Government investigates major for-profit university, leaving students in the lurch

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Photo: Courtesy of Nicole Dykstra

One afternoon in early July, Nicole Dykstra made her usual commute to class at the Everest Institute in Kalamazoo, Mich. Dykstra, 43, is halfway through a nine-month massage therapy program at the school, which is owned by the for-profit university giant Corinthian Colleges International (COCO), based in Santa Ana, Calif.

When she arrived on campus, she and her classmates were greeted by several unfamiliar faces — the campus president and both directors of career and student services.

“They said our campus would be closing,” Dykstra recalls. “They said they had saturated the market in that part of the state and enrollment was down.”

She wasn’t entirely surprised, but the gravity of Corinthian troubles had yet to fully sink in at the time.

Like many students at Everest Institute, Dykstra had been inundated by the school’s kitschy TV ads for years. Each time another commercial came on, she usually rolled her eyes and flipped the channel.

“I had heard negative things about Everest before,” she says.

But when a friend visited Dykstra and her 7-year-old son, her perception of the school changed. Her son, who has spina bifida, a condition in which his spinal cord wasn’t fully formed at birth, is constantly in discomfort. Dykstra's friend, who was taking massage therapy classes at Everest at the time, offered to give him a therapeutic massage. Dykstra saw a difference in his behavior almost immediately.

“He was walking a ton better even just half an hour after the massage,” she says. Despite everything she’d heard about Everest, she was sold. In early 2014, she enrolled in the school’s massage therapy program, at a cost of $9,000 a year, with plans to start a career in pediatric physical therapy. She loved the classes, and even more, she loved how flexible her teachers were with her work schedule and her son’s ever-rotating roster of doctors appointments.

Right around the time she was signing up for classes, however, troubles at Everest’s parent company were just beginning.

In late June, when Corinthian allegedly failed to respond to Department of Education requests for student enrollment and financial aid data, the government put a three-week hold on financial aid payments to the school, including its subsidiaries, like Everest.

For-profit universities rely a lot on the promise of federal financial aid to entice its students, who are typically lower income, to enroll. The vast majority of Corinthian $1.6 billion revenue comes from federal aid dollars. Lawmakers and regulators have been pushing for more power to deny federal financial aid to for-profit schools that aren’t delivering on their promises to students, attempts that have been aggressively combated by the for-profit industry.

Earlier this year, a Department of Education report showed that Corinthian had one of the worst track records of any for-profit, with half of its programs failing the agency’s standards, according to the New York Times. The report was issued in support of the DOE’s proposed "gainful employment rule", which would grade for-profit university programs on student loan default rates, earnings, and job placement and withhold funding from colleges that don’t pass muster. The rule never made it past Congress but the report was still released.

Since late June, the DOE has been in negotiations with Corinthian on an agreement that would free up federal funding for its remaining students and on the condition that it begin closing and selling some of its campuses. Despite rumors of bankruptcy, Kent Jenkins, a spokesman for the college, says it has no plans to declare bankruptcy.

The plan calls for Corinthian to gradually shutter 12 campuses in 11 states. Another 85 campuses will be put up for sale. For the campuses that will be fully closed, Corinthian has put in place a “teach out” plan that would ensure that students who are currently enrolled may continue their studies and graduate, while ceasing enrollment for new students. Since programs range from nine months to two years, the process won’t be a short one, Jenkins says.

“We are gradually winding down operations,” Jenkins says. “You want all students to finish and it will take some time. We will try to complete the sales process within six months.”

Under the terms of the deal, Corinthian will also have to hire an independent monitor to oversee the closing of its campuses and ensure it uses federal aid dollars solely for student services.

The school’s deal with the DOE will not entirely interfere with students’ studies. Dykstra and many students currently enrolled will be able to complete their degrees as the schools gradually shut down. On some campuses, staff help students relocate their studies to nearby schools that offer similar programs.

‘It explains a lot'

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Photo: Courtesy of Jay Goslin

Photo: Courtesy of Jay Goslin

Jay Goslin, 31, graduated from Everest’s Eagan, Minn., campus in 2012 with a degree in medical assisting. After graduation, Goslin decided to take a break from the medical field and moved to Arizona last year.

If I ever do want to go back to working as a medical assistant, I’m worried [having Everest on my resume] is not going to look good,” he says.

Since the school announced it was closing some campuses, teachers have come forward claiming they were pressured to inflate grades and attendance records. Goslin says “it explains a lot.”

“There was an instance in class where a group of students cheated on a test and my teacher found out,” he says. “[The students] told us she basically covered it up and let them go through anyway. For a teacher to do that, it really did not sit well with me.”

Corinthian has denied all reports of grade inflation and misleading financial aid practices.

Job prospects

For Dykstra, the fact that she is able to complete her studies and get what she paid for is comforting. But there’s been a noticeable difference in the quality of her classes since the school’s announcement, she says.

“I can tell our teacher’s attitude has changed,” she says. “She’s become a lot more lax in class. I’m wondering if she’ll shut down as far as teaching is concerned because she knows her job is going to be gone soon. I need that instruction so that I can get my license and complete the massage therapy test and know what I’m doing.”

One of the most attractive promises Everest made Dykstra when she enrolled was a lifetime guarantee of career counseling. The school actively pursues local businesses that have job opportunities for students. Without that support after graduation, she’s concerned about her prospects.

“With all the national attention that’s happening now I’m worried about how this will affect me looking for jobs,” she says.

A much-needed wake-up call

Corinthian isn’t the only for-profit school to land itself in hot water with regulators. On Monday, the University of Phoenix, which enrolls more than 241,000 students, announced that its financial aid programs were also under review by the DOE.

The main concern with for-profit schools is that they are using misleading practices to lure students to enroll, such as over-promising on job placement rates and inflating the success of graduates.

A staggering 96% of students enrolled at four-year private and for-profit colleges take out student loans, versus 57% of those enrolled at four-year private nonprofit schools and 48% at public schools, according to a report by ProPublica.  The average annual tuition at a for-profit institution is $15,130 — nearly twice the cost of public four-year institutions.  

Because they graduate with much more student debt than typical nonprofit college graduates, for-profit students are far more likely to default on their student loans, with default rates of 22%, compared to 13% at public institutions.

The newly heightened scrutiny of the for-profit sector has been a long time coming, says Barmak Nassirian, director of federal relations and policy analysis for the American Association of State Colleges and Universities.

“Corinthian’s demise should serve as a wake-up call to the for-profit sector that predatory practices will finally catch up with bad actors,” he says. “The real cause of Corinthian’s failure was that the disastrous quality of its education and its overpriced tuition finally became widely enough known that it could no longer feed its voracious appetite for enrollment growth.”

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