Letter to Secretary of Education Miguel Cardona Regarding Borrower Defense to Repayment and Gainful Employment Regulation (Michael DiGiacomo)

Dear Secretary Cardona, Department of Education Staff, and Regulating officials,

My name is Michael DiGiacomo. I am a former student and victim of two closed for-profit scam colleges and the student loan industry. I have been fighting this industry since 2003-2006, when I realized I had been played badly by these deceptive debt factories. 

 

These "colleges," and others like them, were easily able to trick not just me, but many thousands of poor, first-time people into attending. The false promises of dream job placement stats and leads, fueled by the student loan industry's "College Students make A Million Dollars More" pitch, along with high pressure tactics, lack of financial understanding, and easy access to government funds made us all the prime target for these scamsters. 

 

They also piled on fraudulent private student loans as they worked hand-in-hand with commercial lenders to help themselves fleece the 90/10 requirement to gain more federal money funds. The promise of the future our parents and grandparents had was turned into a scam to fuel the next big bubble and wallets of those schools, the industry, and their lobbyists.  

 

Now, after having gone through this fight for almost 20 years, through the recruitment lies, joblessness, default, garnishment, depression, hopelessness, and the unknown, I have fought to have my federal student loans canceled as part of Sweet v Cardona [DEVOS] and the defense to repayment process. I am still miles away from relief. 

 

The paychecks, garnished for federal loan money by Sallie Mae-owned debt collectors for years, will never be returned as they somehow escape the parameters of the Sweet v Cardona [DEVOS] settlement. 

 

I spent years choosing between food or gas to get to work because federal student loan garnishments don't take those necessities into account when they rip away your paycheck. I have also not been refunded for years of payments made to the US Department of Education and Nelnet now that the federal loans have been closed in the settlement. 

 

My GI BILL even dried up/time ran out because I was too ruined financially and burned by those schools to want to finally return to ANY college again. Unfortunately, I am not alone on this. Over and over again I have heard the same stories. I have lost friends, have seen people alienate family, or even abandon our country. 

 

Now with Sweet v Cardona [DEVOS] class and post class members, I have heard that even with evidence, payments are not returned even though the loans are closed. I have seen servicers that are supposed to be helping class members [and post class] become whole pinball students away from them back to the department of education or others or give flat out incorrect information. 

 

And why does the class not cover federal loans held by Sallie Mae or other pre-Obamacare lenders? 

 

Why should the same corporate banks that helped the scamster schools be allowed to keep the funding? 

 

Why should the crooks be allowed to keep the robbery purse? 

 

Why is the process of getting a federal loan legally closed so hard?

 

Why is there no federal program in place to help with the predatory/fraudulent private student loans?

 

The processes for Defense to Repayment and the Gainful Employment regulations are hard to follow for someone as knowledgeable as myself about this, never mind a first time student or parent with no experience in the process. Clearly the "Colleges" aren't being honest in the first place to their customers, never mind slow regulators and watch dogs. 

 

I have watched the Student Aid website under serve people applying to defense to repayment they rightfully should be able to use. I have watched it only allow one school when they were hit by multiple. I have seen the website break or take minutes just to type the final name line. This is inexcusable since this is the one chance for people to make things right.  

 

The government guaranteed funding needs to be heavily protected on what schools get access to, and on the other side students need to be easily able to be made whole when it turns out there is systematic fraud. The fraudsters are faster than the government patches to fix it. 

 

Often when someone gets hit by one for-profit college, they get easily hit by a second one thinking the first was an isolated incident. 

 

I have watched this fight and have been part of it for too long to watch it happen all over again. Regulation needs to be strong on the part of protecting borrowers and easy for borrowers to be made whole. The promise of a government accredited college should be just that. It should not be just an arm of a corporate entity or allowed to be made "Not-for-profit" just because they worded it differently. 

 

The same corporate CEO's should not be trading companies and schools around like baseball cards or like whack a mole game once the one before it crashes down. Please put borrowers first if you want to have an educated society and protect them from corporate scamsters. And if somehow the scamsters DO get the upper-hand, please make it easier and more understandable for borrowers to get made whole.

 

When I joined the Army, I made a promise I would protect this country from all threats, foreign and domestic. The for-profit college and student loan industry is a domestic threat to this country and the public. They have decimated generations of prospective students and you still haven't fully picked up the pieces yet. 

 

Sincerely, Michael DiGiacomo

Veteran US Army

Victim of the New England Institute of Art aka "The Art Institutes" Aka Education Management Corporation

Victim of Katherine Gibbs aka Gibbs aka Sanford Brown aka Career Education Corporation

Victim of SallieMae aka USAFunds Aka Pioneer Credit Aka Navient

Trump 2024 and the Student Loan Portfolio

The US Department of Education (ED) handles the student loans of about 40 million US citizens, holding on to about $1.6 Trillion in debt--which is considered an asset to the US government.  And ED-FSA (Federal Student Aid) hires tens of thousands of workers, mostly contractors, to service the debt. But that could change in a few years. If Donald Trump is elected President.  

