Saturday, May 9, 2015

Mo' Money Mo' Problems

For-profit universities and colleges educate about 12% of the postsecondary population.  They attempt to appeal to potential students by highlighting how their school adapts to youhow school can fit around your schedule, and in general how returning to school can change your life, specifically your financial situation.. A for-profit university business model was essentially created in 1992, when the House Committee on Education created the 90-10 rule.  The 90-10 rule allowed students to receive federal student aid eligibility for the universities, if the education from the university is valuable enough that the student would be willing to pay up to 10% of the total cost of the education out of pocket.  Only veterans are exempt from the rule that prohibits students receiving more than 90% of financial student aid from the federal government.  But for profit universities have succeeded in the years immediately following the recession as more and more people were looking to go back to school or attend college for the first time.

The Institute for Higher Education Policy issued a press release stating that "low-income students-between the ages of 18 and 26 and whose total household income is near or below the poverty level-are more likely to be overrepresented at for-profit institutions and are underrepresented at public and private four year institutions."  Possibly even more troubling is that this has been a part of a trend, from "2000 to 2008, the percentage of low-income students enrolling in for-profits increased from 13 to 19 percent, while the percentage enrolling public four-year institutions declined from 20 percent to 15 percent."


There are two ways to look at this.  One is that you can believe what these institutions are saying.  For-profit universities and colleges have long stated that the reason for their colleges to exist is to allow those in the lower socioeconomic statuses to be able to create a way for them to move up to the middle class.  One of the ways that they claim they are doing this is to offer free GED courses at some of the universities.  This has taken place at a number of Everest College locations.  Everest College is a property of Corinthian Colleges, Inc., based in Santa Ana, California. The other way of looking at this is that they are trying to prey on those in the lowest socioeconomic status.  They do this by putting commercials on during times to attract those who are unemployed, by being on during Jerry Springer, Maury, and other daytime shows.  The commercials attempt to sell people on the idea that the lifestyle that they want is just a matter of choice of going to this college.  Many of these students are the first in their families to attend college and are simply unprepared for determining the difference between attending a for-profit university and a more rigorous educational institution.  It's easy to assume the worst in people instead of thinking the best.  But, for-profit universities and institutions might be even harder to assume the best.


A major for-profit university group puts a job listing through a staffing agency, encouraging people with customer service experience to apply.  But primarily, what they are looking for are people who have experience in sales.  The job is for a student services associate.  When these colleges/universities show their commercials, there is a 1-800 number listed to find out how you can begin your new career today.  This 1-800 number is connected to a call center.  These student services associates are the first points of contact for potential students.  Company documents for the for-profit university and the job listing reiterate the point that the job is primarily selling the school/product.  Despite the job title role, the primary role of the student services associate is to sell the product and to delay any answers to questions that potential students have, for the local institution.  Not surprisingly, this job role is listed as being in the marketing department.


Student service associates are trained to be a combination of salesperson and PBX Operator as the goal for each phone call is for the prospective student to visit the campus.  They do this by speaking to an admissions representative at the local campus or scheduling an appointment with the call center representative.  The trainer for one of the for-profit universities frequently mentions that besides buying a car and a home, education will be the most expensive purchase for these students and that people don't buy these expensive things by reading about it online or talking about it on the phone.  They have to come and experience it before they buy it.


Most of the money that for profit universities "earn" are from federal financial aid programs.  The share of federal funds going to for-profit universities doubled from 2001 to 2010 increasing from 12.2% to 24.8% from 2001 to 2010, according to a Senate report by Senator Tom Harkin (D-IA).  In terms of dollars, there was an increase of funds $5.4 billion to $32.2 billion during the same time period.  In 2010, the company college mentioned above received 81.9% of its revenue from federal financial aid programs.  The 30 companies that the Senate Education Committee examined received 79% of their total revenue from federal financial aid programs.  The Pell Grant program which is one of the largest federal programs to assist economically disadvantaged students has also increased the revenues for for-profit universities.  According to the Senate Education Committee's report, from 2001 to 2010, Pell Grant funds collected by for-profit universities increased from $1.4 billion to $8.8 billion.  The share of Pell Grants received by for-profit universities has also increased from 14 to 25 percent.  We're able to explain a small amount of of this increase as Congress increased the amount of Pell Grant funds available in the four years prior to 2010.  For the 2009-2010 and 2010-2011 years, Congress allowed students who attended year-round school to receive two Pell Grants in an academic year.  Additionally, with the Great Recession, there has been an increase in the number of students eligible for Pell Grants attending for-profit universities.  In 2009, the company that I am using as the basis for this, allocated 9.1% of its revenue, $119.2 million to profit, and 22.5% of its revenue, $294.7 million to marketing.  All told, these companies that the Senate Education Committee investigated used 23% of its revenue to marketing in 2009, that is $3.7 billion.  


