Barbarians in the Ivory Tower

America's for-profit colleges offer education only a con man (or a congressman) could love.

Barbarians in the Ivory Tower
Viad Alvarez

Bobby Ruffin, Jr. was only 14 when a recruiter from Ashford University called. The Birmingham, Michigan, boy thought he'd clicked on a link promising help finding money for college. It was actually just a lead generator for the for-profit, online school's sales staff.

At the time, Bobby was an A student. His parents had pulled him from the troubled Detroit schools, hoping that home schooling would deliver something better for their son. He told the recruiter that he wanted to be a doctor. She assured him that Ashford could be a stepping stone to that dream.

Never mind that he was only in the 8th grade.

"It's basically consumer fraud rendered to a business model," Barmak Nassirian says.
Courtesy of Barmak Nassirian
"It's basically consumer fraud rendered to a business model," Barmak Nassirian says.
Suzannne Lawrence, who worked as a recruiter at Argosy University, says the pressure to recruit students prompted all sorts of illicit shenanigans.
Courtesy of Suzanne Lawrence
Suzannne Lawrence, who worked as a recruiter at Argosy University, says the pressure to recruit students prompted all sorts of illicit shenanigans.

"She said you'll be working toward a degree as a medical doctor, so when you do graduate high school you're almost there," Bobby says today. "I'm like, 'This is great, I'm going to talk to my mom.' And she's like, 'No, I wouldn't tell your parents because that would take away from the shock when it happens. If I were you I'd complete the program and when graduation comes around let them know. Mom and Dad will be super excited.'"

Admission to Ashford requires a high school diploma or equivalency. So when it came time to fill out the financial aid forms, the recruiter told Bobby to claim that he'd already graduated. He objected, but she insisted "the loan processing company will go back and correct everything." Still, he left the graduation date blank. Someone filled it in, because Ashford was soon receiving federal student-loan money on his behalf.

Of course, it's illegal for kids Bobby's age to receive financial aid. But for-profit colleges haven't always been scrupulous when it comes to raiding the federal treasury. Between student aid and G.I. Bill programs, most schools receive 90 percent of their revenue from the American taxpayer. And the recruiters — often little more than salesmen paid largely by how many people they enroll — are driven mercilessly to keep those cash registers ringing.

Students don't get much in return. Though tuition rates can run as high as those of America's most esteemed universities, the education's generally substandard. In the end, most kids wind up walking away with a questionable degree bought at top dollar — and a mountain of debt to accompany it.

Bobby took online classes for almost a year. But when he wouldn't endorse Ashford's lying on his financial aid forms, administrators miraculously discovered that he was under 18. Since this left him ineligible for federal aid, Ashford was forced to return his loan money to the feds.

The school wouldn't be eating those costs. Bobby would. Ashford, which declined interview requests for this story, sent him a bill for $13,000.

Last fall, Bobby was finally able to enroll at a real university, Eastern Michigan, where he was named a National Collegiate Scholar. Yet he still owes Ashford. Because that's a private debt, he isn't eligible for deferments while he's in school, and any future wages could be garnished.

Unfortunately, this isn't a scam that only targets the young and naive. The for-profit school industry is so rife with deceit, it's been billed as the second coming of the mortgage loan debacle. And the same people are behind it. Three-quarters of all for-profit students are enrolled at schools owned by Wall Street banks and private equity firms.

All told, they soak $30 billion a year from American taxpayers. But even in the age of slash-and-burn government, Congress has shown no interest in stopping it.

"The problem with the subprime [housing] scam was that it got so big it almost brought down the entire world's economy," says Barmak Nassirian, a former official with the American Association of Collegiate Registrars and Admissions Officers. "This one's wisely limited to $30 billion a year, which is highly sustainable. In the context of a multi-trillion federal budget, that's not even a rounding error."


Consumer Fraud as a Business Model

You may not know it, but you're sitting on $117,000. That's basically how much every American is potentially worth in government student aid. Want to attend grad school? Throw in another $114,000.

