Monday, December 8, 2014

Debt-Collecting Agency Will Buy For-Profit Corinthian College Chain

By Diane Ravitch 

One of the nation’s largest for-profit providers of college degrees has been sold, according to Inside Higher Ed, to a debt-collection agency.

The ECMC Group, a nonprofit organization that runs one of the largest student-loan guaranty agencies, announced Thursday that it will purchase 56 campuses from Corinthian Colleges, a crumbling, controversial for-profit chain.

ECMC will create a nonprofit subsidiary, called the Zenith Education Group, to run the campuses, which enroll more than 39,000 students. The sale price is $24 million, according to a corporate filing from Corinthian. After having absorbed more than half of Corinthian’s enrollment and assets, Zenith will operate the nation’s largest chain of nonprofit career-oriented campuses.

Corinthian’s Everest, Heald and Wyotech chains include 107 campuses, which in July enrolled 72,000 students and employed 12,000. The company has been attempting to sell 85 U.S. and 10 Canadian locations, while gradually closing 12 campuses.

The sale announced Thursday includes 53 Everest College and three WyoTech campuses. 

Corinthian had been teetering even before a 21-day freeze on federal aid payments pushed it over the edge earlier this year. The company, which is one of the sector’s largest, had been hit hard by slumping enrollment and revenue, as well as investigations, lawsuits and bad publicity.

The for-profit higher education industry has long been under investigation for defrauding students, but it survives nonetheless because it hires the top lobbyists in both parties to protect it against regulation. Senator Tom Harkin of Iowa (who just retired) issued a scathing report on the industry in 2012 that unfortunately went nowhere. This story appeared in the New York Times:

“According to the [Harkin] report, which was posted online in advance, taxpayers spent $32 billion in the most recent year on companies that operate for-profit colleges, but the majority of students they enroll leave without a degree, half of those within four months.

“In this report, you will find overwhelming documentation of exorbitant tuition, aggressive recruiting practices, abysmal student outcomes, taxpayer dollars spent on marketing and pocketed as profit, and regulatory evasion and manipulation,” Mr. Harkin, an Iowa Democrat who is chairman of the Senate Health, Education, Labor and Pensions Committee, said in a statement on Sunday. “These practices are not the exception — they are the norm. They are systemic throughout the industry, with very few individual exceptions….

Over the last 15 years, enrollment and profits have skyrocketed in the industry. Until the 1990s, the sector was made up of small independent schools offering training in fields like air-conditioning repair and cosmetology. But from 1998 to 2008, enrollment more than tripled, to about 2.4 million students. Three-quarters are at colleges owned by huge publicly traded companies — and, more recently, private equity firms — offering a wide variety of programs.
Enrolling students, and getting their federal financial aid, is the heart of the business, and in 2010, the report found, the colleges studied had a total of 32,496 recruiters, compared with 3,512 career-services staff members.

Among the 30 companies, an average of 22.4 percent of revenue went to marketing and recruiting, 19.4 percent to profits and 17.7 percent to instruction.

Their chief executive officers were paid an average of $7.3 million, although Robert S. Silberman, the chief executive of Strayer Education, made $41 million in 2009, including stock options.

With the Department of Education seeking new regulations to ensure that for-profit programs provide training for “gainful employment,” the companies examined spent $8 million on lobbying in 2010, and another $8 million in the first nine months of 2011.

The bulk of the for-profit colleges’ revenue, more than 80 percent in most cases, comes from taxpayers. The report found that many for-profit colleges are working desperately to find new strategies to comply with the federal regulation that at least 10 percent of revenue must come from sources other than the Department of Education. Because veterans’ benefits count toward that 10 percent even though they come from the federal government, aggressive recruiting of students from the military has become the norm.

The amount of available federal student aid is large and growing. The Apollo Group, which operates the University of Phoenix, the largest for-profit college, got $1.2 billion in Pell grants in 2010-11, up from $24 million a decade earlier. Apollo got $210 million more in benefits under the Post-9/11 G.I. Bill. And yet two-thirds of Apollo’s associate-degree students leave before earning their degree….

