For-Profit College Issues

In another blow for the for-profit college industry, the U.S. Department of Education is withdrawing its recognition of the independent agency that accredits many for-profit schools.

The Accrediting Council for Independent Colleges and Schools (ACICS) is appealing the decision and will continue to operate while the appeal is processed. It accredits about 245 colleges that enroll 600,000 students. Many of its colleges are for-profit schools.

“While we are disappointed in this decision, ACICS plans to continue diligent efforts to renew and strengthen its policies and practices necessary to demonstrate this agency’s determination to come into full compliance with the Department of Education’s recognition criteria and, most importantly, to improve outcomes for the estimated 600,000 students currently attending ACICS-accredited institutions," the agency's interim president, Roger Williams, said in a prepared statement. 

ACICS was the accrediting agency for ITT Tech and Corinthian, both of which collapsed under the pressure of multiple investigations by federal and state agencies. 

Is your school affected?

If the appeal is not successful, schools accredited by ACICS will have 18 months to find a new accrediting agency. Is your school accredited by ACICS? Find out here.

In September 2015, a report by the Center for American Progress faulted ACICS for not taking action sooner against Corinthian Colleges.

“In April 2014—while the Department of Education was actively investigating the company for its questionable job placement rates and just a few months before the department acted to start Corinthian’s closure—ACICS renewed the accreditation of two Corinthian campuses and authorized a new branch campus,” the report noted.

The report also found that one out of every five borrowers at an ACICS-accredited college defaults on his or her loans within three years of entering repayment, 50% higher than the national average. Many of those loans are backed by federal agencies, meaning that the defaults wind up costing taxpayers.

For-profit colleges are barred from receiving more than 90% of their revenue from federal financial aid, but following the collapse of ITT, Corinthian, and other for-profit chains, DeVry says it will accept no more than 85% of its revenue from the feds.

“This is a significant pledge that DeVry Group is voluntarily making for the long term and it underscores our commitment to finding solutions to the issues facing higher education today,” said Lisa Wardell, president and CEO of DeVry Education Group. “This is part of a broader effort to improve our policies and demonstrate the quality and value of our programs.”

DeVry is working with "a variety of stakeholders on those commitments," which will be announced later this year, Wardell said, adding: “As we continue to engage with key stakeholders, we look forward to sharing details of the other commitments when they are finalized.” 

Cracking down

Federal and state agencies have been cracking down on for-profit schools, which tend to enroll large numbers of military veterans and students seeking vocational training. Many such students qualify for federal financial aid, meaning that taxpayers wind up paying for programs that critics say do little to prepare the students for careers.

ITT Institute shut down earlier this month after the Education Department cut off its flow of federal funds. Corinthian College closed down in 2015, leaving many students adrift. It was hit with a $1.1 billion judgment in March, some of which may be available to help students retire outstanding loans.

DeVry has had problems of its own. In January, the Federal Trade Commission sued DeVry, charging it used deceptive advertising to lure students. Last year, the school closed 14 campuses, moving students to its online program.

DeVry Education Group operates schools under several names, including  American University of the Caribbean School of Medicine, Becker Professional Education, Carrington College, Chamberlain College of Nursing, DeVry Brasil, DeVry University and its Keller Graduate School of Management, Ross University School of Medicine, and Ross University School of Veterinary Medicine.

California has ordered ITT to stop enrolling new students. The order came Friday, just one day after the U.S. Department of Education banned ITT from enrolling new students using federal financial aid funds in certain locations. It also vowed to increase its financial oversight of the chain of for-profit schools.

“The federal action raises grave concerns about the continued financial viability of ITT,” said Joanne Wenzel, chief of the state Department of Consumer Affairs Bureau for Private Postsecond Education (BPPE). “We took today’s action in the interest of protecting potential students who are considering enrolling in ITT.”

The order becomes effective Sept. 1 and affects all 15 ITT locations in California.

BPPE said it will file an accusation on the charges and allegations set forth in the emergency order within 10 days. The accusation will seek to revoke ITT’s approval to operate in California.

Students who have questions or need additional information can call BPPE toll-free at (888) 370-7589 or visit the bureau’s website.

The U.S. Department of Education said it took the action after ITT's accrediting agency found that the institution was not in compliance with accrediting criteria and was unlikely to be able to correct its deficiencies.

“Our responsibility is first and foremost to protect students and taxpayers,” said Education Secretary John B. King Jr. in a statement. “Looking at all of the risk factors, it’s clear that we need increased financial protection and that it simply would not be responsible or in the best interest of students to allow ITT to continue enrolling new students who rely on federal student aid funds.”

The end may be near for the organization that issues accreditations to for-profit universities. Department of Education staff members who have been investigating the Accrediting Council for Independent Colleges and Schools (ACICS) have recommended cutting ACICS' federal recognition. 

“The staff recommendation is to withdraw recognition, which would mean the agency could not remedy its compliance issues,” the staff report said, charging that the ACICS had ignored warning flags at Corinthian Colleges, allowing billions of dollars of federal aid to flow to the now-defunct schools.

The report follows calls for action from consumer advocates, educators, and state attorneys general, including California's Kamala Harris who earlier this month said the accrediting group's actions hurt thousands of students. 

"The predatory scheme devised by executives at Corinthian Colleges, Inc. was unconscionable. And despite enforcement actions by the California Department of Justice and the federal government against Corinthian, ACICS continued to accredit Corinthian, hurting thousands of students in the process,” Harris said. “Students relied on Corinthian’s accreditation status, believing they were obtaining a high quality-education with real job prospects."

The staff report found “extensive and pervasive deficiencies” at ACICS and recommended to the National Advisory Committee on Institutional Quality and Integrity (NACIQI) that it terminate the organization’s federal recognition.

But the wheels grind slowly in federal agencies, and final action is still likely to be at least 18 months away, a DOE official said. A federal advisory body will discuss the staff report next week and additional reviews will follow.

What happens to students?

ACICS currently accredits 243 institutions, most of them for-profit schools. If the Education Department finally denies recognition to ACICS, those schools will be unaccredited and ineligible for federal aid.

In a blog posting, Matt Lehrich, communications director at DOE, said students at ACICS-accredited schools shouldn't panic.

"The chain of events that plays out next will take – at minimum – more than 18 months. That means that many of the students who already have started at one of these schools will be able to complete their certificates or degrees before there is a chance of anything changing," Lehrich wrote.

"Generally speaking, if you’re near the end of your program or you’re preparing to transfer to another college or university, this news probably won’t interrupt your program."

Lehrich has other advice for students in his blog posting, which you can read here. 

California Attorney General Kamala Harris thinks the largest national accrediting agency for degree-granting institutions should lose its accreditation.

Harris has written the U.S. Department of Education, urging it to revoke federal recognition of the Accrediting Council for Independent Colleges and Schools (ACICS), which among its other accomplishments accedited the now-defunct Corinthian Colleges, Inc., which left tens of thousands of students with useless degrees and millions of dollars in debts.

“The predatory scheme devised by executives at Corinthian Colleges, Inc. was unconscionable. And despite enforcement actions by the California Department of Justice and the federal government against Corinthian, ACICS continued to accredit Corinthian, hurting thousands of students in the process,” Harris said. “Students relied on Corinthian’s accreditation status, believing they were obtaining a high quality-education with real job prospects."

ACICS boasts of accrediting more colleges than any other agency but a quick perusal of its roster finds that most of them are small vocational training institutions, offering certificates and associate degrees in such fields as dental assistance and office management. 

Harris joins 13 other state AGs who are opposing the renewal of ACICS as an accreditation agency. Harris and 10 other AGs are also calling for tougher standards for college recruiters on military bases.

Students choose a for-profit college for a lot of different reasons.

For-profit schools, like DeVry, University of Phoenix, and Strayer, were among the first to offer online courses, ideally suited to non-traditional students who wanted to pursue a degree while already in the workforce.

By and large, for-profit colleges have open enrollment, meaning almost anyone with a high school diploma who applies gets in. Traditional colleges over the last two decades have erected barriers, selecting only the students they want.

Finally, for-profit schools advertise, meaning more prospective students are aware of them and might be more likely to choose a for-profit school without looking into the alternatives.

Unfortuately, for-profit schools can be pretty expensive – and in the recent case of Corinthian College – accreditation has been an issue. Many students have left for-profit schools, with and without degrees, carrying a mountain of debt.

In recent years, for-profit schools have gotten some stiff competition from traditional colleges and universities, which are able to provide a quality, online education at much more affordable prices.

Most of them don't advertise, so here are five that deserve a closer look. If they are state supported schools, they usually charge more for out-of-state students. We selected schools that either don't charge extra, or the difference isn't that great.

New Mexico Highlands University

The school, with a campus in Las Vegas, New Mexico., was established in 1893. It offers degree programs in arts and sciences, business, education, and social work.

Tuition in its online programs costs $200 per credit hour for New Mexico residents and $314 for out of state students.

Murray State University

Murray State was founded in the early 20th century in Murray, Ky. It offers a large number of both graduate and undergraduate degree programs that are accessible online.

The in-state tuition rate is $317 a credit hour. Murray State has reciprocal arrangements with some other states in the region for reduced out of state tuition. For example, the cost is $383.50 for Alabama residents, $387 for Ohio residents, $335 for Tennessee residents, and $367 for residents of Missouri.

Columbia College

Columbia College is a private school, founded in 1851, with its campus in Columbia, Missouri. Since 2000, it has poured resources into its online degree programs and charges the same for in-state and out-of-state students – $275 per credit hour.

Bellevue University

Located in Bellevue, Nebraska, Bellevue University is another private school where the tuition is the same for everyone, regardless of where the student lives. It has ranked highly in the U.S. News annual college edition and offers 47 online undergraduate degree programs at a cost of $275 per credit hour.

Middle Georgia State University

Part of the University of Georgia system, Middle Georgia is located in Macon and offers a wide range of graduate and undergraduate programs online.

Students pursing an online degree pay a tuition of $169 per credit hour.

Since state supported colleges are usually cheaper for in-state residents, looks for an inexpensive education alternative where you live. Check out options in your state here.

Republican presidential candidate Donald Trump may have won big on Super Tuesday primary night, but earlier in the day he lost in New York's Appellate Court.

The justices declined Trump's request to dismiss fraud charges brought by New York Attorney General Eric Schneiderman against Trump University.

In his complaint, Scheiderman maintains Trump and business partner Michael Sexton were operating an unlicensed educational institution since 2005.

“By letter dated May 27, 2005, the New York State Department of Education (SED) notified Donald Trump individually, Sexton, and Trump University that they were violating the New York Education Law by using the word "University" when it was not actually chartered as one,” the justices wrote in their decision. “Likewise, SED notified these respondents that Trump University was also violating the Education law because it lacked a license to offer student instruction or training in New York State. SED stated, however, that Trump University would not be subject to the license requirement if it had no physical presence in New York State, moved the business organization outside of New York, and ceased running live programs in the State. In June 2005, Sexton informed SED that Trump University would merge its operation into a new Delaware LLC, and would indeed cease holding live programming in New York State.”

Never happened

But the justices agreed with Schneiderman that never happened. They also dismissed Trump's claim that the statute of limitations had expired.

“We hold that the Attorney General is, in fact, authorized to bring a cause of action for fraud under Executive Law § 63(12),” the court ruled.

In a statement, Schneiderman said the court's ruling was a “clear victory” to hold Trump and Trump University accountable for defrauding students.

“The state Supreme Court had already granted our request for summary judgment determining that Trump and his University are liable for operating illegally in New York as an unlicensed educational institution,” Schneiderman said. “Today’s decision means our entire fraud case can move forward, and confirms that the case is subject to a six year statute of limitations.”

2013 lawsuit

Schneiderman sued Trump for $40 million in 2013, claiming Trump University deceived its students and failed to deliver the apprenticeships it promised. In addition to the attorney general's action, several students have also filed a class action suit against Trump University.

It has even become an issue in the presidential campaign, with Trump rival Sen. Marco Rubio (D-FL) raising it during a recent debate.

"There are people who borrowed $36,000 to go to Trump University, and they're suing now – $36,000 to go to a university that's a fake school," Rubio charged. "And you know what they got? They got to take a picture with a cardboard cutout of Donald Trump."

Meanwhile, Schneiderman says he's pleased to be moving ahead with the case.

“We look forward to demonstrating in a court of law that Donald Trump and his sham for-profit college defrauded more than 5,000 consumers out of millions of dollars,” he said.

The Republican presidential candidates hammered fellow candidate and front-runner Donald Trump last week over Trump University, a for-profit school he set up to provide real estate training.

"There are people who borrowed $36,000 to go to Trump University, and they're suing now — $36,000 to go to a university that's a fake school," said Sen. Marco Rubio (R-FL), during last week's debate. "And you know what they got? They got to take a picture with a cardboard cutout of Donald Trump."

Trump University is the defendant in a class action lawsuit, originally filed in 2010, that claims, among other things, that students were promised a one-year apprenticeship, but it ended after they paid for a three-day seminar. Attendees who were promised a personal photo with Trump received only the chance to take a photo with a cardboard cutout; many of the instructors had little or no academic qualifications.

The Republican presidential campaign has actually focused renewed attention on for-profit universities and their role in mounting student loan debt.

While Trump University was more of an industry-specific training institute rather than university, many students who have enrolled in for-profit colleges have lived to regret it, especially those who borrowed large sums to attend now-defunct Corinthian College.

California Attorney General Kamala Harris is calling on the U.S. Department of Education (ED) to do more to protect students defrauded by Corinthian Colleges and other for-profit schools.

New regulations

The ED recently held the second of three negotiated rulemaking sessions to determine how student borrowers can get relief from federal student loans when these loans were used at a school engaging in decietful and abusive policies. Harris' office was one of two representatives for state attorneys general taking part.

“Too many students defrauded by for-profit colleges remain buried under mountains of student debt,” Harris said in a release. “I call on the Department of Education to revise their proposed regulations to ensure meaningful debt relief is available to any student misled by a predatory college."

Harris's office worked with federal investigators when looking into Corinthian College practices. The investigation found job placement rates were widely misrepresented to enrolled and prospective Corinthian students.

As a result, thousands of students who attended Corinthian have asked the ED to discharge their federal loans because they were deceived by Corinthian’s inflated job placement rates.

Attention on other for-profit schools

Harris maintains that Corinthian was not the only for-profit school engaging in this kind of activity. She says other for-profit institutions have used similar dishonest tactics against their students, and it is expected that many more students will need to utilize this defense.

Harris says another problem lies in vague federal regulations that make it hard to determine exactly who is eligible to have their student loans discharged. She says she would like to see new regulations define the criteria more clearly.

She's calling for a number of changes in the new draft of ED rules, including a broadening of the categories of school misconduct that would give rise to a defense to repayment.

The problems students have had with some for-profit school are well documented. Remember Corinthian College?

You don't have to have a long memory. In September 2014 the U.S. government sued the for-profit college for what it called an illegal predatory lending scheme.

The Consumer Financial Protection Bureau (CFPB) charged that  Corinthian lured tens of thousands of students to take out private loans to cover expensive tuition costs by advertising bogus job prospects and career services. To make matters worse, CFPB said Corinthian then used illegal debt collection tactics to strong-arm students into paying back those loans while still in school.

Before it declared bankruptcy and closed less than a year later, thousands of students had borrowed huge sums to attend, with nothing to show for it.

Proactive move

Now, the Department of Education wants to make sure potential train wrecks like Corinthian cross its radar screen before consumers have been harmed. It has announced creation of a Student Aid Enforcement Unit to respond more quickly and efficiently at the first suggestions of trouble.

"When Americans invest their time, money and effort to gain new skills, they have a right to expect they'll actually get an education that leads to a better life for them and their families," Acting Secretary of Education John B. King Jr. said in a release. "When that doesn't happen we all pay the price. So let me be clear: schools looking to cheat students and taxpayers will be held accountable."

To head up the unit, Robert Kaye is coming over from the Federal Trade Commission (FTC), where he was a top enforcement attorney.

Four divisions

The new unit will have four divisions that will perform special roles. The Investigations Group will be the early warning system, on the lookout for potential misconduct or high-risk activity among higher education institutions so that it can protect federal funding.

The Borrower Defense Group will provide legal support, It will analyze claims and make injury determinations.

The Administrative Actions And Appeals Service Group will impose administrative actions, such as suspending an institution and levying a fine. It will also try to resolve appeals by program participants.

The Clery Group will make sure for-profit colleges comply with the Jeanne Clery Disclosure of Campus Security Policy and Campus Crime Statistics Act, requiring colleges and universities participating in federal financial aid programs to disclose campus crime statistics and security information.

DeVry University is the latest for-profit college to run afoul of regulators. The Federal Trade Commission has sued DeVry, alleging that its advertisements deceived consumers about the likelihood that students would find jobs in their fields of study and would earn more than those graduating with bachelor's degrees from other colleges or universities. DeVry said it will "vigorously fight" the complaint.

“Millions of Americans look to higher education for training that will lead to meaningful employment and good pay,” said FTC Chairwoman Edith Ramirez. “Educational institutions like DeVry owe prospective students the truth about their graduates’ success finding employment in their field of study and the income they can earn.” 

In its complaint, the FTC says DeVry claims that 90% of graduates landed jobs in their field within six months -- a claim the feds say is deceptive. The suit also alleges DeVry's claim that its graduates had 15% higher average incomes one year after graduation than the graduates of all other colleges or universities was deceptive.

Melanie of Suamico, Wisconsin, recently recounted her experience with DeVry in a ConsumerAffairs review. 

"When I graduated in 2010 with a computer bachelor's degree I was excited to get my job and start my career. Well I was fooled," she said. "I got no help from the school (even though I asked for help), I put in hundreds of resumes/apps on my own and got nothing. It is almost like the companies look at the degree that says DeVry on it and they run the opposite direction. I was thinking that I was doing something wrong, but the only thing I did wrong was trust that DeVry would help me get a job."

DeVry says it will "vigorously fight" the charges. "DeVry University measured the employment and earnings results of its graduates in a sound, rational and transparent basis," the company said in a prepared statement. 

"DeVry Group believes that the FTC’s complaint – filed 40 years after DeVry University began publishing accurate graduate employment statistics – is without a valid legal basis. In addition, the FTC’s complaint contains anecdotal examples that exaggerate the allegations but do not prove them," DeVry said. "DeVry University measures the employment and earnings results of its graduates on a sound, rational and transparent basis, and has published these results in a consistent manner over the years to provide students meaningful information." 

Hundreds of offers

The FTC's suit notes that a DeVry television ad showed people in business attire hanging hundreds of “offer letters” on a wall, with a voiceover that said all of the offer letters seen came from just the last year – followed by the 90% claim. The complaint alleges that DeVry counted numerous graduates as working “in their field” when they were not.

That might sound familiar to Gary of Wappingers Falls, N.Y., who said that despite getting his degree and going $62,000 in debt, he has been unable to find a job.

"When I joined the college they stated that they had a 92% placement for graduates within 6 months in their field of study," he said. "If I could trade my worthless degree for satisfaction of my student debts, I would do it in heartbeat."

"The college was no help in setting me up with any interviews, they only looked at my resume and made suggestions. I have been on my own since I graduated and have had no luck," Gary added. "I currently work as a courier to pay my bills, which I could have done without a college degree."

DOE action

In a related action, the U.S. Department of Education is also taking action against DeVry for its marketing practices.  It is providing notice to DeVry that it will be requiring the institution both to stop certain advertising regarding the post-graduation employment outcomes of its students and to take additional steps to ensure that DeVry can substantiate the truthfulness of its post-graduation employment outcomes.

“As required by the law and expected by the public, institutions need to be accurate in their marketing and recruiting to prospective students. And we confirm this truthfulness of advertisements through the backup information schools provide upon request,” said Under Secretary of Education Ted Mitchell.  “The Department and the FTC’s related announcements today are the result of much collaboration and cooperation. We are grateful to our partners at the FTC for their hard work and dedication on this matter.”

The Department of Justice announced today that they have finally reached a settlement with Education Management Corporation (EDMC) for charges of illegal recruiting, consumer fraud, and other violations. The for-profit education company has agreed to pay $95.5 million to settle these allegations.

The case against EDMC actually stretches back all the way to 2007 after two Education Management employees complained about the company's deceptive recruiting practices. One employee filed charges in federal court through use of the False Claims Act– a piece of legislation that allows a citizen to sue if they know that fraud has been committed against the government; in essence, the citizen would be suing in the government's name. By 2011, the Department of Justice, four states, and the second employee would join the case.

Unfair compensation and fraud

The primary charge that EDMC faced was their alleged practice of paying admissions personnel based on the number of students that they were able to enroll in the school, which violates the Higher Education Act's (HEA) Incentive Compensation Ban. Employees who had good enrollment numbers were able to reap bonuses like all-expense paid vacations with loved ones to destinations like Cancun, Puerto Vallarta, Mexico, and Las Vegas.

Additionally, the company faced numerous charges of consumer fraud involving deceptive and misleading recruiting practices. The company is charged with using “hyperaggressive boiler room tactics” to recruit students and collect tuition money. It is estimated that nearly $11 billion was collected by the company between July of 2003 and June of 2011 using these tactics.

“Companies cannot enrich their corporate coffers at the expense of students seeking a quality education, or on the backs of taxpayers who are funding our critical financial aid programs,” said U.S. Attorney David J. Hickton. “Today's global settlement sends an unmistakable message to all for-profit education companies: the United States will aggressively ferret out fraud and protect innocent students and taxpayer dollars from this kind of egregious abuse.”

