for-profit colleges?

Before wading through education statistics — and there’s a swamp of them — it’s best to pack a machete.

For-profits make easy targets. They’re more expensive than community colleges, less established than storied elites, and less glamorous than mid-tier schools with gleaming athletic facilities. They’re also some of the few schools that still explicitly traffic in an increasingly outdated American Dream: come from adversity, go to school, get a job, become financially stable. And then of course there’s that emphasis on profit, something that’s anathema to the platonic ideal of American education, if not the modern reality.

For-profits, in other words, are weeds amidst the ivy, thriving in the cracks and growing faster than they can be cut down. They keep growing for a reason — they’ve adapted to modern higher education better, and sooner, than nearly any other bloc of schools. They may not be pretty, but they’re here to stay.

But poor results and abuses throughout the sector have forced the Obama administration to try and regulate the colleges. For the past few years the Department of Education has tried to ensure for-profits don’t manipulate students into enrolling, and then leave them unable to make their loan payments after graduation.

The regulations have already changed for-profits, and even they admit it’s largely been for the better. But now there’s a new debate taking place, and it’s one that demonstrates just how hard it is to force colleges to be accountable for how much debt their students have after they leave. The rise and regulation of for-profits can help explain how, for some, college went from being a gateway to the middle class to being an obstacle along the way; and what we can, or should, do about it.

Inside the exhibitor hall of the APSCU convention in Florida, it was initially difficult to see an industry chastened. As the attendees slurped their ceviche shooters, the exhibitors hawked their wares. A company called Tribeca Marketing Group had someone in full, spray-painted Statue of Liberty regalia, like a street performer who had mistaken suburban Orlando for Times Square. Pyramid Financial Solutions claimed they were expert at “Turning Tuition into Profit.” Gragg Advertising — “Memorable Creative, Measurable Results” — had a virtual golf course.

But this was not the exhibitor halls of years past. As Goldie Blumenstyk at the Chronicle of Higher Education noted, gone were the mermaids of 2012 and the live cattle of 2011. As Blumenstyk writes, “Mr. Gunderson said the group had asked vendors to exhibit with ‘conduct appropriate for the higher-education sector.’”

Left behind were a bunch of companies hyping their morality. It was especially apparent in “lead generators” — a class of companies unique to for-profits that help the schools find potential students. Lead generators have largely gained a reputation as unscrupulous vultures, willfully leading students who don’t know any better to a college even if it isn’t a good fit. Traditional colleges buy leads, as well (the College Board sells its massive address book of kids who take the SATs). It’s just that for-profit lead generators are recruiting some of the most at-risk high school graduates in America.

But these days, ethics are in. One of the convention’s sponsors, Beelineweb.com, took out an ad on the back of the program that read, “We’ve been doing organic since last century.” When I asked another lead generator, Education Dynamics, which runs sites like GradSchools.com and EducationConnection.com, what was special about their leads, a woman named Anya Bierzynski corrected me: “They aren’t leads to us. They’re highly vetted student inquiries.” Behind her, Shannen Doherty starred in a commercial for one of Education Dynamics’ sites.

And then there was Andy Beedle. Armed with a philosophy PhD from UConn, he taught at Trinity and Grand Valley State Universities before decamping for the world of admissions marketing. Beedle now works for Norton/Norris, an admissions consultant that offers an “EnrollMatch” program that helps colleges “stay compliant yet with enough flexibility to connect with today’s students in the most ethical and effective ways!”

“What’s been great is having this industry get thrown under the bus has made the people who were engaging in unethical practices, the light’s being shown on them now in pretty good ways. Our business model has to be about producing graduates. And those graduates have to get jobs,” he told me.

The new mood was also apparent outside the exhibitor hall. There was a “Compliance/Financial Aid” track of breakaway panels that included: “Detecting Potential Default Scenarios,” “Transparency and the Prospective Student: Effectively Using Disclosures to Achieve Positive Outcomes and Mitigate Future Disputes,” and “Adventures in Veterans’ Compliance: How to Stay Compliant in a Changing Environment.”

This is what happens when an industry feels the hot, bureaucratic breath of federal regulators on its neck. It wises up.