On average, the Harkin report found, associate-degree and certificate programs at for-profit colleges cost about four times as much as those at community colleges and public universities.
And tuition decisions seem to be driven more by profit-seeking than instructional costs. An internal memo from the finance director of a Kaplan nursing program in Sacramento, for example, recommended an 8 percent increase in fees, saying that “with the new pricing, we can lose two students and still make the same profit.” Similarly, the chief financial officer at National American University wrote in an e-mail to executives that the university had not met its profit expectation for the summer quarter, so “as a result” it would need a midyear tuition increase.

Advocates for the for-profit higher education industry complained that their institutions were under attack solely for partisan reasons.
Given this background, one might expect that the U.S. Department of Education would vigorously oppose these for-profit institutions that cost so much and deliver so little to students. 

But, no, when Corinthian Colleges teetered close to bankruptcy, the U.S. DOE gave it a bridge loan to help the chain stay in business until a buyer for the distressed corporation emerged. More than half of the Corinthian chain of for-profitcolleges has been purchased at a bargain basement price of $24 million by a debt-collection agency called ECMC (the Educational Credit Management Corporation). Corinthian was once valued at $3.4 billion. The negotiations were handled by Undersecretary of Education Ted Mitchell, who previously was CEO of NewSchools Venture Fund (which funds charter schools, charter chains, and education technology startups). Consumer advocates were upset that ECMC was taking over a chain of colleges, in light of the fact that it has no experience running educational institutions:
“A chorus of consumer and student advocacy groups said they had serious concerns about the sale. They expressed concern that the campuses would be run by an organization that has not previously managed academic institutions.

“ECMC has no experience running a college, let alone one of this scale, and is instead known for ruthless and abusive student loan operations,” the Institute for College Access and Success, known as TICAS, said in a statement. “With so many other colleges offering lower price, higher quality career education programs, it’s unclear why this agreement is in the interests of either students or taxpayers.”

Higher Ed Not Debt, a coalition of progressive organizations and unions that focuses on student loan issues, similarly took issue with ECMC’s “storied history of harshly preventing the discharge of students’ loans in bankruptcy.”

“While bailing out 56 schools, the sale treats the more than 30,000 students like financial assets,” Maggie Thompson, the group’s campaign manager, said in a statement. “All students should have the opportunity to opt-out of the sale and receive full refunds including full loan discharges of both federal and private loans.”

Durbin, the top-ranking Democratic Senator, has relentlessly criticized Corinthian in recent months. He did not directly praise or criticize Thursday’s agreement, saying only that the sale of the campuses “should focus on sparing the students who have been victimized and the taxpayers who continue to be on the hook.” 

This was an opportunity for the U.S. Department of Education to close down some of the lowest-performing colleges in the nation. This was an opportunity to take a stand against the entire for-profit sector. But the Department of Education structured a deal to save what should have been closed. A lost opportunity. But it does refute those critics from the for-profit sector who claim that their online institutions are unfairly targeted by Democrats.

Wednesday, October 29, 2014

Civil rights orgs seek strong gainful employment rule

 A coalition of eight civil rights organizations released a policy brief today urging the U.S. Department of Education to release a strong gainful employment regulation to protect students, particularly African-American and Latino students, from substandard career education programs.

The brief, “Gainful Employment: A Civil Rights Perspective,” documents the adverse outcomes that African-American and Latino students experience as a result of policies and practices implemented at for-profit colleges.  Students at for-profit colleges are much less likely to graduate, more likely to default, and more likely to incur debt than students at public and non-profit schools. The brief details how a strong gainful employment rule will provide much needed protections to both students and taxpayers.

In Milwaukee, for-profit colleges have targeted low-income and minority students with promises of job placement and a career, but delivered little more than huge debts. Yesterday, the Wisconsin Attorney General sued Everest College for its fraudulent practices, including a job placement rate of 5%. But others like Globe University, ITT, Kaplan and the Art Institute continue to game the federal financial aid system, a source of 90% of for-profit college revenues, and enroll unsuspecting students.
“Stronger oversight is desperately needed to tackle the problems of poor outcomes and high debt within career education programs,” the brief urges. “Currently, even when better and lower cost options are available, African-American and Latino students are disproportionately enrolled in schools where they are both likely to borrow and unlikely to succeed, and there are few incentives for schools to improve poorly performing programs.” font-family: arial, sans-serif; font-size: 12px;">

Click here to download the brief.

