Last month I wrote about how Corinthian Colleges, one of the largest for-profit education companies in the United States, was in trouble.
A lot of trouble. After months of wrangling about the outcomes of Corinthian students, the federal government finally put a 21-day hold on the company’s access to federal grants and loans.
And that turns out to have been a serious blow. On July 4, Goldie Blumenstyk wroteat the Chronicle of Higher Education that Corinthian will die:
Corinthian Colleges Inc. will put 85 of its campuses in the United States up for sale and “teach out” the other 12 under a deal finalized with the U.S. Department of Education on Thursday night. Separately, it will sell its 10 campuses in Canada.
The department said the agreement “provides students at the company’s career colleges a chance to complete their education and protects taxpayers’ investment while Corinthian works to either sell or close its campuses across the country in the next six months.”
How did this happen to Corinthian? Why did the U.S. Department of Education start to get worked up about for-profit colleges?
This whole project started here, at the Monthly. Back in 2009 Stephen Burd wrotefor this magazine that,
Graduates of [large-scale] proprietary colleges often struggle to find jobs in their fields. This is because, in many cases, they don’t get the skills they need to compete. …It’s far easier and less expensive for schools to boost enrollment numbers through aggressive advertising and recruitment than to expend the resources to build quality schools. Corinthian and Career Education… have faced the most damning allegations when it comes to educational quality and steering students into shady private loans.
Burd was a senior policy analyst with New America’s Education Policy Program. For many years prior he was a reporter at the Chronicle of Higher Education. In 2005 he wrote a piece for that publication about another large-scale, venture capital-based for-profit education company, the Career Education Corporation. Burd had a lot of internal documents about how that company functioned, how it was enrolling more and more students in order to get more and more federal money.
That got Burd interested in how the industry worked. Students, it seemed, were taking on huge amounts of debt for programs that didn’t end up getting them jobs. And that wasn’t an unintended consequence; it seemed be the business model.
Burd moved to the New America Foundation and pitched a story to the Monthlyabout how the private student loan industry worked: students took out very high-levels of private student loans (in addition to maxing out their federally-backed grants and loans) in order to attend for-profit colleges, in the hopes of getting good jobs. Instead many of them ended up in the same dead-end jobs they had before they went to these proprietary colleges, only they owed tens of thousands in loans. They were on the hook for these loans, by law, even though the only ones who benefited financially were the for-profit colleges.
Burd focused on the worst actors here for his story, the companies with the highest debt levels, lowest repayment rates, and lowest job-placement rates. The data wasn’t perfect—it wasn’t consistently collected—but what he could find indicated that Corinthian students didn’t turn out very well.
The investigation Burd was conducting brought him in contact with a lawyer in California suing Corinthian. She put Burd in contact with several former students, who told him their stories of how they’d been hurt by attending the institution.
The story, The Subprime Student Loan Racket, detailed how policy allowed and encouraged large for-profit colleges to make gigantic profits from misleading working-class people, who were then held responsible for that debt. It came out in the November/December 2009 issue of the Washington Monthly.
The magazine received a threatening letter from Corinthian, which demanded a retraction, saying Burd’s piece contained numerous and major factual errors. There were only two minor ones, which we addressed in the form of a correction in a the next issue of the print magazine and posted at the end of the online version of the article, explaining that the article inaccurately stated that private loans made up two-thirds of financial aid package of one of the students profiled, “and that her total outstanding student loan balance was $40,000. The correct figures are 42 percent and approximately $32,000, respectively.” We did not retract the piece.
Corinthian wrote this letter in response.
More came of this story, however, much more. This had a lot to do with Iowa Senator Tom Harkin.
In August, 2009 Sen. Ted Kennedy died, and Harkin inherited the chairmanship of the Senate Committee on Health, Education, Labor, and Pensions. Harkin was looking for an issue to address. One of his staffers gave him the Burd article to read.
Harkin was intrigued and the senator called up Harris Miller, the Virginia political operative and lobbyist then serving as the president of the Career Colleges Association, the trade association representing the country’s 1,400 for-profit vocational schools in the United States (now known as the Association of Private Sector Colleges and Universities). Harkin brought Miller into his office, put the article in front of him and said “I want you to refute this and if you can’t there will be hearings.”
Miller tried but he couldn’t, at least not to Harkin’s satisfaction, and so there were hearings. Oh God were there hearings.
Over the next two years the Iowa senator brought many, many people to the Senate to talk about their experience with for-profit colleges, how the industry worked, who benefited and who suffered. Some of the testimony, such as the investor Steve Eisman’s June, 2010 statements before HELP, where he explained how for-profit colleges made money, were quite memorable.
Each hearing focused on a difference aspect of the for-profit industry. There was one on the student loans industry, one on job placement, one on recruiting students to attend for-profit colleges.
The investigation eventually culminated in this damning report about the proprietary education industry and how it operated.
This made the administration, and the American public in general, critical of for-profit colleges. Eventually, with pressure from senators involved with the HELP committee’s investigations (Illinois Sen. Dick Durbin in particular), President Barack Obama’s Department of Education began to get involved in the process too.
If for-profit colleges were exploiting the rules of federal financial aid in order to make more money (backed by federal rules so that even if students couldn’t pay back the money because they didn’t get very good jobs for-profits never suffered financially) maybe it was time for more regulations for for-profit colleges.
In 2010 the Obama administration proposed a gainful employment rule, which would render colleges ineligible for federal financial aid if average former students had to spend too much of their salaries paying off student loans.
The U.S. Department of Education, whose federally-backed grants and loans accounted for more than 80 percent of the company’s revenue, became concerned about Corinthian “falsifying job placement rates and misleading students about financial aid obligations,” according to an article in the Los Angeles Times. The Department asked the company to provide more information about job placement and debt loads. When the company stalled, the feds put that waiting period on access to federal money. And the company, it seemed, just couldn’t survive without all of that government cash.
As according to the phrase Martin Luther King Jr. made famous, “The arc of the moral universe is long, but it bends towards justice.” Sometimes it takes a while for things like these to work out.
It’s nice to have played a part in this process, however minor and however early.