For-profits have long been regulated by the feds. In 1992, Congress imposed restrictions on for-profits, two of which still resonate. The first required that at least 15 percent of for-profits’ revenue came from non-federal dollars. The sector could not exist entirely off the welfare state. That’s since been relaxed to only be 10 percent of a college’s revenue (what’s commonly called the 90/10 rule). These days the average for-profit bases more than 80 percent of its revenue on federal grants and loans, and that’s without factoring in various loopholes. Without federal grants and loans making it easy for poor students to go to school, the bottom would undoubtedly fall out of vast numbers of for-profit colleges.

The second restriction limited the sector’s most pernicious recruiting tactic: paying its recruiters based on how many students they could enroll. By rewarding recruiters on quantity rather than quality, the universities were able to make a quick buck, but students were left paying for something they couldn’t use to their advantage. It was salesmanship, not education, and it was the kind of thing that gave for-profits such a bad name.

By 2002, the industry had convinced George W. Bush’s Department of Education to add 12 loopholes into the law, essentially reversing the recruiter regulations that had already taken effect. Recruiter salaries could be adjusted as long as they weren’t 100 percent based on whether or not the recruiter had netted a good haul. “Incentive compensation,” as the industry calls it, proliferated again.

By 2009, as the Obama administration began to make student debt an issue, there was another effort to stop for-profits from rewarding indiscriminate promises. But the industry was too occupied elsewhere to worry about incentive compensation. And so it was outlawed.

Now, everyone — including the industry itself — praises it. “I think incentive compensation for enrollment is a bad thing. I think incentive compensation for graduation makes all the sense in the world and we oughta be fighting for it,” Steve Gunderson, APSCU president, says. In a fractious corner of education, the one thing everyone can agree on is that there shouldn’t be any reenactments of Glengarry Glen Ross.

What everyone can’t agree on is whether colleges — any college — should be accountable for how indebted their students are. The federal government, spurred by the for-profit sector’s myriad abuses, thinks for-profits should be. The for-profits cried double standard, noting it’s absurd to even imagine the federal government going after private non-profit colleges for this. Too many liberal arts majors coming out of Brown with $60,000 in debt and no immediate job prospects? Sanction a college that’s been around since 1764! (For statutory reasons, the Department of Education doesn’t have the power to regulate schools specializing in liberal arts.)

All of that spurred action, and what followed was a remarkable glimpse into the country’s student loan problem, and why it’s so damn hard to fix it. The Department said it had the power to make a vocational college prove that it could “prepare students for gainful employment in a recognized occupation,” based on the Higher Education Act of 1965. That “gainful employment” bit is the key here — and all the regulations that followed would come to be known by that moniker. If a college couldn’t prove it was helping its students with gainful employment, its students, and thus its coffers, weren’t entitled to federal aid.

The question became what, exactly, gainful employment is, or should be. To put it another way: What qualifies as gainful employment? Does the student have to make more money after college than she would have before? Does it matter how much debt she went into to earn a degree?

Detailing regulatory twists and turns is as thrilling as offering play-by-play of a gently sloped walk, so we’ll gloss over what came next. Ultimately, in 2011 the administration defined gainful employment as the following three thresholds:

  • On average, graduates shouldn’t be spending more than 12 percent of their annual income on loan repayments.
  • 35 percent of a college’s graduates and drop-outs need to be repaying their federal loans after they stop taking courses.
  • Students shouldn’t be spending more than 30 percent of their discretionary income on paying back loans.

Only after a college failed all three thresholds for three consecutive years would they lose access to federal funds. Analysts estimated that the regulations would have made 5 percent of for-profits ineligible for federal funds, effectively dooming them.

To recap: the worst actors in the industry would be put out of business, the ones left behind would be able to boast that they’re DOE-approved, and the industry could begin to shake the impression that it’s overpriced, underwatched, and interested more in students’ money than their post-graduation livelihoods.

But to for-profits, gainful employment was a pox on their campuses, a discriminatory middle finger from an administration hostile to all things profit. They sued.

They won. A federal district court judge struck down the gainful employment regulations, citing the DOE’s arbitrary choice of 35 percent as the repayment threshold. The Department had a right to hold for-profits accountable for its repayment rates, but not without some basis of what the threshold should be.