The brief was released by the Center for Responsible Lending, the Children’s Defense Fund, the Lawyers’ Committee for Civil Rights Under the Law, The Leadership Conference on Civil and Human Rights, MALDEF, the NAACP, the NAACP Legal Defense and Educational Fund, and the National Council of La Raza.

Wednesday, October 15, 2014

14 Attorney Generals endorse legislation regulating for-profit schools

More than six months after a bill that would improve coordination and oversight of the for-profit college industry was introduced in the Senate and House, a number of state attorney generals have signed on in support.

Fourteen attorneys general sent a letter [PDF] of support to senators Dick Durbin, of Illinois and Tom Harkin, of Iowa, as well as representative Elijah Cummings of Maryland for their efforts in introducing the Proprietary Education Oversight Coordination Improvement Act in the Senate and House back in April.

The AGs are from a diverse group of states- Arkansas, Connecticut, Illinois, Iowa, Kentucky, Maine, Maryland, Mississippi, Missouri, Nevada, New Mexico, Oregon, Pennsylvania and Tennessee

Wisconsin’s AG, J.B. Van Hollen, is absent from this list despite the fact that thousands of students from Wisconsin have accumulated huge debts attending for-profit colleges and many of these schools have abysmal job placement and graduation rates. The Wisconsin’s Education Approval Board attempted to pass state standards for these schools in 2011, but their efforts were undermined by intense industry opposition and Governor Walker’s decision to dismiss three members of the governing Board.

The issue emerged in Wisconsin’s Attorney General race last week during a debate. When asked what they would change if elected, Jefferson County DA and Democratic candidate for AG, Susan Happ, said she would aggressively prosecute for-profit colleges that engaged in fraudulent activity while Brad Schimel, the Waukesha County DA and Republican candidate, said he would not.  

The Ag’s letter released Tuesday, October 7th said the that the proposed Act “is both timely and necessary as each of our offices have encountered far too many former and current for-profit school students who have been harmed by the dishonest and unethical practices of some for-profit institutions.”

The group says passage of the Act, which would create an interagency oversight committee to improve enforcement of federal laws and regulations as they pertain to the industry, will provide a mechanism to hold for-profit schools accountable for accepting billions of dollars in taxpayer money.

“There are some schools within the for-profit college industry that are more interested in getting their hands on federal student loan dollars than in educating students,” Kentucky Attorney General Jack Conway says in a news release. “The for-profit college industry lacks real oversight and accountability at the federal level, and this legislation will help prevent future abuses of the student loan system and keep for-profit schools honest.”

The proposed Proprietary Education Oversight Coordination Committee would consist of representatives from the Dept. of Education, Consumer Financial Protection Bureau, the Dept. of Justice, Securities and Exchange Commission, Dept. of Defense, Dept. of Veteran Affairs, Federal Trade Commission, Dept. of Labor, and Internal Revenue Service.

The committee would work with attorneys general at the state level to coordinate federal and state activities related to the for-profit college industry. Currently, several states, including Kentucky and California, are party to lawsuits against proprietary colleges for misleading students about job placement rates.

The group applauded the proposed bill’s proactive stance by warning prospective students about specific, allegedly predatory schools.

Each year the committee established under the bill would publish a warning list of schools that have engaged in illegal activities, had programs withdrawn or suspended and or have been proven to engage in abuse, unethical, fraudulent or predatory practices. The measure would arm students with information that could prevent them from falling into the debt-trap that has become the for-profit college industry.

“State Attorneys General across the country hear complaints from students who have attended for-profit schools,” the letter of support states. “The students are drowning in debt because they have huge student loan liabilities and no job to show for those huge debts.”

There have been several high-profile events and reports regarding the for-profit industry since the bills introduction several months ago.