Historic resolution

The $95.5 million settlement was reached after examining EDMC's ability to pay and financial condition, which has declined as of late. However, the New York Times reports that if the case had gone to trial then the company could have been faced with paying a billion-dollar verdict.

Attorneys involved with the case believe, however, that justice has been carried out against EDMC and that it sets a good example. “This historic resolution exemplifies the Justice Department's deep commitment to protecting precious public resources; to defending American consumers; and to standing up for those who are vulnerable to mistreatment, abuse, and exploitation,” said U.S. Attorney General Loretta E. Lynch.  

Four members of the U.S. Senate, all Democrats, are backing legislation that would further limit the amount of revenue for-profit schools can get from federal aid.

The lawmakers – Jack Reed of Rhode Island, Dick Durbin of Illinois, Richard Blumenthal of Connecticut, and Elizabeth Warren of Massachusetts, have introduced the Protecting Our Students and Taxpayers (POST) Act, that would prohibit for-profit colleges and universities from receiving more than 85% of their revenue from the federal government and change the calculation of federal revenue to include all federal funds.

Current law allows for-profit schools to receive up to 90% of revenue from federal programs, but the lawmakers say it contains a very large loophole, allowing these schools to receive a lot more.

Loophole

“Money from the new Post 9/11 GI Bill and from Department of Defense tuition assistance programs isn’t counted, which leaves hundreds of millions of taxpayers’ dollars virtually unregulated,” Durbin said. “Consequently, these schools aggressively target veterans and servicemembers who too often don’t receive the quality of education they deserve. We can’t let this invitation to exploit our veterans continue.”

At issue is what students pay to attend for-profit schools and what they get out of it. After 2010, the U.S. government put rules in place to hold colleges accountable for students who couldn't get jobs after graduation. The high level of student loan default rates was another concern.

In July, the Obama administration enacted rules to choke off the flow of federal dollars to schools whose graduates don't do well in the job market. It was intended to save taxpayer dollars and protect students from running up debt for a degree doing them little good.

Protecting veterans

Warren said POST builds on that effort, while extending needed protections for military veterans.

“Too many servicemembers and veterans have been targeted by predatory for-profit colleges, and our men and women in uniform deserve better,” said Warren. “The POST Act will tighten the rules and help protect veterans by closing the loophole that permits for-profit schools to prey on our servicemembers.”

Earlier this year for-profit Corinthian College closed its doors after the U.S. government sued it for predatory lending.

The four senators point out another for-profit school, ITT Tech, is under investigation by at least 18 state attorneys general and the U.S. Department of Justice and is being sued by the New Mexico Attorney General, the Consumer Financial Protection Bureau, and the Securities and Exchange Commission.

The lawmakers say for-profit institutions of higher education enroll about 10% of all college students, but take in 20% of the Department of Education’s federal student aid funds and account for 40% of student loan defaults.  

You read it everywhere: advice to prospective college students that they look first to public community colleges rather than for-profit schools, which can be five times as expensive.

Now a study by researchers at the University of Missouri finds that hiring managers show no preference for hiring people with for-profit college credentials compared to those holding comparable credentials from public community colleges.

"Tuition at for-profit colleges can be as much as five times higher than at two-year community colleges," said lead researcher Cory Koedel. "When people are weighing their higher-education options, tuition cost and the ability to gain employment after school should be considered heavily. This study shows that no significant difference exists with respect to generating employer interest between individuals with community college and for-profit degrees. For many people, community college may be the better option financially."

Random résumés

For their study, Koedel, Rajeev Darolia, an assistant professor in the MU Truman School of Public Affairs, and their co-authors, randomly generated thousands of résumés that included either a for-profit college credential, a two-year community college credential, or only a high school diploma. The researchers then sent the résumés to a number of job openings for open positions in fields including sales, customer service, information technology, medical assistance and office, and administrative assistance. T

They found that hiring managers called back to inquire about fake candidates at the same rate, regardless of whether the candidates held community college or for-profit credentials.

"It is clear that employers are not placing any kind of higher value on for-profit credentials relative to community college credentials," Koedel said. "While for-profit colleges may be a good solution for some people, they are expensive, and our study indicates that there are other, more cost-effective education options that are perceived similarly by employers."

This study was published in the Journal of Policy Analysis and Management.

The Department of Education is stepping up its scrutiny of ITT Educational Services, citing federal fraud allegations against two ITT executives and the company’s “failure of the general standards of financial responsibility.”

ITT had already been under heightened oversight, along with other for-profit schools that receive much of their revenue from federally backed student loans and the G.I. Bill.

The feds said they had found several discrepancies during the heightened scrutiny, including a failure to reconcile federal aid accounts promptly and conflicting information about Pell Grant awards.

“Taken together, these facts demonstrate a failure by ITT to meet its fiduciary obligations, to properly and timely reconcile Title IV program funds as per the regulations and Federal Student Aid guidance, and to meet the standards of administrative capability required of institutions participating in Title IV, Higher Education Act programs,” the department wrote in a letter to ITT.

Faces lawsuits

A company spokeswoman, Nicole Elam, said the company was in the process of straightening out the reporting and administration issues.

"While the additional requirements will result in an increased administrative burden, the company does not believe they will have a material negative impact on our financial results, or in any manner affect the timely award of financial aid to eligible students or the operation of our campuses," she said.

Among other things, ITT will be required to submit a monthly enrollment roster, as well as information about all federal aid funds it disbursed during the previous month.

ITT is facing several other legal challenges, including lawsuits filed by the Consumer Financial Protection Bureau and attorneys general in several states. The company enrolls about 50,000 studnets at its 135 locations.

Consumers hoping to advance in a career are often attracted by for-profit institutions that, even though they can be expensive, admit anyone who applies. But not all these school can deliver on promises.

In North Carolina, state Attorney General Roy Cooper has obtained a court order temporarily halting operations at a private, for-profit career school that Cooper maintains charged students hundreds of dollars for unlicensed, unaccredited medical courses and put them to work without proper training.

On Thursday, Wake County, North Carolina Superior Court Judge G. Bryan Collins, Jr., granted Cooper’s request to temporarily bar North Carolina Medical Institute and its owner, Sherita McQueen, from advertising, offering, or accepting payment for any educational products or services in the state.

Cooper is asking the court for a permanent ban on NC Medical Institute’s operation and refunds for students.

Keeping an eye on career schools

“Students seeking training to upgrade their job skills deserve to get what they pay for, and patients deserve care from properly trained employees,” Cooper said. “If you notice a career school taking advantage of students, my office wants to hear about it.”

Cooper claims that the school could endanger patients in his state by certifying some students as qualified nursing aides after completing course work, which Cooper claims is far less training than required by law.

The complaint alleges that McQueen used a former employee’s nursing license and Social Security number to enter 50 unqualified Nursing Aide II students into the State Board of Nursing’s electronic registry, permitting them to get jobs.

License yanked

Back in May the North Carolina State Board of Proprietary Schools and the North Carolina State Board of Nursing refused to renew NC Medical Institute’s license. It previously determined that the school advertised and enrolled students in unlicensed courses, employed unapproved teaching instructors, and presented misleading information to the State Board of Community Colleges.

Cooper said it didn't stop there. He says after losing required licenses, McQueen misled prospective students by telling them that the courses offered by her school were accredited. He said NC Medical Institute continued to charge fees as high as $800 per course for unlicensed medical training programs, including pharmacy technician, medical assistant, and first aid courses.

After completing the classes, students often found themselves unprepared or ineligible for jobs in their fields of study.

Illegal practices

Cooper further alleges NC Medical Institute engaged in illegal practices while licensed. According to an affidavit filed by a North Carolina Board of Nursing employee, the school continued to offer a Nursing Aide II program despite repeatedly failing to meet state requirements.

While this might seem scary and discouraging for someone who hopes to advance in the medical field, Cooper says it shouldn't. Consumers just have to be careful.

“Enrolling in a vocational program can lead to a brighter future, but make sure the school you select is legitimate before you pay any money to enroll,” he said.

He suggests checking out your local or regional community college, where he says students are much more likely to receive quality training at a fair price.

The Obama Administration today puts its foot down on the metaphorical hose through which federal funds flow to for-profit colleges, likely leading to another round of bankruptcies and campus closings.

Choking off the flow of federal dollars to schools whose graduates don't do well in the job market is intended to save taxpayers money and protect students from spending their time and money on degrees that do them little or no good -- and that often wind up costing much more than students expect.

"The student advisor said the degree I was interested in would be $16k total for tuition, with payments of $50.00. Upon graduation, the total for tuition turned out to be $34k with a combined payment of over $400.00 a month," a Payson, Utah, student said in a ConsumerAffairs review of Everest University last year. 

A growth industry

It was only a few years ago that for-profit schools were seen as a growth industry and were touted as more efficient and responsive than traditional nonprofit public and private colleges. But then a hard truth emerged: graduates of the for-profit schools were having trouble finding jobs.

Students found that many employers simply didn't equate a degree from a for-profit college with one from a public or nonprofit private school.

That was the situation Gina of Seattle encountered when she graduated from ITT: "ITT basically made many promises but never came true. I have a BA in criminal justice and can not find a job to save my life. None of my fellow students have either. It's been almost two years. My student loans are around $80,000," Gina said in a ConsumerAffairs review.

In October 2014, after issuing the new rules, the White House listed shortcomings of for-profit schools:  

• Students who attend a two-year for-profit institution pay four times as much as attending a community college.
• Eighty-eight percent of associate degree graduates from for-profit institutions had student debt, while only 40 percent of associate degree recipients from community colleges had any student debt.
• Students at for-profit institutions represent only about 11 percent of the total higher education population but receive 19 percent of all federal loans and make up 44 percent of all loan defaulters.

Gainful employment

The weapon being wielded by the Obama White House is the Education Department's "gainful employment" rule, which was upheld by a federal court last week. It requires colleges to track their students' success in finding jobs and shuts down funding for those with poor placement records.

The rule applies to nonprofit schools as well but in the vast majority of cases, graduates of traditional nonprofits have a much better record of finding jobs in the field for which they trained and also have a much better record of paying back their student loans. 

The department has estimated that the rule will result in the closure of 1,400 programs that enroll more than 840,000 students, nearly all at for-profit schools. 

Out of business

Many of the nation's larger for-profit chains have already severely cut back or gone out of business. Corinthian Colleges, which includes Everest College and several others, shut down in April. 

Besides the Education Department initiative, large for-profit schools like ITT are facing lawsuits by students as well as federal and state agencies. Just last month, Education Affiliates agreed to pay $13 million to resolve a Justice Department claim that it had submitted false claims to the Education Department for federal student aid.

In January, Kaplan Higher Education -- once owned by The Washington Post Company -- agreed to pay $1.3 million to settle a Justice Department suit that it employed unqualified instructors.

For-profit colleges lost a round in court this week as a federal judge dismissed an industry lawsuit challenging the U.S. Department of Education's "gainful employment" rule.

The rule, scheduled to go into effect in July, cuts off federal aid to schools whose students graduate with high debt loads and low earnings. The schools' lawsuit said the rule violated their right to due process.

U.S.  District Judge Lewis Kaplan of New York ruled that the Education Department had the legal power to create the controversial rule in the first place and that it followed proper procedures in developing its second iteration of the regulations. The first version of the rule was thrown out in 2012 in an earlier lawsuit.

Dorie Nolt, press secretary at the U.S. Department of Education, said the department was pleased with the ruling.

"Every student deserves to graduate from higher education with a degree or certificate that equips them for success. These regulations will hold career colleges accountable for the programs they offer and promote improvements that protect students, benefit consumers, and honor taxpayers’ investment,” Nolt said.

"Steadfast conviction"

The lawsuit was brought by the Association of Proprietary Colleges, which represents 20 for-profit colleges in New York.

The group's executive director, Donna Stelling-Gurnett, said she was disappointed with the ruling.

“While we agreed with the department’s goals for this rule from the outset, we remain steadfast in our conviction that this regulation does not achieve those goals,” Stelling-Gurnett said in a statement.

In dismissing the suit, Judge Kaplan said that for-profit colleges don’t have a “vested right" to participate in federal student aid programs and they therefore don't need to be afforded due process protections.

“While for-profit colleges have become heavily reliant on federal student aid, that reliance is of their own creation, not of necessity,” he wrote.

Kaplan had sharp words for the association's argument that the rule infringed upon the states' role in overseeing colleges.

“This argument is quite surprising, but not for its merit,” Kaplan wrote. “It is surprising because it is at best ill-conceived and at worst misleading.”

The Federal Trade Commission announced yesterday that for-profit Ashworth College “agreed to settle” charges that Ashworth misled potential students about the value of an Ashworth education.

Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, said that “When schools promise students they can transfer course credits or get a better job after completing their programs, they’d better be able to back up those claims. Ashworth College didn’t tell the truth when it made those promises to prospective students.”

Ashworth's settlement with the FTC includes an $11 million judgment — which is currently “suspended” due to Ashworth's “inability to pay.” In addition to not-paying this fine, Ashworth is also expected to not-make certain misleading claims to students. Or, as the FTC said:

The proposed stipulated court order prohibits Ashworth College from misrepresenting that:

• completing Ashworth’s program will qualify students to obtain vocational licenses without any additional training or experience;

• Ashworth’s programs provide all the training and credentials required to switch careers or obtain a job in a new field;

• there will be job security or steady employment for consumers completing its programs; and that

• course credits are generally recognized by, and accepted, by other postsecondary institutions.

For-profit schools

Ashworth is the latest in a series of for-profit schools to come under legal scrutiny for similar reasons. Corinthian Colleges, which operated schools under the Heald, Everest and WyoTech brands, had to cease operations and close its remaining schools late last month (and declared bankruptcy a week later), after years of legal troubles including multimillion-dollar fines, suspensions of federal student aid, federal lawsuits charging “predatory lending,” and more.

In mid-April, shortly before Corinthian closed its remaining schools and filed for bankruptcy, it was fined $30 million for misrepresenting its job placement rates to students.

ITT Educational Services also started coming under increased scrutiny this month. A couple weeks ago, Congresswoman Jackie Speier urged the Department of Education to investigate ITT for “deceptive and predatory lending practices, pushing students into high-interest loans they know cannot be repaid.”

A few days later, California suspended GI Bill benefits for ITT Technical Institute locations in the state.

Students at ITT and Corinthian schools both paid high tuition rates (or, more likely, went deep into bankruptcy-proof student loan debt) in order to get what turned out to be useless degrees: traditional four-year colleges or universities generally wouldn't accept course credits from these schools, and neither will state professional licensing boards.

No student loans

The FTC settlement with Ashworth suggests that Ashworth students have the same problem, but they do have one slight advantage (or one less disadvantage) than students of ITT, Everest and similar for-profit schools. The FTC says:

Tuition at Ashworth College ranges from hundreds to several thousand dollars. Ashworth College does not accept student loans, and students are required to pay tuition in full or make monthly payments. However, it does accept military benefits including GI Bill payments, and has directed some of its advertising to military servicemembers and their families.      

So Ashworth students may waste large amounts of money or squander their military tuition benefits on what turns out to be relatively worthless college-course credits — but at least they don't have bankruptcy-proof student-debt millstones weighing them down, too. By the sad standards of contemporary American for-profit higher-educational victims, that actually leaves Ashworth students ahead of the game.

Last week, California Congresswoman Jackie Speier urged the Department of Education (DoE) to investigate the for-profit college operator ITT Educational Services, Inc., which she said has allegedly “engaged in deceptive and predatory lending practices, pushing students into high-interest loans they know cannot be repaid, at vast taxpayer expense” at its ITT Technical Institute schools.

And this week, the California Department of Veterans Affairs (CalVet), which among other things oversees GI Bill tuition benefits for military veterans in the state, ordered 15 ITT locations to stop enrolling new or returning students who use the GI Bill for payment.

Military.com reports that “The suspension only stops future enrollments or reenrollments of Veterans, or their dependents, using the GI Bill,” but “does not affect current students.”

Financial statements

CalVet instituted the suspension because ITT apparently will not or can not produce audited financial statements, as required by both the Securities and Exchange Commission and the DoE.

Speier mentioned something similar in her complaints to the DoE last week, saying in an open letter to the Secretary of Education that “The Securities and Exchange Commission (SEC) filed charges on May 12, 2015 alleging that that [sic] the CEO and CFO of ITT Educational Services covered up ballooning loan obligations stemming from the company's …. predatory lending programs.”

But ITT responded to the SEC's charges by releasing a statement saying “We vehemently disagree with the SEC’s position and we are confident that the evidence does not support the SEC’s claims …. We are eager to have the court clear our reputation that has been unnecessarily endangered by the SEC’s action.”

Whatever the courts ultimately decide about ITT's financial activities, another problem shared by ITT students and graduates involves the school's lack of worthwhile accreditation. Speier said that even ITT grads who'd earned high grade-point averages discovered their degrees were worthless: no reputable four-year college or university would accept ITT transfer credits, and potential employers aren't impressed by ITT-generated credentials, either.

Grads' complaints

Last week, when we reported Speier's complaint about ITT, we also shared the stories of several ITT grads. One woman who studied electronics at an ITT school discovered just how little employers think of ITT: “I have gone on numerous interviews just to be laughed at and questioned about why ITT.”

Another man who had to start his four-year college degree from scratch after no school would accept his two-year ITT degree advised all potential students to stay away from ITT: “Since it is not an accredited school if you ever plan to further your education and want to transfer to a real college you are much better off going to a real college from the start.”

A two-year state community college will cost you much less than a for-profit “institute” such as ITT, and the credits you earn at an accredited state community college are far more likely to either transfer to other traditional four-year schools or be accepted by potential employers.

After the downfall of Corinthian Colleges, which declared bankruptcy earlier this month following years of legal troubles which included federal agencies ranging from the Department of Education (DoE) to the Consumer Financial Protection Bureau (CFPB), plus the attorneys general of several different states, all alleging that Corinthian-owned schools defrauded students in various ways, lawmakers and other public officials have turned a sharper eye to other for-profit schools dependent upon a steady stream of federally backed, bankruptcy-proof student loans to stay in business.

Today, Congresswoman Jackie Speier (D-California) released an open letter to Education Secretary Arne Duncan urging the DoE to “conduct an investigation of and exercise increased oversight over the for-profit college operator ITT Educational Services, Inc.,” which has allegedly “engaged in deceptive and predatory lending practices, pushing students into high-interest loans they know cannot be repaid, at vast taxpayer expense.”

Speier's letter, available in .pdf form here, includes a list of complaints which sound depressingly familiar to anyone who knows Corinthian's story.

Predatory lending

Last year, for example, the feds sued Corinthian for “predatory lending practices,” and Speier's letter mentions similar practices from ITT: “The Securities and Exchange Commission (SEC) filed charges on May 12, 2015 alleging that that [sic] the CEO and CFO of ITT Educational Services covered up balloning loan obligations stemming from the company's …. predatory lending programs.”

Last November, a former ITT student in Pennsylvania wrote us to say “I was one of those students who signed for a private loan in order to continue my education. Unaware of the lies and deceit that was going on within the company. The program of study was electronics.... I was assured that upon graduation I would have a career, not a job.”

But after graduating in 2011, she discovered her degree was useless: “I am a temporary employee. My credit is shot and I make a little above minimum wage. I have gone on numerous interviews just to be laughed at and questioned about why ITT. … I am over $50,000 in debt because I believed I was getting a good education that would lead to a good future.”

And remember: that debt, like almost all student-loan debt, can't even be discharged in bankruptcy. But a former student who goes over his head in debt to attend a traditional, accredited state college or university at least has an authentic college degree (or credits to count toward one) to show for that outrageous debt load. ITT students say they don't even get that.

Good grades but ...

Mike from Oregon told us in January: “I went to ITT and I finally graduated with really good grades, 3.8 … in 1994.” A few years later, Mike wanted to enroll in a regular four-year school to earn a bachelor's degree, but learned that no reputable school would “transfer any credits at all from ITT, so I had to start over from scratch …. since it is not an accredited school if you ever plan to further your education and want to transfer to a real college you are much better off going to a real college from the start.”

Still, Mike says, his degree from ITT isn't completely useless: “you can hang it on the wall to cover up a hole or you can use it to cover a stain.”

Jay in Massachusetts made a similar observation from a different perspective. He spent one academic year – September 2013 through the following June – teaching at an ITT “Electronic Technology School.”

"Rot-gut shameless"

I have been a PhD electrical engineer for 25 years, mostly in the defense sector. But have never worked for such a rot-gut shameless enterprise, not even close. You need to understand [the] whole enterprise, ITT I mean, is a colossal nationwide profiteering scam. There are so many problems with ITT, I hardly know where to begin …. Recruiters routinely tell students that ITT courses will transfer should a student decide to complete a conventional 4-year program at another school after, say, completing an associates degree program at ITT. This is false. Credits will transfer to another ITT school (or possibly to another for-profit school like ITT) - that much is true - but not to an accredited state university.

In her letter to Education Secretary Duncan, Rep. Speier alludes to such complaints, and previous problems with the now-defunct Conrinthian schools, when she says:

The Department of Education has conducted increased oversight and exercised enforcement options in the past, as it did with the Corinthian Colleges [but] those investigations have been plagued with delays. In fact, Corinthian Colleges, Inc. was investigated by the SEC in June 2013 – a full year before ED opened their own June 2014 investigation …. This delay harmed students who continued to take loans on a worthless education, and taxpayers who footed the bill. I ask that in this case you take action quickly and responsibly.

In recent years high school students and their parents have obsessed over the college admissions process.

Certain colleges have become like designer consumer products, a sign of status and announcing to the world that this young person is embarking on a meaningful and successful career. Of course, it doesn't always work out that way.