Nevertheless, the regulations, or the threat of them, have had a major effect on the for-profit sector. Enrollment was down 2.8 percent in 2011, compared to a .2 percent drop in higher education overall. Apollo Group, which runs the University of Phoenix, noted a 14 percent drop in enrollment between summers 2011 and 2012, and its stock is down 80 percent from its 2009 high. Industry watchers attribute this partly to a rebounding economy, but also to new orientation programs in various schools that let students take classes tuition-free for a trial period, so that if they drop out they won’t incur debt and hurt the college’s default rates. That type of screening has led to lower enrollment.

Not to be denied, this September the Department of Education restarted negotiations around gainful employment. For-profits have resumed their fierce opposition to it. As the for-profits fight for their livelihood, they’re fighting against the very thing that could help legitimize them.

Steve Gunderson still shakes hands like a congressman. Double clasp, eye contact, big smile on his elfin face. Gunderson, the president of APSCU, was a Republican congressman from Wisconsin until 1997, three years after being outed as gay on the floor of the House. Now he’s the figurehead of for-profit higher ed, taking the APSCU CEO job in 2012. He’s the guy who has to make the case against the Department of Education’s vision of gainful employment.

I first met Gunderson in late June, before he was scheduled to give the commencement address to hundreds of DeVry graduates in Crystal City, Virginia. Good with small talk, he has a hushed speaking voice when he’s not at a lectern, and has a habit of tucking his fingers against one another as he leans forward in his seat. Gunderson, who hates waiting in line, filed into the room along with the graduates. “Pomp and Circumstance” played. Families craned their iPads to get a good picture. Aside from the large number of minority faces in the crowd and under the mortarboards, it was like any other college’s graduation.

When it was Gunderson’s turn at the dais, he name-dropped Thomas Friedman, David McCullough, Ralph Waldo Emerson, and President Obama. He also tried to assure the graduates that their degree was money well spent. He said associate’s degree recipients could expect an extra $423,000 in lifetime earnings. Bachelor’s degrees: $900,000. The subtext was clear: your student loans are nothing compared to what you’re about to reap.

“Today, entrance into the American middle class requires a combination of hard work, education and career skills,” Gunderson said, “You have been given that gift. The question now is how you will use it.” But for nearly all of these students, the gifts were paid for with an installment plan.

Two days later I went to Gunderson’s office, a nice corner unit nine floors above Connecticut Avenue in D.C., to have a chat. On the agenda: gainful employment, the sector’s struggle for legitimacy, and how to ensure a college is actually doing its job. His book, The New Middle Class: Creating Wages, Wealth, and Opportunity in the 21st Century, sat on a coffee table, and we settled in for a two-hour interview.

“We’re not against gainful employment. That’s the misunderstanding of this sector,” Gunderson told me. APSCU, it turns out, doesn’t want an absence of accountability; it would just like accountability that (it thinks) makes sense. Its main complaint is that you can’t ask a sector that caters to low-income students to ensure a certain number of those students pay back their loans within a certain period of time. “Under that standard, two things would have happened. Schools in the inner city and schools in rural America would’ve been forced to close,” Gunderson said. “You automatically sentence that demographic to being excluded from the opportunity.”

Opportunity. This is Gunderson’s favorite safeword, a tug of the heartstrings and an allusion to a nostalgic American Dream in which anyone, given a chance, can make something happen. APSCU’s convention was titled “Opportunity for all,” remember, and his book’s subtitle is “Creating wealth, wages, and opportunity in the 21st century.” It’s potent stuff, and it’s hard to refute: if someone wants to go to school and better themselves, why should the government stop them? How is it in a government’s interest to deny its citizens that, ahem, opportunity?

But how do we judge what an opportunity should cost? Is it our responsibility — as a society, as a government, as a democracy — to do that calculation for consumers? Or is it only Elizabeth Warren’s?

Gunderson says he considers college to be an investment. But then he also thinks that colleges shouldn’t be held responsible for its students’ financial decisions. Gainful employment, he says, doesn’t make sense because it punishes schools for choices students make after they’re out of school. “It’s like blaming my brother [who’s a car dealer] for people who default on their car loans. Like, what was I supposed to do, you know?”

But college is not a car. One isn’t supposed to be more likely to pay off car payments after buying a car than she was before. Colleges — and especially for-profit colleges — predicate their entire purpose on that very idea. Higher education is supposed to transform the student, whether it be her mind, her resume, or both.

But is it fair to expect the same results from for-profits as from traditional schools, given their students’ demographic differences? Are they handicapped from the start?