Under President Trump, debtors might expect that their loans to be transferred over to large corporations--at some point--with the sale being used to reduce the federal deficit, and to cut labor at ED. This would aid in the effort to eliminate the US Department of Education, as Trump has promised on the campaign trail.

Selling off the student loan debt portfolio may or may not require approval from anyone outside of the President. At least one study, by McKinsey & Company, has already been conducted regarding this possibility. 

In 2019, the Trump administration hired McKinsey to analyze the $1.5 trillion federal student loan portfolio. This analysis was part of a broader effort to explore options for managing the portfolio, including potentially selling off some of the debt. Results were never published. The analysis was conducted alongside a study by FI Consulting, which focused on the economic value of the portfolio, noting that the valuation could vary depending on future default rates, prepayment rates, and economic conditions.

The new owners of the sold off debt would most likely be big banks and other large companies, both domestic and foreign, that find value in the debt. There would be political and social resistance.  And many questions would need to be answered, in detail.

Would large banks or other large corporations be better stewards of the debt?

Would the bidding be transparent?  

Would consumers be able to challenge loan repayments or ask for forgiveness?  

What would happen to the contracts of the existing debt servicers?  

Will this expand the existing Student Loan Asset-Backed Securities market? 

Related link:

The Student Loan Mess Updated: Debt as a Form of Social Control and Political Action

Capital One-Discover Merger: Another Blow to the Educated Underclass

Capital One and Discover Financial Services have publicly announced plans to merge. The deal worth a reported $35B would give this new entity greater power, competing (or colluding) on a higher level with JP Morgan Chase, Visa, and Mastercard.  

For working people who know anything about finance and debt, and have debt themselves, this should be frightening. Together, both banks hold about 400 million credit cards.  

Capital One and Discover are both banks and high-interest credit card lenders. That means they are issued cheap money from the US Federal Reserve and lend it to naive and desperate consumers. 

Discover student loans are used by college students who have used up their Pell Grants and federal loans and are working (and borrowing) to graduate or extend their education. The interest rates can exceed 12 percent.  

Nelnet is the student loan servicer for Discover private student loans, but their $10.4 Billion portfolio is for sale.

Discover also bundles student loans and sells them as securities, student loan asset-backed securities or SLABS. Institutional investors, like retirement and investment funds, buy the debt up as stable investments.  

Capital One does not have student loans, but college students use credit cards from both of these companies to make their way through school, paying the price later. 

While there may be regulatory challenges for the Capital One-Discover deal, it's not likely that the merger, or any other financial consolidation, will be prevented--no matter how onerous it is to consumers.  

Related links:

"Let's all pretend we couldn't see it coming" (The US Working-Class Depression)

One Fascism or Two?: The Reemergence of "Fascism(s)" in US Higher Education

The Student Loan Mess Updated: Debt as a Form of Social Control and Political Action

SLABS: The Soylent Green of US Higher Education

Ambow Education Continues to School Naive Investors

The Higher Education Inquirer has been tracking Ambow Education (AMBO) for about two years.  Ambow Education is the owner of the NewSchool of Architecture and Design in San Diego (NSAD) and the former owner of Bay State College which closed in 2023. NSAD is facing serious accreditation issues.  The only other asset to speak of is an idea called HybriU, which may or may not be a real technology.  

Tomorrow, February 20, 2024, Ambow completes a 1-10 reverse stock split to pump up its stock price just enough to avoid delisting from the New York Stock Exchange (NYSE). The company, which until recently was based in Beijing, has a troubled history. At one time it was reportedly valued at $1 Billion. Today it's valued at about $9 million. The latest company headquarters is in a small, rented office space in Cupertino, California.  

What we saw in trading on Friday, one business day before the reverse stock split, was alarming: share volume was more than 280 times normal: 70 million shares versus a daily average of about a quarter million. The price more than doubled, from 12 cents a share to 30 cents at close. The highest price was 58 cents, almost five times the day's beginning price. What we were seeing was more than abnormal. Was it stock manipulation? We cannot say.  

HEI asked Ambow for a comment but they had no answer for this doubling in value in less than 24 hours and for any news of material change. We also reported the event to the US Securities and Exchange Commission (SEC)--twice in the same day. These reports were in addition to previous complaints to the SEC and the NYSE.

 

Related links: 

Ambow Education Facing Financial Collapse (Dahn Shaulis and Glen McGhee)

Bay State Beacon - Yet Another For-Profit College Debacle (Derek Newton, Forbes)

$AMBO is a Clown Car of Lies, Incompetence, and Poor Governance Speeding toward a Second Delisting (Ecliipse Research)

Massachusetts removes college degree requirements from most state jobs (Bryan Alexander)

[Editor's note: This article was first published at BryanAlexander.org]

Over the past year at least a dozen American states have taken a very interesting step. They have removed a college degree requirement for applicants to some or most state jobs. It’s a way of helping people “break the paper ceiling,” of advancing without needing to have postsecondary education credentials. Examples include Alaska, California, Maryland, Minnesota, New Jersey, North Carolina, Ohio, Pennsylvania (and Philadelphia), South Dakota, Utah, Virginia.