Some graduates of name-brand colleges flame out in their careers. Others fall into depression because they weren't accepted by the school of their choice.

In his book “Where You Go is Not Who You'll Be,” New York Times columnist Frank Bruni argues that the Ivy League has no monopoly on corner offices, governors' mansions, or the most prestigious academic and scientific grants.

His book is a recounting of the stories of highly successful people who didn't attend the most exclusive schools. In fact, he writes there are many great colleges and universities that aren't well known. You just have to be able to find them.

University Research & Review, which offers college placement advice, has issued a list of what it believes are the best colleges you've never heard of. Attending one of them, the company says, will offer a great education and set the stage for a successful career.

Here's their list:

Abraham Baldwin Agricultural College Located in rural Georgia this school, as the name implies, might be ideal for those pursuing a career in making things grow. The school offers a degree in, among other things, turfgrass management for those aspiring to a career in the golf course industry. They even have their own golf course where students practice what they learn.

Amridge University Flexible is one way to describe Amridge University. All of its courses are also offered online with live course lectures viewed in real time and optimized for mobile devices. The school's low tuition also makes it attractive.

Brandman University University Research & Review calls Brandman “one of the most progressive institutions in the country. It now embraces competency based education, meaning if you know the subject matter you are not held back by outdated seat time requirements. This could be a good choice for serious adult learners who want to get on with life and career.

Brescia University There are only about a thousand students at Kentucky's Brescia University, offering both classroom and online programs. Most of the school’s mostly female students are full-time and enroll in programs such as social work, teacher education, and business.

Kettering College This might be a good choice for someone planning on a career in health care. It wins high marks for a professional and committed faculty and a responsive administration.

Lincoln Memorial University Lincoln Memorial is also popular among those interested in health careers. Students can become a doctor of osteopathic medicine, or of veterinary medicine, or maybe earn one of several master’s degrees.

Special features

Park University, Patten University, Western Governors University and William Carey University all have attributes that set them apart. About 90% of Park's students are part-time and about half take their courses online.

Patten University tries to help students avoid taking out loans by developing an inexpensive monthly payment program where a student can take all the courses he or she can handle. All courses are available online.

Western Governors University is a pioneer in competency based education, meaning you can get a degree sooner than you might think. Its course offerings are also 100% online.

William Carey University has unique scholarship and assistance programs available for students. There are special assistance programs for low income families, and students with excellent academic records may qualify for full tuition and fees plus a room allowance.

If you're looking for a single recent anecdote illustrating almost everything dysfunctional about the modern American system of funding higher education, try this one: On Monday, one week after the long-embattled chain of for-profit schools abruptly closed all of its remaining campuses, Corinthian Colleges filed for bankruptcy.

However, Corinthian's former students lack the same opportunity to wipe out their bad debts and start over again at Net Worth Zero (plus an abysmal credit rating), because student-loan debt, for the most part, cannot be discharged in bankruptcy.

What led to Corinthian's downfall? Like most for-profit schools, it was almost entirely dependent on federally backed student aid (especially those bankruptcy-proof loans) to function. The beginning of the end for Corinthian arguably came last June, when the feds temporarily halted all financial aid to Corinthian schools.

Federal agencies ranging from the Department of Education (DoE) to the Consumer Financial Protection Bureau (CFPB), in addition to the attorneys general of several different states, have alleged that Corinthian-owned schools defrauded their students in multiple ways: inflating or lying about post-graduation job-placement rates, teaching courses whose credits were not accepted by reputable universities or state professional-licensing boards, even engaging in what the CFPB called “predatory lending scheme[s]” bad enough that in February, the DoE and CFPB announced $480 million in debt relief for certain Corinthian students.

Affected students could see their debt burdens reduced by up to 40% — which is another way of saying affected students are still on the hook for at least 60% of those “predatory” loans.

Debt strike

Meanwhile, a group of former Corinthian students went on “Debt Strike,” refusing to repay the federally backed loans they took out to pay for their Corinthian school attendance. The “Corinthian 15” (so called because they started out with 15 members) started their strike in February, by posting an open letter to the DoE saying, in part, that:

We wanted an education because we were driven to learn and to achieve a better life for ourselves and for our families.

We trusted that education would lead to a better life. And we trusted you to ensure that the education system in this country would do so. But Corinthian took advantage of our dreams and targeted us to make a profit. You let it happen, and now you cash in. … Corinthian’s predatory empire pushed hundreds of thousands into a debt trap. But even beyond for-profit schools, tens of millions of students are in more debt than they can ever repay. And you are the debt collector, with powers beyond a payday lender’s wildest dreams. …

“More debt than they can ever repay.” That's exactly the sort of person bankruptcy is supposed to help. So, of all possible subgroupings of Americans to be denied that second chance, why single out the indebted students, most of whom took on that debt when they were still teens or young twentysomethings?

$1.2 trillion

As of March, the total outstanding student loan debt in the U.S. surpassed $1.2 trillion. And of the former students who started repaying their federal student loans in 2011, 650,000 had defaulted by 2013. Average default rates were 19.1% for students at for-profit schools, and 7.2% at non-profit colleges.

College tuition rates have risen faster than inflation every year for at least a generation now. And the people – mostly young people – behind these depressing numbers can't even seek the protection of bankruptcy.

It wasn't always like that. Originally, student loan debt was pretty much like any other, where bankruptcy was concerned. But in 1976, Congress changed the bankruptcy code to bar the discharge of student loan debt within five years of graduation. In the 1990s, that limit was raised to seven years. Then, as Inside Higher Ed  said, “the 2005 code revision made it all but impossible to have student loan debt canceled.”

I've heard arguments saying that's only fair, on the grounds “Bankruptcy shouldn't apply to college debt, because a college education can't be repossessed.” Yet that's true of many kinds of debt: you can't repossess medical procedures, vacations, restaurant dinners, gambling debts, property value lost when the housing bubble collapsed – but if you go over your head in debt to acquire such things, you can declare bankruptcy and get a financial second chance. Over-their-head former students cannot.

Reminder to legal adults who are still under 21 years old: the federal government doesn't think you're responsible enough to buy or drink a beer — yet you can sign on for enormous amounts of bankruptcy-proof college debt with that same government's blessing and active encouragement.

Corinthian Colleges filed for bankruptcy earlier this week, shortly after the long-embattled chain of for-profit schools abruptly closed all of its remaining campuses.

Like most for-profit colleges, Corinthian was largely dependent on federal student aid – primarily bankruptcy-proof education loans issued to students. Last June, the feds temporarily suspended funding for Corinthian-owned schools, after the Department of Education argued, among other things, that credits from Corinthian schools often proved useless to students, since those credits were not accepted by regionally accredited state schools, nor by various professional licensing boards.

These and similar problems explain why last October, the attorneys general of 14 different states announced their support for a proposed Congressional measure to increase regulations on the for-profit education industry. (Remember, too, that student loan debt is much worse than other forms, because it can't even be discharged in bankruptcy.)

More recently, the Obama administration tried setting new standards on for-profit schools, standards slated to come into effect this July.

Unsurprisingly, for-profit schools are generally opposed to the newer, stricter regulations. But they have a surprising ally. ProPublica's Alec MacGillis yesterday published the results of an in-depth investigation showing that traditional colleges and universities are also working against the new regulations.

For years, the higher education establishment has viewed the for-profit education business as both a rival and an unsavory relation — the cousin with the rap sheet who seeks a cut of the family inheritance. Yet in a striking but little-noticed shift, nearly all of the college establishment’s representatives in Washington are siding with for-profit colleges in opposing the government’s crackdown. … The emerging alliance points to a new calculation by the higher education lobby. By throwing in with the for-profits, traditional schools might be able to capitalize on Republican control of Congress to limit the government’s reach into their own campuses. Among other things, colleges and universities would like to block the proposed new federal ratings system designed to help families choose institutions based on how of their many students graduate and where they get jobs.

Inflated job placement rates

Corinthian and other for-profit schools have long been accused of inflated or outright fraudulent job-placement rates. For example: in mid-April, only a couple weeks before Corinthian's bankruptcy declaration this week, the Department of Education levied a $30 million fine against Corinthian, alleging among other things that Corinthian-owned Heald Colleges paid companies to hire graduates for temporary positions lasting as little as two days, performing such basic tasks as moving computers and organizing cables, then counted those graduates as “placed in field.”

Heald also counted obvious out-of-field jobs as in-field placements, including one graduate of an accounting program whose food-service job at Taco Bell was counted as “in-field” work.

But why would reputable, accredited traditional universities oppose regulations intended to crack down on such fraudulent behaviors? As ProPublica said:

the higher education lobby represents an industry as self-interested as any other—the two largest of the its many trade groups reported spending $500,000 on federal lobbying last year—and it spies an opportunity in the deregulatory instincts of the Republican majority.

The gambit underscores one of the under-appreciated truths about lobbying in Washington in an era of divided government: Special interests are often as interested in preserving a favorable status quo as they are in getting government to take an action to their benefit. To that end, gridlock can be a feature to be encouraged, not a bug.

At stake in this case is the roughly $150 billion that the federal government shovels annually into colleges and universities in the form of Pell grants and subsidized loans for students. Current and former higher education regulators say the federal government is obliged to assure that taxpayers are getting results for that spending.

Tuition rising

Are taxpayers getting their money's worth? Higher education costs – at traditional universities, not even counting the for-profit schools – have risen considerably faster than inflation every year for at least a generation now.

(Personal anecdote: I attended Cheap State U at in-state rates for four consecutive years in the 1990s, and my senior year tuition costs were significantly higher than freshman year's. Adjusted for inflation, I paid $1,760 per semester as a full-time freshman, compared to $2,661 per semester as a senior. For Fall 2015, the in-state tuition cost will be just under $6,270 per semester. Of course, those cited tuition costs do not include the cost of textbooks, housing, food, parking fees, lab fees, student fees, or any other costs related to college.)

So a high school senior today who enrolls at Cheap State U will pay, in inflation-adjusted dollars, at least three times more money than I did for the same degree. Which wouldn't necessarily be a problem if the job market had similarly expanded, so that today's newly minted college grads can reasonably expect salaries two or three times higher than what I made at the same entry-level gigs.

But that hasn't happened. Wages have been stagnating or even falling, even as the cost of educational credentials continues to rise. Students – and, ultimately, federal taxpayers – are spending more money on education than ever. Are they [we] getting results for all that spending?

Perhaps that's a question the “higher education lobby” would prefer nobody ask.

Corinthian Colleges, the long-embattled chain of for-profit (and not necessarily accredited) schools, announced on its website that it would close all of its remaining campuses effective today. Those campuses include “Everest and WyoTech campuses in California, Everest College Phoenix and Everest Online Tempe in Arizona, the Everest Institute in New York, and 150-year-old Heald College -- including its 10 locations in California, one in Hawaii and one in Oregon.”

Take note: although Corinthian does – or did – operate schools under the Everest name, not all Everest schools were run by Corinthian, so not all of them will be closing. For example: when ConsumerAffairs called the Everest College campus in Woodbridge, Virginia, this morning, we were told that it was not shutting down since Corinthian did not own it.

The CCI website says, “The company is working with other schools to provide continuing educational opportunities for its approximately 16,000 students. Corinthian said those efforts depend to a great degree on cooperation with partnering institutions and regulatory authorities.”

Translation: Those efforts depend to a great degree on whether any reputable, regionally accredited educational institutions will accept transfer credits from Corinthian courses -- and Everest schools, Corinthian-owned or otherwise, have a poor track record in that regard.

California Attorney General Kamala D. Harris said Corinthian "continued to deceive its students to the end."

"Closure of these campuses should help students get out from under the mountains of debt Corinthian imposed upon them through its lies," Harris said. "Federal and state regulators rightly acted to prevent taxpayer dollars from flowing to Corinthian, which preyed on the educational dreams of vulnerable people such as low-income individuals, single mothers and veterans by misleading students and investors about job placement rates and course offerings."

Multiple troubles

In February 2013, for example, an Everest graduate sued the school, alleging that none of the credits he took at Everest were transferable to a state community college. Many consumers posting on ConsumerAffairs have complained of problems transferring their credits.

“I attended Everest here in Miami in 2010,” former student Lucy said in a ConsumerAffairs posting last summer. “At the time I had no high school diploma. I completed a test that qualified me for the pharmacy technician program. ... I passed with flying colors.”

But that hasn't done Lucy much good. “To make a long story short, I am $13,000 in debt and still no employment in my field of study,” she said. “We cannot transfer our education credits because it's not considered real.”

Last June, the Department of Education temporarily halted all federal student aid to Corinthian-owned schools. In September, the feds sued Corinthian on charges of predatory lending practices toward its students. (Remember, too, that student loan debt is far worse than other kinds, because student loans can't even be discharged in bankruptcy.)

Hefty fine levied

Less than two weeks ago, the Department of Education levied a $30 million fine against Corinthian, and ordered its Heald College schools to stop enrolling new students, after an investigation “confirmed cases” that the company misrepresented the schools' job placement rates to current and prospective students of Corinthian-owned Heald Colleges.

For example: the DoE's investigation found that Heald paid companies to hire graduates for temporary positions lasting as little as two days, performing such basic tasks as moving computers and organizing cables, then counted those graduates as “placed in field.” (In many instances, those temp jobs were actually on Heald campuses.) Heald also counted obvious out-of-field jobs as in-field placements, including one graduate of an accounting program whose food-service gig at Taco Bell was counted as “in-field” work.

Despite all of this, the closing announcement on the Corinthian Colleges website says that, “The Company said that its historic graduation rate and job placement rates compared favorably with community colleges,” and quoted Corinthian's CEO, Jack Massimino, as saying “We believe that we have attempted to do everything within our power to provide a quality education and an opportunity for a better future for our students.”

The Department of Education has levied a $30 million fine against Corinthian Colleges, Inc. after an investigation “confirmed cases” that the company misrepresented the schools' job placement rates to current and prospective students of Corinthian-owned Heald Colleges.

The DoE agreement also forbids Heald from enrolling any more students, and requires the school to help current students either complete their education or continue it elsewhere.

According to the DoE, Corinthian's deceptive practices include paying temporary employment agencies to hire graduates for on-campus jobs lasting as little as two days, so that Heald could then count those students as having found work in their field after graduation.

Nothing new

Such allegations against the company are nothing new. The DoE's fine is merely the latest in a series of legal actions taken against the embattled chain of for-profit colleges.

Last September, when the Consumer Financial Protection Bureau sued Corinthian for predatory lending, the charges included allegations that the company would pay temp agencies to hire Corinthian grads to inflate the schools' placement rates, and also that the company promised good “career” options to graduates of Corinthian-owned Everest, WyoTech or Heald schools, yet Corinthian counted as a “career” any job lasting only one day, so long as there was the possibility of a second day of work.

In February, Corinthian students who'd taken out “Genesis” private loans got a collective $480 million in debt relief, resulting in debt reductions of up to 40 percent.

The schools' reputation among some groups is so unsavory that earlier this month, the attorneys general of nine states urged the federal government to forgive the federal debt burdens incurred by students holding the overpriced and worthless degrees.

And this week, when the Department of Education announced the $30 million fine against Corinthian, Education Secretary Arne Duncan said in a statement that “This should be a wake-up call for consumers across the country about the abuses that can exist within the for-profit college sector. We will continue to hold the career college industry accountable and demand reform for the good of students and taxpayers. And we will need Congress to join us in that effort.”

"Violent students' and taxpayers' trust"

The DoE's investigation found that Corinthian had badly mislead potential and current students of Heald Colleges, to the point where the students might not have enrolled in that school at all, had they known the truth.

U.S. Undersecretary of Education Ted Mitchell said in a statement, “Instead of providing clear and accurate information to help students choose which college to attend, Corinthian violated students' and taxpayers' trust. Their substantial misrepresentations evidence a blatant disregard not just for professional standards, but for students' futures.”

Among other things, the Department's investigation found that Heald paid companies to hire graduates for temporary positions lasting as little as two days, performing such basic tasks as moving computers and organizing cables, then counted those graduates as “placed in field.” Heald also counted obvious out-of-field jobs as in-field placements, including one graduate of an accounting program whose food-service job at Taco Bell was counted as “in-field” work.

In addition, the DoE said, “Heald College failed to disclose that it counted as 'placed' those graduates whose employment began prior to graduation, and in some cases even prior to the graduate's attendance at Heald.”

Like that Accounting graduate working at Taco Bell: she graduated from Heald in 2011 but had started at Taco Bell five years earlier, in June 2006.

A Corinthian spokesperson said in a statement that the Department of Education's conclusions were “highly questionable” and “unfounded,” and that “These unfounded, punitive actions do nothing to advance quality education … but would certainly shatter the dreams and aspirations of Heald students and the careers of its employees.” The spokesperson also said that Corinthian plans to appeal.

Once almost exclusively a feature of for-profit colleges, online degree programs have since flourished at non-profit private and public universities. As a result, a college education has recently become more flexible and more affordable.

More flexible in that a college student can work full or part time while completing their degree from the comfort of their living room, doing the course work at any hour of the day or night.

Affordable, in that the competition between colleges and universities for online students has kept tuition hikes in check.

Ranking online schools

So which online college is best? There are any number of ratings services but BestCollegeReviews.com has just reviewed 400 online colleges and picked its top 25.

It used three criteria to measure the colleges and universities – criteria that consumers might also use in selecting a school.

First, the reviewers looked at affordability, measuring the average cost of attending one semester, taking 15 credit hours.

Second, they assessed flexibility, counting the number of bachelor's degree-granting programs students may enter. A secondary consideration – the flexibility with which students may obtain a degree.

Finally, the reviewers measured academic rigor and support, looking at the strength and reputation of the online program’s parent institution as well as the range of support services for online college students.

$2,500 per semester

When all was said in done, Northern Arizona University topped the list. It won praise for its 45 bachelor’s level degrees that can be completed entirely online.

It was also one of the most affordable schools on the list with an estimated per-semester cost of only $2,500. Students may take an unlimited number of courses online for a six month period. There are no lab or course fees, and all materials required by the courses are available online.

Arizona State University was second on the list. It's far from the least expensive school, but won praise for its 47 bachelor’s degree programs that are fully online. There are 80-plus programs when specializations and non-bachelor’s level programs are included.

Value for the money

Degree offerings are comprehensive, ranging from art, business, communications, culture, education, engineering, health, language, to STEM. There are 6 start dates available per year, allowing students to start on their degree when it works best for them. The $7672 per semester tuition is considered a good value for the education and flexibility it provides.

Granite State College places third on the list, with 29 fully online bachelor’s level degrees that may be completed at full-time, part-time, or accelerated rates. Program offerings are comprehensive, ranging from digital and social media, to nursing, to education. Its tuition is the 10th most affordable, coming in at $4,675 per semester.

Rounding out the top 10 are:

4. University of Central Florida

5. State University of New York

6. Oregon State University

7. American Public University System

8. Ft. Hayes State University

9. Pennsylvania State World Campus

10. Grand Canyon University

Last summer the federal government started cracking down on Corinthian College, the for-profit chain behind Everest Institute, WyoTech and Heald schools. Corinthian was already under investigation in 20 different states by last June, when the Department of Education temporarily suspended all federal financial aid to Corinthian schools.

In July, Corinthian missed a deadline to reach an agreement with the federal government, and started selling off some of its campuses. In September, the feds sued Corinthian for predatory lending practices against its students, and only a couple of weeks ago, the Department of Education and Consumer Financial Protection Bureau jointly announced that certain Corinthian students would be forgiven a collective $480 million worth of private, high-cost “Genesis” loans.

Despite all of this, many former Corinthian students still find themselves saddled with enormous debts for worthless degrees — in many instances, their Everest or Corinthian credits won't transfer to other schools, and employers are rarely impressed by Corinthian-generated credentials.

Also, student-loan debt is worse than most other forms of debt because it is bankruptcy-proof, to ensure that teenagers and young 20-somethings who go over their heads in debt attending the wrong school face much harsher consequences than, say, middle-aged adults who go over their heads in debt trying to profitably “flip” a house, charging too many luxe vacations on their credit cards, or gambling all their money away at the legal casino nearest them – those poor financial choices can be forgiven in bankruptcy, but student debts cannot.

Student strike

Last week, 15 former Corinthian students associated with an offshoot of the Occupy movement known as the Debt Collective announced that they were staging a “debt strike” and refusing to repay their student loans in order to protest the government's legal and financial support of the company.

On the Debt Collective's “Student Strike” page, the “Corinthian 15” posted an open letter to the Department of Education saying that:

Who are we? We are the first generation made poor by the business of education.

We are people living paycheck to paycheck, single mothers, and young people just starting out. We wanted an education because we were driven to learn and to achieve a better life for ourselves and for our families.

We trusted that education would lead to a better life. And we trusted you to ensure that the education system in this country would do so. But Corinthian took advantage of our dreams and targeted us to make a profit. You let it happen, and now you cash in. … We are not alone in this fight. Corinthian’s predatory empire pushed hundreds of thousands into a debt trap. But even beyond for-profit schools, tens of millions of students are in more debt than they can ever repay. And you are the debt collector, with powers beyond a payday lender’s wildest dreams. …

Legitimate grounds

The Corinthian 15 might have legitimate legal grounds to demand the discharge of their loans. Even some U.S. senators think so.

Last December, six senators led by Elizabeth Warren (D-Mass.) wrote to Education Secretary Arne Duncan, urging that the Department of Education “immediately discharge” the federal debt obligations of former Corinthian students.

The letter pointed out that such cancellations are allowed according to the DoE's own rules: when students sign the documents to take out a federal student loan, the fine print says that “In some cases, you may assert, as a defense against collection of your loan, that the school did something wrong or failed to do something that it should have done.”

