How For-Profit Colleges Stay in Business Despite Horrible Track Records

Last week the Huffington Post ran an in-depth expose on how for-profit colleges like Everest College (Corinthian College Inc.) and Sanford Brown (Career Education Corp.), who recently closed Milwaukee campuses, have created an accreditation system that ensures their continued operation and access to billions in federal funds despite dismal job placement and graduation rates.

It's a classic case of the fox guarding the chicken coup or, as they say in more polite company, a blatant conflict of interest that allows the hucksters who open these diploma mills to rake in millions while leaving students with nothing but broken dreams, credits that don't transfer and life-long debt.

It's worth the read:

Over the past decade, Corinthian's schools have remained fully accredited, enabling the publicly traded company to tap federal student aid coffers for nearly $10 billion, or more than 80 percent of its total revenues, according to a Huffington Post review of securities filings and disciplinary records maintained by its accreditors.

By every available indication, Corinthian Colleges Inc., one of the country's largest chains of for-profit colleges, stands out as an institution whose students face especially long odds of success.  At nearly half of Corinthian's schools, more than 30 percent of students default on their federal loans within three years of leaving campus, according to the most recent federal data. 

California last year cited excessively high default rates in denying access to state tuition grants at 23 of the company's campuses. Over the last three years, attorneys general in eight states and the federal Consumer Financial Protection Bureau have probed Corinthian's recruitment claims and financial aid practices, raising the prospect of lawsuits. Yet by the reckoning of the accrediting bodies that are supposed to scrutinize Corinthian's 97 U.S. campuses, its schools are meeting standards on student debt and adequately preparing graduates for jobs. 

Corinthian's success in maintaining accreditation even as its students sink into default typifies the state of play in the for-profit college industry and underscores both the incentives and the provenance of the people doing the accrediting work: Accrediting agencies receive their funding from fees paid by the very colleges they monitor. The review teams they dispatch to visit and rate schools are composed of volunteers from other schools accredited by the same agencies. 

 During a congressional hearing on higher education policy held earlier this year, one expert likened this arrangement to the cozy practices that fueled the last financial crisis, when Wall Street banks hired credit-rating agencies to certify the sanctity of the bonds they forged from risky mortgages. "This is like bond ratings firms giving AAA ratings to mortgage-backed securities sold by the same firms that pay their fees," Kevin Carey, the director of education policy at the New America Foundation, said at the hearing. "It does not work out well in the long run." 

The entire expose is linked here.