Now Massachusetts has joined them. (alternative link)

Governor Maura Healey filed an executive order on Thursday to ensure most state government job listings do not include degree requirements and hiring managers use a “skills-based” approach when picking candidates to fill open positions.

Skills-based instead of credential-driven: that’s an important shift.

Healey announced this decision during a speech to Associated Industries of Massachusetts on Thursday, in part to spur companies to rethink their approaches to hiring. She noted that career success shouldn’t be limited to the portion of the state’s population — nearly half, per a recent census count — with a bachelor’s degree.

Did you catch that last point, about almost 50% of the state having a degree? In fact, Walletbub just determined that Massachusetts was the most educated state in America. And that state now set aside those educational requirements at scale.

I don’t want to overstate this decision. After all, Massachusetts employs fewer than 50,000 people (source) so we’re not overhauling the state’s labor force. At the same time, nothing in the governor’s decision prevents people with degrees for applying to state positions. Moreover, the states which have taken such steps number not even one third of the lot; a majority of American states still require postsecondary sheepskin for public jobs. A powerful reason for those decisions is the currently low unemployment level; when that rises, perhaps these states will reverse their positions.

And yet I think this is noteworthy. It stands opposed to the inherited “college for all idea,” instead viewing non-academic achievement as on par with college or university degrees. It may encourage other organizations to do the same – other states, businesses, nonprofits – to similarly downgrade reliance on postsecondary attainment. As word of these shifts gets out it might depress college enrollment to a degree.

Note, too, that this isn’t a partisan move. Republicans and Democrats alike seem equally fond of the idea so far, even in our hyperpolarized times. It’s easy to find examples of this, starting with how the state leaders who have taken this step are members of both parties. A bipartisan pair of governors urged others to reduce college requirements. While the conservative National Review praised the strategy, so did Barack Obama:

Here’s an example of a smart policy that gets rid of unnecessary college degree requirements and reduces barriers to good paying jobs. I hope other states follow suit!

Let’s keep an eye on this trend. As 2024’s elections ratchet up, this could become a partisan issue. Or it might just continue with more governors deciding to open up public jobs beyond academic achievement. Is the college for all consensus shattering?

The Student Loan Mess Updated: Debt as a Form of Social Control and Political Action

[Editor's note: The FY 2023 FSA Annual Report is here.] 

In 2014, the father-son team of Joel Best and Eric Best published The Student Loan Mess: How Good Intentions Created a Trillion Dollar Problem. Their argument was that rising student loan debt posed a major social and economic problem in the United States, exceeding $1 trillion at the time of publication (predicted to reach $2 trillion by 2020). This "mess" resulted from a series of well-intentioned but flawed policies that focused on different aspects of the issue in isolation, ultimately creating unintended consequences.

Key Points of the 2014 book:

History of Federal Involvement: The book explored the evolution of federal student loan programs, highlighting how each policy change created new problems while attempting to address the previous ones.

Cost of College: Rising tuition fees along with readily available loans fueled the debt crisis, as students borrowed more to cope with increasing costs.

Repayment Challenges: The authors delved into the difficulties graduates face repaying their loans, including high interest rates, complex repayment plans, and limited income mobility.

Societal Impacts: The book examined the broader societal consequences of student loan debt, such as delayed homeownership, reduced entrepreneurship, and increased economic inequality.

Beyond the Mess: While acknowledging the complexity of the issue, the authors discussed potential solutions, including loan forgiveness programs, income-based repayment plans, and increased government regulation of for-profit colleges.

Overall, "The Student Loan Mess" provided a critical historical analysis of the factors contributing to the crisis and suggested pathways towards a more sustainable system of higher education financing.

Expansion of Federal Loan Programs (1960s-1990s):

The creation of federal loan programs initially aimed to increase access to higher education.

This led to rising tuition costs as universities saw guaranteed funding, with less pressure to remain affordable.

Loan eligibility expanded, encouraging more borrowing even without clear career prospects for graduates.

Cost Explosion and Predatory Lending (1990s-2000s):

College costs skyrocketed due to various factors, including decreased state funding and increased administrative spending.

Loan limits were raised, further fueling the debt increase.

Private lenders entered the market, offering aggressive marketing and deceptive practices, targeting vulnerable students.

Recession and Repayment Struggles (2008-present):

The Great Recession exacerbated loan burdens as graduates faced limited job opportunities and stagnant wages.

Complex repayment plans and high interest rates created a challenging landscape for borrowers.

The rise of for-profit colleges further complicated the issue, often saddling students with debt for degrees with low earning potential.

Growing Awareness, Advocacy, and Reform (2010s-present):

Public awareness of the student loan crisis grew, leading to increased advocacy and demands for reform.

Issues like predatory lending, debt forgiveness, and income-based repayment gained traction.

In 2010, the Health Care and Education Reconciliation Act made a significant change to the federal student loan system. Previously, the government guaranteed private loans, meaning it reimbursed lenders if borrowers defaulted. In turn, lenders received subsidies for participating. The Act ended these subsidies for private lenders, resulting in over $60 billion saved that could be reinvested in student aid programs.