According to an internal document obtained during one of the lawsuits against them, the target demographic for these schools are "isolated, impatient individuals with low self-esteem, who have few people in their lives who care about them and who are stuck and unable to see and plan well for [the] future."  During the new hire training, student services associates are told by the marketing director that they intentionally put commercials and advertisements to target those who are poorer or unemployed.  This is not necessarily a problem, as colleges should be reaching out to these individuals.


The training for student services associates mostly consists of trying to overcome objections, giving non-answers, and keeping the prospective student on the phone long enough to complete the lead information. According to one job aide given to employees, student service associates are told that they cannot answer any questions.  An example from a company document about staying within the company's compliance while responding to the prospective student is found below:


Caller: How much does all of this cost?

Associate: Cost is important to many of our students and we have trained professionals at the campus who can go over cost with you. Make sure when you go in for your tour that you ask to speak to ou r financial services department.
Most prospective students do not ask additional questions when this answer is given and even if more questions were asked, more non-answers would be given.  The student services associate's goal is to keep prospective students on the phone while they get your information.  They are, in fact, graded on their ability to get this information and their performance at the job depends on it.  Another internal document states that "if the prospective student's information is entered without any contact information it will be scored as a zero by quality."  The most important pieces of information to gather by these associates are the phone number and e-mail address.
To save you the trouble of having to call one of these institutions and have your contact information on file for them to call you an excessive amount (we'll get to that later), I will let you know what information is asked and how the associate attempts to keep you on the phone to get this information.
Most prospective students when they call have a program that they are most interested in and that is the first thing they say.  Associates are required to cross-sell to online courses, if they are offered online, as soon as the program is mentioned.  This is because, as the trainer of the company states, it is much cheaper for the company to run online classes and they can have more students in them.  If the college/university does not offer the program at all, for instance philosophy, they are also required to say that they don't offer that program. But associates are not allowed to list programs that they offer, only ones that are considered "core programs" and have been cleared by the company's legal team.  If it's related, even slightly, the associate is supposed to mention the field that it relates to. The examples on the company documents obtained by the author are Ultra Sound (associate is to mention the medical field), Web Design (computers), and Legal (Criminal Justice).  In 2010, the company was found to have a little over a third of its students enrolled online.  

The student services associate asks for the prospective student's name so that the information can properly be stored.  After receiving the name, most associates go onto the next screen, which will hold the information for the student's address.  This serves two purposes.  The first of which is to find out the closest campus location for the student.  The campus location is determined by a combination of the address and the program of interest. The second purpose is to have the student's information to mail them out information on the university group. Student service associates are encouraged to get the mailing address but if that is not possible, student service associates need the zip code to populate the school.  So, after the address and the program of interest, the school should populate.  But associates are told not to give out the school, just yet.  The best practices taught in training is to explain to the student that it takes a few moments to load up the school and to proceed with receiving the rest of the contact information from the student.



The associate tends to ask for the phone number, next.  At, at least one, prominent for-profit university group the phone number is captured by a caller id system and automatically populated into this lead generator tool.  If the student does not want to give out their phone number, the associate enters in a dummy phone number and selects it as the main contact.  The student believes that by not giving out their phone number they will not be inundated with phone calls asking them to attend this school.  One former employee of this university group does not believe this work.  As the former employee recalls an outbound phone campaign with the dummy phone number listed as an alternate contact.  Finally, after the phone number is collected, the student is asked to provide an e-mail address.

At this point, the prospective student is usually upset that the school that they originally asked for has not been given to them yet. But there's still two more questions to ask.  The first is to ask if they have served or are currently serving in the military.  Employees are led to believe that this question is asked to help veterans, but as we'll see below, this is used for fairly nefarious purposes.  The last question to finish out the phone call is to ask the highest level of education.  In order to qualify for federal financial aid, you have to, at least, have a high school diploma or GED.  As we saw above, this is very important to for-profit university groups.  After receiving all of that information and following the job aide to not answer any questions, the associate could now give out the information for the school to the prospective student.