In early summer, the Department of Education cut off the funnel of federal dollars received by Corinthian Colleges Inc, the operator of for-profit schools Everest University, Heald College and WyoTech. As a result, CCI agreed to sell or close the vast majority of its campuses across the country.

Back in September, the Consumer Financial Protection Bureau announced it was suing CCI for allegedly duping tens of thousands of student into taking out costly predatory, and often financially devastating student loans. The suit seeks to halt CCI’s practices and provide relief to students who have collectively taken out $569 million in school issued private student loans.

Also in September, ITT Education Services announced it was under increased scrutiny from Securities & Exchange Commission and the Department of Education for failure to provide financial statements.

The Proprietary Education Oversight Coordination Improvement Act currently awaits the consideration from Health, Education, Labor and Pension committee in the Senate and consideration from the Higher Education and Workforce Training committee in the House.

Tuesday, October 7, 2014

Happ announces plan to crack down on for-profit scams

Jefferson — Attorney General candidate Susan Happ will crack down on the growing number of for-profit colleges that prey on Wisconsin students and veterans, she said Friday.

“Unscrupulous for-profit colleges are luring students with promises they can’t keep, leaving many of them with no degrees of little value or no degrees at all, but mountains of debt,” Happ said. “As Attorney General, I will investigate, prosecute and seek hefty penalties for deceptive practices, and work to see that students are made whole,” she said. 

In a policy paper issued Friday, Happ said veterans are a special target of the for-profit schools because of a provision in federal law that works to the schools’ advantage if they receive veterans’ benefits. 

Many for-profit colleges across the nation and in our state play by the rules and provide Wisconsin students with a solid education.” Happ said. “These by-the-book colleges, however, have to compete with an increasing number of schools utilizing high pressure sales techniques that misrepresent the costs and benefits of the programs they offer, their graduation placement rate, their accreditation status and whether credits will transfer to another institution.” 

Their high-pressure tactics and deceptive marketing violate state consumer protection laws,” Happ said. “We will seek hefty penalties, sending a message that Wisconsin will not permit them to profit from peddling a subpar education to our veterans and low-income students who need it the most.” 

Happ’s plan also calls for partnering with other state Attorneys General and federal agencies to adopt best practices from other states, supporting legislation and regulation to help curb the deceptive practices, and collaborating with the state Dept. of Veterans Affairs, the federal Veterans Administration, and other agencies serving Wisconsin veterans to educate veterans about the perils of dealing with some in the industry, and warning them about what to watch for when choosing a college. 

There are currently 162 post-secondary for-profit institutions servicing Wisconsin students. While most have a presence in the state, many are located out of state but service Wisconsin students. The Wisconsin Educational Approval Board estimates 26,000 Wisconsin students attend for-profit online colleges annually, paying nearly $155 million in tuition to mostly out-of-state companies.

Wednesday, September 17, 2014

Federal Government sues Corinthian College

Yesterday,  the Consumer Financial Protection Bureau (CFPB) sued for-profit college chain Corinthian Colleges, Inc. for its illegal predatory lending scheme. The Bureau alleges that Corinthian lured tens of thousands of students to take out private loans to cover expensive tuition costs by advertising bogus job prospects and career services. Corinthian then used illegal debt collection tactics to strong-arm students into paying back those loans while still in school. To protect current and past students of the Corinthian schools, the Bureau is seeking to halt these practices and is requesting the court to grant relief to the students who collectively have taken out more than $500 million in private student loans.

“For too many students, Corinthian has turned the American dream of higher education into an ongoing nightmare of debt and despair,” said CFPB Director Richard Corday. “We believe Corinthian lured consumers into predatory loans by lying about their future job prospects, and then used illegal debt collection tactics to strong-arm students at school. We want to put an end to these predatory practices and get relief for the students who are bearing the weight of more than half a billion dollars in Corinthian’s private student loans.”

The complaint against Corinthian can be found at:

Corinthian Colleges, Inc. is one of the largest for-profit, post-secondary education companies in the United States. The publicly traded company has more than 100 school campuses across the country. The company operates schools under the names Everest, Heald, and WyoTech. As of last March, the company had approximately 74,000 students.

