College Inc. Redux is Overdue

We desperately need a PBS Frontline updating of College Inc. This 2010 documentary by Martin Smith and Rain Media took us behind the curtains, into the big business of US for-profit higher education. At the time, College Inc. made an important statement: that for-profit higher education had become a racket, funded by greedy Wall Street investors, and that government oversight was necessary to rein in the worst abuses at schools like Corinthian Colleges and Ashford University.

 

 

From 2010 to 2012, the Senate Harkin Commission researched and exposed the systemic abuses of the largest for-profit colleges. And under President Obama, some of these abuses were addressed through policy changes at the US Department of Education, Department of Veterans Affairs, and Department of Defense. 

 

Times Have Changed, Not In a Good Way

 

Much has happened in the last decade and a half since College Inc. was produced. US higher education did not become less predatory, even as a number of for-profit colleges (Corinthian Colleges, ITT Tech, Art Institutes, Le Cordon Bleu, and Virginia College) were shuttered. Republicans worked to ensure that meaningful policy changes, like gainful employment safeguards, were blocked. And some of the worst predators (Kaplan and Ashford) morphed into businesses owned by state universities (Purdue and University of Arizona).

 

Online education has become pervasive despite concerns about its effectiveness. Content creators and facilitators have replaced instructors at large robocolleges like Southern New Hampshire University, Grand Canyon University, Liberty University Online, and the University of Phoenix. 

 

The for-profit (aka neoliberal) mentality has spread. Online Program Managers (OPMs) have brought for-profit education to non-profit institutions, carrying with it an enormous cost to consumers. Advertising and marketing has become out of control, helping fuel a manufactured College Mania of anxious parents and their children. 

 

Despite the College Mania, folks have become more skeptical of higher education, and for good reason. Student loan debt has further crippled the lives of millions of Americans as Republicans have stepped in to block debt forgiveness. Community colleges and some state universities have gone through significant enrollment declines. Small colleges have closed. And elite colleges have become more wealthy and powerful and controversial. Something not on the radar in the 2010 documentary or in popular culture at the time. 

Layoffs in Higher Education

The Layoff.com is a "simple discussion board" for workers who would like to learn more about the rumors or possibility of job cuts in their organization. It's also been helpful for us to understand what has been happening behind the scenes in the US Higher Education business. 

We have been observing and participating on this website for more than a dozen years, watching the fall of Corinthian Colleges (Everest College, Wyotech, and Heald), ITT Tech, Education Management Corporation (the Art Institutes and South University), the partial collapse of Apollo Group (University of Phoenix), Perdoceo (formerly Career Education Corporation), and Laureate International, and the transformation of Kaplan University to Purdue University Global and Bridgepoint Education (Ashford University) to University of Arizona Global.   

 

 

 

As the College Meltdown has advanced, we have also observed a number of private schools collapse and public colleges and universities struggle. As enrollments continue to drop, we can expect more layoffs to occur and for education related businesses to struggle more.  

 

The contents of this article are updated periodically, to illustrate trends in the College Meltdown.  The most recent update was published October 29, 2024.  2U, the online program manager for elite university certificates has been the poster child in 2024, but there are many other companies and institutions in peril.  

 

2U and edX 

 

Adtalem Global Education  

 

Albright College

 

Baldwin-Wallace University  

Barnes and Noble College Booksellers

 

Cengage

Chegg

 

Concordia University, Ann Arbor

Coursera

 

Delta State University 

 

DeVry University 

 

Emerson College 

 

Gwynedd-Mercy University 

 

Keystone College  

 

Maximus 

 

National American University 

 

Navient 

 

Northern Illinois University 

 

Penn State University  

 

Perdoceo   

 

Portland State University 

 

Saint Cloud State University 

 

Sallie Mae  

 

Southern New Hampshire University 

 

Tennessee State University

 

Udemy 

University of Arizona 

University of Maryland Global 

 

University of New Orleans 

 

University of North Carolina, Asheville

 

University of Phoenix 

 

University of Wisconsin-Milwaukee 

 

Walden University 

 

Western Illinois University   

 

Western Washington University 

West Virginia University 

 

Wittenberg University 

2U-edX crash exposes the latest wave of edugrift

2U, a Lanham, Maryland-based edtech company and parent company edX, is facing layoffs of an estimated 200 to 400 workers--a significant number for a company that only employs a few thousand--amid more rumors that the company is for sale. While the pain of their firings may be consequential for those who are experiencing it, the pain of those the company has damaged, mostly striving middle-class consumers and their families, may be worse.  