But there are other requirements for the student services associate. The first of these requirements is that the associate is to deliver an experience to match up with the students' key items.  The idea is that the student associates need to sell the student on this particular for-profit university group.  Some of these experiences is financial aid/services, accelerated courses, small class sizes, hands on training, instructors with real-world experience, career services, ongoing counseling, and flexible schedules.  All of these are taken directly off a company document provided to student services associates.  But even these services/experiences are intentionally left vague and most of them will eventually be passed onto someone else at the campus.

One of the biggest questions students have about for-profit universities is about whether their education will even mean anything. Almost every student wants to know if the school is accredited.  From the job aide given to new hires, "it is absolutely imperative that you not attempt to answer the question [about accreditation] with a 'yes' or 'no' or to provide any information at all about what type of accreditation our schools have." (Emphasis mine).  New hires are told that when accreditation is mentioned in a phone call, the call is automatically listened to for quality purposes.  The job aide for new hires tells them to deflect the answer by saying the following:

Accreditation is important to many of our students, so I'm going to try to get you in touch with a campus so they can answer all of your questions for you.



The boards that are responsible for accrediting these for-profit colleges, very often, have members or are chaired by people who also serve in cushy executive positions.  In the case of Corinthian Colleges, the chair of one of two boards that accredits the universities serves as the executive vice president of operations.

If the student asks a point blank question, such as, is there a campus in my area and they give the state, it is the responsibility of the associate to still ask for the contact information before they answer this question.  It should be noted that these associates are given the information where campuses are located.  The easiest way to do this, as a best practice that associates are trained in, is to explain that the company opens campuses up all the time and this way we have the information, in case one is to open up.  Another way is to offer online classes.  But the point remains the same; students are seen as leads, and not students.

Part of the reason student services associates are asked to make sure they get the contact information is so that the aggressive outbound calling campaign can begin.  Outbound dialing to prospective students is very aggressive.  Reports from one for-profit university group indicate that they only call leads that have been in the system for over 90 days without enrolling in the school.  Other university groups contact the prospective student almost immediately after filling out the interested in attending school information.  Some university
groups claim that they are not buying/selling students' information and they may be telling the truth.  Other university groups do, seem at least, to buy/sell student information.  Prospective students have told me that they have signed up for information regarding one school and had a totally different school contact them.  Anyway, prospective students are bombarded with phone calls.  There are not exact figures provided by the company in the company documents that have been obtained by A More Perfect Union.  I have seen students contact more than 5 times in a given day.  I have also seen the same name pop up through the dialing process every day.  I'm not asking you to trust my memory but if you know of someone who signed up to receive information on a for-profit university, for the most part, they will agree with me.

Associates go through a quick training process to prepare for outbound dialing.  The training is fairly narrow and is designed to overcome objection.  The main goal of the training is for the associate to either instill fear to the prospective student or to try to stump the student so they agree to the transfer to the school.  Again, the associate is told that they cannot answer any question but encourage the student to accept the transfer to the school. 



Not surprisingly, for-profit university groups' executives are paid much more than leaders at public and non-profit colleges and universities.  The CEO's of for-profit universities studied by the Senate Education Committee earned on average $7.3 million in fiscal year 2009.  The highest paid public college president in 2011 was Gordon Gee, who made about $2 million.  This is about 3.5 times less than the AVERAGE CEO of a for-profit university group.

Some companies, in order to stay within the 90/10 rule, have raised tuition.  These companies have been fairly upfront about it.  At least to students. Well, once they're already enrolled.  The script for student services associate is found above, but that's nothing compared to admissions representatives who are actually at the campus.  Admissions representatives are asked to deflect questions of cost by using the following script obtained by the Senate Education Committee:


"The cost of the program will vary depending on several factors.  Is your question really how much is it going to cost you in out of pocket dollars?  In order for me to answer the question, first we would have to determine the right program for you.  Second, we would have to determine what time-frame you expect to complete the program; and finally the Student Finance office would determine the types of financial assistance you may be eligible for.  Could you tell me why you are asking about the cost?"