Warren's complete letter to Duncan is available in .pdf form here.

The New Yorker spoke to Mallory Heiney, one of the Corinthian 15 who attended a Michigan branch of Everest Institute in hope of becoming a nurse. But, she said, her instructors stopped showing up for classes due to Corinthian's financial troubles.

Inside Higher Ed spoke to another member of the Corinthian 15, Makenzie Vasquez, who said she dropped out six months into an eight-month program because she could not afford payments on the private loan offered by Corinthian, and now owes more than $30,000 in debt.

The federal government does offer certain income-based repayment programs for low-income students burdened by excessive student loan debt. Vasquez says she knows about such programs but says that, as a matter of principle, she does not want to repay the loans: “I didn’t get anything for this money, so I don’t see why I should have to give them anything …. I was conned going into this school. They sold me a dream and I got a nightmare.”

Educators generally advise consumers thinking of enrolling at a for-profit school to consider their local community college instead. Almost all community colleges will allow you to take on a part-time rather than full-time courseload, if necessary, so you can still work while attending school, and even pay your tuition and other costs as you go, rather than take on a student-loan debt that can't even be discharged in bankruptcy.

For-profit colleges were the first to really jump on the Internet and start offering courses to students all over the country.

There had been “distance learning” programs in the past but companies like the University of Phoenix built a business model around it.

University of Phoenix was founded in 1976, long before the Internet came along. But it was always aimed at students who already had jobs and needed to work school in around their careers.

It's now owned by Apollo Group, a publicly traded company, and has more than 200,000 students, down from a reported 600,000 in 2010. These days, traditional public and private non-profit colleges have gotten into the online education game, giving University of Phoenix and other for-profit colleges some pretty stiff competition.

We reported last year on five traditional colleges that have made a name for themselves offering quality education at competitive tuition rates. It turns out there are a lot more.

Nonprofit options

Nonprofit Colleges Online, a website edited by Brett Gershon and Liz Robertson, singles out colleges and universities it says “put students before profits and education before the bottom line.”

The site recently recently singled out what it considers the top online graduate degree programs offered by non-profit colleges and universities.

Earning the top spot for its online MBA program is Amberton University of Garland, Texas. The cost of the 2-year program is $8,712 for out-of-state students.

Columbia College of Missouri was second and Mississippi State University was third. Both have 2-year tuition costs that come in below $13,000.

Valuable means to an end

"MBA programs are considered a valuable means to an end, intended to help employees advance their careers and contribute significantly to their respective workplaces,” Robertson said. “The networking students do in MBA programs is invaluable to their professional lives; friendships made in a competitive graduate school will likely serve as beneficial professional relationships throughout one's career. With so many accelerated programs available to the non-traditional, modern student - including online, distance programs - and the increasingly relevant and growing global economy, there has never been a more convenient, opportune time to apply for admission to an MBA program.”

And it goes without saying, earning such a degree for under $15,000 in many cases, doesn't saddle the degree recipient with crushing student loan debt.

Bachelor's degrees, which take at least four years to complete, cost more. The good news is Nonprofit Colleges Online can help here too.

Non-profit bachelor's degrees

When it recently rated undergraduate programs it singled out Eastern Oregon University as the best value for a bachelor's degree in business administration. The estimated tuition cost for the degree is $18,700.

Stephen F. Austin State University was second at $19,816 and Fort Hayes State University was third at $23,126.

For students planning to complete their degree online, non-profit colleges likely offer significantly lower costs than most for-profit institutions.

The savings may be even greater if an in-state non-profit school offers online degree programs, since in-state tuition is much less than for out-of-state students.

The lesson is pretty clear. When shopping for an online education, it pays to look beyond for-profit schools and consider the well-established and reputable non-profit schools offering online degree programs.

Public policy makers, from President Obama to education leaders, have stressed the value of a community college education.

Students can earn a 2-year degree or complete the first 2 years or work on a bachelor's degree for a significantly lower cost than a public or private 4-year institution.

But what about value? Getting a job after graduation is what it's all about. How valuable is the education you get at a community college?

The answer is, it depends.

Major study

Researchers in Washington state have completed a major study of students who enrolled in either certificate or degree programs at the 34 community colleges in the state in the early 2000s. Next, it followed their career progress over the next 7 years.

First, the good news. The study found that students who enrolled in a 2-year degree program got their moneys worth and more.

But those who enrolled in short-term certificate programs – usually less than a year – got little value when they returned to the labor market.

The findings are significant because lately, short-term certificate programs have been rapidly growing. They're popular with students because they don't take long to complete. Colleges like them because they're a growing revenue source.

The researchers say between 2000 and 2010, the number of students receiving short-term certificates grew by 151% nationally. In that time they went from being 16% of credentials issued by community colleges to 24%.

The extra time will pay off

But the researchers say if you are thinking about investing a year in a certificate program, it will likely be more advantageous to invest an extra year to get a 2-year degree.

“While we find that earning associate degrees or long-term certificates is associated with increased wages, an increased likelihood of being employed, and increased hours worked, we find minimal or no positive effects for short-term certificates,” the authors write.

Madeline Trimble of the Community College Research Center says the bulk of the evidence suggests that short-term certificates lead to lower returns, on average, than longer-term credentials.

“Even in those states where their returns are positive, the average increase in earnings is unlikely to be greater than $300 per quarter,” she said.

Study co-author Mina Dadgar discusses key findings in the video below.

Time to take another look

Dadgar and Trimble are calling for a critical examination of short-term certificates. They say states should be concerned with the recent dramatic increases in short-term certificates and whether that is money well-spent.

They say students considering a degree program at a community college should know that getting a long-term certificate like an associate's degree was linked with a 11% increase in the chances of getting a job for women and an 8% increase for men.

Community colleges are a proven way to get started on a college education without running up huge levels of debt. In 2010-11, average tuition and fees for a full-time student enrolled in a public two-year college were $2,713, compared to $7,605 at public four-year institutions and significantly higher levels at private for-profit and nonprofit institutions, according to the College Board.

The government has adopteda final rule to protect students who graduate from for-profit career training schools.

Called the “gainful employment” rule, the regulation will monitor how graduates of these institutions fare in the job market. If not enough graduates land jobs in their field, the institution could lose access to federal student aid.

A nice first step, say some critics, but it doesn't go far enough. Maura Dundon, senior policy counsel at the Center for Responsible Lending (CRL), says the final rule only monitors what happens to graduates. Thousands more, she says, enroll, take out huge loans, but never finish. Yet they still have to pay back the loans.

First step

“The Department of Education’s final gainful employment rule aims to prevent programs with extremely poor outcomes from receiving federal student aid dollars,” Dundon said. “This rule is a step towards protecting vulnerable students from unmanageable debt burdens, but more remains to be done.”

Dundon says the final rule falls short when it fails to address the outcomes of students who withdraw without getting a degree or certificate. She says the rule also fails to consider student loan default rates.

“Although default and the inability to graduate are the most serious risks faced by for-profit college students, the final rule dropped a provision that would have considered default rates of all program attendees,” she said.

'Caving to pressure'

In an interview with U.S. News, Rory O'Sullivan, lead student advocate on the Education Department's gainful employment rule-making panel, said the Obama administration "caved to industry pressure" by cutting a proposed measure that would have tracked students who drop out of career programs after loading up on student loans.

That's a big deal, Dundon says. While she is pleased the final rule keeps the proposed debt-to-earnings metric as a way to measure whether students have actually found gainful employment, the rule leaves out many people who need help the most.

“Since a majority of for-profit college students are unable to complete their degree, the decision to eliminate consideration of default rates has seriously weakened the rule,” Dundon said.

Industry response

Despite complaints that the final rule has been watered down, the for-profit colleges aren't very happy about the rule either. The Association of Private Sector Colleges and Universities blasted the rule as an attempt to slam the door to higher education for millions.

“The gainful employment regulation is nothing more than a bad-faith attempt to cut off access to education for millions of students who have been historically underserved by higher education,” said association CEO Steve Gunderson. “Regulations created and issued based on bias against certain institutions have no place in our country. Furthermore, the debt-to-earnings metric is arbitrary and capricious.”

Gunderson charges the DOE is favoring public colleges and universities that he says have lower graduation rates and higher default rates, despite receiving government operating subsidies.

But DOE maintains that many students at career colleges — including thousands of veterans — pay too much money but don’t get the education they paid for.

“Instead, students in many of these programs are provided with poor quality training, often for low-wage jobs or in occupations where there are simply no job opportunities,” DOE said in a release. “They frequently find themselves with large amounts of debt and, too often, end up in default. In many cases, students are drawn into these programs with confusing or misleading information. The situation for students at for-profit institutions is particularly troubling.”

To support that contention DOE says students who attend a 2-year for-profit institution pay 4 times as much as those attending a community college. It says 88% of associate degree graduates from for-profit institutions had student debt, while only 40% of associate degree recipients from community colleges had any student debt.

Wisconsin is the latest to sue for-profit Corinthian Colleges, Inc., charging that it used misleading and deceptive trade practices to attract students to its Everest College in Milwaukee.

“Our office will prosecute post-secondary schools that use deceptive recruiting tactics to increase enrollments, leaving vulnerable, unemployed graduates with excessive federal student loan debt, underwritten by the taxpayer,” said Wisconsin Attorney General J.B. Van Hollen.

Van Hollen said Corinthian made false representations about critical facts such as the school’s job placement rates for its graduates and the availability of externships the school offered.

The Consumer Financial Protection Bureau (CFPB) sued Corinthian last month for what it called an illegal predatory lending scheme.

The CFPB alleges that Corinthian lured tens of thousands of students to take out private loans to cover expensive tuition costs by advertising bogus job prospects and career services. Corinthian then used illegal debt collection tactics to strong-arm students into paying back those loans while still in school, the agency said.

The Wisconsin complaint alleges that Corinthian fraudulently inflated its graduation rates by including in its placement numbers unemployed graduates and graduates employed outside of their field of study. It also charges that Corinthian’s recruiters represented to prospective students a 80-90% national job placement, when in fact its job placement rates were far lower, dipping as low as 5% at the Milwaukee campus.

The complaint also alleges that Corinthian recruited new students regardless of their qualifications, including many who were unlikely to complete or benefit from Corinthian’s accelerated allied health programs. For example, Corinthian’s admission representatives enrolled students who struggled with basic reading comprehension into accelerated allied health programs, which required quick mastery of complex medical terms, Van Hollen's suit charges.

The school allegedly also enrolled students in health career programs, even though such students would be virtually unemployable due to their criminal backgrounds.

The complaint also alleges that Corinthian’s recruitment tactics created a false sense of urgency to pressure prospective students to enroll immediately. Corinthian sent mailings to prospective students stating they had “priority status” and that it was “Urgent” that they “call in the next seven days.”

There was no urgency or priority. In fact, any prospective student who walked in the door at Everest College Milwaukee would be eligible for enrollment within the next month, provided they had a high school diploma or a General Education Diploma (GED), the state charges, saying that Corinthian’s misrepresentations induced many Milwaukee-area students to spend (or most commonly borrow) up to $20,000 for a course of study.

The Milwaukee school closed its doors in August of 2013 and the school provided some refunds to students who did not graduate. The complaint seeks restitution to affected students and graduates, as well as forfeitures and fees.

There really isn't a “low cost” college education. Getting an undergraduate degree takes time and money, and in recent years, it has taken increasing amounts of the latter.

Student loan debt is now over $1 trillion and rising. With growing awareness of the problems taking on too much debt early in life can cause, many students are searching for less-expensive ways to get an education.

Fortunately there are more than there used to be, thanks to online education. Taking courses online was a practice pioneered by for-profit colleges. It was convenient but expensive.

Because for-profit schools were heavy advertisers and aggressive recruiters, many students selected these schools without doing much shopping for a cheaper alternative. Maybe there weren't that many alternatives in the past, but there are now.

State-supported schools

By far the cheapest college alternative are state universities that have embraced online education, in an effort to compete with for-profit schools. But since state supported schools offer lower tuition rates only to people who live in the state, you need to live in the right state to take advantage of these bargains.

For example, the University of Florida's online tuition for Florida residents is just $129 per credit hour. Assuming it takes 120 credits to obtain a bachelor's degree, the cost would be $15,480, a relative educational bargain.

But it you don't live in Florida the rate is $500 per credit hour, making the same education cost $60,000. If you aren't a resident of Florida, your first step should be to check all the state-supported colleges where you live to find out if they offer similar low rates for in-state students.

Private, non-profit schools

If you are unable to find a state university in your state that offers low-cost online courses, there are a few private, non-profit schools that have affordable programs, no matter where you live. Many of these schools started out as what were once termed “correspondence” schools, before the Internet came along.

Bellevue University is a private, non-profit university in Nebraska, founded in 1966. It focused on adult education from the outset and continues to do so today.

For the current academic year, Bellevue's posted tuition rate for its online courses is $250 per credit hour. That puts the cost of a 4-year degree at around $30,000.

Another private non-profit school catering to adult students is California Southern, founded in 1978. Its tuition rate for online courses is also $250 per credit hour.

Southern New Hampshire University is a private, non-profit college that in recent years has wholeheartedly embraced online education. Its tuition rate is $320 per credit hour but is reduced to $225 for active duty military and their spouses.

Arizona State University is a public college that has a single online course rate, regardless of whether you live in Arizona. Its tuition for online courses is $480 to $543 per credit hour.

Other considerations

Not all schools offer all courses and programs online, so before deciding on a particular school you should check out what is offered. Another important consideration is the school's accreditation. After all, if you are going to the expense of obtaining a degree, you want to make sure it actually means something.

If a school is accredited, it means an independent agency vetted by the Department of Education has reviewed the school's programs and faculty to make sure they meet and exceed standards of excellence.

Regional accreditation is the best. The Department of Education currently recognizes 6 regional agencies within the U.S.

Another way to judge a school is by its completion rate – the percentage of students who start their education and end up with a degree. The higher the the graduation rate the more you can assume the school supports its students, guiding them to completion of their chosen degree program.

Saying that some for-profit schools are just in it for the money, a group of 14 state attorneys general are supporting a Congressional measure that would tighten regulation of the for-profit college industry.

“There are some schools within the for-profit college industry that are more interested in getting their hands on federal student loan dollars than in educating students,” Kentucky Attorney General Jack Conway said in a letter to the bill's sponsors.

“The unfair and unethical business tactics of those schools are leaving too many students drowning in debt with worthless degrees, while taxpayers are left footing the bill for debts that are never repaid," Conway said. "The for-profit college industry lacks real oversight and accountability at the federal level, and this legislation will help prevent future abuses of the student loan system and keep for-profit schools honest.”

The measure was introduced by U.S. Senators Dick Durbin (D-IL) and Tom Harkin (D-IA) and U.S. Representative Elijah Cummings (D-MD). It would tighten coordination among the nine different federal agencies that now have a hand in overseeing for-profit schools. 

Additionally, the bill would require the interagency committee to hold quarterly meetings as a group and annual meetings with state attorneys general to coordinate federal and state activities related to for-profit school oversight.

Warning list

The legislation would also charge the committee with publishing a “For-Profit College Warning List” for parents and students, which would identify schools that have engaged in illegal practices or where there is evidence of widespread abuse.

“This bill will provide the federal government with a mechanism by which to hold for-profit colleges more accountable for accepting billions of dollars in taxpayer money and will not conflict with, nor pre-empt the important work of the States in enforcing state law,” the letter states. “Further, this bill will help prevent Title IV funds from continuing to line the pockets of some for-profit colleges that offer deficient educations in a deceptive manner.”

Conway leads a national bipartisan working group of 37 state attorneys general who are reviewing the questionable practices of some for-profit colleges. In Kentucky, Conway has filed suit against four proprietary colleges for allegedly misleading students about job placement rates.

In addition to Conway, attorneys general from Arkansas, Connecticut, Illinois, Iowa, Maine, Maryland, Mississippi, Missouri, Nevada, New Mexico, Oregon, Pennsylvania and Tennessee signed the letter supporting passage of the legislation.

The Consumer Financial Protection Bureau (CFPB) is suing for-profit Corinthian Colleges, Inc. for what it calls an illegal predatory lending scheme.

The CFPB alleges that Corinthian lured tens of thousands of students to take out private loans to cover expensive tuition costs by advertising bogus job prospects and career services. Corinthian then used illegal debt collection tactics to strong-arm students into paying back those loans while still in school.

The Bureau is seeking to halt these practices and is asking the court to grant relief to the students who collectively have taken out more than $500 million in private student loans.

Corinthian is one of the largest for-profit college chains in the country. It has more than 100 school campuses across the country, operating schools under the names Everest, Heald, and WyoTech. As of last March, the company had approximately 74,000 students.

In June, the U.S. Department of Education delayed Corinthian’s access to federal student aid dollars because of reports of malfeasance. Since then, Corinthian has been scaling down its operations as part of an agreement with the Department of Education. However, Corinthian continues to enroll new students.

Lured by lies

The lawsuit charges that Corinthian schools used misleading claims to lure students, including:

· Sham job placement rates: The CFPB alleges that Corinthian’s school representatives led students to think that when they graduated they were likely to land good jobs and sufficient salaries to repay their private student loans. But the CFPB believes that Corinthian inflated the job placement rates at its schools. Based on its investigation, the CFPB alleges that this included creating fictitious employers and reporting students as being placed at those fake employers.

· One-day long “career”: According to the CFPB’s investigation, Corinthian schools told students they would have promising career options with an Everest, Heald, or WyoTech degree. But Corinthian counted a “career” as a job that merely lasted one day, with the promise of a second day.

· Pay for placement: The CFPB also alleges that the Corinthian schools further inflated advertised job placement rates by paying employers to temporarily hire graduates. The schools did not inform students about these payments or that these jobs were temporary.

· Craigslist career counseling: According to the CFPB’s investigation, the Corinthian schools promised students extensive and lasting career services that were not delivered. Students often had trouble contacting anyone in the career services office or getting any meaningful support. The limited career services included distributing generally available job postings from websites like Craigslist.

Predatory Loans

Tuition and fees for some Corinthian programs were more than five times the cost of similar programs at public colleges. In 2013, the Corinthian tuition and fees for an associate’s degree was $33,000 to $43,000. The tuition and fees for a bachelor’s degree at Corinthian cost $60,000 to $75,000.

The CFPB charges that Corinthian colleges deliberately inflated tuition prices to be higher than federal loan limits so that most students were forced to rely on additional sources of funding. The Corinthian schools then relied on deceptive statements regarding its education program to induce students into taking out its high-cost private student loans, known as “Genesis loans.”

Help for students

The CFPB is publishing a special notice for current and former Corinthian students to help them navigate their options in this time of uncertainty, including information on loan discharge options.

The CFPB estimates that there is approximately $1.2 trillion in outstanding student loan debt, with more than 7 million Americans in default on more than $100 billion in balances. Students and their families can find help on how to tackle their student debt on the CFPB's website.

When you read about the collapse of Corinthian Colleges and other for-profit educational institutions, you might wonder how they managed to stay in business for so long anyway.

According to a July 30 report released by Sen. Tom Harkin (D-Iowa) and the Senate Health, Education, Labor and Pensions Committee, the answer appears to be, “Because the federal government keeps them in business, especially with its Post-9/11 GI Bill program for military veterans.”

Harkin's 22-page report kicks off with this executive summary:

Almost three years ago the HELP Committee determined that eight of the top 10 recipients of veterans’ educational benefits under the Post-9/11 GI Bill benefits were large, publicly traded companies that operate for-profit colleges. ... Taxpayers continue to spend twice as much on average to send a veteran to a for-profit college although HELP Committee analysis shows that up to 66% of the overall students who enrolled at these for-profit colleges in 2008-09 withdrew without a degree or diploma. Additionally, some companies operating for-profit colleges appear to be increasingly dependent on Post-9/11 GI Bill funds to comply with federal requirements intended to ensure that these companies do not become overly reliant on federal education resources.

What does “overly reliant on federal education resources” mean in this context? Harkin's report mentions the “90/10” rule: a for-profit college can have no more than 90% of its funding come from federal student aid.

However, the report also says, “federal military educational benefits including Post-9/11 GI Bill benefits are not counted as federal financial aid and in fact are counted on the '10' side of the revenue calculation.” That's one reason private for-profit schools work so hard to target veterans: such students bring with them all the benefits of federal dollars and none of the accounting downsides.

Winding down

The report also mentioned that “amongst the top recipients” of this federal aid was Corinthian Colleges – the same Corinthian which, as of last June, was under investigation by 20 different states, in addition to the federal Securities and Exchange Commission, Consumer Financial Protection Bureau and Justice Department – eventualy leading to the Department of Education temporarily suspending all federal student aid to the schools. In early July, Corinthian announced its plan to sell off 85 of its campuses and wind down operations at 12 more.

But surely, Corinthian is the only distasteful entry on the top-ten list, right?

Not according to the report: “In all, seven of the eight companies are currently under investigation by state attorneys general or federal agencies for deceptive and misleading recruiting or other possible violations of federal law.”

Those “eight companies” refer to the private, for-profit educational institutions on the top-federal-aid list. Of the ten schools listed among the recipients of this federal aid, the University of Maryland was the only public college, and Embry-Riddle Aeronautical University the only private non-profit school.

It's not that Harkin and the HELP committee have any objections to paying for veterans' educational benefits; the problem is that the feds are spending more money on veterans' educations than ever before and getting less in exchange:

a disproportionate share of new Post-9/11 GI Bill benefits were flowing to for-profit colleges owned by large, publicly-traded corporations. This issue was of particular concern because, despite questionable outcomes for students attending these colleges, it was costing taxpayers more than twice as much to send a veteran to a for-profit college than it cost to send the same veteran to a public college.

