Redevelopment Authority votes on Corinthian/Everest College bonding

Should city assist for-profit college?

Reprinted from Milwaukee Magazine NewsBuzz

June 16, 2010

City support for a controversial for-profit college is expected to be voted on for the second time on Thursday. At issue is whether the city’s Redevelopment Authority will issue $11 million in tax exempt bonds to help finance a redevelopment of several properties near North 6th Street and West McKinley Avenue.

This would then become the location for a local branch of Everest College, which critics charge poorly serves students while leaving them with high levels of debt. The federal Department of Education, meanwhile, has threatened to clamp down on federal student loans issued to students of for-profit colleges like Everest.

The Redevelopment Authority board already voted 6-0 in November 2009 to pursue the bond sale. On Thursday, the board will vote on whether to issue the tax-exempt bonds – which the developer would be responsible for repaying to investors, albeit with a lower interest rate.

The school would only occupy about half of the buildings in the overall project, which is being developed by McKinley Avenue LLC. The proposed location for Everest, a 45,000-square-foot building at 1311 N. 6th St., borders on vacant sections of the Park East neighborhood to the south that still haven’t been redeveloped. Much of the land was cleared by the demolition of a freeway spur in 2003.

Ald. Milele Coggs, whose district includes the development, opposed the special-use permit the Board of Zoning Appeals granted to Everest in February, allowing it to convert the former Journal Sentinel garage at 1311 N. 6th St. into a college. She argued Everest was a poor fit for the neighborhood and not a residential development as called for in the city’s comprehensive plan. Coggs also questioned how the campus would affect traffic in the area.

And like other local leaders, Coggs questioned Everest’s business practices. “This is definitely not the ‘right development’ for the location,” she said. For-profit colleges are often accused of luring students into expensive training programs that fail to prepare them for the job market.

Federal loan defaults

According to U.S. Department of Education records, for-profit colleges have a poor record when it comes to student defaulting on loans, and Everest’s record stands out as particularly bad. In 2007, 11 percent of students at for-profit schools defaulted on their loans, as compared to 6 percent of students in traditional, not-for-profit colleges. Everest institutions averaged a default rate of almost 16 percent.

Everest is owned by Corinthian Colleges, a national chain of for-profit colleges. In 2007, the company settled a case brought by California regulators by paying $6.5 million. The regulators had alleged the company’s schools were illegally recruiting students by exaggerating the percentages of their graduates who went on to find jobs.

Lawsuits in other states, including Florida, have taken the company to task over credits from its programs not transferring to other colleges. Other students have accused Corinthian schools of misrepresenting what their programs offered.

Like most for-profit colleges, Corinthian schools are nationally accredited and offer medical and other vocational training. Although the “national” accreditation sounds attractive, says Michael Rosen, head of the Milwaukee Area Technical College teacher’s union and a vocal critic of for-profit colleges, it’s less favorable than the regional accreditations held by traditional colleges.
He says graduates have difficulty finding jobs because for-profit schools have fewer ties with local industries, and employers have less trust in for-profit degrees. As for Corinthian, Rosen says, “They’re one of the most notorious.”

Rosen questions the city’s support of the Everest development, saying its “social cost,” in the form of graduates loaded with student debt they can’t pay off, will outweigh the new tax revenue.

Mark Sullivan, the new president of Milwaukee’s Everest College, responds to critics: “The challenge of student loans is an issue facing all students regardless of what college they attend. Before students enroll, they get a clear, comprehensive explanation on their overall college costs.”

As for the quality of Everest’s teaching, he says: “The quality of an Everest College education is demonstrated through the schools’ national accreditation, its 95 percent satisfaction rating among students and its over 70 percent employment placement rate for graduates in their fields of study, a placement rate which is being achieved despite the recession and a tough job market.”

Everest moves ahead

Everest is already recruiting applicants for job openings at its Milwaukee campus – for admissions representative, student finance planner, student finance representative, director of admissions, high school director of admissions, director of student finance and director of education.

The college already has concrete plans for its first classes. Enrollment begins Sept. 1, and classes start on Oct. 18. The school is planning to enroll 650 students in its first year and hire more than 40 employees.

As NewsBuzz reported previously, the U.S. Department of Education is considering a rule that would only apply to for-profit colleges and require their students, on average, to pay off their federal student loans within 10 years using 8 percent of their salary. Otherwise, the school’s students would be ineligible for federal financial aid.

The Career College Association, which represents for-profit colleges, estimates the rules could drive many schools out of business by drying up federal funding. The group estimates that programs instructing about 2,000 students in Wisconsin would go under if the rules are imposed.

According to The New York Times, the average for-profit college gets about three quarters of its budget from federal aid to students. In 2007, DOE reports, students from for-profit colleges accounted for 41 percent of defaults on federal student loans.

For-profit schools say the DOE is creating rules Congress should be required to pass. The Department says it has the authority to make new rules to protect federal financial aid system, though, according to the Bloomberg news service, it delayed releasing a long-anticipated new draft of the rules last week, possibly a sign DOE officials were having second thoughts.

In Milwaukee, other such colleges besides Everest have plans to expand or move to the city, including Bryant & Stratton College, an Art Institute and the Milwaukee Career College.