For-Profit Colleges
Mr. President, it has been nearly 4 years since the collapse of Corinthian Colleges and almost 2 years since the collapse of ITT Tech, two of the largest college collapses in U.S. history. These infamous companies left tens of thousands of…
Mr. President, it has been nearly 4 years since the collapse of Corinthian Colleges and almost 2 years since the collapse of ITT Tech, two of the largest college collapses in U.S. history.
These infamous companies left tens of thousands of students in the lurch, interrupting their education and leaving them with worthless credits and tons of debt.
Rather than being anomalies, these companies embodied the for-profit college industry, an industry that enrolls only 9 percent of all postsecondary students but accounts for 33 percent of all Federal student loan defaults. The same predatory practices that took down Corinthian and ITT Tech are commonplace throughout the for-profit college industry, even today.
So this notion that some would have you believe--that, with Corinthian and ITT Tech gone, this industry is magically cleaned up and purged of bad actors--is nothing more than an attempt by the industry to justify rolling back important consumer protections like the Gainful Employment and Borrower Defense rules.
Case in point: Ashford University is owned by Bridgepoint Education. This is a company that, from its very inception, has shown a determination to work the system in order to profit.
It all began in 2005, when a group of investors bought a tiny Catholic college in Iowa, which at the time had an enrollment of 312 students, but what came along with that small campus was the gold for Ashford: regional accreditation. That accreditation opened the company's coffers to millions in Federal student aid funds.
Since that time, Ashford has closed the Iowa campus and become an online giant, enrolling more than 40,000 students across the country and taking in almost $390 million in Federal title IV funds.
Boy, have Ashford executives and owners gotten rich. From 2014 to 2016, Bridgepoint's CEO, Andrew Clark, made more than $10 million in total compensation.
Meanwhile, its students have been left buried in debt with worthless diplomas that employers often don't recognize. According to a recent Brookings study, as of 2014, Ashford student cumulatively owed almost $6 billion in Federal student loan debt, making it one of eight for- profit schools in the top 10 schools whose students owe the most cumulative debt. Of the Ashford students who left in 2009, nearly half had defaulted on their debt 5 years later.
Just like Corinthian and ITT Tech, Ashford has been the subject of numerous Federal and State investigations and lawsuits.
Ashford is currently being investigated by State attorneys general in Iowa, Massachusetts, New York, and North Carolina, as well as the U.S. Securities and Exchange Commission and U.S. Department of Justice. The California Attorney General is currently suing Ashford for ``defrauding and deceiving students.''
In addition, in 2014, Ashford was forced to pay $7.25 million in a settlement with the Iowa Attorney General for consumer fraud. Once again, Ashford used false and misleading statements, as well as unfair and high-pressure sales tactics to lure students into enrolling and taking on debt.
Just last year, Ashford agreed to pay $30 million to the Consumer Financial Protection Bureau for deceptive acts and practices, including misleading students about their student loan payments.
Also like Corinthian and ITT Tech, Ashford uses mandatory predispute arbitration clauses to hide its misconduct and prevent students from holding them accountable in court.
These clauses, often buried in stacks of enrollment documents that students must sign in order to take classes, force students to give up their right to sue the school of misconduct either as individuals or part of a class. The practice is almost unheard of at public and legitimate not-for-profit institutions, but is a hallmark of the for- profit college industry.
Not only does the practice steer disputes into arbitration proceeding where the deck is often stacked against the student, nondisclosure agreements often prevent the alleged misconduct or the outcome of the arbitration proceeding from becoming public. This hides misconduct from regulators and accreditors, often allowing for-profit colleges like Ashford to continue illegal practices for years without detection.
In addition to receiving millions of dollars in Department of Education title IV funds, Ashford also heavily recruits veterans and servicemembers who qualify for Department of Veterans Affairs G.I. bill funds.
You see, for-profit colleges see veterans and servicemembers as gold.
Federal law prohibits for-profit colleges from receiving more than 90 percent of their revenue from Federal sources, but rather than counting all taxpayer-funded education assistance programs, including VA G.I. bill and Department of Defense tuition assistance, current law only counts title IV funds as Federal revenue.