Gunderson told me that the industry needed more “risk-adjusted metrics,” meaning more data that took the for-profits’ high-risk students into account. The little research that has tried to control for the difference in students has been inconclusive.

Even if the data is mixed, are we really to blame for-profits for exploring America’s neglected corners? Reflecting on the industry’s struggles, Gunderson said, “I think it’s a cheap shot to criticize our sector for serving students who are low-income and eligible for financial aid. I don’t see anybody else trying to serve them and I think there’s real evidence that the traditional elites are not reaching out and serving that constituency.” It would be easier to refute Gunderson’s point if states hadn’t just spent a half-decade defunding community colleges.

This is what happens when we are unwilling to adequately fund public higher education, but still claim it as an imperative for a new American economy. We end up outsourcing the Americans who need the most help to the private sector. That sector, despite being more accountable to its shareholders than its customers, customizes its programs for a demographic that, through a quirk of welfare, can pay. As the government decides how best to fix the problem, millions of students are caught in between.

Which brings us back to gainful employment, and what, to APSCU, is fair. Its ideal is simple: Apply the same standards to for-profit schools as to the rest of higher education. As of now gainful employment only applies to vocational schools because of arcane legislative reasons. The sector would prefer that changed.

This, of course, also buys for-profits time, as a legislative change like that requires Congress to pass a new Higher Education Act. That is unlikely anytime soon, which is why the DOE has been so aggressive with gainful employment in the first place.

Gunderson said he understands why there’s such a focus on accountability right now, with student debt rates as high as they are. But he thinks that something is lost if we turn away students at the door. There’s one central question he asked that could apply to all of American higher education: “How do you balance outcomes versus access?”

On the final day of the APSCU convention, as attendees recovered from the Kool & the Gang concert, I ducked into a panel called “Managing Risk in the Current Regulatory and Legal Environment.” There, five men (lawyers and college officials) gave a presentation about how not to run a company into the ground. General advice: don’t be egregiously predatory, and don’t work with anyone who is.

When the conversation turned to lawsuits — there have been many against for-profits — one panelist was particularly active. William Calhoun, the Vice President and Deputy General Counsel at Corinthian Colleges, has dealt with enough lawsuits to have tips about best practices. He noted that the company doesn’t pay nuisance settlement fees just to make a case go away. Calhoun, warning he was going to be politically incorrect, said that if it did it would allow the plaintiffs to “sidle up to the trough as often as they can to get money out of you.”

Intrigued by Calhoun’s equating students to swine, I went up to talk with him. Calhoun said he knew better than to speak on the record. Kent Jenkins is the man who does that.

I emailed Jenkins on June 10. That same day there were reports that the SEC had begun an investigation into Corinthian’s practices. As Corinthian itself wrote in its SEC filing: “Corinthian is also under investigation by the Consumer Financial Protection Bureau and several state attorneys general.”

Among opponents of for-profits, Corinthian is seen as one of the sector’s worst offenders. David Halperin, an anti-for-profit activist, has a particularly comprehensive chronicle on his website, RepublicReport.org. Some highlights:

  • If gainful employment regulations had gone into place immediately, 43 of Corinthian’s 143 schools would have failed all three tests.
  • In order to comply with the requirement that more than 10 percent of its income come from non-federal sources Corinthian raised tuition, forcing its students into deeper debt.
  • Corinthian admitted on an investor call that it expected 55 percent of its private loan recipients will default.

Amidst all this, it should come as no surprise that Corinthian’s stock is down 89 percent from its 2009 high.

Jenkins, a verbose guy from North Carolina who has done stints as both a reporter and a public relations officer, has made a career pushing back against government intervention. His LinkedIn page boasts that he’s helped stopped a “water-system takeover by Chattanooga city government,” and “defeat organ transplant policies proposed by U.S. Department of Health and Human Services.” His entry for Corinthian boasts, “Crisis communications strategy to counter year-long series of congressional hearings on private-sector education.”

“I’m not going to sit here and tell you that our sector has not had problems,” Jenkins told me. But look at “any type of organization in the U.S. that is trying to offer career education that leads folks directly to a better job opportunity. Who’s doing it better than us? Who gets comparable or better results?”

He has a point. Federal job training programs are underfunded, stigmatized, and ineffective. And then there are community colleges, which are overburdened and offer a traditional course structure. Indeed, community colleges have a much lower completion rate on 2-year associate programs than for-profits — 21.9 percent compared to 62.7 percent in 2008, according to DOE data. In certificate programs, the numbers are more equal, with community colleges slightly better.