Debates on the role of government and private lenders in financing higher education continued.


Next Chapters?

Since 2014, almost ten years after the Student Loan Mess was published, several major developments have unfolded concerning student loan debt:

Growth and Persistence:

Debt continues to climb: While the growth rate has slowed somewhat, outstanding student loan debt has surpassed $1.7 trillion and remains a significant burden for millions of borrowers.



 

Racial and socioeconomic disparities persist: African American and Latinx borrowers disproportionately hold a higher amount of debt compared to white borrowers, exacerbating economic inequalities.

Policy Changes: 

https://x.com/The Biden-Harris administration has provided $136.6 billion in debt relief. 

Expansion of income-driven repayment plans: Options like Income-Based Repayment (IBR) and Pay As You Earn (PAYE) have been expanded, allowing borrowers to adjust their monthly payments based on income.

Public Service Loan Forgiveness (PSLF) challenges: Legal uncertainties and administrative backlogs have plagued PSLF, leaving many public servants struggling to qualify for loan forgiveness.

Temporary pandemic relief: During the COVID-19 pandemic, federal student loan payments were paused and interest rates set to 0%. Payments resumed in 2023.

Debt cancellation debates: Proposals for broad-based student loan forgiveness have gained traction, with several Democratic lawmakers pushing for different cancellation amounts. However, these proposals have faced legal and political hurdles. In 2023, the 9th Circuit Court ruled in favor of mass cancellation of loans from predatory for-profit colleges (Sweet v Cardona). A few months later, the US Supreme Court struck down President Biden's plan for debt relief to more than 30 million Americans.

Increased attention to for-profit colleges and online program managers: Scrutiny of predatory practices and low graduate outcomes at for-profit institutions has intensified. Gainful employment rules have been reestablished, but whether they will be enforced is in question.  


Looking forward:

The future of student loan debt remains uncertain. Key questions include:

Will broad-based loan forgiveness materialize?

Can income-driven repayment plans be made more effective?

How will future administrations address affordability and access to higher education?

What role will the private sector play in financing higher education?

How will declining enrollment numbers and skepticism about the value of higher education affect student loan debt and debt relief?  

Will higher ed institutions be held accountable for the debt of their former students and alumni?

Can higher education reduce consumer costs and provide value to consumers and communities at the same time?  

How will student loan debt affect disability, retirement, and life expectancy among long-term debtors?     

Policy Drivers:

Economic factors: A strong economy could increase government revenue, potentially enabling broader debt forgiveness or increased funding for higher education access initiatives. Conversely, an economic downturn could make policy interventions more challenging.

Elections and political pressure: Public opinion and the results of future elections will influence the political will for reform. Continued activism and pressure from advocacy groups could sway policy decisions.

Legal challenges and court rulings: Lawsuits over debt cancellation programs and loan servicer practices could impact the legal landscape and shape future policy options.

Private sector involvement: Developments in the private student loan market and potential regulations of lending practices could affect access to credit and repayment options.

Consumer Decisions:

Debt burden and economic outlook: The level of outstanding debt and future job prospects will significantly influence borrower behavior. Increased debt loads could incentivize riskier repayment strategies or delaying major life decisions like homeownership.

Awareness and financial literacy: Improved understanding of loan terms, repayment options, and alternative financing methods could empower borrowers to make informed decisions.

Government programs and incentives: Changes to income-driven repayment plans, loan forgiveness programs, and other government initiatives will directly impact consumer choices about managing their debt.

Emerging Trends:

Alternative financing models: Innovations like income-share agreements and skills-based financing could disrupt traditional loan structures and offer new options for students.

Technology and automation: Increased use of technology to streamline loan management and repayment could improve efficiency and transparency.

Focus on affordability and value: As concerns about the value proposition of higher education grow, there might be a shift towards emphasizing affordable options and skills-based learning.


How does student loan debt affect the lives of Americans?

Student loan debt has a profound impact on the lives of millions of Americans in various ways, affecting not just their finances but also their major life decisions and overall well-being. Here's a breakdown of some key areas:

Financial Impact:

Burden of debt: The average graduate has over $40,000 in student loan debt, significantly impacting their monthly budget and disposable income. This can limit savings for retirement, emergencies, and major purchases like a house.

Lower credit scores: Missed payments or delinquencies can negatively affect credit scores, hindering access to future loans and increasing interest rates on other forms of credit.

Delayed milestones: High debt burdens may cause individuals to delay major life milestones like buying a home, getting married, starting a family, or pursuing further education due to financial constraints.

Career Choices:

Job dissatisfaction: To make loan payments, some graduates might feel pressured to stay in high-paying but unfulfilling jobs, sacrificing career satisfaction for financial stability.

Entrepreneurial risk: The fear of financial failure due to debt may discourage individuals from pursuing entrepreneurial ventures, hindering innovation and economic growth.

Limited career mobility: Debt may lock individuals into specific career paths based on earning potential, restricting their ability to pursue desired career changes.