This means that by aggressively targeting and recruiting veterans and servicemembers, for-profit colleges like Ashford can receive an unlimited amount of their revenue straight from the Federal Treasury.
Marine veteran James Long found himself on the receiving end of that aggressive recruiting. A few years ago, Bloomberg told his story:
His Humvee was struck by artillery shells in Iraq. He
suffered a severe brain injury. While recovering at Camp
Lejeune, he was visited by an Ashford recruiter who signed
him up for classes. But despite knowing he was enrolled, his
brain injury was so severe that he couldn't remember what
courses he was enrolled in.
The California Attorney General's complaint against Ashford includes the stories of two other veterans.
First, an Army Reserve veteran referred to as P.M. was encouraged by Ashford representatives to attend courses at a local community college while taking classes at Ashford.
P.M. was told that, by attending a ground-based campus rather than just Ashford's online classes, he would qualify for a higher monthly housing allowance under the G.I. bill, and he could transfer his community college credits toward his Ashford program. He was later ``alarmed'' to find that Ashford limited the number of credits he could transfer and refused to recognize some of the courses he had previously completed.
As a result, P.M. had to take additional courses at Ashford, receiving the lower housing allowance rate, to make up for the lost credits. He then ``fell behind on his rent, had to take on another job to keep up with his bills, and his credit score suffered.'' In addition, he wasted part of his limited G.I. bill education benefits on courses that he could not put toward a degree.
Another veteran, ``P.J.,'' was told that Ashford would accept most of the 140 credits he had earned at other institutions and could expect to graduate within 18 months. He was also assured that he would be able to transfer his Ashford credits to a community college.
After he had already enrolled and began taking classes at Ashford, P.J. discovered that Ashford had accepted none of his credits from other schools despite their promises. When he later tried to transfer his Ashford credits to two other schools, he found that neither would accept them.
This is how Ashford treats veterans.
In recent years, Ashford has taken in as much as $38 million in G.I. bill funds and is currently engaged in a fight to maintain eligibility to receive these funds in the future.
Here is what it boils down to: Ashford is not approved for G.I. bill benefits by the California State Approving Agency, a requirement for it to be eligible for G.I. bill funds nationwide. The company has spent months on dubious legal action and other schemes to skirt Federal G.I. bill eligibility requirements. The matter is now in court.
With its G.I. bill eligibility in doubt, Ashford announced in November it would voluntarily suspend new enrollments of veterans using G.I. bill funds. This would prevent new veterans from being put at risk and additional taxpayer dollars being wasted should the company lose eligibility.
As reported by The Chronicle of Higher Education, the company resumed new G.I. bill enrollments in February and acknowledged on a call with investors that the suspension had ``negatively impacted fourth-quarter performance.'' That is right; the company made the blatant decision that profits are more important than veterans.
Last week, Senator Hassan and I sent a letter to Bridgepoint's CEO, Andrew Clark, expressing our outrage and calling on him to immediately halt new enrollments until their G.I. bill eligibility is resolved with the VA. If the company fails to do so, it will lay bare the true disregard they have for the students, especially veterans, they claim to serve.
Also last week, Bridgepoint announced that it is up to even more shenanigans. It will attempt to separate from Ashford and another school it owns to become an Online Program Management company while Ashford seeks to become a not-for-profit college. If approved, this complicated maneuver would mean that Ashford would no longer have to abide by the Federal 90-10 rule or other accountability measures focused on for-profit colleges.
At the same time, other for-profit conversions have been structured in a way that their owners are still able to personally profit from the new not-for-profit entity. It is the best of both worlds for owners and investors; the school is able to shed Federal accountability requirements while still profiting off of students and taxpayers.
I call on the Internal Revenue Service, the Department of Education, and Ashford's accreditor--the WASC Senior College and University Commission--to carefully scrutinize this proposal in light of other dubious for-profit conversions and Bridgepoint's own long record of misconduct.
Despite the closure of Corinthian and ITT Tech, companies like Ashford continue to exploit students and veterans while raking in billions in Federal taxpayer dollars, using every possible scheme they can think of to do it.
Until Secretary DeVos stops siding with her friends in the for-profit college industry or Congress acts, students will continue to be harmed and taxpayer dollars will continue to line the pockets of cheats and crooks.