To help pay for the recruiting and high executive compensation, for-profit universities charge more for their classes than a comparable traditional four-year institution.  The medical assistant program at one of the universities costs about $22,000 compared to$1.650 at a community college in the same city.  An associate's degree in paralegal studies costs just over $41,000 compared to just over $2,000 at a nearby community college.  A bachelor's degree in business costs over $80,000 compared to $55,000 at a local 4 year university.  In part because of these high costs, it is nearly impossible for people enrolled in these for-profit universities to live the prosperous lives that they imagined, when they picked up the phone to call to improve their lives.


Because of these high costs, almost every student who attends a for-profit university takes out loans, 98% of students enrolled in a two-year program and 96% of students enrolled in a four-year program.  The Senate Education Committee found that among the 30 for-profit university groups that they examined, the average withdrawal rate was 54%.  Meaning that over half the students who enrolled in a for-profit university withdraws before finishing their program.  Nearly two-thirds of students enrolled in one of the major for-profit university groups' associates program withdrew before completing their program.  The median student withdrew after just over 120 days.  But certificate programs, such as medical assistant is another major draw for for-profit universities.  Nearly 40% of students enrolled in certificate programs at a for-profit university will withdraw before they have completed the program.  Many of them doing so within 100 days of enrolling.  

Because of the high withdrawal rate for students prior to completing their program, students attending for-profit colleges are much more likely to default on their student loans.  The Department of Education tracks and reports the number of students who default on student loans.  A default on student loans means that the student has not made a payment in 360 days within 3 years of entering repayment.  About 22 percent of students who attend for-profit colleges default on their student loans.  About 9% of students who attended public or non-profit colleges defaulted on student loans.  Students who attend for-profit colleges default three times more than students who attend non-profit or public colleges.  Almost half of all student loan debt in the United States is held by students who attended for-profit universities.  Beginning this year, any school will lose federal financial aid eligibility if its default rate exceeds 40% in a single year, or if the default rate is higher than 30% for each of the most recent three years.  If this had been in place in 2011, Corinthian Colleges would have lost federal financial aid eligibility.  

For-profit universities have been trying aggressive strategies to make sure that their students default within the window that would penalize them.  The strategy is to place students who are facing these problems into temporary deferments or forbearances. But this is not in the best interest of the students.  As the Senate Education Committee notes in their report, "during forbearance of Federal loans, as well as deferment of unsubsidized loans, interest still accrues.  The additional interest accrued during the period of forbearance is added to the principal loan balance at the end of the forbearance, with the result that interest then accrues on an even larger balance.  Thus, some students will end up paying much more over the life of their loan after forbearance or deferment."


The most money that a for-profit university group spent per student on instruction in 2009 was Corinthian Colleges, who spent $3,969 per student.  By comparison, they also spent $2,465 on marketing per student, and $998 on profit per student.  Public and non-profit 4-year colleges spend a lot more per student on instruction.  Community colleges spend about the same as for-profit institutions but they offer tuition at a much lower cost.  University of California at Los Angeles spent $30,331 per student on instruction.  The University of Southern California spent $35,920 per student on instruction.  Orange Coast College spent $3,272 per student on instruction.  In 2010, one major for-profit university had one student services staffer (i.e. tutor) for every 160 students.  Meanwhile, there was one recruiter for every 40 students.  Guess we know where the priorities are.


For profit university groups routinely mislead prospective students about how the students will fare once they leave the school.  One major for-profit university has 1 career counselor for every 145 students and that is one of the best rates out of all of the for-profit university groups studied by the Senate Education Committee.  One for-profit university group was found to inflate the numbers for every program by 37%.  In 2010, the same for-profit university group falsified employment records of 288 graduates over four years.  


The Government Accountability Office (GAO) attempted an undercover investigation to see the practices of for-profit colleges firsthand.  They attempted to enroll at 15 of the for-profit university groups.  12 GAO employees successfully enrolled. While attending class, all of the enrolled students began to perform in a "substandard" level.  At three of the schools, the instructors acted consistent with the policies and standards of the school.  One student received points for assignments that they did not complete and ended up passing the class.  The full report can be found here.  


One college never acknowledged one student's request to withdraw before ultimately expelling the student for failure to attend.  This may be a violation of federal regulations that state that a college needs to use the date that a student attempts to start the withdrawal process as the date of withdrawal.  Federal laws and regulations require that students who have federal loans be given exit counseling about the risk of default among other things.  Three of the students involved in the investigation never received their exit interviews.