At the same time, veteran enrollment in public colleges declined in favor of enrollment at for-profit schools.

Quite dismal

Though the federal government currently does not keep track of how well GI Bill veterans perform in school, Harkin's report suggests those statistics are quite dismal: “overall student outcomes provided by the companies to the HELP Committee for students enrolling between 2008 and 2009 give ample reason for concern. At the for-profit colleges currently receiving the most benefits, up to 66% of students withdrew without a degree or diploma.”

The report's conclusion prescribed some possible remedies for this problem:

It is critical that the federal government establish and make public how servicemembers and veterans are faring throughout the higher education system. Further, it is essential that statutory provisions like [the] 90/10 rule be strengthened to better protect our veterans and servicemembers and properly account for all the federal dollars these schools are receiving from taxpayers and that additional steps be taken to address aggressive marketing.

Meanwhile, if you are a current or future military veteran planning to use your GI Bill benefits to go to school, you're probably better off avoiding private for-profit schools in favor of private non-profits, community colleges or even good old State U.

After the stock market closed Monday Apollo Education Group, Inc., which operates University of Phoenix (UP), disclosed that its course offerings will be reviewed by a federal agency.

The company's stock dropped 5% in after-hours trading.

The company's Form 8-K filing with the Securities and Exchange Commission said that it has been informed by the U.S. Department of Education that the government plans to conduct an ordinary course program review of University of Phoenix's administration of federal student financial aid (Title IV) programs in which the UP participates.

The review, which is scheduled to begin August 4, 2014, will focus on federal financial aid years 2012-2013 and 2013-2014, as well as compliance with other policies and regulations.

Typically, neither the government entity conducting the review nor the entity being reviewed comments or elaborates on the process. Apollo Education Group was required to issue the 8-K in order to notify shareholders of a “major event” concerning the company.

UP is one of the largest and best known of the for-profit colleges, which have been a focus of recent concern over rising student loan balances and default rates. It, like many colleges, derives a lot of its income from students who have tapped into Title IV federal aid.

Title IV

According to the Department of Education, Title IV programs are the major source of federal student aid. They include Federal Family Education Loans, direct loans and Federal Perkins Loans.

Title IV aid also comes in the form of grants, including the Federal Pell Grant, Academic Competitiveness Grant, National SMART Grant and Federal Supplemental Education Opportunity Grant.

Default rates

The Department of Education has found that for-profit colleges continue to have the highest average 2 and 3-year cohort default rates (CDR) at 13.6% and 21.8%, respectively. By comparison, public institutions were at 9.6% for the 2-year rate and 13% for the 3-year rate. Private non-profit institutions had the lowest rates at 5.2% for the 2-year rate and 8.2% for the 3-year rate.

The 2-year CDR increased in 2013 over 2012’s 2-year rates for both the public and for-profit sectors, rising from 8.3% to 9.6% for public institutions, and from 12.9% to 13.6% for for-profit institutions. CDRs held steady for private non-profit institutions at 5.2%.

According to the Center for Responsible Lending, for-profit colleges absorb around 25% of the more than $32 billion in federal student aid. In addition to Title IV aid, military veterans may take advantage of education loans that do not fall under Title IV.

DoD education aid

Back in 2012 Holly Petraeus of the Consumer Financial Protection Bureau raised warnings about the amount of DoD education aid going to for-profit institutions.

“On my trips to military communities, I’ve heard stories that raise concerns about the practices of some for-profit colleges,” Petraeus said in a speech. “Marketing is aggressive and relentless; servicemembers are urged to take out private student loans rather than seeking out quality programs whose costs would be covered in full by their military benefits; and poor service and treatment is common at some institutions once service members are enrolled.”

Petraeus said between 2006 and 2010, combined VA and DoD education benefits received by just 20 for-profit education companies increased from $66.6 million in 2006 to an estimated $521.2 million in 2010, a 683% increase.    

If you're looking to buy a for-profit college, Corinthian Colleges has announced plans to sell off 85 of its campuses in the next few months.

Corinthian, which runs schools under the names Everest College, Everest Institute, WyoTech and Heald, first faced the possibility of shutdown in late June, when the U.S. Department of Education halted federal student aid to all Corinthian students.

Corinthian was already under investigation by 20 different states, in addition to the federal Securities and Exchange Commission, Consumer Financial Protection Bureau and Justice Department.

On July 2, Corinthian announced that it had missed the latest deadline to reach an agreement with the government, but the next day, on July 3 (coincidentally or not, just before the start of the three-day holiday weekend) Corinthian announced in a press release its plan to “put 85 of its U.S. schools up for sale, and 'teach out' (gradually wind down) operations at 12 other schools.”

The dozen schools involved in the teach-out also must agree to stop enrolling new students.

Repayment issues

Under current law, most federally backed student loans must be repaid regardless of the loan recipient's financial circumstances — even bankruptcy won't discharge or reduce federal student loans. But student loan debts are discharged in full if the school shuts down and the student in question does not continue his or her education — and since the loans are federally guaranteed, that means the federal government is required to pay back the loans — up to $1.2 billion, for all outstanding Corinthian-based student debts.

However, as of press time, it is not known whether this loan forgiveness will apply to Corinthian students or not. It does appear that the government and DoE are trying to avoid this, by convincing other colleges to accept Corinthian credits, and then convince the students to continue what they started at Corinthian; if that happens, the students rather than the feds would remain responsible for those loans.

Tuition at Corinthian (and thus the debt loads students take on to pay for it) tends to be much higher than a non-profit schools.

At Everest schools in California, for example, completing the two-year criminal justice program would cost $40,000 for fees and tuition, plus $4,783 for books and supplies. In comparison: as of 2013, the average annual tuition rate for state residents attending two-year California community colleges was $1,174.

Casual observers of the meltdown engulfing the for-profit Corinthian Colleges, which owns and operates 107 schools under the names Everest Institute, Everest College, Heald and WyoTech, might wonder: why is it taking so long?

From the Department of Education's perspective, after all, shutting down an underperforming or non-performing school is quite easy: simply stop backing federal student loans to students enrolled at that school, and the main source of funding vanishes overnight, right.

Turns out it's not that simple. On Thursday, July 2, when Corinthian announced it had missed the latest deadline to reach an agreement with the government, the result was — nothing much, except that Corinthian and the government are still working toward reaching some agreement.

Bloomberg News reported the missed deadline in a policy piece explaining why “It's hard to shut down a poorly performing for-profit college.”

The reason can be summarized in one word: money. Specifically those federal-backed student loans, one of the very few types of loans which are, under ordinary circumstances, nearly impossible to discharge regardless of your financial circumstances: even declaring bankruptcy won't free you from your student loan obligations (why the government thinks an 18-year-old student should be more responsible for bad debt than, say, a middle-aged credit card holder who charged too many luxe vacations, is a different issue).

But you, the student, are free from your federal student loan obligations if the school you attended shuts down. In that case, the federal government is on the hook for those loans, not you.

Inside Higher Education noted that there's currently $1.2 billion in outstanding federal loans to Corinthian College students, (or, as the Consumerist blog said, “The government has 1.2 billion reasons to keep Corinthian Colleges afloat”).

Granted, even if/when Corinthian does shut down, that doesn't necessarily mean every Corinthian-based student loan becomes the feds' responsibility. Some of the Corinthian students might be able to have their Corinthian credits accepted by other schools and then continue their schooling, in which case they would still be expected to repay all of their student loans including those taken to pay for Corinthian.

How much longer will Corinthian Colleges stay in business? The for-profit company, which runs Everest Institute and Everest College, is currently under investigation at the federal level by the Securities and Exchange Commission, the Consumer Financial Protection Bureau and the Justice Department, in addition to at least 20 different states.

Corinthian is currently breaking apart – selling some of its campuses, and shutting down others – yet the school's imminent demise apparently hasn't stopped it from trying to lure in new students.

Last Friday, California's attorney general Kamala Harris kicked off the weekend by filing additional charges against Corinthian, claiming that it violated California laws against false advertising and unfair competition, by not telling prospective students about the school's uncertain future.

“It is unacceptable yet not surprising that Corinthian Colleges continues to illegally target vulnerable Californians — including low income individuals, single mothers and veterans returning from combat — by lying about its dire finances and failing to tell prospective students that the schools to which they apply will all be sold or closed," Harris said in a press release. "My office is seeking expedited action to force Corinthian Colleges to put the interests of its students above its rapidly shrinking profits.”

Biggest collapse

But were Harris' actions actually necessary? A July 1 report in Bloomberg Newssuggests the answer is “yes.” Bloomberg – which called the shutdown “the biggest collapse the U.S. for-profit education industry has ever seen” – said that the school is still enrolling new students, who are being kept in the dark about the school's future:

Jessica Arellano, 30, a medical assistant student at Corinthian’s Everest College in West Los Angeles, said on Friday [June 27] that she wasn’t aware of the company’s situation and that she received a confusing e-mail last week assuring her that classes and student aid would continue as usual.

Few if any course credits earned at Everest or other Corinthian schools will be accepted by accredited universities, or by states demanding certain educational qualifications for professional licenses.

Even worse, any student loans taken to pay for an Everest “education” are legally identical to loans taken out for legitimate schools: they cannot generally be discharged in bankruptcy, no matter how worthless the degree. If a school goes out of business, however, federal student loans can sometimes be canceled.

Any student or would-be student hoping to enroll in college knows the dangers of taking on excessive levels of student loan debt to pay for it. But another form of risk is far less well-known: the danger of spending large amounts of time and money getting a degree that proves entirely worthless, because the school is not accredited.

Accreditation is basically a form of quality control assuring that the school meets certain educational standards. If you're hoping to qualify for a professional license, employment with a government agency, or even having your credits transfer to another institution of higher learning, a degree from a non-accredited school is usually worthless.

For example: last week, six graduates of Mount Marty College, a private school in South Dakota, filed suit after the school's nursing program failed to gain accreditation. The graduates had hoped to work as nurse practitioners, but their unaccredited degrees don't qualify them for licenses.

Meanwhile, in North Carolina, students at the Apex School of Theology filed suit claiming that the school and its founder/president deceived them about the school's accreditation status, threatening their ability to become licensed counselors.

A lawsuit filed in Wake County charged that the school and its CEO, Joseph E. Perkins, concealed, suppressed and withheld information about the school's lack of acceditation, Courthouse News Sevice reported.

Not that Apex is completely unaccredited; the suit claims that its “only accreditation is the purported 'national' accreditation awarded it by an entity that calls itself the 'Transnational Association of Christian Colleges and Schools' (TRACS).”

Neither North Carolina nor any other state recognizes TRACS accreditation for professional-licensing purposes, the lawsuit claims.

Public schools too

Though accreditation problems are more common in private or for-profit schools, public schools attached to state university systems are not immune from the problem.

Last week, Alabama State University was put on warning for failing to comply with six different standards required by the Southern Association of Colleges and Schools; if things don't improve by the end of the six-month warning period, the university might lose its accreditation. As the Montgomery Advertiser noted, “Loss of accreditation is a near death sentence for a public university since most federal funding and student aid is tied directly to accreditation.”

If you're looking to attend an American college or university, remember to avoid any school which is non-accredited, or boasts having accreditation from a “national” organization; what you want is a school accredited by one of the regional accrediting agencies recognized by the U.S. Department of Education.

If you watch TV, especially in the wee small hours of the night when advertising rates are dirt-cheap, you've probably seen those cajoling commercials urging under-educated and therefore under-employed viewers to improve their lives by enrolling at the for-profit Everest College or Everest Institute: “You want the skills that pay the bills.”

Indeed you do, but Everest may not be the best place to get them, especially in light of the school's recent troubles with the federal government. The U.S. Education Department last week halted federal student aid to some colleges operated by Everest and its corporate parent, Corinthian Colleges, Inc.

In an SEC filing, Corinthian said the action could put it out of business. 

But Corinthian said today that it had "reached a memorandum of understanding with the U.S. Department of Education that maintains uninterrupted daily operations at its schools" pending completion of a more detailed plan, which the company said might involve the sale of some of its schools.

Corinthian said it would "continue to seek new owners for most of its campuses" and "proceed in an orderly fashion with the 'teach-out' of schools that are under-performing" or that have been kicked out of the federal student aid program.

"During the teach-out process, no new students will be enrolled at the affected schools, but all current students will be able to complete their instructional programs or transfer to another institution," Corinthian said.

Adequate protection?

Whether that's adequate protection for students remains to be seen.

“It’s time to make the protection of Everest College students our highest priority. Corinthian should immediately stop enrolling students to prevent more students from being loaded with debt if the company fails because of fraudulent disclosures to the federal government,” said U.S. Sen. Dick Durbin (D-Ill.), upon learning last week that several Chicago-area Everest campuses were in danger of shutting down.

Durbin also called on accrediting agencies to take a closer look at for-profit schools.

"For years I have been calling public attention to the growing scandal in the for-profit college industry. Their “accrediting commissions” are nothing more than in-house lap dogs; their tuitions are sky high; their diplomas are often worthless and they account for an incredible 46% of all student loan defaults, despite enrolling only 10% of the nation’s students," Durbin said, “The Corinthian canary has a bad cough and it’s time to start protecting unsuspecting students from the tragic consequences of a potential failure of this enterprise.”

Illinois Attorney General Lisa Madigan said she was "encouraged" by the federal action.  

“My office has been investigating for-profit colleges for several years having received hundreds of complaints about questionable marketing and lending practices, including dubious claims of job placement rates and accreditation status,” said Madigan said.

Credits transferable?

"I attended Everest here in Miami in 2010," a consumer named Lucy said in a ConsumerAffairs posting a few days ago. "At the time I had no high school diploma. I completed a test that qualified me for the pharmacy technician program. ... I passed with flying colors."

But that hasn't done Lucy much good. "To make a long story short, I am $13,000 in debt and still no employment in my field of study," she said. "We cannot transfer our education credits because it's not considered real."

The schools have also faced charges of lax academic standards.

Earlier this month, the Republic Report said that a former librarian from an Everest College campus in California resigned from her job after the school granted admission to a 37-year-old man who can only read at a third-grade level:

The man, who shakes, speaks haltingly, and may suffer from a developmental disability, told the librarian he expected to be a police officer after completing the program. But the librarian, Laurie McConnell, is certain he can never obtain such a job.

McConnell, who had been devoting much of her time at work to helping the student with his reading assignments, wrote to the campus’s president on May 21 that the student would be “impossible to place in the field” and had “no idea of the ramifications of signing the enrollment agreement” at Everest. But the president, Richard Mallow, did not give her a response. McConnell quit on May 27, four days after she first contacted me to say that the student was “being defrauded” by Everest. “He breaks my heart,” she told me, “and I feel completely helpless.”

The student was enrolled in Everest's two-year criminal justice program, which would cost $40,000 for fees and tuition, plus $4,783 for books and supplies. By way of comparison: as of 2013, the average annual tuition rate for state residents attending two-year California community colleges was $1,174.

Educators generally advise consumers thinking of enrolling at a for-profit school to consider their local community college instead. Almost all community colleges will allow you to take on a part-time rather than full-time courseload, if necessary, so you can still work while attending school, and even pay your tuition and other costs as you go, rather than take on a student-loan debt that can't even be discharged in bankruptcy.

The graduation season is wrapping up with the high school class of 2014 getting ready to head to college in the fall. Meanwhile, the class of 2015 is getting serious about picking a college – or rather, being picked.

Besides the very real concern of paying for an increasingly expensive education, prospective students must worry about being accepted at the school of their choice. It wasn't always so.

In the 1960s and 1970s there was a move toward what was called “open admissions.” It was a policy found mostly at state-supported colleges and universities and said if you had a high school diploma or GED, you were in.

Perhaps in a case of “ivy-envy,” most state-supported schools now set minimum academic standards that must be met, as well as activities and character traits that go into considering whether a student will be allowed to spend thousands of dollars to attend.

Nerve racking

That can make the next few months a nerve-racking time for students waiting to hear where they will be in the fall of 2015. It can be especially tough for a student who only began to hit her academic stride late in her high school career.

A spotty high school transcript will likely mean rejection letter after rejection letter. Unless, of course, the student chooses to attend a college with an open admissions policy.

Nearly all community colleges have such a policy. If you have a high school diploma or equivalent, they generally will give you a chance. But some four-year colleges still have open admissions policies too.

“There are some advantages to considering admission at an open-enrollment school,” write the editors at College Parent Central. “For some students who had difficulty in high school and do not have the grades appropriate for a more selective admission, an open-enrollment institution is an opportunity to prove that they can successfully undertake college-level work.”

Advantages

In fact, for some students stressed out from the admissions pressures at other schools, applying to an open-enrollment college provides a much-needed safety valve. And there are other potential benefits.

The application process is usually a lot more streamlined and, best of all, the tuition is likely to be less. And while colleges often tout their selective admissions process as promoting diversity, students at open-enrollment schools may in fact be exposed to a wider range of students than those who attend a college with a narrower academic niche.

The New York Times reported in 2012 on changes to the student body after City University of New York dropped its open admissions policy in 2001. Average SAT scores are up but African-American and Hispanic representation among the freshman class has declined.

You still have to apply to get into an open-enrollment college since there might not be enough slots available. And even though you aren't required to submit SAT or ACT test scores, most schools will require you to take a series of placement tests to measure your competency.

But once in, you can't relax. To stay in you have to maintain good academic progress and keep your grades in good standing.

Be selective

Remember, even though these schools are not selective, you should be. Included among open-enrollment schools are for-profit colleges. They tend to be the most expensive and in most cases, their value may be suspect.

CollegeCalc is a website that can help you find an open-enrollment school. Most likely you'll want to look for one in your home state to take advantage of in-state tuition.

California, for example, has 133 open-enrollment colleges – the bulk of them 2-year community colleges. However, some 2-year schools offer limited bachelor's degrees. Colorado Mountain College, for example, is a 2-year institution that currently offers two bachelor's degree programs.

It may be totally unrelated but it seems college costs really began to escalate when state universities dropped their long-standing open admissions policies and began competing for the “best” students.

To compete, they built plus residence halls, elaborate dining facilities and hired the best professors. All of that cost money.

At the risk of severely dating myself I will mention that in the early 1970s my in-state tuition at a state university with open admissions was $147 a semester. Considering the rate of inflation, that translates into into $860 in today's dollars.

But $860 a semester today would be an unheard-of bargain at any college or university. The current in-state tuition at my alma mater is not $860, but $5,280 per semester.

The Consumer Financial Protection Bureau (CFPB) today sued ITT Educational Services, Inc., accusing the for-profit college chain of predatory student lending.

The CFPB alleges that ITT exploited its students and pushed them into high-cost private student loans that were very likely to end in default. The CFPB is seeking restitution for victims, a civil fine, and an injunction against the company.

“ITT marketed itself as improving consumers’ lives but it was really just improving its bottom line,” said CFPB Director Richard Corday. “We believe ITT used high-pressure tactics to push many consumers into expensive loans destined to default. Today’s action should serve as a warning to the for-profit college industry that we will be vigilant about protecting students against predatory lending tactics.”

 The CFPB said that, like the mortgage market in the lead-up to the financial crisis, the for-profit college industry may be experiencing misaligned incentives. These colleges benefit when students take out large amounts of loans, regardless of the students’ long-term success.

That may describe the situation Aaron of Orange Park, Fla., faces. He wrote to ConsumerAffairs earlier this month said that, although he attended ITT Tech for two years, he did not learn anything. 

"The way it was set up, if you go to school you will pass," he said. "I wish to God I never went there, but now I'm $43,000 in debt."

Mark of Cincinnati described a similar experience, He also said he completed an Associate degree in two years but after being unable to find a steady job in his chosen field, he now works in a window factory.

"I'm paying on a degree I have never used. I'm paying for technology I learned all those years ago that is now obsolete and I wouldn't stand a chance of getting a job in this field now. I feel I was lied to and cheated," Mark said. "Three of the loans I am paying on are College Advantage loans. These loans are not eligible for any income based repayment and I am paying almost $360 on these loans now. My government loans would be $280. If the government loans were not on deferment, I would be in the hole over $600 every month."

Coaxing students into debt

The CFPB said it is concerned that some of these corporations may be employing practices to coax consumers into taking out more federal and private student loans. Today’s announcement is the Bureau’s first public enforcement action against a company in the for-profit college industry.

Most of ITT’s students borrow large sums to pay the high tuition costs and the majority of this money is borrowed from federal student loan programs, CFPB said, adding that private student loans also provide critical revenue for ITT. Because most ITT students’ federal aid does not cover the full cost of an ITT program, most students -- like Mark of Cincinnati -- face a “tuition gap” requiring them to find other sources of funding.

The CFPB’s lawsuit alleges that ITT encouraged new students to enroll at ITT by providing them funding for this tuition gap with a zero-interest loan called “Temporary Credit.” This loan typically had to be paid in full at the end of the student’s first academic year. But ITT knew from the outset that many students would not be able to repay their Temporary Credit balances or fund their next year’s tuition gap, the lawsuit alleges.

What to do 

Consumer advocates recommended that students seeking training in technical fields attend a local community college. The tuition is a fraction of that charged by for-profit colleges and the curriculum is often more relevant and up-to-date.

To assist student loan borrowers who may be in delinquency or default, the CFPB recently launched an updated version of the Repay Student Debt interactive tool.