Wanting to see a for-profit campus in person, I asked Jenkins to meet me at Corinthian’s Everest Institute in South Plainfield, New Jersey. South Plainfield is part of the larger Everest chain that specializes in medical assistantship, accounting, and electrician training. In 2010, something like 19.7 percent of students who had attended South Plainfield defaulted on their loans. (Numbers aren’t exact because South Plainfield is grouped with several other schools in its default report.) Average loan debt is around $11,000, which Everest discloses to all students, as federal law now requires.

This is where Matthew Mastrogiovanni, the logistics administrator who wanted to be an electrician, took his courses. And it’s also where Denice Addy, a 29-year-old from nearby Irvington, graduated with a dental assistant certificate in August. Addy had been to a few other schools, but their structure put her off. Everest’s single-track curriculum appealed, as did its commercials. “I thought they were funny. I’m sorry to say that, but I thought they were a joke, so I went down to the school to check it out. To see if the school was a joke. But once I got there it was actually a decent school.”

South Plainfield’s campus is right off the highway, in a rundown industrial lot. I found Jenkins with South Plainfield’s president, Bob Butterworth. Butterworth came to Corinthian from a background in business, working at Marriott, PepsiCo, and Wendy’s International. He and his sleepy blue eyes had no education experience before this job. Neither did Jenkins and his salt and pepper mustache.

The tour began, and seemed to be engineered to rebut every one of the industry’s critiques. Poor customer service? Let me introduce you to our receptionists, whom we call Directors of First Impression. Kids that get lost in the shuffle? Here’s our bulletin board with all the current students’ faces — nearly all people of color — under a label that reads, “Our New Future Graduates.” Sketchy admissions employees? Let’s take a walk to the admissions pod, where everything’s out in the open, so anyone can overhear anything at any moment. Everyone who worked for Everest was wearing nametags, like they were in a commercial.

Coming through the vents I detected that familiar, clammy breath of the federal regulator. I hadn’t felt it since Orlando.

The campus itself had the feel of the interior of a very new high school — gleaming floors, classrooms that doubled as lab spaces, and kitschy street signs, one of which read “New Start Boulevard.” In one hall there was a piece of paper stuck to the wall that boasted about a 53.36 percent hiring ratio for nursing students out on externships.

Students were in class and wandering the halls, the same as students anywhere else — some goofing off, some paying attention. We walked into a physical therapy class as test subjects’ legs were high in the air. These students, and the ones in front of the dental mannequins, and the ones in a makeshift house with loose electrical wiring, and the ones prodding old Dell computers in an IT workshop had come to Everest to try and change something. They wanted something more from their lives, and for various reasons had chosen to spend more to get it.

Denice Addy, the South Plainfield grad with the dental assistant diploma, has a job now. But Everest didn’t help her get it. She found it herself, at her kids’ dentist’s office. First the office brought her on as an intern, and then hired her outright. “My school actually didn’t help. Of course they’re going to take that and say that I did. But in all actuality I found it myself,” she said.

I asked if she felt like she needed the Everest certificate to get that job. “They’ve hired people that have no experience and they’ve hired from other schools. So, yeah, if I wouldn’t have gone to Everest I probably would have gotten there anyway.” Her program cost upwards of $16,000. But she doesn’t regret going. “I wanted a career, you know?” she told me, reflecting on why being in dentistry is better than her last job, in security. “Because I don’t think security — you don’t need to actually go to school for that.” There is a ladder to climb in healthcare that there wasn’t in security. Going to college was a step towards socioeconomic mobility.

Nevertheless, the loans put Addy, Mastrogiovanni, and the rest of for-profit students in a precarious position, just like student loans can do for students who go to more traditional colleges. All of them limited their immediate financial scope in order to hopefully expand it in the future. But for-profit students are the ones less equipped for that adjustment than any other, largely because the society that’s trying to save them now didn’t provide for them somewhere else.

Now that the sector’s combative stance towards government in the early part of the decade has passed, what everyone seems to agree on is that change is coming. With a stalled Congress, for-profits remain one of our only immediate chances to experiment with how we hold colleges accountable for student debt. For obvious reasons, they find that onerous; but nearly everyone else should find that exciting. This is the frontier.

