This is the second part of Yahoo Finance’s Illegal Tender podcast series on for-profit colleges. Listen to the episode here.
Despite various controversies, for-profit schools remain exceptionally good at one thing: marketing themselves.
From the slick TV ads to the savvy recruiting tactics — some as simple as presenting an opportunity to an underserved group — these colleges have proven efficient at outreach.
“When you are just a business person and you are focused on what are the things that we can do to get more students to enroll and to increase the margin. … If that's what's driving your daily decisions, you will end up being a predatory school,” Bob Shireman at the Century Foundation told Illegal Tender.
“Because you can make a lot of money by enrolling vulnerable people who don't really realize what they're getting into,” Shireman added, “who are borrowing a lot of money for college and who are enrolled in classes, taught by people who are not paid enough for what they're being asked to do.”
A recent report by Brookings Institution found that for-profit colleges spend the most money on ads among types of colleges and the smallest share of students.
For-profit colleges spend the most on ads. (Chart: Brookings Institution)
In 2017, public colleges spent $171,000 on advertising and non-profit colleges spent $273,000. For-profit colleges? $1.25 million.
That’s roughly $371 spent on ads per student, as compared to the $14 a public college spends on ads per student.
“All the research I was doing, it wasn't a few bad apples — the entire apple orchard was poisoned,” Alex Shebanow, director of ‘Fail State,’ a documentary about for-profit colleges, told Yahoo Finance’s Illegal Tender. “It was hard to find a for-profit that was of good value to the students.”
Trace Urdan, a former Wall Street analyst who covered the for-profit industry and is now “passionate believer in the constructive role of private capital in driving education innovation,” pushed back against the argument that for-profit schools are inherently corrupted by business incentives.
“This is the frustration that exists in the sector,” Urdan told Illegal Tender. “So yes, there are definitely bad actors and good actors. There are some that are sort of cynical. There are some that are simply unsophisticated. There's a lot of these that are family run businesses and some of it is structural. You get into the cosmetology space, and it's incredibly complicated in cosmetology because we have all these state regulations that require students to receive an obscene amount of training in order to qualify for licensure to cut somebody's hair. So, then you have to have schools that will... provide all of those hours of instruction for the students.”
This is the second part of Yahoo Finance’s Illegal Tender podcast series on for-profit colleges. Listen to the episode here.
“That's how you make a lot of money in higher education,” Shireman noted. “It's not illegal to do that — it’s just a horrible value.”
And some of those promises are empty, leaving students with thousands of dollars in debt and no meaningful a degree or job prospects.
“The tagline we use in the film Fail State is: ‘Subprime goes to college,’” Shebanow said. “And, basically, what we saw in the home mortgage crisis, a few years prior, was being replicated in higher education in the for-profit industry. And it was widespread and rampant.”
Much like Americans bought into the idea of owning a home that was being pitched by predatory lenders, defrauded for-profit students bought into the idea of a college education as pitched by recruiters.
“I like to consider myself kind of a sales person, but with a little bit more human factor,” Jay O’Brien, a former recruiter for-profit schools who got into the industry after the Great Recession. “I was wide-eyed, I didn't understand really how recruitment would funnel into education.”
‘Harris School of Business was really focused on body counts’
O’Brien recalled that his first for-profit recruiting job, with the now-defunct Art Institute of Philadelphia, seemed to be a well-run institution.
“They had a great training program… There was a lot of compliance… a lot of oversight, [and] a lot of regulations” he said.
His second gig, however, struck him as flagrantly predatory.
A Medical Assistant student checks a note handed out to students that have been turned away at the gate to the now-defunct for-profit Everest College on April 27, 2015 in Alhambra, California. (PHOTO: Al Seib / Los Angeles Times via Getty Images)
“Harris School of Business was really focused on body counts — getting people in that didn't have financial aid that was rendered already because they could use their financial aid access for nine months, 12 month programs, get them a certificate,” O’Brien said. “They promise them the world as far as internships and externships, and they really weren't able to produce on that.”
In 2014, former employees of the Harris School of Business alleged that the school officials “routinely misled students about their career prospects.” In 2019, the NJ College Loans to Assist State Students program — which helps students in New Jersey who cannot obtain federally backed loans — cut off Harris School of Business because of the high default rates for graduates.
“They never accepted or wanted to have conversations about John Smith or Jane Doe not being a good fit or not wanting to enroll into and medical assistant program where you're going to be making $11 an hour because they have two kids at home because they can't work second or third shift,” O’Brien said. “They didn't care about that. They wanted to know why aren't they signing up.”
Events in 2020 illustrated how for-profit colleges operate as both businesses and schools.
Harris School of Business is owned by Premier Education Group, a Connecticut-based conglomerate that received between $2 million to $5 million in coronavirus stimulus funds for small businesses while some schools in the company’s portfolio received coronavirus stimulus funds for schools.
Harris School of Business was allocated more than $1.4 million by the Education Department under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
The school did not reply to requests for comment.
This is the second part of Yahoo Finance’s Illegal Tender podcast series on for-profit colleges. Listen on Apple Podcasts | Google Podcasts
Aarthi is a reporter for Yahoo Finance covering consumer finance and education. Follow her on Twitter @aarthiswami. If you attended or worked at a for-profit college and would like to share your experience, reach out to her at aarthi@yahoofinance.com