Corinthian opened an Everest College campus in Milwaukee in 2011 with the support of the Metropolitan Milwaukee Chamber of Commerce's President Tim Sheehy and the Commissioner of the Department of City Development Rocky Marcoux. Controversial from the start because of lawsuits alleging fraudulent practices in other states, Corinthian closed its Milwaukee Everest campus less than two years after it opened. At the time it closed, Everest had a drop-out rate of more than 50% and a job placement rate of less than 6%. 

In June, the U.S. Department of Education delayed Corinthian’s access to federal student aid dollars because of reports of malfeasance. Since then, Corinthian has been scaling down its operations as part of an agreement with the Department of Education. However, Corinthian continues to enroll new students.

Today’s CFPB lawsuit alleges a pervasive culture across the Everest, Heald, and WyoTech schools that allowed employees to routinely deceive and illegally harass private student loan borrowers. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB has the authority to take action against institutions engaging in unfair, deceptive, or abusive practices. Based on its investigation, the CFPB alleges that the schools made deceptive representations about career opportunities that induced prospective students to take out private student loans, and then used illegal tactics to collect on those loans. Today’s lawsuit covers the period from July 21, 2011 to the present.

Lured Into Loans By Lies
Most students who attend Everest, Heald, and WyoTech schools come from economically disadvantaged backgrounds and many are the first in their families to seek an education beyond a high school diploma. According to internal Corinthian documents, most students lived in households with very low income. Today’s lawsuit alleges that the schools owned by Corinthian Colleges, Inc. advertised their education as a gateway to good jobs and better careers. It alleges that throughout the Corinthian schools, consumers were lured into loans by lies, including:
 ·         Sham job placement rates: The CFPB alleges that Corinthian’s school representatives led students to think that when they graduated they were likely to land good jobs and sufficient salaries to repay their private student loans. But the CFPB believes that Corinthian inflated the job placement rates at its schools. Based on its investigation, the CFPB alleges that this included creating fictitious employers and reporting students as being placed at those fake employers.

·         One-day long “career”: According to the CFPB’s investigation, Corinthian schools told students they would have promising career options with an Everest, Heald, or WyoTech degree. But Corinthian counted a “career” as a job that merely lasted one day, with the promise of a second day.

·         Pay for placement: The CFPB also alleges that the Corinthian schools further inflated advertised job placement rates by paying employers to temporarily hire graduates. The schools did not inform students about these payments or that these jobs were temporary.

·         Craigslist career counseling: According to the CFPB’s investigation, the Corinthian schools promised students extensive and lasting career services that were not delivered. Students often had trouble contacting anyone in the career services office or getting any meaningful support. The limited career services included distributing generally available job postings from websites like Craigslist.

Predatory Loans
Tuition and fees for some Corinthian programs were more than five times the cost of similar programs at public colleges. In 2013, the Corinthian tuition and fees for an associate’s degree was $33,000 to $43,000. The tuition and fees for a bachelor’s degree at Corinthian cost $60,000 to $75,000.

The CFPB believes the Corinthian colleges deliberately inflated tuition prices to be higher than federal loan limits so that most students were forced to rely on additional sources of funding. The Corinthian schools then relied on deceptive statements regarding its education program to induce students into taking out its high-cost private student loans, known as “Genesis loans.” Today’s lawsuit alleges that under the Genesis loan program:

·         Interest rates were more than twice as expensive: Corinthian sold its students predatory loans that typically had substantially higher interest rates than federal loans. In July 2011, the Genesis loan interest rate was about 15 percent with an origination fee of 6 percent. Meanwhile, the interest rate for federal student loans during that time was about 3 percent to 7 percent, with low or no origination fees.

  •  Loans were likely to fail: Corinthian expected that most of its students would ultimately default on their Genesis loans. In fact, more than 60 percent of Corinthian school students defaulted on their loans within three years. The Everest, Heald, and WyoTech schools did not tell students about these high default rates. Defaulting on private student loans can have grave consequences for consumers, including affecting a borrower’s job prospects and making it difficult to get any kind of loan for years. 