When the tour came to a close, I walked by the gong that students ring when they enroll, through the lobby with the children’s play set in the corner, and out into a parking lot noisy with the sound of the highway. As I got into Jenkins’ car for a ride to the train station I noticed something in the adjacent lot. It was empty and neglected, having been forgotten years ago. But there was something growing amidst the emptiness. A field of weeds had shot through the asphalt, yearning for the sun.

PHOTOS: U.S. President Barack Obama delivers remarks on affordable education at Henninger High School in Syracuse, New York, August 22, 2013. REUTERS/Jason Reed | Senator Tom Harkin (D-IA) speaks to reporters after a vote on Capitol Hill in Washington December 17, 2012. REUTERS/Joshua Roberts | Graduating students arrive for Commencement Exercises at Boston College in Boston, Massachusetts May 20, 2013.   REUTERS/Brian Snyder | A student in flip flops and shorts (C) watches as U.S. President Barack Obama (not pictured) receives an honorary degree during the spring commencement ceremony at Ohio State University in Columbus, May 5, 2013.   REUTERS/Jason Reed | Steve Gunderson headshot courtesy of APSCU.

INFOGRAPHIC: Courtesy of Yahoo and Chris Wilson.

18 comments

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Wow this is very good! You should write a book on this.

Posted by ductmonkey | Report as abusive

I’ll be honest, I began reading your article intently, until I realized that it degenerated into nothing more than a biased rant against the for profit sector, and is evident because you presume to understand the whole of a complex issue by propping up incomplete arguments with incomplete data. That moment came at this statement,”The schools justify their extra cost by offering accelerated programs and more robust distance-learning options that can accommodate a more demanding lifestyle. This, they’ve determined, is what the rest of higher education isn’t offering — and it’s what’s worth at least an extra $10,000.” Please tell me the whole dollar amount of what the operational cost is to educate someone at the associate degree level; I’ll give you a hint, the cost of tuition at community college isn’t it. For-profits don’t cost more because they think the services they provide are worth that much extra – public institutions cost less because taxpayers subsidize a significant portion of the cost of education. State education budgets, federal education dollars; there is a river of taxpayer money propping up public institutions that the for profit sector is not eligible to receive. Bottom line, they cost more because students are picking up the entire cost of education rather than relying on taxpayers to pay for most of it.

Further, APSCU’s primary opposition is largely tied to an equitable playing field, and though this is expressed in demographics, demographics is not the sole differentiation. When gainful employment first came out, the administration used an example of the difference in repayment rates between Berkley and a for profit college. What a revelation! Affluent upper class students are more financially stable than poor inner city students!? Well just shut down all the for profits because poor struggling people aren’t as good as repaying their loans! Only problem is, you would of course find the same level of disparity between Berkley and ANY COMMUNITY COLLEGE IN THE COUNTRY. Gainful employment, and those who are its proponents, designed it to kill the for profit sector, end of story – it only regulates the for profit sector. It doesn’t hold public institutions or state universities to the same standards that they purport are necessary to a fair and well run institution of higher education. APSCU is not against regulation, they would just like to see some semblance of fair and equitable regulation that isn’t designed to wipe for profits off the map. The DOE proposed regs ignore public sector institutions with dismal pass and dropout rates, an army of liberal arts majors working in retail, and regardless of how much title IV funding is drawn down by these schools (which by the way are loans that get repaid by students and the government profits from the interest on them), makes no attempt to address how tax dollars are spent in state and federal budgets that are wasted on students who are deliberately failed out of a freshman English class of 300 students taught by a TA because the professor is too busy being held to standards of research publications to attract more federal grants to the university.

Please don’t take some narrow predetermined view when you write your articles. It became clear that you simply just don’t like the sector. How about you, and the DOE, take a more equitable approach to reviewing and addressing the grievances that exist across all of higher education. Make a set of rules that apply to everyone, fairly, and then we can move forward. For profits don’t like bad actors in our sector (many of us anyway) as they drag down the legitimacy of all schools in the sector. Don’t just find a convenient scapegoat you can beat on to make a name for yourself. All of higher education is currently broken, not just the for profit sector. I will say, true to Gunderson’s point, I don’t see Berkley, Stanford, or hell, even any state university ripping down their gates to provide opportunity to those who need it the most, and who need the most help to get it. How about getting off your high horse? Thanks.