CFPB also takes complaints about student loans. To submit a complaint, consumers can:

• Go online at www.consumerfinance.gov/complaint
• Call the toll-free phone number at 1-855-411-CFPB (2372) or TTY/TDD phone number at 1-855-729-CFPB (2372)
• Fax the CFPB at 1-855-237-2392
• Mail a letter to: Consumer Financial Protection Bureau, P.O. Box 4503, Iowa City, Iowa 52244

Students who seek degrees at for-profit colleges are more likely to enroll without shopping price and course offerings at other for-profit and non-profit institutions. That's one of the principal findings of a new study by Public Agenda, a non-profit group that studies complex and divisive issues.

The survey found that only four in ten undergraduate students at for-profit colleges said they seriously considered other schools before enrolling at their current institutions. An intriguing question, which the survey does not specifically address, is why.

The survey does, however, reveal that a large number of students at for-profit schools don't really understand what a for-profit school is, or how it is different from a public, non-profit school. The pollsters found most are unsure whether their schools are for-profit or not.

Advertising is effective

When you ask students what led them to consider a particular for-profit school, you learn – especially from the adult students – that they are more likely than others to say they learned about colleges from advertisements. State-supported non-profit colleges rarely advertise while for-profits advertise a lot.

The Consumer Financial Protection Bureau (CFPB) has taken a keen interest in the marketing of for-profit schools, whose tuitions are much higher than most non-profits but whose students often take on loans and seek government grants to pay for their education.

In a New York Times op-ed in 2011, CFPB's Holly Petraeus accused some non-profit schools of focusing on members of the armed services and veterans with “aggressive and misleading marketing,” then failing to provide the academic support that was promised.

“Vast sums are involved.” she wrote. “Between 2006 and 2010, the money received in military education benefits by just 20 for-profit companies soared to an estimated $521.2 million from $66.6 million.

Alumni not dissatisfied

The Public Agenda survey shows students and graduates from for-profit schools are not completely dissatisfied. Their main complaint is the high cost of their education and their sizable student loan balance.

What they like about their for-profit schools – particularly adult students who have jobs – is that these schools tend to offer online classes, accelerated degrees, personal guidance from career counselors, financial aid advisers and tutors, and credit for practical, work-related experience.

Carolin Hagelskamp, director of research at Public Agenda and lead author of the report, says for-profit school graduates who have jobs are much more likely than unemployed alumni to say the experience was worth it.

"It is certainly the case in this study that many graduates from for-profit schools put some blame on their schools for not adequately preparing them for the job market," she said.

What employers think

Another important question is how employers view applicants with degrees from for-profit schools. According to the survey, about half the surveyed employers don't perceive any difference between a degree from a for-profit school and one from a state university.

However, the other half who do see a big difference. Among this group those who see a difference view public schools as superior on a number of counts. In focus groups conducted along with the survey research, employers tended to favor traditional institutions, with many saying that they'd prefer to hire a candidate from a reputable state school versus a for-profit college.

For-profit schools have their supporters. They point out that these schools have been a source of innovation in higher education, being an early leader in the expansion of online education. The for-profit sector has also increased access to higher education for older students with substantial family responsibilities.

Non-profits catching up

The fact is, non-profit schools are quickly catching up, as evidenced by the recent emergence of Southern New Hampshire University – a private, non-profit university – becoming a leader in online education and advertising heavily.

For the survey's authors, the question gets back to why students aren't considering a wider range of schools?

“More needs to be done to help future students understand the value of comparing different schools,” the authors write. “Prospective students want and need better opportunities, online and in person, to engage with and evaluate quality indicators and other information about colleges and programs, including information on how different schools are governed and funded.”

For-profit colleges that advertise heavily and conduct most of their course offerings online have been the center of growing concern about student loan debt.

According to recent regulatory filings, some of these for-profit institutions are coming under closer scrutiny by the Consumer Financial Protection Bureau (CFPB) and various state attorneys general. In a December filing with the Securities and Exchange Commission, ITT Educational Services Inc., disclosed that the CFPB is investigating whether lenders making student loans “are engaging in unlawful acts or practices relating to the advertising, marketing, or origination of private student loans.”

These mostly online institutions have grown in popularity as people try to improve their marketable skills in a tough economy. While traditional colleges tend to be highly selective in admissions, requiring minimum GPAs and test scores, most online institutions have an open admissions policy. Students, most of whom take out loans, spend thousands of dollars more in tuition than they would at a state university or community college in their home state.

Standing out

But it is worth noting not all institutions offering online degrees fall into this category. One, in fact, stands out.

Southern New Hampshire University is conducting a national TV advertising campaign promoting its online undergraduate and graduate degree programs. Unlike ITT, University of Phoenix, DeVry and other for-profit colleges, SNHU is a non-profit,  private, university near Manchester, N.H.

It offers more than 80 online, accredited undergraduate majors in business and liberal arts, as well as graduate degree programs. Never heard of it? That's probably because before 2003, it was a sleepy little college on a 300-acre campus.

That year Paul LeBlanc took over as president and, with an entrepreneur's vision, transformed the university's small online degree program. In less than a decade it made Fast Company's list of the World's 50 Most Innovative Companies, taking its place with such names as Google, Apple and Facebook. 

What it costs

Because it is non-profit its tuition costs are much less than what you'd pay at a for-profit school. For online degrees and certificates, it costs $960 per course, or $320 per credit hour, making it less than in-state tuition at many state-supported universities.

The college was founded in 1932 as an accounting school and today is much like any other small college. Its on-campus enrollment is around 3,000, it competes in Division II men's and women's athletic programs – its men's soccer team won its second straight national title last month – and it has the full complement of fraternities and sororities. Its innovative approach earned a shout-out from President Obama last August as the president, in the video below, made a speech promoting higher education reform.

Today SNHU's online degree programs serve more than 11,000 students – much larger than the on-campus population. Its Center for Online and Continuing Education is the largest online degree provider in New England and, according to Fast Company, brings in more than $74 million a year.

But unlike for-profit colleges, that money is plowed back into SNHU's operations, helping to subsidize the main campus. As a result, when other colleges or universities have to raise tuition or make cuts, SNHU can keep adding course offerings while keeping tuition costs stable.

Other options

Other traditional colleges have begun increasing their online offerings as well, perhaps viewing it as a way to get a handle on rising education costs. The University of Maryland University College – part of the University System of Maryland system since 1947 – has become a virtual university meeting the needs of adult students at public college costs. It boasts an online enrollment of 95,000.

Central Michigan University's Global Campus is another growing public school presence now competing with for-profit universities. It offers graduate and undergraduate degree programs with undergraduate tuition of $370 per credit hour.

If you're looking for a degree or just a few hours of college credit, don't overlook these institutions and others like them. Chances are, you'll get a lot more for your money than you would at a for-profit college.

California Attorney General Kamala D. Harris is suing Corinthian Colleges, Inc. (CCI) and its subsidiaries, charging false and predatory advertising, intentional misrepresentations to students, securities fraud and unlawful use of military seals in advertisements.

The complaint alleges that CCI and the subsidiaries that operate Everest, Heald and WyoTech colleges intentionally targeted low-income, vulnerable Californians through deceptive and false advertisements and aggressive marketing campaigns that misrepresented job placement rates and school programs.

CCI deployed these advertisements through persistent Internet, telemarketing and television ad campaigns, according to the suit. The complaint further alleges that Corinthian executives knowingly misrepresented job placement rates to investors and accrediting agencies, which harmed students, investors and taxpayers.

“The predatory scheme devised by executives at Corinthian Colleges, Inc. is unconscionable. Designed to rake in profits and mislead investors, they targeted some of our state’s most particularly vulnerable people -- including low income, single mothers and veterans returning from combat,” Harris said.

Targeting the vulnerable

According to the complaint, CCI’s predatory marketing efforts specifically target vulnerable, low-income job seekers and single parents who have annual incomes near the federal poverty line. In internal company documents obtained by the Department of Justice, CCI describes its target demographic as “isolated,” “impatient,” individuals with “low self-esteem,” who have “few people in their lives who care about them” and who are “stuck” and “unable to see and plan well for future.”

The complaint maintains that CCI advertised job placement rates as high as 100% for specific programs when, in some cases, there is no evidence that a single student obtained a job during the specified time frame. The complaint further alleges that CCI runs millions of online and mobile ads offering ultrasound, x-ray, radiology, and dialysis technician programs at their California campuses -- when, in fact, CCI does not offer those programs. CCI’s call center agents are disciplined if they tell callers that CCI does not offer these programs, the complaint maintains.

Additionally, according to the complaint, CCI includes official Army, Navy, Air Force, Marine Corps, and Coast Guard seals in mailings and on web sites without authorization and in violation of California law.

Exaggerated job placement claims

The complaint contends that CCI committed securities fraud by reporting a nationwide job placement rate of 68.1% in presentations to investors, when senior executives knew this percentage was false. The complaint describes internal audits emailed to CCI executives that show job placement data error rates between 53% and 70%.

The complaint references an email from a CCI executive which explains that in 2011, two Everest College campuses (Hayward and San Francisco) paid a temporary employment agency “to place students to meet the accreditation deadline and minimum placement %.” The complaint also states that CCI double-counted job placements and failed to maintain required records of reported job placements.

Myneisha of Southfield, Mich., who enrolled in an Everest Institute Pharmacy Technician program, has a score to settle on that matter. "They say they help you with job placement," she writes in a ConsumerAffairs post, "when in actuality all they do is give you a list of places that are hiring and tell you to apply. It has now been 5 years, and I am back in school enrolled in a pharmacy technician program. Now, I am stuck with a nice bundle of student loans, and I work for a financial institute."

According to a recent CCI securities filing, the average tuition for an associate’s degree is $40,000 and the average tuition for an online CCI associate’s degree is $34,000. The average tuition for CCI’s non-degree healthcare programs is $17,000.

CCI is based in Santa Ana and currently operates 24 Everest, Heald and WyoTech campuses in California, 111 total campuses in North America and three online programs. Out of the 81,000 students who attend CCI colleges, approximately 27,000 (33%) are in California.

An effort by ConsumerAffairs to reach CCI for comment was unsuccessful.

A little more than a week after the state of New York sued Donald Trump for $40 million, claiming his Trump University doesn't give students much benefit, the feds are taking a harder look at all for-profit career education institutions.

The U.S. Department of Education has released draft regulations that would hold these institutions – mostly providing technical training – accountable for how their students fare in the real world, after graduation. Specifically, the regulations would measure graduate earnings and compare them to the debt the students ran up while getting the training.

Programs that repeatedly produce graduates with a lot of debt and little in the way of employment prospects would be cut off from the lucrative federal aid spigot. And therein lies the government's leverage.

Federal aid

Federal loans and aid provide students with the means to go to college and pay ever-increasing tuition – whether it is a state-supported institution or one of the many for-profit institutions. With access to this wealth of federal aid, for-profit schools of all types tend to be profitable indeed.

But losing access to that stream of taxpayer money would hit for-profit schools hard. In fact, if could deal a fatal blow.

While the department’s Gainful Employment rule would apply to career education programs at all kinds of institutions, its impact might be felt most strongly at for-profit colleges. The Center for Responsible Lending (CRL) cites a Government Accountability Office (GAO) report that it said found for-profit college attendees had higher levels of debt, were less likely to pass licensure tests needed for employment, and were less likely to be employed than those who attended public or private, non-profit schools.

CRL says the report showed nearly half of borrowers who default on federal student loans in the first few years of repayment had attended for-profit colleges, even though for-profits only enroll 12% of all students.

How the rule would work

The rule would work like this: A career education program would be considered failing if its graduates had debt exceeding 12% of their annual earnings and 30% of their discretionary earnings. Discretionary income is anything above 150% of the poverty line and covers non-necessities – things like money for entertainment or vacations. CRL, an activist group that advocates more consumer-friendly lending practices – says the new rules are a good first step.

“Ensuring that a borrower has the ability to repay a loan -- including a student loan -- is a tenet of good lending practices,” CRL said in a statement. “Federal banking regulators have recently promoted similar standards for mortgage lending and small-dollar loans.”

That said, CRL said it thinks the rules could be tougher in two key areas. First, it would include all attendees — not just graduates — when determining eligibility for Federal financial aid. After all, a lot of students start these programs, run up student loan tabs, then don't graduate. They still have to pay back those loans and should be part of the accountability formula, CRL says.

Meeting license requirements

Second, CRL says it would like to see greater emphasis on ensuring that programs meet licensure or other requirements for securing employment. Many jobs require that prospective employees obtain some sort of licensing or graduate from an accredited program.

This isn't the first time that the Department of Education has attempted to increase accountability requirements for for-profit institutions. When it proposed similar tougher rules in 2011, the trade group representing for-profit colleges sued. A federal judge sided with the colleges, ruling that one of the Education Department's rules was arbitrary.

The Department of Education's revised rules eliminates that provision, causing optimism among backers of the tougher rule that these revised regulations might pass muster. Meanwhile, work has resumed this week on the second round of negotiations over the proposed rule.  

New York's attorney general had no more than arrived at a $10 million settlement with one for-profit school than he was onto the next one, suing Donald Trump for $40 million, claiming his "Trump University" deceived its students and failed to deliver the apprenticeships it promised.

Trump said the suit was politically motivated but in a CNN live television exclusive, Schneiderman shot down Trump's “wild accusations” in an interview with Anchor Chris Cuomo on “New Day.” Schneiderman denied he spoke to President Obama on Thursday about the lawsuit or Donald Trump and believes this case is “pretty straightforward.”

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In the earlier case, Attorney General Eric T. Schneiderman reached a $10.25 million settlement with Career Education Corporation (“CEC”), a for-profit education company that operates seven career-focused schools in New York.

“Students pay thousands of dollars to for-profit colleges because they rightly believe education is the ticket to success in their careers. That’s why it’s so unfortunate that this company exploited students’ aspirations and published misleading information,” Schneiderman. “Students deserve – and the law requires – accurate data when schools publish it for prospective students.”

"Mostly useless"

As for Trump, Schneiderman said that students pay up to $35,000 for courses that they think will enable them to get rich in real estate by sitting through what the suit argues are "expensive and mostly useless seminars."

Schneiderman said students are promised they will get apprenticeships with accomplished entrepreneurs and get to meet Trump. Neither happens, the suit charges.

"Trump University engaged in deception at every stage of consumers' advancement through costly programs and caused real financial harm," Schneiderman said. "Trump University, with Donald Trump's knowledge and participation, relied on Trump's name recognition and celebrity status to take advantage of consumers who believed in the Trump brand."

The state Education Department several years ago ordered Trump to stop calling the seminar a "university," noting it didn't have a license and didn't meet the requirements of a university. The name was changed to "Trump Entrepreneur Institute" in 2011.

Trump said the suit was politically motivated.

But Scheiderman's lawsuit catalogs complaints that date back to 2005 and involve consumers who paid as much as $35,000 to sit at Trump's right hand, hoping to learn how to pull off profitable real estate deals.

CEC job placement rates

CEC is headquartered in Illinois and operates seven career-focused schools in New York: Sanford-Brown Institute campuses in Garden City, Melville, White Plains and New York City; and Briarcliffe campuses in Bethpage, Patchogue, and New York City.

CEC also operates several on-line schools, including American InterContinental University and Colorado Technical University. CEC currently enrolls 75,000 students worldwide.

Private, for-profit schools have been criticized in recent years for taking students' money and giving them a degree that has little or no value. But you can't say that about the University of Northern Virginia.

It took students' money and enabled them to get a visa that allowed them to stay in the U.S. while they got a degree in some high-tech field that would perhaps make it possible for them to get a job with the federal government or, you know, as an Edward Snowden-style federal contractor, which is what most people in Northern Virginia seem to be.

The school, home of the Fighting Commuters, had a lot of spirit but, according to state education officials, not much else. It only had four classrooms on the ground floor of an obscure office building but it managed to crank out 198 degrees over the last 15 years.

Things began to unravel when state education officials started taking a closer look at UNVA. You had to look closely, after all, since there wasn't much there, according to published reports. It failed four state inspections and lost its accreditation several years ago.

Last week, the State Council of Higher Education ordered the school to close and advised students to check with the Department of Homeland Security, which is likely to have some bad news about their visas.

Northern Virginia has a number of obscure for-profit universities that critics say make it easy for foreign nationals to get education visas and then either stay in the country illegally or pursue legal residency after getting an information technology job with a government agency or contractor.

Getting a college education is an expensive undertaking, but where you go to school makes a big difference in the bill. A state college is more affordable than a private school, in most cases.

And for-profit colleges, which are run as businesses and whose classes tend to be conducted mostly online, can be quite expensive. The Department of Education last month issued a new set of regulations that bring new pressure on the for-profit college industry in an effort to prevent students from being left with crushing debt and slim job prospects.

Karee, of New York, says she entered the University of Phoenix's accounting program with the understanding the tuition would be $24,000. Not bad for a four-year degree. Unfortunately, she misunderstood.

'Biggest surprise of my life'

“After two years, I got the biggest surprise of my life,” she wrote in a ConsumerAffairs post. “That $24,000 was for a two-year degree, an associate degree! I discussed this with the school when I realized I was completely misled, and was advised that that is how it was done. I had to complete a two-year degree before I went on to my BS. So instead of paying for one degree, I ended paying for two useless pieces of paper.”

A surprisingly large number of students in for-profit colleges pursue two-year associate degrees. Surprising, because almost every area of the country has access to a state-supported community college, where the cost of an associate degree is roughly half what for-profit schools charge.

Cree, a single mom from Lafayette, La., writes that she wishes she had gone to a community college instead of University of Phoenix.

“Once you put "University of Phoenix" anywhere on your resume, it is not even looked at,” she writes. “I now find myself back at the brick and mortar school where I started.”

A few credits short

Don, of Cypress, Calif., enrolled at Devryand said he almost earned his degree but has used up his financial aid, leaving him a few credits short. It turns out he owes a lot of money.

“I am a father, husband, and with a new baby on the way,” Don writes. “I have to pay $57,000 back to Sallie Mae with no degree? Is that right? “I'm paying $600 a month with nothing to show for it.”

Lori, of Colver, Pa., writes that she too ran short of aid money before earning a Devry degree.

“My entire degree as a part-time, online student was to cost $58,000.” she writes. As of July, Devry had billed me over $73,000. That is with 28 credits still remaining and eight transferred credits.”

The new regulations governing for-profit colleges are not as tough as some critics of the industry had hoped. They give these companies another three years to meet new standards before facing a stiff penalty – losing access to federal student loan dollars.

Higher default rates

Pressure for the tighter restrictions built over the last two years amid growing evidence that students at for-profit colleges default on their federal loans at a much higher rate than students at public and private colleges.

Federal officials say the purpose of the regulations is to set a standard for judging an institution of higher learning. Under the new rules, they will be required to show that their students are able to leave with the ability and skills to get a job that will allow them to manage their debt.

Sen. Dick Durbin (D-IL) has criticized what he calls the harmful recruiting tactics of some for-profit colleges and said that federal aid through the Defense Department’s voluntary military education programs – Tuition Assistance for servicemembers and MyCAA for their spouses – should be focused on educating, rather than marketing.

At a Senate hearing last month, Durbin called on the Defense Department to strengthen oversight of federal funds and increase the quality of education within the program. He pointed out that while for-profit schools enrolled only 12% of all college students, they receive 25% of the Department of Education’s federal student aid funds and account for 47% of student loan defaults.

November, besides being the kick-off to the holiday season, is also a critical month in the college application process.

So amid planning for shopping and family feasts, students and their parents are trying to meet college decision deadlines. The College Board has unveiled a tool it says could be helpful in staying on track.

It's called BigFuture, a place where students can create a personalized plan that gives them expert advice on all the steps they need to take to apply to college. It might prove helpful to those who tend to procrastinate or get overwhelmed by decision-making.

How-to help

It offers guidance on how to finalize your application list, how to get a great letter of recommendation and how to craft your application essays.

“The key to minimizing the stress of the college application process, whether you are starting as early as middle school or are a senior just beginning now, is to get and stay organized,” said April Bell, director of counseling at the College Board. “A step-by-step action plan will allow you to keep track of deadlines and various elements of a strong college application.”

Students can get started by answering just five simple questions. Parents can also find action plans on the Website to help guide their children.

It also provides comparative information on almost 4,000 college options.

Finding the right school

Worried about getting into college? The site might prove helpful. College admission isn’t as competitive as many students think.

Fewer than 100 colleges in the U.S. are highly selective, accepting fewer than 25 percent of applicants. Close to 500 four-year colleges accept more than 75 percent of applicants. Open admission colleges accept all or most high school graduates. The site can help students find those schools.

The College Board cites research showing that applying to at least three colleges improves your chances of successfully enrolling in college.

“Also critical is the ability to narrow your list once you’ve explored all of your options,” Bell said. “Most counselors recommend that students apply to five to eight colleges -- more than that may not be the best use of time and resources.”

Of course, paying for college is also a challenge. BigFuture has a tool providing students a personalized cost estimate from more than 300 colleges by using the College Board Net Price Calculator. They can also link to an individual institution’s net price calculator by clicking on the “paying” tab on the school’s profile page on the college search section of BigFuture.

There was a time when it looked like for-profit education had nowhere to go but up. But things change and after a period of explosive growth, the University of Phoenix says its profits are off sharply and it's closing 115 of its smaller locations.

That leaves about 13,000 students looking for someplace to finish their course work. The school said they can transfer to online courses or move to a different locations. The locations being closed are scattered around the country in 30 states.

Students are being notified today, the school said.

UOP has about 328,000 students, down from its peak of about 400,000. After the closures announced today, it will have 112 locations in 36 states, the District of Columbia and Puerto Rico.

University of Phoenix President Bill Pepicello blamed the falling enrollment on economic uncertainty. 

