Predatory For-Profit Schools Project (PFPSP) Overview

Overview

The North Carolina Justice Center’s Predatory For-Profit Schools Project (PFPSP) works to educate students and the general public about deceptive and predatory practices that are endemic in the for-profit school industry. We also provide legal representation to students who enrolled in certain for-profit school programs and are now left with little more than crushing student loan debts.

Background: For-Profit Schools and Predatory Schemes

What are For-Profit Schools?

For-profit schools are privately owned, post-secondary schools. Like any for-profit company, these schools are motivated to maximize profits for their individual owners or investors. A majority of students at for-profit schools are enrolled in two-year certificate programs, ranging from nursing to graphic design to accounting and business administration.

For-Profit School Predatory Scheme

Many for-profit schools charge artificially high tuitions, and they target low-income students who take out government-guaranteed student loans to pay those costs. For-profit institutions routinely funnel the bulk of their revenues into advertising and enrollment efforts—rather than into quality education programs. This ensures a constant stream of financial-aid dollars into their corporate coffers, to the benefit of shareholders and executives making exorbitant salaries.

For-profit schools often set up students to fail. With a business model centered on getting as many new students to enroll as possible, for-profit schools commonly pay little attention to whether the students are academically ready for or would benefit professionally from the programs. Consequently, a great number of students enrolled in for-profit programs drop out without finishing their degrees.

The Debt Trap

Students who leave for-profit schools without finishing their degrees are left with worthless credits and crushing student-loan debts. One out of every five loans to students attending for-profit schools results in default, but by that time the schools have already pocketed the money. The government guarantees the loans, so taxpayers are left to pick up the tab.

But the real losers are the students, who disproportionately come from low-income communities and who were seeking to make positive changes in their lives. If the students are unable to pay back their student loans, the debt becomes a millstone around their necks, preventing them from qualifying for subsequent student loans to attend legitimate educational institutions, destroying their credit ratings, and impairing their ability to get credit and to pass workplace background checks.

The Senate Investigation

These concerns over student failure rates and debt led Senator Tom Harkin to spearhead a two-year investigation into the for-profit schools industry. In 2012, the Senate Committee on Health, Education, Labor, and Pensions released its report, which including the following findings:

  • Most for-profit colleges charge much higher tuition than comparable programs at community colleges and flagship state public universities. The investigation found associate degree and certificate programs at for-profit schools averaged four times the cost of degree programs at comparable community colleges. Tuition for bachelor's degree programs averaged 20 percent more than the cost of analogous programs at flagship public universities.
  • Because 96 percent of students starting at for-profit colleges take on federal student loans (compared to 13 percent at community colleges), nearly all students have student-loan debt when they leave, even if they haven’t earned a degree or diploma or don’t have increased earning power. The vast majority of the students are left with student loan debt that may follow them throughout their lives, creating a financial burden that is difficult or even impossible to escape.
  • Many for-profit colleges fail to make the necessary investments in student support services that have been shown to help students succeed in school, a deficiency that undoubtedly contributes to high withdrawal rates.
  • For-profit colleges spend the billions of taxpayer dollars they receive each year primarily on non-education-related expenses. In fiscal year 2009, for example, the companies examined by the Senate committee spent:
    • $4.2 billion or 22.7 percent of all revenue on marketing, advertising, recruiting, and admissions staffing
    • $3.6 billion or 19.4 percent of all revenue on pre-tax profit
    • $3.2 billion or 17.2 percent of all revenue on instruction
      In 2009, the CEOs of the publicly traded, for-profit education companies took home, on average, $7.3 million. In contrast, the five highest-paid leaders of large public universities averaged compensation of $1 million, while the five highest-paid leaders at non-profit private colleges and universities averaged $3 million.
  • More than half a million of the students who enrolled in for-profit colleges in 2008-09 left without a degree or diploma within a median of four months. Among those working toward two-year associate degrees, 63 percent of students departed without a degree.
  • Students who attended a for-profit college accounted for 47 percent of all federal student loan defaults in 2008 and 2009. More than one in five students enrolling in a for-profit college—22 percent—default within three years of entering repayment on their student loans.
  • The recruiting tactics of many for-profits schools mislead prospective students with regard to the cost of the program, the graduation rates of other students, the job placement of other students, and the transferability of credits.

See For-Profit College Investigation

Investigations into Corinthian Colleges, Inc.

The U.S. Department of Education has forced Corinthian Colleges, parent company of Everest, Heald, and WyoTech colleges, to close or sell off its schools and programs. The department took these actions after Corinthian failed to provide required job placement data for its students.

Corinthian is required to provide written notice to the more than 81,000 students enrolled in programs at Everest, Heald, and WyoTech colleges of the impending sale or closure of Corinthian’s campuses and programs. Students will have different options regarding the completion of their degree program and possible discharge of their student-loan debts, depending on whether their Corinthian-owned program is being closed or sold off.

In September 2014, the Consumer Financial Protection Bureau filed a lawsuit against Corinthian Colleges, accusing the company of using predatory loan and debt-collection practices against tens of thousands of students. CFPB is seeking more than $500 million in relief for students who took out private student loans from Corinthian. CFPB released this document with important information for Corinthian students. To get the latest information on this lawsuit, go to the Consumer Financial Protection Bureau website and type “Corinthian Colleges” into the search box.

Filing an Administrative Complaint (Regarding deceptive or unfair treatment by a for-profit school)

Media

Resources for Students

Choosing the Right School

The US Department of Education offers several websites to help students find the right school. Through the College Navigator, students can find out whether a school has a for-profit or non-profit status, what its accreditation is, and what its default rates are for students. They can also use the Department of Education’s accreditation tool. Plus, the College Affordability and Transparency Center helps students figure out how much a particular program will cost and if there are better, less expensive options.

Resources for Veterans

Before choosing a college, veterans should use the resources listed above to help them make the best choice. The links below also offer resources specific to veterans:

Help with Student Loan Debt

Contact Us

If you or someone you know has had a problem with a for-profit school, contact us. The Predatory For-Profit Schools Project provides free or low-cost assistance to eligible students.

Mail:    Predatory For-Profit Schools Project
c/o NC Justice Center
PO Box 28068
Raleigh, NC 27611

Email: ForProfitScam@ncjustice.org

Please provide your name, the for-profit school you attended or are attending, and your contact information, so we can get back to you. Please do not send us your original documents.

Disclaimer

Please do not provide us with any confidential information. Unsolicited emails and information you provide to the North Carolina Justice Center, or your sending a written request for assistance, will not create an attorney-client relationship. Unless the Justice Center advises you otherwise, the Justice Center does not represent you and you remain responsible for any filing deadlines that you may have.

The information and materials on this website are intended for information purposes only and are not intended to be treated as legal advice. The information is general in nature and may not apply to particular factual or legal circumstances. Neither this website, nor the use of information from the website creates an attorney-client relationship.