Strong-Armed by Illegal Debt Collection Tactics
Under the Genesis loan program, nearly all student borrowers were required to make monthly loan payments while attending school. This is unusual; federal loans and almost all other sources of private student loans do not require repayment until after graduation. This put pressure on Everest, Heald, and WyoTech students to come up with funding while attending school. Today’s lawsuit alleges that Corinthian took advantage of this position of power to engage in aggressive debt collection tactics. The CFPB alleges that Corinthian’s campus staff members received bonuses based in part on their success in collecting payments from students. The debt collection tactics included:

·         Pulling students out of class: The CFPB’s investigation revealed that Corinthian’s efforts to collect payments included shaming students by pulling them out of class. Financial aid officers would inform instructors and other staff that students were past due on their Genesis loans. Corinthian schools also required students to meet with campus presidents to discuss the seriousness of the overdue loans. At one Corinthian campus, students and employees referred to one financial aid staff member as the “Grim Reaper” because the staff member so frequently pulled students out of class to collect debts.

·         Putting education in jeopardy: According to the CFPB’s investigation, the Corinthian colleges jeopardized students’ academic experience by denying them education until they paid up. They blocked students’ access to school computer terminals and other academic resources. The Corinthian schools also prevented students from attending and registering for class, and from receiving their books for their next classes.

·         Withholding diplomas: According to the CFPB investigation, Corinthian schools informed students that they could not participate in the graduation ceremony or would have their certificate withheld if they were not current on their Genesis loan in-school payments. In many cases, financial aid staff threatened that if students did not become current on their loans, they could not graduate or start their externships. Some former students stated that Corinthian schools continue to withhold their certificates because they are unable to make payments on their Genesis loans.

Halting Illegal Conduct and Obtaining Relief for Private Student Loan Borrowers
Today’s lawsuit seeks, among other things, compensation for the tens of thousands of students who took out Genesis loans. The CFPB estimates that from July 2011 through March 2014, students took out approximately 130,000 private student loans to pay tuition and fees at Everest, Heald, or WyoTech colleges. Some of these loans have been paid back in part or in full; the total outstanding balance of these loans is in excess of $569 million.

The CFPB is seeking redress for all the private student loans made since July 21, 2011, including those that have been paid off. In its lawsuit, the CFPB is also seeking to keep Corinthian from continuing the illegal conduct described above, and to prevent new students from being harmed.

Today the CFPB is also publishing a special notice for current and former Corinthian students to help them navigate their options in this time of uncertainty, including information on loan discharge options.

The CFPB Notice for Current and Former Corinthian Students can be found at:

The CFPB estimates that there is approximately $1.2 trillion in outstanding student loan debt, with more than 7 million Americans in default on more than $100 billion in balances. Students and their families can find help on how to tackle their student debt on the CFPB's website.

The Bureau’s complaint is not a finding or ruling that the defendant has actually violated the law.

