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The perils of enrolling in for-profit colleges

Photo of Stephen Burd

Higher Ed Watch

Students wait outside Everest College, Tuesday, April, 28, 2015 in Industry, Calif., hoping to get their transcriptions and information on loan forgiveness and transferring credits to other schools. Corinthian Colleges shut down all of its remaining 28 ground campuses on Monday, April 27, displacing 16,000 students. The shutdown comes less than two weeks after the U.S. Department of Education announcing it was fining the for-profit institution $30 million for misrepresentation.

Students wait outside Everest College, Tuesday, April, 28, 2015 in Industry, Calif., hoping to get their transcriptions and information on loan forgiveness and transferring credits to other schools. Corinthian Colleges shut down all of its remaining 28 ground campuses on Monday, April 27, displacing 16,000 students. The shutdown comes less than two weeks after the U.S. Department of Education announcing it was fining the for-profit institution $30 million for misrepresentation.

In late 2007, several recruiters from ATI Career Training Center in Dallas, Texas, stopped in at a bar down the street from the school for a drink and to try to persuade the female bartenders there to apply to the for-profit college.

In the midst of a bitter custody battle with her ex-husband, who also worked at the bar, Tiffany Ondich was ready for a change. So Ondich met with one of the school’s admissions officers, who recommended that she apply for a spot in the Respiratory Therapy program. The recruiter told her that 90 percent of the program’s graduates get jobs in the field and assured her that she could easily expect to make between $50,000 and $60,000 a year straight out of school.

Ondich signed on the dotted line and received Pell Grants and student loans to finance her program. Over the next two years, she worked hard and earned her associate degree magna cum laude.

Five years later, Ondich has still not been able to get a job in her field. “If I am ever granted an interview, which is rare, I am laughed at when they discover where I earned my degree,” she says. Financially strapped, she has defaulted on her student loans, ruining her credit and putting her financial future at risk.

Related: Changing the incentives for colleges to enroll and graduate low-income students

Meanwhile, the school she attended has been shuttered. The for-profit college chain ATI Enterprises declared bankruptcy in 2013, soon after the U.S. Department of Justice reached a $3.7 million settlement with the company over allegations that it had engaged in a systematic effort to deceive students about its record of placing graduates into jobs, among other things. The agreement did not require that ATI admit to any wrongdoing.

“The people who were really damaged by ATI were left holding the bag, having to pay for a degree that’s not worth the paper it was written on,” Ondich said.

Ondich’s experience highlights the risks that students—especially those who are low-income or working-class—take when enrolling in for-profit colleges. While some for-profit colleges are undoubtedly good and live up to their promises, too many others leave students worse off than before they enrolled—overloaded with debt and without the training they need to get jobs that will help them repay their loans.

For-profit colleges certainly seek out low-income students to attend their schools. According to a recent report by the Pell Institute for the Study of Opportunity in Higher Education, students from families with annual incomes below $40,000 make up nearly 60 percent of students attending both two-year and four-year for-profit schools in the United States. Comparatively, just over a quarter of undergraduates attending public flagship and research universities are low-income, the report states.

For-profit college supporters praise the schools for providing access and opportunities to students who are underserved by traditional nonprofit institutions, both public and private.

But it’s also true that for-profit college companies are attracted to these students because they provide the schools with access to billions of dollars in federal financial aid. Some of these companies receive nearly 90 percent of their revenues from government student aid programs.

ATI is a case in point. According to the lawsuit that the Justice Department filed against the company in 2012, ATI—which operated 18 schools in five states, including Texas and Florida—went to extraordinary lengths to enroll low-income and working-class students in order “to extract as much federal funding as possible.”

Related: Nonprofits step in to help students that colleges allow to ‘slip through the cracks’

Admissions counselors, the lawsuit states, sought out students “at prisons, parole meetings, homeless shelters, and the Salvation Army.” They tried to “induce students to enroll at ATI with promises of gift cards, bus passes, fuel cards, and, in some cases, even housing.” It didn’t matter that most of these students were academically unqualified for enrollment. “Their main focus was on filling seats, not on finding the right educational opportunity for each prospective student,” the lawsuit states.

The Justice Department found that ATI regularly admitted students who had not graduated from high school or earned a GED. To make these students appear eligible for federal financial aid, school officials created fake high school diplomas for them. They also purchased diplomas for some students from an unaccredited high school in Texas that the state eventually shut down.

To entice students to their schools, ATI recruiters not only deceived them about job placement rates, but also misled them about how much they would earn after they graduated.

According to the lawsuit, the company’s financial aid administrators “coached” students to lie on financial aid applications so they’d be eligible for more federal aid than they were entitled to receive. For instance, they urged students to list themselves as independent of their parents so they could qualify for more aid. They also counseled students to “falsely list relatives’ children” as their own, and to omit spouses’ financial information to inflate their apparent financial need.

In addition, administrators fabricated attendance records so they could collect financial aid for students who had never shown up for class or who had dropped out previously, the lawsuit states. These students were left with loan debt for classes they never even attended.

Related: Students are returning to for-profit colleges

As alarming as these allegations are, they are hardly unique to ATI. Over the last decade, many for-profit higher education companies have come under scrutiny from federal and state regulators, and have faced numerous lawsuits by former employees, students and shareholders over allegations of misleading recruitment and admissions tactics.

Just last month, Corinthian Colleges declared bankruptcy, after the U.S. Department of Education found that it had routinely deceived prospective students about its success in placing graduates into jobs in their fields of study. At its peak, Corinthian served more than 80,000 students at over 100 campuses in the United States and Canada.

So while some for-profit colleges genuinely provide access and opportunity to low-income students, others prey on these students to gain access to their federal aid dollars. The government must do a better job of policing the industry and shutting down unscrupulous schools. In the meantime, students should be wary of enrolling in these institutions.

Ondich was misled into enrolling at a school that has brought her nothing but misfortune. The federal government should discharge her federal student loan debt and that of her classmates—as it did last week for former Corinthian students, at a potential cost of $3.5 billion to taxpayers—so they can have another shot at making better lives for themselves and their families.

This story was produced by The Hechinger Report, a nonprofit, independent news website focused on inequality and innovation in education. Read more about higher education.

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Stephen Burd

Stephen Burd is a senior policy analyst in the Education Policy Program at the New America Foundation, a non-partisan public policy institute in Washington, DC.… See Archive

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