And as for-profit colleges have discovered, an 18-year-old with 100 large makes for a very easy mark.

In order to get in on the gravy train, a school only needs accreditation from some supposedly neutral body. But Congress neglected to say who should do that accrediting, resulting in a system loaded with charlatans. Some agencies have built sturdy reputations over decades. Others are little more than rubber-stamp factories, more geared toward gobbling up members' dues than safeguarding kids.

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

Yet even bargain-bin accreditation takes several years. So the titans of Wall Street found a way around this by purchasing small, failing schools to snatch up pre-owned accreditation.

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

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12 comments
theEuphoriac
theEuphoriac

Guess writing about how sketchy these for-profit universities are is good enough. Because the full page ad for Argosy University on pg. 12 of this weeks Observer just doesn't send the same message. I get that the Observer needs funding, but you couldn't even make it two weeks? Village Voice ftw...

gigabytmaster
gigabytmaster

For-profit "schools" shouldn't even be legal, let alone able to get away with this level of fraud.  Sad thing is, though, a lot of this doesn't sound that much different from my experience at UTD's Jindall School of Management.

londoncalling
londoncalling

I was enrolled in a for profit school program for graphic design in the early 1990's. I decide after 4 months that it was not for me and was not on the up and up. Meaning there were computer graphics coming on the scene and this school (college) had no computers available and was not looking into getting any either.

I was told by the financial aid office that I was responsible for the loan that I had taken out and would need to pay that back to the government or to Sallie Mae.

I said forget about that and started researching the school and the members of the "Oklahoma State Board for Private Schools that served as the "watchdog" over these private school and any improprieties. 

I found out that the people that owned the private colleges were no only on the Oklahoma State Board but the man that owned the school I was attending was the President of the Board!

So I decided to attend their meeting and state my case in front of the entire board!

Needless to say my loan was "forgiven" and I never heard from them or Sallie Mae again!

Perhaps if more students did something simular these school would close up and go away permanently... 

ThePosterFormerlyKnownasPaul
ThePosterFormerlyKnownasPaul topcommenter

Be careful what you ask for, you just might get it.

 

Why should neither the for-profit schools nor Congress be worried about the money?  After all, it was someone elses money.

TheCredibleHulk
TheCredibleHulk

...get your degreeeeeeee..... set yourself freeeeeeeee........

 

National-American-Universiteeeeeeeeeeeeeeeeeee!

 

*smiles, humming*

roo_ster
roo_ster

VVoice is just carrying water for lefty academics who don't like competition.  The larger problem is not-for-profit colleges, many of which have the same danged problem, but are too poorly run to have any money over at the end of the day.  The higher ed bubble will burst pretty soon and the cocooned & mostly un-hireable academics will be slapped in the face by reality.  The various for-profit schools will be part of the solution after the bubble bursts.

numapompilius
numapompilius

sounds like a real redistribution of wealth underway.(taking from the poor and middle class to give to the rich)

texasnative3
texasnative3

I'm not sure Bobby can be held to the contract since he was a minor when he signed it.  Perhaps Bobby should speak with an attorney.

J_A_
J_A_

South Harmon Institute of Technology

Sotiredofitall
Sotiredofitall topcommenter

"Higher Education" has become a scam on many levels, not just at the for-profit outfits.  The UT Austin football program had operating profit with $70.1 million in fiscal 2010 and I still get phone callas asking for donations to support school academic programs.

cynthia.beard
cynthia.beard

 @roo_ster You obviously didn't read the article but are just spouting typical, tired partisan rhetoric. 

livinginlarue
livinginlarue

 @Sotiredofitall  Add to that the practice of high school administrators  to push ill prepared students into ANY type of higher education in order to improve the school's stats and you have a real problem.  There was a counselor at a school I taught at that comvinced an economically disadvantaged special ed student that she could go to community college on student aid.  She could only take "developmental" classes and after two years had no college credits and a debt she will struggle a lifetime to repay.

 
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