Monday, September 1, 2014

Labor Day: America needs a full employment agenda

Editorial reprinted from the NYTimes

In the months before Labor Day last year, job growth was so slow that economists said it would take until 2021 to replace the jobs that were lost or never created in the recession and its aftermath.
The pace has picked up since then; at the current rate, missing jobs will be recovered by 2018. Still, five years into an economic recovery that has been notable for resurging corporate profits, the number and quality of jobs are still lagging badly, as are wages and salaries.
In 2013, after-tax corporate profits as a share of the economy tied with their highest level on record (in 1965), while labor compensation as a share of the economy hit its lowest point since 1948. Wage growth since 1979 has not kept pace with productivity growth, resulting in falling or flat wages for most workers and big gains for corporate coffers, shareholders, executives and others at the top of the income ladder.
Worse, the recent upturn in growth, even if sustained, will not necessarily lead to markedly improved living standards for most workers.
That’s because the economy’s lopsidedness is not mainly the result of market forces, but of the lack of policies to ensure broader prosperity. The imbalance will not change without labor and economic reforms.
For instance, new research from the Economic Policy Institute shows that from the first half of 2013 to the first half of 2014, hourly wages, adjusted for inflation, fell for nearly everyone. An exception was a small gain for the bottom 10 percent of wage earners, which was because of minimum-wage increases in 13 states this year.
That’s clear evidence that raising the federal minimum wage, while only a first step toward better pay, would have a powerful effect. A lift from the current $7.25 an hour to the modest $10.10 called for by President Obama and Democrats in Congress would put an estimated additional $35 billion in the pockets of affected workers over a three-year phase-in period.
Unionization is also associated with higher wages and benefits, especially for low-wage workers, which argues for greater legal enforcement of the right to organize without retaliation.
Similarly, stronger enforcement of both labor laws and antitrust laws is needed to ensure against wage theft. Once assumed to be mainly an issue of unpaid overtime or other wage violations, wage theft became a white-collar issue this year, when it was revealed that collusion among the biggest companies in Silicon Valley had suppressed the pay of software engineers by an estimated $3 billion.
The pay of middle-income workers has also been diminished. Decades of outsourcing government jobs to the private sector has undercut public employment, once a mainstay of middle-class life, even as evidence has mounted that outsourcing often does not save money or improve services. What’s needed is a systematic review of government contracts with the private sector and a willingness to end those that are counterproductive.
Another threat to middle-class wages is rampant misclassification — of employees as independent contractors and of workers as supervisors — a tactic that employers use to deny pay and benefits that would otherwise be due. In a promising development, a federal appellate court recently ruled that drivers for FedEx in California are employees, not independent contractors, an example of the courts stepping in when the other branches of government have let an injustice persist.
There has been progress since last Labor Day. Mr. Obama has signed executive orders to improve the pay and working conditions of employees of federal contractors. The Labor Department is revising rules on overtime pay; simply updating them for inflation would make millions of additional workers eligible for time-and-a-half for overtime.
What is still lacking, however, is a full-employment agenda that regards labor, not corporations, as the center of the economy — a change that would be a reversal of the priorities of the last 35 years.

Monday, August 25, 2014

Study: for-profit college degrees have no value in labor market

A recent study conducted by the National Center for Analysis of Longitudinal Data in Education Research found that students who graduated from for-profit colleges with thousands of dollars in student loan debt have the same chances of getting called back for an interview as a peer who has no college experience at all and zero student loan debt.

According to a report released in 2012, the average cost for a two-year associate’s degree at a for-profit college is $35,000 compared to $8,300 for a similar degree at a community college. The same study also shows that roughly 60%of for-profit college students take out a student loan versus just 13% of community college students.

Researchers of the study sent nearly 9,000 fake résumés to job openings in six different career categories and compared those responses to the responses of applicants that had community college experience or no college experience at all. font-family:

Hopefully, studies like these will have scholars thinking twice before they fall for the next for-profit college commercial seen on television.

Tuesday, July 29, 2014

Governor Walker praises predatory for profit college

In 2010, Wisconsin Governor Scott Walker slashed technical college funding by 30%, reducing state funding to levels last seen in the 1980's. Walker also cut the University of Wisconsin system's funding by $250 million. 

These cuts lead to increased tuition and reduced sections and services to students. 
Yesterday, Walker toured and praised a predatory for-profit college, ITT Tech, that is currently under investigation for fraud by the federal Consumer Financial Protection Bureau. 
MATC instructors are well aware of ITT because so many of our students are former ITT students who are saddled with huge debts and worthless ITT Tech credits. Joriah Siemann was one such student. When Milwaukee Magazine interviewed Joriah in 2012, the 39-year-old still owed $20,000 to ITT Tech in Greenfield, the very college Walker praised. 
 Joriah earned an associate degree from ITT in computer networking in 2004 after learning about the program online. After an entry exam, Siemann told Milwaukee Magazine, he felt pressured by his admissions representative to enroll on the spot. He acquiesced, not realizing he’d also taken out $35,000 in loans to pay for his tuition. To top it off, he says the school’s job-placement efforts were subpar. “They didn’t help me find a job at all,” Siemann says. “I’m kicking myself for going to ITT.”  