2U's problems are not new. The Higher Education Inquirer first reported on the beginning of company's meltdown in October 2019.  In July 2022, 2U announced layoffs as it changed its business model (again) and the US Department of Education scrutinized the company's grad school offerings.

2U began in 2008 as an online program manager (OPM), one of a few companies offering edtech services that required large amounts of capital and labor costs. They expanded through the acquisition of other edtech firms, Trilogy Education Services (2019) and edX (2021).  edX is an education platform that was created by Harvard and MIT as a massive open online course (MOOC) platform, but as part of 2U now concentrates on selling a number of elite and brand name tech bootcamps.

In 2022 and 2023, the Wall Street Journal (Lisa Bannon), Chronicle of Higher Education (Mike Vasquez), and USA Today (Chris Quintana) investigated 2U after a few US senators sounded the alarm about consumers being fleeced by 2U and other OPMs. 

With 2U's reputation in shambles and layoffs ahead, the parent company wrapped itself around the more respectable edX brand. Bjju's, an Indian edtech firm, was said to be looking at 2U or Chegg as a possible acquisition (Byju's is now facing its own problems).  

Concentrating on growth for years, then acquisition, then consolidation and rebranding, 2U has never generated an annual profit--and that trend doesn't appear to be changing. 

Earlier this year we listed 2U, Chegg, Coursera, and Guild Education as part of the EdTech Meltdown. 

Unlike the prior wave of for-profit college failures of Corinthian Colleges, ITT Tech, Education Management Corporation, and others that hurt working-class student debtors, 2U has collaborated with elite universities, targeting mostly middle-class folks for advanced degrees and certificates with elite brand names such as USC and UC Berkeley. Credentials that frequently are not worth the debt. Credentials that often did not lead to better paying jobs. Credentials that burden (and sometimes crush) consumers financially with private loans from Sallie Mae and others.

edX's website advertises coding, data analytics, cybersecurity, and AI bootcamps from a number of name brands: Ohio State University, Columbia University, University of Texas, Harvard University, Michigan State University, University of Denver, Southern Methodist University, University of Minnesota, University of Central Florida, Arizona State University, Northwestern University, Rice University, the University of North Carolina, and UC-Irvine.   

• Ohio State University AI Bootcamp $11,745
  
• University of Texas Coding Bootcamp $12,495
• Berkeley Extension Coding Bootcamp $13,495
• University of Pennsylvania Cybersecurity Bootcamp $13,995
  
• Columbia University Data Analytics Bootcamp $14,745 

It's not clear how well managed the programs are and how much these schools are involved in instruction and career guidance.  However, edX claims that with their bootcamp certificates, graduates will "gain  access to more than 260 employers--including half of the Fortune 100--seeking skilled bootcamp graduates." 

While the targets of for-profit colleges and 2U may have been different, their approaches were similar: sell a dream to consumers that often does not materialize. Spend tens of millions on targeted (and sometimes misleading) advertising and enrollment. Keep the confidence game going as long as it will last. But that may not be much longer.

In April 2023, 2U filed a lawsuit against the US Department of Education to avoid further government oversight. A familiar defensive strategy in the for-profit college business.

There is much we don't know about how significant the damage has been to those who bought the 2U story and spent tens of thousands on elite degrees and certificates, but it must be significant. Most US families do not have that kind of money to spend on something that doesn't result in financial gains.  

Recent reviews of edX on TrustPilot have been scathing. And social media have been brutal on 2U, Trilogy, and EdX. Reddit, for example, has posts like "The dirty truth about edX/Trilogy Boot Camps." In a more recent post about edX, there was a flurry of negative reviews.

In 2016, we wrote "When college choice is a fraud." At that time we were focusing on the tough choices that working-class people have deciding between their local community college or a for-profit career school. Little did we know that the education business was already moving its way up the food chain and that edtech companies like 2U would be engaging in the latest form of edugrift. 

Related link:

2U Virus Expands College Meltdown to Elite Universities (2019)

Buyer Beware: Servicemembers, Veterans, and Families Need to Be On Guard with College and Career Choices (2021)

College Meltdown 2.1 (2022)

EdTech Meltdown (2023)  

Erica Gallagher Speaks Out About 2U's Shady Practices at Department of Education Virtual Listening Meeting (2023)

"Edugrift" by J.D. Suenram (2020)

When college choice is a fraud (2016)

Art Institutes Close. Students May Be Eligible for Student Loan Forgiveness.