Military students at for-profit universities are highly sought after.  This is because they are exempt from the 90/10 rule.  Even better for these schools, is that money for military veterans counts on the 10 side of the 90/10 rule.  One for-profit university group produced a 56 page strategy document to help recruit new military students.  The first objective for this strategy was to increase military enrollment fourfold in two years.  They advocated for spending $30 million on marketing in key military publications and key military installations.  Another for-profit university group stated that the most important targets for them was the 800,000 military spouses who were authorized a one-time entitlement of $6,000.  The memo stated that they should reach out to these spouses "at the military bases with various career fairs, direct communications, and visibility with the Office of Military Families in Washington would be very important."   


In August of 2009, the post 9/11 GI Bill was implemented.  Veterans who serve 90 days or more in active duty after September 10, 2001, are eligible for up to 36 months of educational benefits.  Veterans can transfer this credit to their spouse or their children. The Department of Defense expanded aid available to active duty soldiers through the tuition assistance program.  This program provides up to $4,500 a year to a soldier's classes.  In 2009, Congress also created the Military Spouse Career Advancement Accounts designed to help military spouses by giving them up to $4,000 over three years.  Because of this, military recruiting was amped up by the for-profit education sector.


One for-profit university group created a training manual specifically designed to target U.S. soldiers, to "utilize fear, uncertainty, and doubt in the sales process."


One military recruiter told The New York Times "there is such pressure to simply enroll more vets- we knew that most of them would drop out after the first session."


One military man in charge of education and development at a military base explained that these schools prey on marines, calling all day and night.  They take advantage of the fact that the nobody in the marines' families attended college.  


Senator Harkin called these practices disgraceful.  He noted that "out of the $640 million in Post-9/11 GI Bill benefits that flowed to for-profit schools in 2009-10, $439 million went to 15 publicly traded companies.  This amount is equal to 69 percent of the military money flowing to for-profit schools, and 25 percent of all Post-9/11 GI Bill benefits.  Eight of the ten top recipients of VA dollars see more than half of their associate degree students they enroll drop out within one year.  At some of the schools, more than 60 percent of military veterans default on their student loans for for-profit universities.


Military veterans are actively recruited to attend these schools, as opposed to public four or two year institutions.  If a military veteran puts in their information for a non-profit institution, they're unlikely to get calls and e-mails back.  But if they do it for a for-profit institution, then recruiters will call them everyday until they sign up to attend the classes.  These types of tactics certainly seem predatory.  Especially when you consider the fact that, for the most part, credits received from these institutions do not transfer because the schools are not rigorous enough or even are accredited.  Military veterans who expect the GI Bill to help further their education face predatory tactics from for-profit institutions and wind up in debt pursuing a dream that will not in all likelihood, come true.


For-profit universities serve an integral part of our society, today, unfortunately. People who are poor, who underperformed in high school, former convicts, etc. need to be able to find a job. We place an increased importance on being properly educated to have the job but we don't explain to people how to properly pursue this education.  State government budgets are increasingly slashed because government spending is ridiculed in the public eye.  With the budgets being slashed, public four year universities are having to go through drastic reductions in staff to maintain their budget sheet.  Community and junior colleges, places that have traditionally been there to help the poor and underserved, are seeing their budgets decrease in dramatic fashion.  It's no wonder that we see the rise of for-profit colleges and universities.  It's no wonder that we see these colleges thrive in economic recessions, charging exorbitant tuition for a diploma, certificate, degree that is ultimately worth about as much as the paper it's printed on.  But I'm not here to hate the player, but hate the game.  Junior colleges and community colleges need to ramp up their recruiting efforts.  States need to recognize this as a problem and fund junior and community colleges.  Ultimately, these people will see that this education can be done better for a much lower cost.  People who graduate from community and junior colleges make more money than those who graduate from these for-profit institutions.  People need to be made aware of this, instead of having thousands of commercials for ITT Technical Institute and University of Phoenix on for every commercial break.  But, oh well. I can't be too mad at for-profit colleges as they are just taking advantage of a system that has seriously betrayed those who need it most.  Instead of laughing off the commercials for Kaplan or any other of these colleges, we need to address the systemic problems and help those who need it most. 

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