"People are simply holding off investing money in education at a time when the costs are escalating and the outcomes are uncertain," he said said.

Maybe so but while it's true that enrollment is falling at for-profit schools, traditional public and private universities are struggling to keep up with surging student loads.

Heavy backlash

For-profit schools have been feeling a heavy backlash lately, as students complain about the quality of the courses and critics lash the industry for siphoning off billions of dollars in taxpayer funds.

“My experience at this school has been a nightmare,” Shannon, of Chicago, wrote in a ConsumerAffairs post about University of Phoenix. “I feel lied to and used. I specifically chose this school as I was told most of my previous human service credits would be transferred, which they have not. I could accept retaking some classes if I felt I was learning anything useful. Instead, I have had professors who barely understand the material. My biggest complaint however is their heavy reliance on group work, a practice which greatly benefits them by increasing their graduation rate.”

A report issued in July by the Senate Committee on Health, Education, Labor, and Pensions showed $32 billion in the most recent year went to companies that operate for-profit colleges. Yet, more than half of the students who enrolled in those colleges in 2008-9 left without a degree or diploma within a median of four months.

In its report, the committee suggests the corporate structure of the for-profit institutions creates pressure to produce ever-larger returns for shareholders. While small independent for-profit colleges have a long history, by 2009 the committee found at least 76 percent of students attending for-profit colleges were enrolled in a college owned by either a company traded on a major stock exchange or a college owned by a private equity firm. The financial performance of these companies is closely tracked by analysts and by investors.

“Congress has failed to counterbalance investor demands for increased financial returns with requirements that hold companies accountable to taxpayers for providing quality education, support, and outcomes,” the committee found. “Federal law and regulations currently do not align the incentives of for-profit colleges so that the colleges succeed financially when students succeed.”

Through federal education aid, taxpayers invest billions of dollars in college students' education. A Congressional report says a lot of that money is going to for-profit institutions without much for students -- or taxpayers -- to show for it.

A two-year probe by the Senate Committee on Health, Education, Labor, and Pensions shows $32 billion in the most recent year went to companies that operate for-profit colleges. Yet, more than half of the students who enrolled in those colleges in 2008-9 left without a degree or diploma within a median of four months.

“My experience at this school has been a nightmare,” Shannon, of Chicago, wrote in a ConsumerAffairs post about University of Phoenix. “I feel lied to and used. I specifically chose this school as I was told most of my previous human service credits would be transferred, which they have not. I could accept retaking some classes if I felt I was learning anything useful. Instead, I have had professors who barely understand the material. My biggest complaint however is their heavy reliance on group work, a practice which greatly benefits them by increasing their graduation rate.”

Profit pressures

In its report, the committee suggests the corporate structure of the for-profit institutions creates pressure to produce ever-larger returns for shareholders. While small independent for-profit colleges have a long history, by 2009 the committee found at least 76 percent of students attending for-profit colleges were enrolled in a college owned by either a company traded on a major stock exchange or a college owned by a private equity firm. The financial performance of these companies is closely tracked by analysts and by investors.

“Congress has failed to counterbalance investor demands for increased financial returns with requirements that hold companies accountable to taxpayers for providing quality education, support, and outcomes,” the committee found. “Federal law and regulations currently do not align the incentives of for-profit colleges so that the colleges succeed financially when students succeed.”

Carlos, of North Hollywood, CA, chose Westwood College after being contacted by a recruiter. He was he was taken aback initially when he saw that the cost of a degree would be more than $72,000. He said he was told not to worry, that student loans and grants would cover most of that.

28 percent graduation rate

“The faculty helped me fill out the FAFSA and I couldn't help but notice that the graduation rate was 28 percent in 2009, updated for 2012 to 21 percent, according to OEDB.org,” Carlos posted. “I was concerned and brought it to the attention of the staff. They told me not to mind that and it just hasn't been updated.”

Carlos said he attended for one year before getting discouraged and going to another school. The committee said many for-profit colleges fail to make the necessary investments in student support services that have been shown to help students succeed in school and afterwards, a deficiency that it suggests contributes to high withdrawal rates.

In 2010, the for-profit colleges examined employed 35,202 recruiters compared with 3,512 career services staff and 12,452 support services staff -- more than two and a half recruiters for each support services employee.

High drop-out rate

“This may help to explain why more than half a million students who enrolled in 2008-9 left without a degree or Certificate by mid-2010,” the committee said in its report. Among two-year Associate degree-seekers, 63 percent of students departed without a degree.”

The lawmakers also voiced concern about the amount of public money flowing to for-profit colleges. The report notes that in 2009-10, 25 percent of the total Department of Education student aid program funds went to for-profit schools.

Pell grants flowing to for-profit colleges increased at twice the rate of the program as a whole, increasing from $1.1 billion in the 2000-1 school year to $7.5 billion in the 2009-10 school year.

For-profit colleges also receive the largest share of military educational benefit programs: 37 percent of post-9/11 GI bill benefits and 50 percent of Department of Defense Tuition Assistance benefits flowed to for-profit colleges in the most recent period. Because of the cost of the programs however, they trained far fewer students than public colleges.

Returning service members are eligible for education benefits under the GI Bill and attracting these students can be lucrative for the growing number of for-profit educational institutions in the U.S.

But in recent years policymakers have been closely monitoring these schools' marketing to ensure the former service personnel are getting reliable and complete information. A number of states sued one company – QuinStreet Inc. - for allegedly putting out misleading information. That case has now been settled.

QuinStreet owns a network of websites that generate leads primarily for the for-profit education industry. The multistate enforcement action arose in conjunction with a larger ongoing effort by state attorneys general looking into the recruiting and deceptive business practices of some for-profit colleges.

Misleading information

The investigation determined that the sites misleadingly gave the impression that the schools immediately listed as "eligible GI Bill schools" were the only schools at which the veterans' benefits could be used.

As part of the settlement QuinStreet will relinquish ownership and control of the domain GIBill.com to the Department of Veterans Affairs, which will use it to promote the GI Bill program and educate service members about the benefits available to them under the program.

In the future, the company must clearly disclose that its sites are not associated with the U.S. government and unequivocally state that companies appearing on certain websites are not the only schools that accept GI Bill benefits. The company will also pay $2.5 million to the settling states.

Complaints from students

Many complaints from students about for-profit schools revolve around funding, including the GI Bill. Ahshayahona, of Shaw Air Force Base, S.C., says she has completely run out of G.I. Bill funds because of what she said is delays by Kaplan University.

“I now have no GI Bill money because Kaplan got all of it and I owe on loans because of Kaplan,” Ahshayahona wrote in a ConsumerAffairs post. They have now kicked me out of my program and told me that I had to apply for re-admission. I have had to pay $50 out my pocket for a background check for Kaplan. I have close to a 3.0 GPA and I feel like Kaplan is blocking me from doing my clinicals because they can not find a facility that would deal with them or their students.”

Consumer advocates and state Attorneys General have seen for-profit colleges intensify their recruitment of veterans since 2008, when Congress enacted the Post 9/11 GI Bill, which made billions of dollars in educational benefits available for veterans and their families. According to a February 2011 General Accounting Office report, $9 billion in educational benefits were provided to service members and veterans in Fiscal Year 2010.

Oregon Attorney General John Kroger notes that of 20 for-profit colleges analyzed by the U.S. Senate HELP Committee, total military educational benefits increased from $66.6 million in 2006 to a projected $521.2 million in 2010. Part of the reason why military members are attractive to for-profit colleges is because their benefits don't count toward the business' 90 percent cap on federal Department of Education funding, Kroger said.

More leverage

The Internet has allowed creation of a number of for-profit colleges that offer most of their courses online. While attending class online is convenient, it's not cheap.

The cost of attending a for-profit college is the same as some private colleges and universities, and is paid for in much the same way, with student loans and grants.

But is the value of the eduction and the degree the same? Many who attend for-profit colleges say they aren't, despite claims made by admissions officers. A Senate Judiciary subcommittee this week began looking into the debt for-profit college students incur and what they get for their money.

Enormous debt

“We’ve seen first-hand the damage done to the lives of students burdened with enormous debt from for-profit schools," said Illinois Attorney General Lisa Madigan, who testified before the subcommittee. "These students wanted nothing more than to go to school and better their lives, but too many of them end up struggling to pay for an expensive education with few job prospects in their chosen field.”

Madigan singled out Westwood College, which she sued earlier this year. The lawsuit alleges Westwood used deceptive marketing that left students with thousands of dollars of debt and limited job opportunities.

Madigan’s lawsuit alleges, for example, that through marketing its criminal justice program, Westwood falsely convinced students they could pursue a law enforcement career with such agencies as the Illinois State Police and suburban police departments, even though those employers don’t recognize a Westwood degree due to its lack of regional accreditation.

Students' stories

A number of former students back her up. In a detailed posting at ConsumerAffairs, LeRoy, of Chino Hills, Calif., describes how he was led to believe a Westwood Degree in IT security would help him advance up the career ladder.

"But there were doubts about what I was learning," LeRoy wrote. "I asked several of the instructors why we were reviewing outdated technology in some of the classes. I was told that the information in the class is on the certification exams that you can take after you successfully completed the course. Being gullible, I took that as a good explanation."

After graduation, LeRoy said he took certification tests and, relying on what he had studied, failed. Meanwhile, he says his monthly payments to Sallie Mae for his student loans is nearly $750.

Since filing the Westwood suit, Madigan said her office has received 1,007 calls from students with similar stories of taking out private loans for degrees that failed to qualify them for careers in criminal justice. She vows to maintain a crackdown on what she sees as abuses within the system.

“The abuses in the for-profit schools industry are rampant," Madigan told the subcommittee. "Left unchecked, I fear this troubling trend will produce a generation of students saddled with crushing debt and years of financial insecurity."

The Government Accountability Office went undercover to take a look at what really goes on at privately-owned, for-profit colleges.  What it found wasn't so good.

The agency selected 15 schools and successfully infiltrated 12 of them, using bogus high school records to gain admission. The 12 "students" enrolled in 31 courses at an average cost of $1,287 each, and 10 of them managed to collect federal student financial aid.

The "students" purposefully submitted substandard work; one received a passing grade by submitting photos of celebrities and political figures in lieu of responses to essay questions. Three students were expelled for poor work or nonattendance.

Eight of the nine students withdrew without incident at the end of the investigation.  At the ninth school, GAO's request to withdraw was never acknowledged and the student was eventually expelled for nonattendance.

No exit counseling

Three students did not receive federally mandated exit counseling, where students are supposed to be advised of loan repayment options and the consequences of default.

That's what happened to Rosa of St. Augustine, Fla. 

"I was going to the University of Phoenix online. I had to withdraw due to going through a divorce ... I did not know at the time that unlike the community college, when I withdrew that even though I paid with financial aid, I'd have to repay that and my transcripts would be held," she told ConsumerAffairs.com in a complaint earlier today. "No one warned me of this when I told them I was thinking of withdrawing."

Congress and consumer organizations have been casting a wary eye at for-profit schools recently, noting that enrollment in such schools has grown far faster than in traditional higher-education institutions.  

GAO conducted its investigation at the request of Sen. Tom Harkin (D-Iowa), chairman of the Senate's Health, Education, Labor and Pensions Committee, who has been highly critical of for-profit schools, noting that -- among their other drawbacks -- for-profit schools are far more expensive than comparable programs at community colleges or public universities. The average tuition for a for-profit school is about six times higher than a community college and twice as high as a 4-year public school.

Taxpayer dollars

Students enrolling in subpar for-profit schools are not only putting their own time and money at risk, they are also burning through huge amounts of taxpayer dollars.  During the 2009-2010 school year, for-profit colleges got almost $32 billion in grants and loans provided to students under federal student aid programs.

Close to one in four students who attends a for-profit school defaults on his or her federal student loans within 3 years of leaving school, Harkin's office said. This high rate of default combined with the fact that nearly all students at for-profit schools must borrow money to pay the cost of tuition, has resulted in a sector that enrolls approximately 10 percent of American higher education students but accounts for nearly 50 percent of all student loan defaults.

In many cases, students -- like Shelly of Helena, Mont. -- say they were not properly advised before taking out student loans to attend for-profit schools. 

"I attended Mountain State University online first, with FASFA loans and had no problem, actually got money back from them a couple of times. I then went to Kaplan online for one term," Shell said. "I have only been using FASFA to finance as I have no money that is why I had loans. Kaplan says I owe them money but will not explain why."

"I repeatedly told them that I had the loans and they had always covered it. I have asked them to explain why but got no response. Now I am back at Mountain State and have had no problems," Shelly said. "However, Kaplan will now not let the FASFA money go the Mountain State. It's because they will not let me register for the next term due to a 'balance' owing."

Not worth much

Even students who successfully complete their studies often find their degree or certificate doesn't do them much to help their job search.

"Got my degree from Phoenix University; I have a Masters on Business Administration focus on HR," said Claudia of Houston. "I have a student loan that is about $45,000."

But Claudia said her degree isn't accepted by many potential employers.

"They see this school as a for-profit and they do not want to deal with students from this place; resumes are set aside. Is there anything that I could do? I am having to pay for something that did not embrace any rewards to my career."

For profit colleges continue to come under official scrutiny since their students often tap taxpayer supported aid programs. In Minnesota, state officials claim Education Management Corporation (EMC) crossed the line.

EMC, 80 percent owned by Wall Street giant Goldman Sachs Capital Partners and other private equity funds, operates Argosy University and Art Institutes International in Minnesota. The state has filed suit, claiming the company illegally collected state taxpayer-financed student aid.

The suit, filed by Minnesota Attorney General Lori Swanson, alleges that EMC’s for-profit colleges were ineligible to receive the state financial aid because the company paid incentive compensation to its recruiters based on the enrollment of new students, in violation of federal law.

Avoiding the hard sell

“Incentive payments by for-profit colleges to their recruiters are illegal because they can lead to a hard-sell atmosphere where students are sometimes hustled to enroll in expensive programs paid for by taxpayer-backed student loans, hurting both students who are trying to better themselves and taxpayers who must pick up the tab if the loans default,” Swanson said.

In August, the U.S. Justice Department and several other states sued EMC in Pennsylvania, claiming the company falsely certified compliance with provisions of federal law that prohibit a university from paying incentive-based compensation to its admissions recruiters that is tied to the number of students they recruit. At the time of the suit, a spokeswoman for the company vigorously denied the allegations.

In her suit, Swanson said EMC uses a variety of media to advertise its schools. Students who express interest in enrolling at an EMC college are contacted by EMC recruiters. Federal law prohibits for-profit colleges from paying “any commission, bonus or other incentive payment” to any person engaged in student recruiting, which is based either directly or indirectly on the recruiter’s success in enrolling new students.

Points for recruits?

The lawsuit alleges that the compensation paid by EMC to its student recruiters violated this ban. The lawsuit alleges that the company used a matrix to compensate their student recruiters, which converted the number of new students a recruiter enrolled into points and used the recruiter’s point total to determine his or her salary, thus making incentive payments to recruiters based upon the number of new students enrolled in violation of federal law.

Swanson has recently begun to take a harder look at for-profit colleges, which have also come under scrutiny at the federal level. She cites U.S. Senate data indicating that 76 percent percent of for-profit college students attend institutions owned by Wall Street investors.

According to Swanson, some for-profit colleges target students who are the first in their family to go to college or who don’t have much money or experience with higher education. The GAO and others have sharply criticized the recruiting practices of some for-profit colleges.

Undercover probe

For example, in an undercover investigation of 15 for-profit colleges (including Argosy University-Chicago), the GAO found that all 15 colleges made deceptive or questionable statements to undercover applicants, such as misrepresenting the applicant’s likely salary after graduation and not providing clear information about the college’s graduation rates.

The lawsuit asserts claims under Minnesota’s False Claims Act, which became effective July 1, 2010. The Act allows the state to pursue fines and damages against entities that knowingly present, or cause to be presented, false or fraudulent claims for payment or approval to the State of Minnesota. The other states that filed suit against EMC are Florida, Indiana, Kentucky, Illinois, and California.

The U.S. Department of Education, responding to intense criticism by Sen. Tom Harkin (D-Iowa), has taken the first step in reining in abusive practices at for-profit colleges which pile deep debt onto their students in exchange for questionable credentials. 

It issued a new rule that sets a standard for these schools: their programs have to ensure graduates can earn enough to pay off the hefty student loans they must carry to pay for their enrollment.  But consumer advocates say the rule doesn't go far enough.

The activist group USPIRG said it was disappointed that the new standard “doesn’t go into effect soon enough, nor is it strong enough to adequately clean up the industry on behalf of student loan borrowers” and said it would continue pushing for further reform.

“The price tag for these colleges is so high that about half of all borrowers who default on their student loans attend for-profit colleges,” USPIRG said.  “The quality of the education is so weak that, in one survey, 57 percent of students departed without a diploma.”

Meanwhile, taxpayers are picking up the tab by underwriting billions in federal student loans and grant aid that pour into these colleges.  About one in ten college students attends a for-profit college, but these colleges absorb one in four federal loan and grant dollars.

Other groups responding to the new rule included:

• American Association of University Women (AAUW) “This final rule will benefit women, minority, low-income, and veteran students, in particular. Together, these groups constitute a disproportionately large number of students at for-profit schools, where students accrue almost double the median debt compared with their peers at nonprofit institutions,” said executive diirector Linda D. Hallman.

• American Federation of Teachers (AFT) “This regulation is a modest step to help protect students from inflated promises about job prospects and earnings by career education programs that often leave students with no gainful employment but a mountain of debt. This problem is particularly pernicious in the for-profit sector, where student debt and loan default rates are significantly higher than in the nonprofit sector,” said  AFT President Randi Weingarten.

• Campus Progress “Given the overwhelming evidence that the worst for-profit colleges are abusing students and taxpayers, the rule isn't strong enough, but it's still an important reform that could, over time, help millions of students. We believe that, collectively, the rules issued by the Administration, ongoing investigations by state attorneys general, and increasing scrutiny by Congress and the media will ultimately compel for-profit schools to clean up their act or else shut their doors,” said David Halperin, Director of Campus Progress, the youth arm of the Center for American Progress.

• National Education Association (NEA) “This rule advances the common-sense principle that federal financial aid should go to career education programs that consistently provide what they promise and don’t leave students buried in debt they cannot repay,” said Dennis Van Roekel, NEA president.

Harkin has said he will continue to investigate abuses in the private for-profit education sector despite vocal opposition from Republicans, including Republican members of the Health, Education, Labor and Pension Committee, who boycotted the most recent hearings on the issue.

Harkin was criticized for inviting noted Wall Street short seller Steven Eisman to testify on the issue despite Eisman’s financial conflicts of interest, and over allegations from an internal GAO document he pressured investigators to include numerous details in a report on for-profit schools. GAO later corrected a slew of errors in that report.

The Department of Education has released final regulations that place requirements on for-profit colleges not generally required of traditional public and private colleges and universities.

Over the next four years, for-profit institutions, such as University of Phoenix, Devry and ITT Technical Institute, must show that students getting degrees actually get jobs, in order to maintain access to student financial aid.

The new regulations are designed to address complaints from students who say they come out of school saddled in debt but have few job prospects. Carl, of Fort Lauderdale, Fla., says his wife graduated from the University of Phoenix, while racking up significant student loans over four and a half years.

The bill

“We just received loan statements from both CitiBank and FedLoans totaling $49,000.00 for a B.S. Degree,” Carl told ConsumerAffairs.com. “How could an online school cost so much? There are no classrooms, air conditioning or light bills as overhead.”

While many career college programs are helping to prepare America's workforce for the jobs of the future, the government says far too many students at these schools are taking on unsustainable debt in exchange for degrees and certificates that fail to help them get the jobs they need or were promised.

"These new regulations will help ensure that students at these schools are getting what they pay for: solid preparation for a good job," Secretary of Education Arne Duncan said. "We're giving career colleges every opportunity to reform themselves but we're not letting them off the hook, because too many vulnerable students are being hurt."

New requirements

To qualify for Federal aid, the law requires that most for-profit programs and certificate programs at nonprofit and public institutions prepare students for gainful employment in a recognized occupation.

Under the new regulations, a program would be considered to lead to gainful employment if it meets at least one of the following three metrics:

• at least 35 percent of former students are repaying their loans (defined as reducing the loan balance by at least $1);
• the estimated annual loan payment of a typical graduate does not exceed 30 percent of his or her discretionary income;
• or the estimated annual loan payment of a typical graduate does not exceed 12 percent of his or her total earnings. While the regulations apply to occupational training programs at all types of institutions, for-profit programs are most likely to leave their students with unaffordable debts and poor employment prospects.

Excluded students

As admission standards for traditional non-profit colleges have risen, many of these excluded students have turned to for-profit schools for a degree. Also, students already in the workforce make up a significant portion of the enrollment, since many classes are in the evening or can be taken online.

According to the Department of Education, students at for-profit institutions represent 12 percent of all higher education students, 26 percent of all student loans and 46 percent of all student loan dollars in default.

The median Federal student loan debt carried by students earning associate degrees at for-profit institutions was $14,000, while the majority of students at community colleges do not borrow. More than a quarter of for-profit institutions receive 80 percent of their revenues from taxpayer-financed Federal student aid.

"While for-profit schools have profited and prospered thanks to Federal dollars, some of their students have not,” Duncan said. “This is a disservice to students and taxpayers, and undermines the valuable work being done by the for-profit education industry as a whole."

Massachusetts Attorney General Martha Coakley is investigating the recruiting and financial aid tactics used by the University of Phoenix and has asked the school to produce documents dating back to 2002, a Phoenix newspaper reports.