The United States Senate report (see below) on for profit colleges suggests that ITT’s priorities are not educating or helping place students in jobs. It found that nationwide in 2010, ITT employed one recruiter for every 34 students, but one career counselor for every 204 and one student services employee for every 807.  

Siemann was working two jobs – as a systems administrator and a restaurant server – and was enrolled at MATC while paying off his ITT degree when he was interviewed by Milwaukee Magazine in 2012.

Walker claims that ITT Tech in Greenfield has a good record. But the experience of students like Joriah contradict the Governor's talking points.

Saul Newton, an Afghanistan army veteran and a UW Waukesha student wrote the following op ed in the Milwaukee Journal Sentinel in response to Walker's visit to ITT:

 Governor Scott Walker expressed his support for a for-profit college under investigation in multiple states and by the federal Consumer Financial Protection Bureau, claiming their track record has been positive.

The Governor’s comments came during an official tour at the ITT Technical Institute Center for Career Development in Greenfield on Monday afternoon. Walker toured the facility and spoke with students and faculty. 

“The track record they’ve had in the Milwaukee area, at least, has been a positive one,” said Walker.

ITT Technical Institute is a for-profit technical college operating 144 campuses in 35 states. According to the Consumer Financial Protection Bureau, ITT’s tuition costs are among the highest in the nation. In Wisconsin, an Associate’s degree program can cost up to $44,000, and a Bachelor’s degree program can cost over $89,000.

In 2012 the Educational Approval Board, the state agency charged with overseeing for-profit and independent colleges, foundthat 51% of ITT students in Wisconsin drop out before completion of their program. Only two other institutions had a higher drop out rate. One Wisconsin based ITT program saw 93% of students drop out. 

ITT Tech relies heavily on veterans to pad its revenues. According a scathing report by the U.S. Senate Committee on Health, Education, Labor and Pensions, Sen. Tom Harken (D-IA) found that ITT focused specifically on recruiting military veterans and service members. 

ITT Technical Institute collected $178 million in veterans benefits from 2009-2011. ITT was the second highest recipient of revenue from military educational benefits among institutions the HELP Committee examined. The report alleged highly deceptive and fraudulent recruiting practices toward veterans and active duty military members.

When asked about ITT’s recruiting practices toward the military, Governor Walker defended the college.

“That may be the experience they’ve had in other places, but the experience we’ve seen with folks working in this state has been pretty positive. We actually have a stronger GI Bill in the state of Wisconsin than they do nationally.”

In February, the CFPB filed a lawsuit in federal court alleging ITT Technical Institute pushed students into predatory high-interest student loans and mislead them about job prospects and salaries upon graduation.

"ITT marketed itself as improving consumers' lives but it was really just improving its bottom line," said CFPB Director Richard Corday. "We believe ITT used high-pressure tactics to push many consumers into expensive loans destined to default.”

ITT is also under investigation by thirteen state Attorneys General for predatory and fraudulent recruiting practices. 

An estimated 26,000 students attend for-profit colleges in Wisconsin, paying $155 million every year in tuition to mostly out of state companies.

In 2010, following the unexpected closure of several campuses in the Milwaukee area, a state committee was established to set performance standards at for-profit schools like ITT. After meeting just one time, Walker replaced three members of the seven members serving on the committee. It was dissolved shortly thereafter.

The for-profit college industry has been a significant factor in the explosion of student loan debt across the country. ITT collected $586 million in federal student loans. The HELP Committee report concluded more than 1 in 5 students who attended a for-profit college but did not graduate defaulted on their student loans within three years, more than three times the rate of student attending other types of institutions. 

Student loan debt is a serious drag on our state's economy. Research from One Wisconsin Institute, a liberal advocacy organization in Madison, showed that those with a student loan are twice as likely to rent or live with others than owning their own home and they are twice as likely to own a used, rather than new car. New cars are the driving force for the American auto industry. One Wisconsin's research shows we lose over $200 million every year in Wisconsin in new car purchasing power directly attributable to student loan debt.
For-profit colleges like ITT Technical Institute continue to operate in Wisconsin with no standards for student achievement. Given the Governor’s comments, that trend is likely to continue.