The Art Institutes (Ai) is closing its doors this Friday, September 30. Ai has locations in Miami and Tampa (FL), Atlanta (GA), Austin and Houston (TX), and Virginia Beach (VA). About 2000 students are affected.  The Art Institutes website provides closed school information.

The Art Institutes chain had a storied history, starting in Pittsburgh, Pennsylvania in 1921 and growing to 50 locations by 2010. Its boom was the result of intensive profit-making in the higher education business in the 1990s and early 2000s. Goldman Sachs was a key contributor to its explosive growth.

Ai's decade-long decline was part of a wave of for-profit colleges that faced increased federal scrutiny for low graduation rates, high levels of student loan debt, and declining enrollment. Unlike Corinthian Colleges (2015), ITT Tech (2016), Westwood College (2016), and Virginia College (2018), the Art Institutes survived with government assistance--but with less than ten campuses. 

Art Institute Students 

Students from the Art Institutes may transfer to other schools, but many of their credits may not be accepted by other institutions. Consumers should also be extremely wary of the schools they plan transferring to.  

Students would normally be allowed to have their student loans forgiven through a process called Closed School Discharge. But that avenue for remedy has been paused. Present and former students, however, may be able to have their student loan debt relieved through Borrower Defense to Repayment if they can prove that they were defrauded. 

Borrower Defense-Sweet vs Cardona is a Facebook space for people who have already succeeded in getting their student loan money returned to them and others working on claims. Borrower Defense-Sweet vs Cardona has more than 14,000 members. 

EdTech Meltdown

The Silicon Valley tech downturn has been creating reverberations in other parts of the economy and in other areas of the US.

Edtech, a small subset of the tech industry that overlaps with higher education, is facing major headwinds as skepticism about higher education and the economy grows.  Even two industry insiders, Noodle CEO John Katzman and Kaplan executive Brandon Busteed have been critical of the short-term thinking and questionable outcomes of edtech. Katzman has called some companies in the space "more adtech than edtech," implying that some do little more than marketing and advertising for colleges and universities.     

Ultimately, it's US consumers who are feeling the greatest pain as participants in online education--a mode of instruction that for millions of people may have more risks than benefits--within an increasingly dysfunctional economy that produces expensive education and fewer good jobs.   

Significant problems that were observed in large subprime colleges like University of Phoenix, Corinthian Colleges, ITT Tech, DeVry University, Colorado Tech, and the Art Institutes more than a dozen years ago have resurfaced in edtech.  And other problems unique to edtech have emerged. 

Chegg is an edtech company based in Santa Clara, California, and provides homework help, online tutoring, and other student services.  The company's value grew more than 300 percent in 2020, during the Covid pandemic, but has faced headwinds for the last two years. This includes allegations that  Chegg enables students to cheat on homework and other assignments. Derek Newton has chronicled this problem in the substack The Cheat Sheet.

 

[Chegg shares grew in 2020 during the Covid pandemic. Source: Seeking Alpha] 

 

Coursera is a publicly traded MOOC based in Mountain View California.  Shares started trading in April 2021.  The company has under-performed as a profit making enterprise. Massive Open Online Courses were once seen as a wave of the future in adult education but their popularity has waned. 

 

[Coursera has underperformed since its IPO in April 2021.  Source: Seeking Alpha]

2U (based in Lanham, MD) and Guild Education (based in Denver) and are two edtech companies based outside of Silicon Valley. 

2U is a publicly traded Online Program Manager (OPM).  The company services major universities such as the University of Southern California and University of North Carolina with support for some of their online degree programs. 2U has received an enormous amount of funding from Cathie Wood, a major Silicon Valley investor, and has continued to receive support despite a long record of financial losses.  

Some 2U investors have grown tired of persistent losses--and it has shown in the declining share price. The company also faces increased scrutiny in DC for recruiting consumers unable to recoup the cost of education for high-priced masters degrees in areas such as social work.  2U acquired edX, the Harvard-MIT MOOC in 2021 and its profitability remains to be seen.  

In 2023, 2U sued the US Department of Education for attempting to require more transparency between OPMs and their clients.  This strategy is similar to the defensive strategy that subprime colleges have used to stop gainful employment regulations, and more recently, borrower defense to repayment rules.  