The Arizona Republic said the probe was disclosed in a Securities and Exchange Commission (SEC) filing by the school's parent corporation, Apollo Group.

The report said the Massachusetts probe was thought to be part of a “coalition” of state agencies that are looking into the activities of for-profit universities and trade schools.

Apollo Group, among the largest education institutions in the world, has more than 405,000 students.

Florida's attorney general last year said the state was investigating several for-profit schools. Oregon officials sued Apollo Group last year for allegedly misleading investors in its financial statements.

Congress has also been investigating and holding hearings after the Obama Administration floated a proposal to regulate federal aid to for-profit schools and their students.

The General Accountability Office (GAO) was sharply critical of recruiting practices at some for-profit colleges, saying recruiters lie and urge aid applicants to committee fraud.

Millions of people depend on grants and scholarships to pay for college. Navigating the process of applying for financial aid can be confusing and some companies claim they can help, but only end up providing information and assistance the student can already get for free elsewhere. The Better Business Bureau recommends doing your research before paying a company to find financial aid for college.

During the 2009-2010 school year, $94 billion in grants was made available to college students to help cover education costs, according to The College Board. Sources of the funding included federal and state government, institutions, private entities and employers.

“Times are tight and many families desperately want to tap into the well of scholarships and grants to help their kids go to college,” said Stephen A. Cox,president of the Council of Better Business Bureaus. “While some companies are trying to take advantage of struggling families looking for funding, the good news is that all of the information you need is already available for free.”

Every year, BBB receives complaints from parents who paid money upfront to a company that promised to find scholarships and grants for their child but ultimately didn’t deliver.

One such company, Edifi-College Financial Aid, sends prospective college students a letter explaining they have been selected for a personal interview. Students who call for their interview are scheduled for a financial aid seminar along with other students and parents. Complainants say they attended the seminar and later paid more than $1,000 for help finding aid, but the services offered were mostly assistance in filling out financial aid forms.

BBB is also receiving complaints about J.E.C.C., Inc. Complainants say they thought they were taking advantage of a free trial CD-ROM on how to get federal grants for college. Some were charged as much as $69 even before receiving the information in the mail and those who did receive the information complained that it wasn’t helpful at all.

BBB recommends listening for the following red flags when receiving the sales pitch from a financial-aid finder:

• “The scholarship is guaranteed or your money back.” In reality no one can guarantee that they will get you a grant or scholarship. The refund guarantees that are offered usually have so many conditions or strings attached that it is almost impossible for consumers to get their money back.

• “You cannot get this information anywhere else.” Actually, scholarship information is widely available in books, from libraries and financial aid offices and on the Internet, if you are willing to search for it.

• “We will do all the work.” Only parents and students can really determine and provide the financial information needed to complete the forms.

• “You have been selected by a national foundation to receive a scholarship.” If you have not entered a competition sponsored by the foundation, this claim is highly unlikely.

• “May I have your credit card or bank account number to hold this scholarship?” This is never a requirement for a legitimate scholarship offer.

• “The scholarship will cost some money.” Legitimate scholarship offers never require payment of any kind.

For more information on finding financial aid for school, visit www.fafsa.gov.  

First there was the high-tech bubble, then the housing bubble. What bubble will burst in 2011?

Many are betting it will be for-profit education - as critics question the value of the expensive degrees and certificates awarded by the likes of Kaplan University and the University of Phoenix.

"Serious questions have emerged about the share of the military educational benefit pool going to for-profit schools with questionable outcomes," said a report issued earlier this month by the Senate's Health, Education Labor and Pensions Committee.

Committee chair Tom Harkin (D-Iowa) said that by extending benefits similar to the GI Bill to current veterans, "Congress may have unintentionally subjected this new generation of veterans to the worst excesses of the for-profit industry: manipulative and misleading marketing campaigns, educational programs far more expensive than comparable public or nonprofit programs, and a lack of needed services."

The for-profit colleges make big profits on federally-guaranteed loans but critics say that even students who graduate - a small percentage - aren't likely to snag the kind of high-paying positions they're led to expect.

For-profit schools exploded over the last decade. They appeal to working adults seeking training that will help them advance their careers, veterans and active-duty military hoping to smooth the transition to civilian life and, in many cases, those who did poorly in high school and are unable to gain admittance to more selective universities.

Kaplan's bubble may already have burst. Owned by the Washington Post Company, Kaplan is facing Congressional investigations and numerous lawsuits, including a whistle-blower suit filed by the school's former director of education, David Goodstein.

The lawsuits claim that Kaplan recruiters aggressively signed up students who were unqualified and enrolled students in vocational-training courses for industries that they knew to be over-staffed.

Alarmed by the reports of graduates who leave school with heavy debt only to wind up working low-paying jobs, the U.S. Department of Education has proposed regulations that would cut off federal financing to programs that have high debt-to-income ratios and low repayment rates.

One such student is Hope of Hahira, Ga. She graduated from Kaplan in 2006 with an associates degree in paralegal studies and despite having a straight-A average in school, she was fired after a year because her Kaplan education was inadequate, she said in a complaint to ConsumerAffairs.com.

"I now owe all of this student loan debt and am unable to find a job in my field and am in default of my student loans because I can't support myself," Hope said. "I wish that I had known that this school was not a school where credits are transferable and where the "material" isn't appropriate or conducive to learning how to work in the legal environment."
The Washington Post Company has been quick to defend Kaplan, its most profitable unit. It reported spending $350,000 on lobbying during the third quarter of 2010, more than any other higher-education company.

Post Company chairman Donald Graham, a powerful figure in Washington, has also put his personal influence to work, schmoozing lawmakers and regulators. The Post has editorialized against the regulations, saying they would limit students' choices.

"The aim of the regulations was to punish bad actors, but the effect is to punish institutions that serve poor students," Graham said in a recent interview with The New York Times.

But Department of Education figures show that only 28 percent of Kaplan students were repaying their student loans - well below the 45 percent level generally considered the minimum acceptable rate. At the University of Phoenix, by contrast, 44 percent of students were repaying their loans.

The Florida Attorney General has also launched an investigation of Kaplan. In a statement, the office of Attorney General Bill McCollum said the investigation concerned "alleged misrepresentations regarding financial aid; alleged unfair/deceptive practices regarding recruitment, enrollment, accreditation, placement, graduation rates, etc."

Earlier this year, Sen. Harkin's committee held hearings that included undercover videos showing high-pressure recruiting tactics by Kaplan and other for-profit colleges.

The Post Company's Graham called the videos "sickening" and said the company has done its best to clean up the abuses.

The lobbying muscle of the Post Company and other for-profit education companies may be adequate to squash further Congressional action and head off restrictive new regulations.

But the question for consumers to ponder is whether a degree or certificate from a for-profit school will carry the same weight as a similar degree from a community college or public four-year university. Returning veterans and job-seekers hoping to advance their prospects are often better off going directly to potential employers and talking with them about the requirements and aptitudes they look for in prospective employees, employment counselors say.

Here's a no-brainer. College costs are going up again this year, just like they do every year. What may be different however, is that the cost of going to an in-state public college or university is going up nearly twice as fast as the cost of going to a private school.

According to a study released by the not-for-profit organization, the College Board, the average increase for in-state tuition for the 2010-2011 school year is nearly eight percent (7.9%) while private school tuition is only up 4.5%. The College Board is the same group that administers the SATs in case you were wondering.

There was a bit of silver lining in the College Board report. There have been record increases in federal grant aid in the form of Pell Grants and tax credits.

The study titled Trends in Student Aid 2010 and Trends in College Pricing 2010 reports that despite rising prices, the average net prices after considering grant aid and tax benefits have increased more slowly than the Consumer Price Index over the past five years.

The average price of tuition and fees for in-state students at public four-year institutions is $7,605 in 2010-11, a jump of $555 from the previous year. At private nonprofit four-year colleges and universities, the average price is $27,293, which represents an increase of 4.5 percent, or $1,164. Published tuition and fees at public two-year colleges increased by $155 (6.0 percent) to $2,713 and for-profit institutions charge an average of $13,935, $679 (5.1 percent) more in 2010-11 than the year before.

Increases in grant aid and tax credits don't benefit all students, but they are providing a financial boost for millions of families and students. The largest increase in Pell Grant history led to $28.2 billion in grant aid reaching 7.7 million students in the 2009-10 school year. That was an increase of almost $10 billion from 2008-09. Grant aid from colleges and universities is also growing, and many students continue to rely on grants from states and private sources.

The College Board is a not-for-profit organization founded in 1900 to expand access to higher education. Today, the membership association is made up of more than 5,700 of the nation's leading educational institutions and is dedicated to promoting excellence and equity in education. Each year, the College Board helps more than seven million students prepare for a successful transition to college through programs and services in college readiness and college success — including the SATs and the Advanced Placement Program. The organization also serves the education community through research and advocacy on behalf of students, educators and schools.

A Texas court has granted a temporary restraining order against two individuals that operated three Internet-based "home schools."

According to an enforcement action brought by the Texas Attorney General's Office, the defendants unlawfully marketed and sold fraudulent high school diplomas.

The state is seeking court-ordered restitution for customers who paid the defendants $225 to enroll in their program, take their "tests" and obtain their purported diplomas. The court ordered a temporary injunction hearing for 2 p.m. on Nov. 4.

The five unaccredited "diploma mill" defendants operate under a holding company called Advent Harvest Academy Corp. The "schools" named in the enforcement action are Sunrise Private High School, Longhorn Private High School and Bluebonnet Private High School. Defendants Teri Tout-Dennis and Mike Martin serve as director of education and executive school director, respectively.

"As the State of Texas strives to improve educational opportunities for all our children, it is intolerable to find unscrupulous individuals who would offer anyone with Internet access the ability to receive a diploma without the prerequisite studies," Attorney General Greg Abbott said. "This is a grave disservice to youngsters who later in life will come to realize they were exploited for their money and gained nothing in return."

According to state investigators, Advent Harvest Academy Corp. and its schools imposed no educational requirements. The schools required no age verification or identification; likewise, no instruction program or compulsory student "attendance" is mandated. Students simply pay $225 in advance via a credit card and then take an unaccredited "test."

Students are instructed to fax the test to the defendants who then "grade" it and respond with fraudulent academic diplomas through the mail, including "transcripts" containing credit hours based on the test results.

The defendants' so-called schools are registered with the Texas Secretary of State as domestic for-profit corporations and use the corporate number issued by that agency as their "school ID number" on diplomas. The numerical identification reflects an attempt to confer an air of legitimacy to the appearance of the diplomas., Abbott said.

The schools further attempt to make their fraudulent diplomas look legitimate by unlawfully superimposing a State of Texas seal onto the document. In an effort to avoid questions about state oversight, the defendants falsely told customers that they are not required to meet state licensing standards because they meet the "home school" exemption.

The schools have never been accredited by the Texas Education Agency, the Texas Association of Private and Parochial Schools or the Texas Private School Accreditation Commission, Abbott charged.

A recent report showing many students at for-profit colleges aren't repaying their school loans has prompted the federal government to propose new oversight for these enterprises.

The U.S. Department of Education has proposed rules that would make these for-profit colleges and universities ineligible for government-backed student loans if fewer than 35 percent of students and former students are paying their loans. Schools would also be denied access to federal funds if graduates are spending more than 12 percent of their income to pay back student loans.

But the proposal is getting serious pushback from civil rights groups who say the rule would limit access to career colleges for many minorities.

Among those voicing concerns about the regulations are Rev. Jesse L. Jackson, Founder/CEO of Rainbow PUSH Coalition; Willie Gary, one the nation's leading trial lawyers; Harry Alford, President and CEO of the National Black Chamber of Commerce; Randal Pinkett, Chairman and CEO of BCT Partners; and 12 of the 39 voting members of the Congressional Black Caucus.

Devastating impact

"There are widespread concerns that this regulation will have a devastating impact in African-American communities, where black unemployment is nearly twice as high as whites," said Milton Anderson, President of Virginia College's branch in Jackson, Mississippi. "Schools, such as Virginia College, do an outstanding job teaching skills that are needed for promotions and new jobs. The government should not close the door to opportunities for people willing to learn additional skills and training that will help them better provide for themselves and their families."

Anderson, who is a spokesman for the Coalition for Education Success, noted that 43 percent of the enrollment at career schools, or 1.2 million students, are minorities.

The so-called "Gainful Employment" rule would make entire programs ineligible for federal loans and grants if they fail to meet a broad new standard that black leaders say has little to do with academic quality. The proposal would require all programs offered at career colleges and trade schools to meet a specific definition in order to qualify for federal student financial aid.

It would base eligibility on the ratio of student debt to potential student income following graduation. It does not take into account that most students benefit from the long-term benefits of their careers and not just the immediate increase in income.

In a September 15 letter to Education Secretary Arne Duncan, Jackson wrote that the Department's approach will hinder the access of minority students to higher education and make it even more difficult to realize President Obama's goal of leading the world in the percentage of college graduates by 2020.

"I am concerned that the proposed rule casts too broad and too general a brush on many institutions, some of whom are doing an excellent job at serving economically disadvantaged and minority students," Jackson wrote. "For many of these historically under served students, educational options must be more accessible than those that typically are offered by traditional higher education institutions if they are to be meaningful."

Elitist and racist

Gary says it is "extremely disappointing" that the Education Department seeks to implement this policy.

"The Education Department has proposed rules that will harm all the schools, and all the students who may want to attend these institutions," Gary said. "This is bad public policy. Clearly, the Education Department's approach is elitist, if not outright racist."

Gary asked why the restrictive regulations have not been proposed for the nation's leading liberal arts colleges and universities or even at state colleges where students with the similar socioeconomic backgrounds have similar default rates on their student loans.

"Instead, the proposed regulations are aimed at institutions whose graduates don't often become CEOs, doctors and lawyers," Gary said. "Career schools produce nurses, auto mechanics, computer technicians and other skilled workers, whose services are often overlooked and devalued in our society."

Read more about Education.

Financial planner Reecy Aresty has specialized in helping students and parents find money for college. His book "How To Pay For College Without Going Broke, serves as a blueprint for finding financial aid.

"Many states, including California, have grant programs for low-income families," Aresty told ConsumerAffairs.com. "Other states, such as Florida, have 'merit aid' programs. Any family can qualify for substantial financial aid, if they own and control a small business. Private scholarships are great when the family can't qualify for need-based aid."

Aresty says the way students receive scholarships and financial aid is important to their overall bottom line. All too often, he says, a scholarship check is made out to both the student and the college. When that happens, he says the college usually reduces the amount of aid it has promised the student by the exact amount of the scholarship.

"The colleges consider it a resource to help pay for a student's education," he said.

For example, let's say the cost of attending college is $45,000. The "expected family contribution" is $10,000, so the family needs to come up with $35,000. In most cases the college is only too willing to help.

The college might guide the student toward Stafford Loans and other aid packages, cutting the need from $35,000 to $22,000. If it's a student the college really wants, Aresty says it might offer $22,000 in college scholarships, grants, and tuition waivers, and put the offer in writing.

But what happens when the college learns that the student has landed a $10,000 "private" scholarship? Aresty says the student gets another letter, showing the college's offer of $22,000 in aid has been reduced to $12,000.

"Theft"

Colleges might look at this policy as a commonsense way to spread aid around, but Aresty likens it to theft. He says many colleges require students to show their financial cards early in the process.

"Those students who applied to any of the 220 elite private and a few state colleges that require the CSS Financial Aid Profile financial aid form may have already indicated they would be scholarship recipients," Aresty said. "Section SR, Student's Expected Resources for 2007-2008, Question 5, asks for the total dollar amount expected from 'grants, scholarships, fellowships, etc., from sources other than colleges,' and they must be listed individually in Section ES."

Aresty says the majority of schools that only require the Free Application for Federal Student Aid form simply send out a questionnaire asking about private scholarships. They're less devious, he says, but just as deft.

"Truth be told, it's all about the money, and have no doubt about it, he said. "Every year there are billions awarded in private scholarships, and who benefits? None other than these 'poor' institutions of higher learning, enriching their billion-dollar endowment funds at the cost of their deserving students."

While he says there are a number of reasons that college costs are rapidly rising, the amount of aid now available to students in the form of grants and loans is a large contributing factor.

"Guaranteed Stafford Loans of $5,500, $6,500, $7,500, and $7,500 enable schools to charge more because every student can now borrow more," he said.

Aresty recently founded the College Information Network, which includes the The High School Blog, The College Blog, Payless For College, and The Way To College.

Dallas-based online university Trinity Southern faces a consumer fraud lawsuit filed by the Pennsylvania Attorney General's Office after a sting operation that won an MBA degree for an investigator's cat.

Investigators put together a bogus resume for Colby Nolan -- a deputy attorney general's six-year-old cat. With the resume and $299 in hand, the online university decided to award Colby an MBA degree, which came with a diploma, a list of course work, and a 3.5 grade point average.

Pennsylvania Attorney General Jerry Pappert's lawsuit names four defendants of engaging in an elaborate scheme to promote and sell bogus academic degrees by hijacking the Internet Protocol (IP) addresses of more than 60 Pennsylvania businesses and one state government office without their knowledge and using them to send spam.

The defendants are Trinity Southern University (TSU), Plano, Texas; Innovative Cellular and Wireless Inc. (ICW), Corpus Christi, Texas; brothers Craig Barton Poe, Frisco, Texas and Alton Scott Poe, Saint Cloud, Florida.

The Scam

According to investigators, beginning in January 2004, the defendants transmitted more than 18,000 illegal e-mail messages to promote the sale of online academic degrees from Trinity Southern University. The website link that was included in the e-mails claimed that for a fee between $299 and $499 consumers can purchase a Bachelors, Masters, Executive Masters or Ph.D. degree in several fields including English, Business Administration and Biology.

The complaint accuses the defendants of fraudulently claiming that Trinity Southern University:

• Is a legitimate institution that can issue academic undergraduate, graduate and doctoral degrees in several majors.

• Offers legitimate transcripts including a list of classes, grades and a final grade point average or GPA.

• Is accredited by Recoleta University in Argentina when no such university exists.

• Is privately accredited by NAPLAC.org when there is no organization by that name. In addition the address of the accreditation letter belongs to defendant Alton Scott Poe.

• Will verify information provided by consumers to be used in the evaluation process to grant degrees or to recommend that consumers are eligible for more advanced degrees.

• Will prosecute or revoke the degrees of those who withhold information or provide false information for admission and enrollment.

Pappert said undercover agents contacted the defendants online to obtain a $299 Bachelors Degree in Business Administration for Colby Nolan, the cat. After the review and evaluation process was completed the defendants replied to the agents e-mail to inform Colby that his work experience qualified him to receive an Executive MBA, not the bachelors degree that was requested.

Within several weeks the defendants awarded an Executive MBA to Colby Nolan. The official looking diploma arrived on professional stock paper and included an embossed gold seal from TSU with the signatures of the university president and dean.

For an additional $99 fee, the agent requested the cats transcript. The document arrived and included Colbys graduation date, student number and a GPA of 3.5. The transcript also included the individual courses Colby passed including economics, accounting and finance along with the corresponding grades (all As and Bs) and the credit hours.

The Defendants

Alton Scott Poe is purportedly the Dean of Admissions and Vice Chancellor of TSU. Craig Barton Poe is the President of ICW, which handles the billing and credit card processing for the sale of TSU academic degrees.

Craig Poe also uses the alias Desmond Jones with a fictitious residential address in Scranton, Pennsylvania. In addition, all of the websites advertised in the alleged scheme are registered to Desmond Jones.

The defendants are accused of violating Pennsylvanias Unsolicited Telecommunication Advertisement Act and Unfair Trade Practices and Consumer Protection Law.

I filed this lawsuit to stop a massive illegal spam campaign that not only defrauded consumers and employers, but damaged the reputations of numerous Pennsylvania businesses across 24 counties and a government office, Pappert said. These legitimate outfits unknowingly became third party hosts in the scheme when their servers and IP addresses were hijacked to transmit the illegal spam.

The Spam

The complaint claims that more than 300 of the e-mails were sent to consumers without authorization through the servers of more than 60 Pennsylvania businesses and the Pennsylvania State Senate. Each e-mail typically included a fictitious name and web address for the sender.

Investigators said consumers who received the unwanted spam may have complained to the unsuspecting sender electronically or telephoned the business identified in the from line to speak directly to the person listed as the sender. The forged identification and routing information prevented consumers from tracing the spam back to the defendants.

In addition, random words were inserted in the spam messages to confuse and bypass certain available spam filtering technology, according to the complaint. Its possible that some companies first learned about the scam from consumers.

Pappert said many spam recipients likely opened the e-mail due to a misleading subject line in the header of the message. For example, many of the illegal e-mails contained the words Virus Alert in the subject line, and Internet Virus Department in the from line.

The message instructed consumers to open a link that contained the following statement: We have detected a possible computer virus on your computer. You must open the details of the report within 24 hours or we will be forced to shut down your Internet service.

The virus alert subject line was a ruse to get consumers to pay attention to the e-mail and not delete it, Pappert said. Those who opened the phony message and clicked on the link immediately knew that it had nothing to do with a computer virus, but was instead a sales pitch for the defendants online degrees. Under Pennsylvania law, this type of e-mail is deceptive and illegal. This activity not only flooded e-mail systems and increased operational costs, but hurt the reputations of dozens of businesses that were wrongfully accused of sending illegal spam.

It is clear to us that this degree service is not designed for entertainment purposes but to deceive consumers and/or prospective employers into believing that TSU graduates have legitimately earned a Bachelors, Masters or Ph.D. degree in a particular field of study, Pappert said. These diplomas have no value in the job market except to harm genuinely accredited colleges and universities and their online academic programs.