The Consumer Financial Protection Bureau this week sued for-profit Corinthian Colleges for predatory loan practices and illegal collection strategies. The lawsuit accuses Corinthian of a variety of illegal and misleading actions against its students. As longtime readers will know, I’m a big fan of the West Wing television show and the Corinthian case reminds me of a quote from the show, “This is why good people hate us.” A Republican member of Congress is trying a surprise line of questioning to embarrass a witness and “win” the hearings. The quote is from the majority counsel who is disgusted by the strategy. To me, the allegations against Corinthian are precisely why good people hate for-profit higher education.
The for-profit sector has made strides in reaching students—particularly adult students—that traditional colleges can’t or won’t serve.
Yet, the continued excesses and misleading actions of bad actors in the sector undermine the potential positive role that for-profits could play in improving college access and attainment.
As an example, consider the most significant charges against Corinthian.
1. Corinthian campuses made up fake employers and matched students with these fake entities in order to meet job placement standards.
2. Corinthian paid employers $2,000 to employ graduates for 30 days to meet job placement standards.
3. Corinthian used illegal and bullying tactics on students that were 90 days past due on student loans. They would cut off computer access and pull students out of class. In addition, Corinthian increased tuition to force students to take out private student loans. To add insult to injury, 57% of students made less than $19,000 and had little ability to repay particularly while enrolled in classes. The entire practice was to keep in line with the federal 90-10 rule that says for-profits can’t get more than 90% of their revenue from federal aid.
These are abhorrent practices that must not be allowed.
As bad as these actions are on their face, the fact that federal grants and loans made up the bulk of Corinthian’s revenues is even more disgusting.
Simply put, the company relied primarily on federal student aid to help their bottom line and engaged in these illegal and deceptive practices to keep the federal gravy train running.
There was no concern for students. There was no concern for federal law. There was no serious attempt to help students with career services.
This was abuse.
Fortunately, Corinthian has been in trouble for a while and is going to be closing.
However, there is irreparable harm to many students that were looking for postsecondary education.
For-profit supporters would argue that Corinthian is an anomaly and shouldn’t be used to judge the entire sector.
Yet, we know that many colleges engage in similar practices if not to the degree of Corinthian.
We also know many non-profit higher education institutions take advantage of students and need to improve their own practices.
Yet, at the end of the day, the action of Corinthian continue to shed a bad light on all for-profit higher education providers.
Students, the government, and the public can’t trust these institutions to provide the education promised or follow federal law.
And yes, for-profit higher ed, this is why good people hate you.