America has had problems with for-profit colleges. Now, history could be repeating itself.
The economic hit from COVID-19 will threaten the existence of many school, but experts believe that for-profit colleges could actually stand to benefit — like they did during the 2008 Great Recession.
“For-profit colleges will be marketing more aggressively during this period… and especially at a time when high school students aren’t in school near their counselors… traditional mechanisms through which students learn about college options and the value of going to college have been limited,” Josh Wyner, of the Aspen Institute, told Yahoo Finance.
“And so what we’ve got is a void for for-profit colleges,” Wyner added. “And they’ve got an edge over the competition, because they’ve always been much more sophisticated in how they market to students.”
“How Does For-Profit College Attendance Affect Student Loans, Defaults, and Labor Market Outcomes?” NBER Working Paper No. 25042, September 2018.
‘They stole my time’
A 2018 lawsuit filed in the U.S. District Court for the District of Minnesota against Capella University, which recently added two plaintiffs, detailed the mess that some students who had attended for-profit schools are dealing with.
Capella actively recruited students. The school is owned by parent company Strategic Education Inc. The students who attended the school, mainly for doctoral programs, ended up taking on thousands of dollars in student debt before experiencing significant roadblocks when they actually tried to graduate.
The lawsuit alleges that this was a problem experienced by a large number of students across Capella University.
“Going to Capella was supposed to be a part of advancing my career in life… I feel like I was misled at every turn,” Louis DeWeaver, a former Air Force vet from Michigan in his 50s, said on a recent press call. “They made it sound like there was structure and pathway to completing their online courses within a reasonable time frame and at a reasonable cost. … But I faced roadblocks… at every turn… and every time things slowed down, it cost me more and more money.”
DeWeaver said that when he joined the class action suit, the university turned around and tried to kick him out of the program. He ended up withdrawing after two and a half years with $50,000 in student loan debt and no degree.
“And they stole something else from me: They stole my time,” he added. “At my age, I wanted to earn my degree in a time frame… I lost a lot of time and money on the dead end street of Capella University, I would hate to see other vets who are having a tough time during this coronavirus economy suffer at the hands of Capella.”
Capella University has been dismissive of the lawsuit. They believe that it is “without merit” and that the court has “already dismissed 40 of the 45 legal claims and eight out of nine plaintiffs.”
The university added that it wasn’t aware that any veterans such as DeWeaver were involved in the lawsuit, adding:
“Capella University – accredited by the Higher Learning Commission – is proud of its programs, its faculty, its staff, and its continued service to our nation’s veterans, and we remain dedicated to providing flexible, professionally aligned online degree programs for working adults.”
The attorney who represents plaintiffs, Joseph Peiffer, of the law firm Peiffer Wolf, stressed that the for-profit college industry was poised to make a very good profit during the coronavirus-induced downturn.
“You saw this during the Great Recession,” Peiffer told Yahoo Finance, referring to predatory practices of for-profit colleges. “They target the most vulnerable section of the population,” Peiffer added, noting that with millions of Americans filing unemployment claims, “they think going back to school is the best option for them.”
Peiffer believes that thousands of students will be affected by the class action suit. When he was apprised of Capella’s statement, he added: “As much as Capella may want to minimize these students experiences and take away their voices, we intend to hold them accountable. Vets like Louis and Shawn served our country and invested in their education. They deserved far better than Capella.”
‘Poised to do the same thing a dozen years later’
There are some signs of a forthcoming boom in the for-profit sector: Capella’s parent company reported that net income was $23.7 million more this quarter as compared to 2019, “due primarily to higher revenues due to enrollment growth and lower merger and integration related costs,” the company stated in a press release accompanying its 10-Q filing.
Enrollment at Capella increased by 4% compared to the same period last year, and revenue increased 3.4% as a result of that.
“The truth is, this for-profit money machine already rakes in hundreds of millions of dollars in U.S. education funds from victimized vets and other students,” Peiffer said. “Capella last surfed the wave of the Great Recession in 2008 and 2009 to make huge profits. Now, it is poised to do the same thing a dozen years later.”
Change in the Education Department’s tone
The Obama administration saw a trend where students attending certain types of for-profit colleges were leaving with huge amounts of debt and nearly all virtually incapable of being able to get a quality job.
In 2016, the New York Fed noted that enrollment at these schools had “skyrocketed” as the country made its way out of the Great Recession. Debt levels rose as well, as most students who graduate from a for-profit school holding a higher level of debt than if they had attended other institutions.
“Career colleges must be a stepping stone to the middle class,” former U.S. Secretary of Education Arne Duncan said in a press release in 2014. “But too many hardworking students find themselves buried in debt with little to show for it. That is simply unacceptable. These regulations are a necessary step to ensure that colleges accepting federal funds protect students, cut costs and improve outcomes. We will continue to take action as needed.”
The administration then launched the gainful employment rule to impose greater accountability for “career training programs” to help students.
And according to the department’s data, 1,400 programs, serving 840,000 students — of whom 99% are at for-profit institutions — ”would not pass the accountability standards,” it stated.
The Trump administration under Education Secretary Betsy DeVos has since repealed that rule in 2019. The spurred several lawsuits, including from America’s second-largest teachers’ union and the California Attorney General.
“The Secretary used her authority under the [Higher Education Act] to allow institutions to implement the new rules early as of July 1, 2019,” the most recent 10-Q from Capella’s parent company stated. “Those institutions that implement early are not required to report gainful employment data for the 2018-2019 award year, are not required to comply with gainful employment disclosure… Both Capella University and Strayer University have elected to implement the July 2019 regulations early and have documented their decision to do so as required by the Department of Education.”
‘They took everything from me’
Shawn Cooper, another Air Force vet, wishes he’d never signed up for the entire experience.
Cooper lives in Texas with his wife and children. He says that, at first, he was “incredibly proud” to embark on a doctoral program in health administration at Capella.
“After my daughter was born, I really dove into my studies to make my children proud,” he explained. “I had a 4.0 GPA but Capella constantly dragged things out while I was enrolled from 2014 to 2018. No matter how hard I pushed to move things forward, they always slowed things down, changed the rules, and kept digging me for more money.”
The school kicked him out, saying that it was due to “poor performance,” despite his perfect GPA. When he appealed the dismissal, they rejected that.
“That’s when I knew that I needed to fight back, so I signed up for this lawsuit,” Cooper added. “It’s not in my DNA to just roll over. All I got from my troubles at Capella University was a mountain of debt and a diagnosis of anxiety, but no degree.”
Cooper now owes over $100,000.
“They took everything from me,” he said, adding that “this is about so much more than the debt. … I started school when my daughter was born, so I was incredibly busy with school for the first three years. So I’ll never get those years back. I’ll never get those moments that I missed with my daughter back.”