Mental and Emotional Wellbeing:

Stress and anxiety: The constant pressure of debt repayment can lead to significant stress and anxiety, impacting mental and emotional well-being.

Lower self-esteem: Feelings of financial instability and hopelessness can negatively impact self-esteem and overall life satisfaction.

Stigma and discrimination: Some individuals may face social stigma associated with student loan debt, further exacerbating the emotional burden.

Societal Impact:

Economic inequality: Student loan debt disproportionately affects certain groups, like minorities and low-income students, perpetuating and widening economic inequality.

Lower homeownership rates: High debt burdens can hinder homeownership, negatively impacting the housing market and contributing to wealth disparities.

Reduced consumer spending: Debt-burdened individuals have less disposable income, limiting their purchasing power and affecting the overall economy.


Social Class and Student Loan Debt

There's a well-documented and intricate relationship between social class and student loan debt, characterized by significant inequalities and disparities. Here's a breakdown of some key points:

Higher burden on lower classes:

Borrowing rates: Individuals from lower socioeconomic backgrounds are more likely to borrow student loans due to limited family resources and higher college costs compared to their income.

Debt amounts: Borrowers from lower socioeconomic backgrounds often take on larger debt loads due to higher tuition fees and living expenses, often exceeding their earning potential after graduation.

Repayment challenges: They face greater difficulty repaying loans due to lower-paying jobs, making them more susceptible to delinquency and default. This hinders wealth accumulation and upward mobility.

Contributing factors:

Limited financial support: Lack of parental financial support or savings forces students from lower socioeconomic backgrounds to rely heavily on loans for college expenses.

Limited college options: Limited access to affordable, high-quality educational institutions often steers individuals towards for-profit colleges with deceptive practices and low graduation rates, leading to high debt with limited job prospects.

Ongoing Debate

There is ongoing debate on solutions to address the student loan crisis, with proposals ranging from broad-based loan forgiveness to reforms in higher education financing and income-driven repayment plans. The future of student loan debt and its impact on Americans remains uncertain and depends on various factors, including policy decisions, economic trends, and individual financial choices.

The Student Loan Debt Movement

There has been an organized effort for student loan debt relief since the 2010s. This movement, using direct action, lawsuits, and lobbying has had some gains, putting pressure for accountability for schools that use predatory practices--and getting debt relief for hundreds of thousands of debtors.  The most notable organization has been the Debt Collective.  

Image of Ann Bowers, courtesy of the Debt Collective

There have been legal allies too, such as the Harvard Project on Predatory Student Lending (PPSL) and the Student Borrower Protection Center (SBPC).    

Named plaintiffs Theresa Sweet (L) and Alicia Davis (R) outside the federal district court in San Francisco on November 6, 2022, three days before the final approval hearing in Sweet v Cardona (Image credit: Ashley Pizzuti) 

Resistance to Debt Relief

The reasons why some people might not support student loan forgiveness. Some conservatives believe that it is unfair to forgive the debts of those who willingly took out loans, while others believe that it would be a waste of taxpayer money. Additionally, some believe that student loan forgiveness would not address the root causes of the problem, such as the high cost of tuition.

It is important to note that not all conservatives oppose student loan forgiveness. Some support income-based repayment plans or public service loan forgiveness. Additionally, some believe the government should focus on making college more affordable, rather than simply forgiving existing debt.

According to a 2019 poll by the Pew Research Center, 54% of Republicans and Republican-leaning independents opposed forgiving all student loan debt, while 37% supported it.

Student Loan Debt Power Analysis: Who Benefits from Inaction?

There are elites and elite organizations who are (at least on the backstage) against student loan debt relief: student loan servicers (e.g. Maximus, Nelnet, Navient, and Sallie Mae), big banks, large corporations, and the US military. For them, debt serves as a way to get others to do their bidding. Debt is essential as a leverage tool to recruit and retain workers. Debt relief could also create more competition for better, more meaningful jobs, which some elites may not want for their children. States may be unwilling or unable to further subsidize higher education if elites are unwilling to pay. This situation is likely to worsen as Medicaid budgets are used for a growing number of elderly and increasingly disabled Baby Boomers.  

Related links:

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

 

People's Rally for Student Debt Cancellation to be held outside Supreme Court, February 28, 2023  

 

Department of Education: Over half of federal student loan borrowers were not paying before Pandemic (Alan Collinge)

Student Loans and a Brutal Lifetime of Debt (Dahn Shaulis and Glen McGhee)

Maximus, Student Loan Debt, and the Poverty Industrial Complex

SLABS: The Soylent Green of US Higher Education

I Went on Strike to Cancel My Student Debt and Won. Every Debtor Deserves the Same. (Ann Bowers)

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

Higher Education FOIA Requests to US Department of Education

Robocollege Update

 

Robocolleges are a mix of for-profit and non-profit online colleges, both secular and Christian.  Their focus is on automation and reduced costs, particularly labor costs:

Instruction is delivered through automated Learning Management Systems (LMS) and online platforms, relying less on professors and more on pre-recorded lectures and automated grading. Even support staff are being replaced by chatbots.  