 

 [2U shares have dropped more than 90 percent over the last 5 years. Source: Seeking Alpha]

Guild Education is a privately held corporation that grew to an estimated $4.4B evaluation in a few years. Guild serves businesses by administering online education benefits for large corporations such as Walmart, Target, and Macy's.  While its work may help companies with their bottom line, they appear to do little for their workers. 

At least ten of Guild's investors are based in Silicon Valley, including Silicon Valley Bank and venture capital firms in San Francisco, Palo Alto, and Menlo Park, California. Valuations.fyi reports Guild's estimated value at $1.3B, a 70 percent drop from its peak in June 2022. 

 

[Image above: Guild's valuation in Billions from valuations.fyi]

 

The Higher Education Inquirer will continue to observe changes in edtech as the College Meltdown advances.  

A ‘rigged’ economy and skepticism about college (Paul Fain, Open Campus)

How University of Phoenix Failed. It's a Long Story. But It's Important for the Future of Higher Education. 

The Cheat Sheet (Derek Newton)

2U Virus Expands College Meltdown to Elite Universities 

Erica Gallagher Speaks Out About 2U's Shady Practices at Department of Education Virtual Listening Meeting

Borrower Defense Claims Surpass 750,000. Consumers Empowered. Subprime Colleges and Programs Threatened.

Guild Education: Enablers of Anti-Union Corporations and Subprime College Programs 

College Meltdown 2.0 

The Growth of "RoboColleges" and "Robostudents"

The American Dream is Over (Gary Roth) 

An Email of Concern to the People of Arkansas about the University of Phoenix (Tarah Gramza)

February 26, 2023. 

Hi! My name is Tarah Gramza. Dahn Shaulis has been talking with me about the University of Phoenix/University of Arkansas situation. I offered to share my knowledge as I have quite a bit with years of experience in this mess of subprime colleges and student loan debt.  

I am the creator/administrator of a quite popular Facebook group with approximately 14,000 members. Theresa Sweet and I came together by sheer accident and became close friends. We have managed this group together for a few years now. 

Theresa started her battle with the US Department of Education (aka ED) nearly a decade ago trying to get anyone’s attention to hear her story and draw attention to the fraud being committed by these schools right under everyone’s noses. Our stories are all similar: we attended schools who promised a future full of butterflies and roses, misled quality of education, pressured enrollment, false advertised job placement, lied about costs...the list goes on. 

Following the bread crumbs

Our lawsuit started as a mission to hold the Department of Education accountable for delaying the processing of Borrower Defense to Repayment applications. These delaying actions broke ED's own rules and regulations. The last several administrations tried to change rules for their own agendas and to satisfy their paid cronies. We know for a fact many congressional leaders have been deeply invested and made millions from this for-profit schools fraud. This includes the Secretary of Education at the time, Betsy DeVos. 

The first settlement forced ED to process applications fairly within a period of time. The department made a big mistake, they decided to deny 90% of class members applications and used illegal denial letters, which ultimately stopped the settlement and sent us back to litigation/discovery. During the discovery it was uncovered that ED had internal emails showing they were intentionally not reviewing applications per the law requirement (a policy of mass denial), withheld evidence by the department on many of the main culprit schools, and knew about the fraud being committed at the highest levels. This led to additional claims by the class and now opened the department up for direct financial liability and undue harm. This led to the final settlement that sits today. 

Between the first settlement and the illegal denials and the present one, the administrations changed and Betsy DeVos quit her job. During the discovery (testimony) it was found that upper leadership under Betsy DeVos pointed their fingers directly at Betsy herself and that she directed these policies, an attempt was made to make her testify. As government always does, they protected her and their own tails in the process and she was allowed to skate by unscathed. The new administration decided it was time to start doing the right thing; the sheet was pulled back enough for everyone to see they well knew about the fraud for over a decade. 

This lawsuit also brought forward the fact that ED had not used its own rules to go after schools for recoupment costs on the taxpayers behalf and recoup funds from these executives, schools, leaders. This includes some of the leaders of major school collapses such as Corinthian Colleges and ITT Tech. Sadly, the executives just jumped from one school to the next bringing their fraud with them along the way, leaving a wake of schools with damaged students. 

Putting it together

The final settlement (Sweet v Cardona) was signed and all of a sudden four schools from the list of 151 known offender schools decided to intervene on the lawsuit. They used every excuse they could to conjure up to stop this case and hold up the settlement--even though the settlement didn’t hold them accountable for the class discharged claims. The judge ultimately denied their requests leading a final settlement approval. Three of those four schools then appealed the judge for a stay,which was officially denied Friday evening. 

