The practices of some of the nation's largest for-profit colleges are less than upstanding. Some colleges have many more recruiters than professors; admit students without the qualifications to actually earn a degree; and then pay top executives and shareholders millions while students are shackled with outsized debts. A lawsuit joined Monday by the Justice Department and a handful of states, including Florida, will give the public an even clearer picture of this shady side of the for-profit, publicly traded education business. The crackdown is welcome.
For too long the for-profit college industry has been operating without sufficient scrutiny. The industry sucks up about a quarter of all federal student financial aid even though for-profit schools enroll only about 12 percent of higher education students. The graduation rate for first-time, full-time bachelor's degree students at for-profit colleges is about 22 percent within six years, compared with 55 percent at public institutions and 65 percent at private nonprofit colleges. And for-profit schools' enrollees constitute nearly half of all student loan defaults.
Recent efforts by the Education Department to hold these schools accountable for the high debt load shouldered by graduates relative to the low-paying jobs they are able to secure were watered down after fierce industry pushback. The unsatisfying result from the fight over the "gainful employment" regulations raised concerns that the Obama administration was backing down.
It's good to see Justice Department enter the fray in a multibillion fraud action against the Educational Management Corp., the nation's second-largest for-profit college company. It enrolls about 150,000 students in 105 associated schools across the country, including the Art Institute of Tampa, and Argosy and South Universities in Tampa.
The suit accuses the company of paying recruiters based on the number of students they enroll, a violation of federal law that bars such incentive compensation. According to the suit, Educational Management Corp. was ineligible for the $11 billion in state and federal financial it received over the last eight years. Under the False Claims Act there is potential for triple damages if the allegations are proved, which should get the industry's attention.
While the company denies wrongdoing, the suit was initially brought by two insiders who worked for the company. The 122-page complaint describes intense pressure on recruiters to increase enrollments, regardless of the qualifications of the applicants. Allegedly, recruiters were pushed to enroll people for online courses even if they didn't own computers. By signing up unqualified students, schools reap huge sums from state and federal student aid, while students drop out with a mountain of debt and no degree. It's little better than a scam.
The suit is just one of dozens of fraud cases against these colleges brought by insiders. Some have been settled. But a suit with the backing of the federal government and four states for more than $33 billion should finally get the attention of bad operators and force schools to start putting educating students first.