While some qualified individuals might be involved, educational content is often developed by large teams with varying expertise, potentially sacrificing quality for cost-effectiveness.

Marketing and advertising continue to be costly. But targeting marketing (e.g. targeting military service members and veterans, teachers, nurses, and government workers in low-income neighborhoods) can improve cost efficiency. 

Robocolleges offer degrees with a wide range of value to consumers (return on investment versus debt).  For people who need a degree (or an advanced degree) to play the game in government and medicine, these credentials may have value. 

Competency-based education and credits for life experience reduce the number of courses some students need to graduate.  Servicemembers going to Purdue Global, for example, can get an AA with as few as five college courses and a BS with as little as seven additional courses.

Cheating is probably easier for online students who are so inclined and whether these companies care is not really known.  

Southern New Hampshire (SNHU) continues to be the growth and efficiency leader, with the highest enrollment, more than 160,000 students. SNHU is also experimenting with artificial intelligence to reduce labor costs. In addition, SNHU works with Guild (aka Guild Education), which recruits workers from Walmart, Target, Waste Management, and other large employers.  

Grand Canyon (for-profit) and Liberty University (non-profit) target Christians for online credentials.  But oppressive debt is a concern with some of their programs. Social mobility for students is subpar.  

Purdue University Global and University of Arizona, Global Campus are two former for-profit colleges now owned by state universities. Information about their financial status is sketchy. Like SNHU, Purdue Global works with Guild to recruit working folks.  Purdue Global owes its online program manager. Kaplan Education, about $128 million.  Arizona Global has had financial difficulties which have affected the University of Arizona's bottom line.  

The University of Phoenix has returned to profitability by reducing instruction and student services by $100 million a year and legal costs by $50 million a year.  Consumers continue to file fraud complaints by the tens of thousands.  And debt is an enormous problem with former students.  It's not apparent whether Phoenix can maintain such enormous profits, but its future as a non-profit affiliated with the University of Idaho may reduce its tax burden and legal liabilities. 

Here are the most recent numbers from the US Department of Education College Navigator:

American Intercontinental University: 89 full-time instructors for 14,333 students.
American Public University System has 332 F/T instructors for 48,688 students.
Aspen University has 27 F/T instructors for 7,386 students.
Capella University: 180 F/T for 39,727 students.
Colorado State University Global: 40 F/T instructors for 9,565 students.
Colorado Technical University: 55 F/T instructors for 24,808 students.
Devry University online: 61 F/T instructors for 26,384 students.
Grand Canyon University has 550 F/T instructors for 101,816 students.*
Liberty University: 735 F/T for 96,709 students.*
Purdue University Global: 337 F/T instructors for 45,125 students.
South University: 41 F/T instructors for 7,707 students.
Southern New Hampshire University: 130 F/T for 164,091 students.
University of Arizona Global Campus: 122 F/T instructors for 34,190 students.
University of Maryland Global: 177 F/T instructors for 55,838 students.
University of Phoenix: 80 F/T instructors for 88,891 students.
Walden University: 235 F/T for 42,312 students.

*Most F/T faculty serve the ground campuses that profit from the online schools. 

 

Related links:

Robocolleges, Artificial Intelligence, and the Dehumanization of Higher Education (2023)

AI-ROBOT CAPITALISTS WILL DESTROY THE HUMAN ECONOMY (Randall Collins, 2023)

Guild Education: Enablers of Anti-Union Corporations and Subprime College Programs (2021)

The Growth of "RoboColleges" and "Robostudents" (2019)

The Higher Education Assembly Line (2019)

 

 

 

 

ED Completes Pre-Acquisition Review for University of Phoenix Deal. University of Idaho Continues Hiding Details of Transaction Fees, 43 Education "High-Risk" Bonds.

[Editor's note: This article will be updated as we receive more information.]

US Department of Education (ED) sources have told the Higher Education Inquirer that the Pre-Acquisition Review for the Idaho-University of Phoenix deal was completed in November 2023 in response to a request from the University of Phoenix in June of the same year.  

The University of Phoenix is currently owned by two powerful investment firms: Apollo Global Management and Vistria Partners. But those companies have been attempting to unload the for-profit college for more than two years. The latest potential owner is the University of Idaho's affiliate organization, Four Three Education--at an initial cost of $685 million.    

ED will not require anyone to post a Letter of Credit--despite the fact that Four Three Education currently has no financial assets and will likely have to issue high-risk bonds to acquire the University of Phoenix. 

Four Three Education, and the University of Idaho, may be responsible for compensating the Department of Education for successful Borrower Defense to Repayment (fraud) claims made by tens of thousands of consumers.  While that could amount to more than a billion dollars, the University of Idaho affiliate expects to spend much less by using aggressive legal means. 

Financing for the Phoenix project has been deliberately opaque. The University of Idaho, however, has acknowledged that it may be liable for some future losses, but only up to $10 million annually. And Idaho officials, including University of Idaho President C. Scott Green, seem undeterred by these potential problems.  

