Barbarians in the Ivory Tower

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

His tenure at the Art Institute came to an end on Easter when he was hurt in a serious car accident. Unable to type for six months, Pantzke decided he'd instead study photography on his own. In just 18 months at the Art Institute, he'd run up $26,000 in debt and burned through an additional $65,000 of his G.I. Bill benefits — with almost nothing to show for it.

Yet if Pantzke got away, there were plenty of other servicemen where he came from. A story by Bloomberg News caught a recruiter from Ashford University visiting a wounded-warrior barracks at Camp Lejeune in North Carolina. It seems that injured veterans — notably those with head injuries — are particularly receptive to the for-profit sales pitch. The story's opening line said it all: "U.S. Marine Corporal James Long knows he's enrolled at Ashford University. He just can't remember what course he's taking."

Federal data shows that for-profits are increasingly targeting veterans. In 2009, they took in almost as much military money as public colleges did — though they were educating just one-third of veteran students. Last year, eight of the top 10 educational institutions collecting G.I. Bill benefits were for-profit, taking in a stunning $626 million.

"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.

"I think sometimes the emphasis is on signing up the student as opposed to whether or not the student is really ready to be successful at that school," says Holly Petreaus, an official with the Consumer Financial Protection Bureau and wife of General David Petreaus. "The top 10 recipients of GI bill aid, eight are for-profit schools, and they are very heavily engaged in marketing to the military — quite successfully, frankly."

It's All About the Benjamins

The University of Phoenix will never be confused with Yale. According to one 2010 report, 90 percent of its students fail to graduate within six years.

Still, by pure monetary standards, former CEO Todd S. Nelson was a success. During his tenure, he tripled revenue for the school's parent company, the Apollo Group. Enrollment surged to more than 300,000.

Unfortunately, he accomplished this the old-fashioned way — by cheating. Since 1992, it's been illegal to pay recruiters based on how many students they bring through the door. Phoenix did it anyway until two recruiters blew the whistle, initiating a suit that would ultimately cost the school $88 million in settlements and fines.

Under pressure, Nelson was forced out in 2006, walking away with a generous $18 million severance. Founder John Sperling put a polite spin on the exit, saying only that Nelson was "preoccupied" with stock price to the detriment of the school's long-term health.

Yet if Nelson's profit motives were too lusty for Phoenix, they were a match made in corporate heaven for Goldman Sachs. The Wall Street bank had partnered with two private equity firms to buy EDMC. Nelson was hired as the company's new CEO. Former Maine Governor John McKernan Jr. — the husband of U.S. Senator Olympia Snow — was named chairman of the board. Over the next five years, the company's revenue would nearly triple to $2.8 billion.

Last year, Nelson took home $13.1 million in salary and stock. By the standards of for-profit executive pay, he was working on the cheap.

Gregory Cappelli, his replacement at the University of Phoenix, received $25 million last year. CEO Robert Silberman of Strayer Education raked in an astounding $41.9 million in 2009. Yet even this pales next to Jonathan Grayer, the former CEO of Kaplan University, who walked away with a $76 million severance package — courtesy of Kaplan's parent company, the Washington Post.

By comparison, Harvard President Drew Faust collected a meager $875,331 in 2010.

Nelson's bad-boy practices have predictably caught up with him. Last year, the Justice Department and attorneys general from five states charged EDMC with fraud for paying recruiters based on the money they generated. Six more states have joined the suit.

EDMC claims its sales pay is not just based on bodies enrolled, but such things as business ethics, professionalism and job knowledge. Kathleen Bittel would beg to differ. She was an EDMC recruiter when Nelson arrived, and will readily attest to the change in atmosphere.

Over the next three years, the sales staff increased from 950 people to more than 2,600. "Once Goldman Sachs took over and they brought in [Nelson], everything changed," she says. "Everything became much more cutthroat. It was just more oppressive and very high pressure. ... They were watching you constantly. We used to joke it was like being on the cotton plantation and they were the overlords coming by on their horses. The only thing they were missing were the whips — but they had the whips verbally."

Like Lawrence, Bittel had studied psychology and proved adept at forging bonds. She'd gone back to school in her forties to support her family of four after her husband got cancer. She understood the difficulties of raising kids, working full-time and going to college. At first, she admits to "drinking the Kool-Aid," believing Argosy's online program could help people like her.

But after six months on the job, she was allowed to take Argosy courses for free. That's when she discovered she'd aided a bait-and-switch. Many of the features she heralded to students were barely functional or didn't exist. The Worldwide Professionals Network, where students could find graduate mentors in their field, was nothing more than a bulletin board. Promised MP3 downloads of classes also didn't exist.

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Education is an extremely important part of life. If schools are built for profit, the whole purpose of a school is a sham. They shouldn`t be considered legal if they are for profit. Shocking how they walk away after doing this kind of fraud. Forcing students to pay up through payday loans or other various types of loans. While the government spends hundreds of billions on the military to fight someone else`s war.


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...


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.


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 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.


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




*smiles, humming*


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.


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


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.


South Harmon Institute of Technology

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.


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


 @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.