Posted by bsnoaddress | Report as abusive

Our work unit hires about 50 people per year on average. I don’t hire anyone whose degree is from a for-profit college. It means they didn’t go to a real college. “Phoenix University” is not a university, folks. Don’t put that on a resume unless you want to work in a hair salon or car dealership.

Posted by AlkalineState | Report as abusive

Hard enough securing a good job/career and pay even with a real degree – the kind of degrees that require brains and effort.

Time to shut down these diploma mills and stop ripping off the vulnerable in our society.

Posted by Cleansesociety | Report as abusive

For profit schools try to train and educate those rejected by public schools…. They take on the hardest to turn around. The Ivy Leagues select those with the highest of scores and doom the rest to figure it out for themselves.

The elitists in the public universities treat themselves to the highest salaries and perks imaginable. The University of California is about to spend millions to remodel a mansion for Janet Napalitano … and pay her $560,000 a year. They reject more applicants than anyone else.

Without private for profit schools the lower rungs of society are rejected into a permanent servant class. So much for the high minded elite. They are worse than any banker. Now they want the competition shut down.

Posted by neiman1 | Report as abusive

Last time I checked it was pretty easy and affordable to attend junior college (many of which offer the exact same vocational courses or college courses offered by for-profits) graduate with an associates degree (obtain real credits that transfer) and go on to a 4 year university (all while working) and not hobble yourself with debt.
These diploma mills (Strayer, U of Phoenix, ITT) are misleading people as to their career opportunities and at the same time almost certainly ruining/screwing them financially.

Shut ‘em down please.

Posted by Cleansesociety | Report as abusive

@neiman1: “For profit schools try to train and educate those rejected by public schools…”

By lowering their standards and hitting print on that ‘business management’ degree. Yeah, that’s real hard. I don’t know any serious employers who take these “University of Phoenix” type places seriously. It is an absolute waste of money and time to attend these for-profit degree mills.

The first thing an employer looks at is: Did you go to a real school? Doesn’t have to be a fancy school. I’ve hired great people out of South Dakota State, University of Washington, University of Northern Colorado at Greeley…. as long as they studied hard and learned something. Online seminars and fake degrees from for-profit universities don’t cut it.

Posted by AlkalineState | Report as abusive

The bigger issue is that if you look at a public and not- for- profit private university’s income statement and break out the costs that have nothing to do with teaching/education, the costs per student escalate dramatically.

So if one does away with administration and construction that is divorced from the classroom (e.g. the millions spent on bonehead courses for freshman students that are unable to perform at the minimum level in the core curriculum, diversity and other special “programs” staffs and budgets, non-core facilities (expansive dorms and student unions, recreation and athletic facilities) the cost per student hour will begin to approach that of the for-profit schools.

But we cannot discuss that, because “profit” is much more sinister than “programs” that have little to do with education.

Posted by COindependent | Report as abusive

If you found out your ‘ordained minister’ had simply bought a piece of paper online for $30 instead of going through seminary school and normal ordination….. wouldn’t you be a little skeptical?

And if their response was, “well those seminary schools are really hard. Tons of reading required”….. you might still attend church there, but the minister would always carry the taint of loser. Especially when he asks for a raise.

Now make that $30 minister certificate into a $30,000 ‘Masters in social work”…. and you have a University of Phoenix analog.

Posted by AlkalineState | Report as abusive

So tired of all this. Cut defense spending in half, close corporate tax loopholes, put in place a small securities trading tax and double the income tax rate on the top 1-3%. That will give us approx. $1.5 TRILLION a year to spend on the very basic societal rights of healthcare and education. And don’t tell me the economy would fall apart…. the economy would do fine and actually improve significantly over the long haul. Ahhh…..if only I were king for a day.

Posted by Engorged | Report as abusive

@ bsnoaddress: First of all, that is a fantastic handle for someone who works for- (or may even have a major stake in-?) a for-profit “distance learning” educator but perhaps you meant to reveal that more obviously w/ your (otherwise presumptuous) comment “…don’t like bad actors…(many of us…”

I only like actors (read: pretenders) when they’re working in the entertainment industry and then they still have to be pretty good.

In any case, let’s agree this is an opinion column and your input seems equally “biased”. In the event Mr. Matlin indeed simply doesn’t like your business, his article is not without supporting fodder. I for one echo his alleged distaste of this (still very young) trend in higher ed.