The Most Recent Court Case

A court case to determine whether the University of Idaho violated open meeting laws was completed last week.  Idaho District Judge Jason Scott ruled that the University of Idaho was not in violation for holding three secret meetings followed by a quick vote on May 18, 2023. The University of Idaho claimed that secrecy was essential for the deal to occur.

The State asserted that the Idaho Board of Education did not perform due diligence for the sale, relying on President Green and his word that this was a worthwhile deal for the University of Idaho. In turn, Green admitted he did not ask important questions about competition, for fear that he would be considered naive, and that he outbid the competition.  

As Judge Scott remarked, the wisdom of the deal was not on trial. If it had, perhaps the ruling would have been different. 

Information about the competition to buy the University of Phoenix continues to be sketchy. The University of Arkansas System rejected a deal from the University of Phoenix in April 2023, weeks before the last closed door meeting. UMass Global was mentioned in the court case, but with no evidence that they were ever a serious suitor. 

The Idaho-Phoenix Scheme

The University of Idaho spent a reported seven million dollars on consultants over two months to determine whether the deal would be profitable to the University of Idaho. But little is publicly known about how the funds were spent. Hogan Lovells, President Green's former employer, was one of the organizations involved in consulting the University of Idaho. A local law firm, Hawley Troxell was also involved.  

Idaho also created a non-profit organization, Four Three Education, to act as a firewall in the event the school loses money. The current President of the University of Phoenix, Chris Lynne, will remain in place and be a member of the Four Three Education Board. 

The University of Idaho claims that the University of Phoenix will make a $150 million annual profit but they have not produced evidence. Information about Phoenix's assets are also limited, but Idaho claims the for-profit college holds $200 million in cash. How liquid (or how restricted) the cash is has not been mentioned.

Funding for the sale will be through an initial debt of $685 million, which includes more than $100 million in transaction fees. When bond interest is included, the deal is likely to cost billions of dollars according to an industry source. In an opinion piece in the Idaho Statesman, Rod Lewis, a former attorney for Micron Technology and former president of the Idaho State Board of Education stated:

Phoenix will issue $685 million in corporate bonds anticipated to be “bb” rated (known as “high risk” or “speculative” bonds). Phoenix’s estimated debt service will be $60 million to $70 million per year. It sounds risky, and it is.

We will know more when the University of Idaho produces the bond contracts and names the bond underwriters.    

Poisoning the Public Higher Ed Well

The University of Phoenix relies heavily on obfuscation, intimidation, political lobbying, and lawsuits to reduce expenses related to fraud. Given recent data on consumer complaints about the University of Phoenix, University of Idaho officials say they are prepared for contingencies related to the tens of thousands of Borrower Defense to Repayment claims. But the school or its affiliated organizations could also be liable for claims related to questionable business practices in the present and future. 

It's too early to tell whether Idaho will profit from its acquisition. But if the sale is consummated, the University of Phoenix will join a growing list of state-affiliated and non-profit robocolleges, one that includes Purdue University Global (formerly Kaplan University) and University of Arizona Global Campus (formerly Ashford University), two schools that have not lived up to their parent company names.

Related links:

Predatory Colleges, Converted To Non-Profit, Are Failing (David Halperin, Republic Report)

University of Phoenix's Sinking Ship: Who is Chris Lynne?

University of Phoenix and the Ash Heap of Higher Ed History

Fraud Claims Against University of Phoenix Continue to Mount

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

The Slow-Motion Collapse of America’s Largest University

The Growth of "RoboColleges" and "Robostudents"

My 2024 Higher Education Finance Reading List (Robert Kelchen)

[Editor's note: This article first appeared at the Kelchen on Education blog.]

As a department head, I typically only teach one class per year. This spring, I get to teach my PhD class in higher education finance again—the eighth time that I have taught it in my eleven-year faculty career. Each time, I have updated the readings considerably as the field is moving quickly and I figure out what works best for the students. I use articles, working papers, news coverage, and other online resources to provide a current look at the state of higher education finance.

The format that I have taught the class using has also changed frequently over time due to what works best for the program and other events of the past several years. Here are reading lists from previous years and how I have taught the class:

Summer 2023: Accelerated five-week format, mix of asynchronous and online synchronous

Spring 2022: Online synchronous, meeting one evening per week

Spring 2020: Met one Saturday per month, started out in person but moved to Zoom halfway through due to the pandemic

Fall 2017: In person, meeting one evening per week

This spring, I am back to teaching the class in person one evening per week for the first time in nearly seven years. Here is the reading list I am assigning my students for the course. I link to the final versions of the articles whenever possible, but those without access to an academic library should note that earlier versions of many of these articles are available online via a quick Google search.