Why would four schools appeal a lawsuit that doesn’t involve them of which ultimately has no recoupment against them for the class?

Well- here’s why, the post class group AND any following applications will have recoupment. The department, right around the time of the announcement, had recently announced the recoupment efforts against Devry University and this terrified the schools. They knew full well they were next and that it would put them out of business and these shareholders would be left holding the bag. Now a plan needed to be put into place to try to find a way out. 

The plan

University of Phoenix is one the biggest offenders and probably one the largest schools to profit from this business model of fraud. We’ve seen evidence that much of the fraudulent activity came directly out of the University of Phoenix training manuals. They also had some of biggest lawsuits, so intervening as University of Phoenix was a bad idea. 

The well-known school lobbying group Career Education Colleges and Universities (CECU) led by Jason Altmire banded together to not only bundle money from these subprime schools to stop this lawsuit, by using these four smaller less widely known, less lawsuits, as pawns in a bigger game. Jason has been known and deeply ingrained in this scandal for over 20 years, even before he was lobbying. He was an elected official voting for this for profit game. Holding up the lawsuit benefited every single school named on Exhibit C and you will see why below. 

The new rules and regulations were published a few months back with hard targeted rules that establish a line in the sand starting July 2023. These regs held harsh consequences for all schools not only into the future but also for past bad deeds. The rules also clarified and hardened the rules for information sharing (evidence) and group discharges. 

It became apparent that the shareholders and owners of University of Phoenix needed out and now. This is because the recoupment efforts follow owners. If they can sell the school, they can cash out what is left of their $1 Billion investment and run intact. Which leads to the point of this email, if Arkansas, or any other buyer decides to buy University of Phoenix they will be the target for the recoupment efforts which I estimate to be approximately $600M dollars as it stands today with the number pending recoupable borrower defense applications. If things go as expected this number could exceed $1B. The rules call for recoupment of funds and also steep consequences such as loss of title IV funds. 

Jason Altmire and his lobbying group are so desperate to prevent these rules, they are suing in Texas to prevent them from being implemented.

Why would the Governor of Arkansas pursue this deal?

The Governor of Arkansas knows full well the risks. The political side of this story is administrations. Republican administrations have been very friendly to these schools and have in the past created and changed ED rules in the schools favor and turned a blind eye to the fraud. Democrats have also been guilty of this but in today’s climate we have to think of the present state of the Republican position in student debt relief. The state of Arkansas is offered a sweet deal of a percent of profits on a private deal which they claim doesn’t cost tax payers. 

The hidden agenda by the governor is she is gambling against a change in administration that is friendlier and will either not pursue recoupment against a state owned (affiliated) school OR she is thinking the Biden administration will lose the next election in which they will push to change the rules again! This is a steep gamble as I suspect the secrets in this deal don’t offer protections to the state as presented in press briefings. If the state is signing a contract for profits, what happens if the school goes under? As you may be aware, much of these warnings have been shared with the leadership of Arkansas by many student advocate groups including our lawyers for the Sweet case, the Project on Predatory Student Lending-PPSL. 

Recent announcements made by the Department of Education have added an additional layer of risk for anyone purchasing University of Phoenix as ED recently announced it “may require certain individuals to assume personal liability as a condition of allowing the schools they own or operate to participate in the federal financial aid programs and likely to require an individual to assume personal liability on behalf of the institutions or groups of affiliated institutions that pose the largest financial risk to the United States. This is determined based on institutions with the most serious and significant sets of concerns.” The question becomes, who will be putting their personal assets as collateral? University of Phoenix is not only a risk, it is one the primary reasons for the need for additional protections to the tax payers.

What value would the purchase of University of Phoenix have to the state of Arkansas if it can’t have its Title IV renewed? This fact alone combined with the University of Phoenix history, should scare away even the most riskiest investor!

Now you know the big picture. I hope it helps guide your actions and I hope you are willing to write and share with the public how this dangerous gamble is being wagered against the people of the state of Arkansas. For the records, I am a Republican and my focus is to point to facts of the situation and the truth of the climate in politics leads toward the assessment I’ve given. Let me know if you have any questions. I’m happy to help where I can. I also hold a large document that provides significant evidence against all the schools but the University of Phoenix file speaks volumes and will likely expand on the depth of the fraud, if you are interested.

Sincerely,

Tarah Gramza