I graduated from a state-supported school 7 years ago and am still paying down my student loans with a decent salary every month, so there’s my bias.

I do not have a problem with anyone, richer or poorer, finding a way to the same (accredited) achievements I did with, as Mr. Matlin puts it, the luxuries of increased convenience and efficiency (a biased writer probably would have used EASIER but this doesn’t have the same meaning).

I do have a problem with any inkling of a sniff of what some summarize as predatory lending and I am well aware, beyond a shadow of a doubt, that the for-profit market is still wrought with this.

My best friend from childhood works for the highest-ranked (full disclosure: by the Fed – more bias!) student loan servicer in the US. He tells me some incredible stories of the people they encounter on regular occasion.

The most desperate and disheartening of them are (almost) always pupils of for-profit institutions, some of which have recently graduated, and some who have recently dropped out.

I do disagree w/ Mr. Matlin’s negative characterization that the tired old dream of “anyone, given a chance, can make something happen” is dead.

I’ll give you a hint; it’s not. And then I am going to disappoint probably every jaded American who reads this by claiming (warning: OPINION!) it lives in the hearts and souls of responsible, dedicated parents, who, regardless of ANY of their circumstances, strive to give their children EVERY incentive to excel academically early on and ensure they stay in school later on.

That dream can be passed on to disciplined children who later match their parents’ passion and endeavor to apply and be accepted to a public or private non-profit school where they can (likely) study and graduate for less $ overall.

I just had my first child, a boy, who I intend to (attempt) to pass this dream on to.

GOOD LUCK bsnoaddress

Posted by voelker1 | Report as abusive

I thought I did my research. I thought I was making a good decision for myself. University of Louisville (my hometown) wouldn’t even look at me for enrollment into their school and being an “older” student I needed to keep my full time job to pay my bills (mortgage, cars and such.) ITT was the only thing here at that time. All the things they told me sounded wonderful and right up my alley. But no one tells you that you’ll never make as much as you need with a starting position. No one tells you your loan payments will be $500 a month for blah blah blah years. I graduated with a bachelors in 2010. Now I’m unemployed and don’t believe a word of the lie called the “American Dream”. I was proud to finally get my degree…until I found out that employers look at it like it was toilet paper. And the truth is that the education I received was NOT WORTH what it cost me. What a waste!!!

Posted by BeadyEyedGirl | Report as abusive

You don’t have to shut the for-profit institutions down. But because they are on average, twice as expensive as public schools, and over 90% propped up by federal student loans….. require the for-profit institutions to be co-signers on the loans, up front. Then if the student defaults later, the for-profit school is on the hook to pay the taxpayers back. Bet those fly-by-night degree mills would be a LOT more careful about who they took and what they provided.

Posted by AlkalineState | Report as abusive

Most of our state owned and operated public schools do not stress the importance of money management. I called the Ohio State Board of Education and asked them why money skills are not stressed in high school. The person told me it’s because they focus on academics.

A person on welfare is “kept” and has a total lack of responsibility. Money sills are zero because they don’t have to think about paying bills, budgeting, etc.

Let’s put the blame where it belongs, on our public school system and lack of teaching money skills to everyone.

Posted by Kerrroadgirl | Report as abusive

Cap all federal student loans at 20K. These institutions rely on federal student loans as their primary revenue stream. The federal government is effectively their Only paying customer then. So…. the federal government is in a strong negotiating position with these schools. The schools can take less or take nothing. Never pay their start-out asking price.

Posted by AlkalineState | Report as abusive

Ya the 4 profits are just weeds compared to the professional crooks, the non-profit IVs and public colleges that are by and for their pensions, politics, and propaganda. The whole pile is rotten.

Posted by JP007 | Report as abusive

@AlkalineState
I agree completely with you. This is in fact exactly what I have proposed elsewhere. For profit schools must be guarantors of their own students loans.

Posted by QuietThinker | Report as abusive

That’s a cheap shot at William Calhoun. He was referring to plaintiff attorneys with nuisance value cases, not student plaintiffs. I was there, as were you. Your interpretation does not even make sense on its face because only a lawyer–not a student–can sidle up to a trough “as often as they can.” A student litigant can only bring one case. A plaintiff attorney can bring cases serially. Cheap shots betray motives.

Posted by lebouchon | Report as abusive