Because the media loves discussing Donald Trump, it wasn't surprising to see heavy press coverage of a lawsuit brought by New York Attorney General Eric Schneiderman accusing the unlicensed Trump University of "persistent fraudulent, illegal and deceptive conduct." Trump responded by harshly attacking Schneiderman, whose suit demands that Trump pay back at least $40 million to the 5,000 people who were enticed into paying $10,000 to $35,000 for real estate investment courses "that did not deliver on their promises." Trump University's sad broken promises included telling some students they would get a photo-op with the Donald, when all they got was a picture with a cardboard cutout. But the real fraud was convincing enrollees that the Trump-owned for-profit "university" would get them on the path to a successful career, which apparently didn't happen for many of them.
What is most significant about the Trump dust-up is that the conduct alleged -- false promises, high prices, weak educational programs, and terrible outcomes for many students -- has been playing out for decades all across America at a wide range of for-profit colleges. Indeed, victims of these other schools are often left much worse off than the students at Trump University: Many start poorer -- veterans, single parents, students of color, immigrants, people struggling to support themselves; many fall prey to misleading ads and high-pressure sales tactics; and many graduate or drop out owing much more than the Trump students, sometimes over $100,000. And for-profit colleges students often find that their degrees do nothing to help them get good jobs.
Worse, many of these programs, in contrast to Trump University, are eligible for federal and state financial aid, meaning that taxpayers are left paying much of the bill. The U.S. government has provided as much as $32 billion in a single year in financial aid for for-profit college programs, many worthless. The biggest for-profit colleges get around 86 percent of their revenue from taxpayer money.
Not all for-profit colleges are bad, and even in some of the most unethical, predatory schools, there are good teachers and programs. But overall the picture is extremely troubling.
For-profit colleges are a huge driver behind the $1 trillion student debt crisis and the countless ruined lives that have resulted; they have about 13 percent of U.S. college students, but 47 percent of all student loan defaults.
Big for-profit colleges created this enormous racket by lobbying Congress for special advantages -- and backing up their lobbying with campaign contributions. In the past couple years, the media, the public, and government investigators have gotten wise to the abuses of for-profit colleges, and enrollment and stock prices have fallen sharply. But while many for-profit colleges have proven to be failures at educating students, they remain really good at lobbying. Using aggressive lawsuits as well as friends they buy on Capitol Hill, Republicans but also some Democrats, these wealthy education companies have thwarted efforts by the Obama administration to hold predatory schools accountable, and their relentless lobbying continues to this day. They appear to be hoping they can ride out the bad publicity and get back to making huge profits, which sometimes fuel obscenely high executive salaries.
It looks, however, like the Obama administration is finally ready to make a strong push against predatory for-profit colleges. The new Consumer Financial Protection Bureau is pressing for industry reforms to protect students. The Pentagon and Veterans administration are demanding that colleges stop misleading and mistreating our troops and vets. The Justice Department is pursuing legal actions, as is the Securities and Exchange Commission, and there is potential for the Federal Trade Commission to do the same. Over strenuous objections by the for-profit colleges, the Department of Education is renewing its effort to establish rules to cut off aid to for-profits and other trade schools that consistently leave students unable to pay back their loans. And last Friday, the president himself, speaking off the cuff, offering a strong indictment of abuses by this arrogant industry.
- The same New York Attorney General, Schneiderman, announced last week that one of the biggest for-profit college companies, Career Education Corporation (CEC), will pay $10.25 in fines and restitution to students over charges that CEC, which operates Sanford-Brown Institute and other schools, significantly inflated its job placement rates in communicating with students, accreditors, and government officials. CEC's bad acts included: counting as placed in a permanent job a student who worked one day at a health fair created by CEC; counting graduates of criminal justice programs as placed "in field" if they obtained retail sales jobs; and claiming placement rates as ranging from 55 percent to 80 percent, when the actual figures were 24 percent to 64 percent. Like many for-profit schools, CEC was also caught failing to inform prospective students that some of its programs lacked programmatic accreditation, meaning that graduates would have no opportunity to apply for the kinds of jobs for which they thought they were training.
- This wasn't the only recent trouble for Career Education Corp. In June, a California arbitrator awarded Anna Berkowitz $217,000 in the first of over 1,000 claims filed against CEC's Le Cordon Bleu College of Culinary Arts in Pasadena. The arbitrator ruled that CEC committed fraud when its staff told Berkowitz that borrowing $40,000 to pay for eight months of training at the school would make her "a shoe-in" to land a job as a pastry chef earning $75,000 a year to start. Berkowitz and other former Cordon Bleu say they now realize it was highly unlikely they would ever be able to pay off their heavy loans working in the culinary industry.
- Last month, a Missouri jury awarded $13 million in punitive damages to a single mother who had been deceived by for-profit Vatterott College. Jennifer Kerr had enrolled at Vatterott to pursue her dream of becoming a nurse. A Vatterott recruiter told Kerr the school didn't have a nursing program, but it did offer a medical assistant's degree. With that credential, the recruiter said, Kerr could make $15 to $17 an hour, and her Vatterrott credits would transfer to a nursing program and put her on the "fast track" to being a nurse. But after taking on more than $27,000 in loans and being in the program for over a year, Kerr discovered that her program wasn't a medical assistant program at all -- it was a medical office assistant program. Vatterrott staff then told her a medical assistant's degree would require more classes and another $10,000. (One of the investors in Vatterott, which has a long record of abusing students and leaving them deep in debt, is Mitt Romney.)
While none of the major predatory for-profit college companies -- University of Phoenix, EDMC, Corinthian, Kaplan, CEC, etc. -- have a frontman as publicly odious as Donald Trump, their abuses and harms go much deeper than those of Trump University. For the sake of our fiscal responsibility, our students, and our economy, their reckless joyride must end. They need to dramatically reform, or America needs to tell them, all together now: You're fired.
This article also appears on Republic Report .
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