The higher education finance landscape and data sources

Chetty, R., Friedman, J. N., Saez, E., Turner, N., & Yagan, D. (2017). Mobility report cards: The role of colleges in intergenerational mobility. Working paper. (link)

Schanzenbach, D. W., Bauer, L., & Breitwieser, A. (2017). Eight economic facts on higher education. The Hamilton Project. (link)

Webber, D. A. (2021). A growing divide: The promise and pitfalls of higher education for the working class. The ANNALS of the American Academy of Political and Social Science, 695, 94-106. (link)

Recommended data sources:

College Scorecard: https://collegescorecard.ed.gov/ (underlying data at https://collegescorecard.ed.gov/data/)

Equality of Opportunity Project: http://www.equality-of-opportunity.org/college

IPEDS: https://nces.ed.gov/ipeds/use-the-data

NCES Data Lab: https://nces.ed.gov/datalab/index.aspx

Postsecondary Value Commission’s Equitable Value Explorer: https://www.postsecondaryvalue.org/equitable-value-explorer/

ProPublica’s Nonprofit Explorer: https://projects.propublica.org/nonprofits/

Urban Institute’s Data Explorer: https://educationdata.urban.org/data-explorer/colleges/

Institutional budgeting

Barr, M.J., & McClellan, G.S. (2010). Understanding budgets. In Budgets and financial management in higher education (pp. 55-85). Jossey-Bass. (link)

Jaquette, O., Kramer II, D. A., & Curs, B. R. (2018). Growing the pie? The effect of responsibility center management on tuition revenue. The Journal of Higher Education, 89(5), 637-676. (link)

Rutherford, A., & Rabovsky, T. (2018). Does the motivation for market-based reform matter? The case of responsibility-centered management. Public Administration Review, 78(4), 626-639. (link)

University of Tennessee System’s FY2024 budget: https://finance.tennessee.edu/budget/documents/

University of Tennessee System’s FY2022 annual financial report: https://treasurer.tennessee.edu/reports/

UTK’s Budget Allocation Model (responsibility center management) website: https://budget.utk.edu/budget-allocation-model/

Higher education expenditures

Archibald, R. B., & Feldman, D. H. (2018). Drivers of the rising price of a college education. Midwestern Higher Education Compact. (link)

Commonfund Institute (2023). 2023 higher education price index. (link)

Griffith, A. L., & Rask, K. N. (2016). The effect of institutional expenditures on employment outcomes and earnings. Economic Inquiry, 54(4), 1931-1945. (link)

Hemelt, S. W., Stange, K. M., Furquim, F., Simon, A., & Sawyer, J. E. (2021). Why is math cheaper than English? Understanding cost differences in higher education. Journal of Labor Economics, 39(2), 397-435. (link)

Korn, M., Fuller, A., & Forsyth, J. S. (2023, August 10). Colleges spend like there’s no tomorrow. ‘These places are just devouring money.’ The Wall Street Journal. (link)

The financial viability of higher education

Britton, T., Rall, R. M., & Commodore, F. (2023). The keys to endurance: An investigation of the institutional factors relating to the persistence of Historically Black Colleges and Universities. The Journal of Higher Education, 94(3), 310-332. (link)

Ducoff, N. (2019, December 9). Students pay the price if a college fails. So why are we protecting failing institutions? The Hechinger Report. (link)

Jesse, D., & Bauman, D. (2023, November 13). This small college was out of options. Will its creditors give it a break? The Chronicle of Higher Education. (link)

Massachusetts Board of Higher Education (2019). Final report & recommendations. Transitions in higher education: Safeguarding the interest of students (THESIS). (link)

Sullivan, G. W., & Stergios, J. (2019). A risky proposal for private colleges: Ten reasons why the Board of Higher Education must rethink its plan. Pioneer Institute. (link)

Tarrant, M., Bray, N., & Katsinas, S. (2018). The invisible colleges revisited: An empirical review. The Journal of Higher Education, 89(3), 341-367. (link)

State and sources of revenue

Chakrabarti, R., Gorton, N., & Lovenheim, M. F. (2020). State investment in higher education: Effects on human capital formation, student debt, and long-term financial outcomes of students. National Bureau of Economic Research Working Paper 27885. (link)

Gándara, D. (2023). “One of the weakest budget players in the state”: State funding of higher education at the onset of the COVID-19 pandemic. Educational Evaluation and Policy Analysis. (link)

Kelchen, R., Ortagus, J. C., Rosinger, K. O., Baker, D., & Lingo, M. (2023). The relationships between state higher education funding strategies and college access and success. Educational Researcher. (link)

Kunkle, K., & Laderman, S. (2023). State higher education finance: FY 2022. State Higher Education Executive Officers Association. (link)

Ortagus, J. C., Kelchen, R., Rosinger, K. O., & Voorhees, N. (2020). Performance-based funding in American higher education: A systematic synthesis of the intended and unintended consequences. Educational Evaluation and Policy Analysis, 42(4), 520-550. (link)

Tennessee’s outcomes-based funding formula: https://www.tn.gov/thec/bureaus/ppr/fiscal-policy/outcomes-based-funding-formula-resources/2020-25-obf.html

Federal sources of revenue

Bergman, P., Denning, J. T., & Manoli, D. (2019). Is information enough? The effect of information about education tax benefits on student outcomes. Journal of Policy Analysis and Management, 38(3), 706-731. (link)

Black, S. E., Turner, L. J., & Denning, J. T. (2023). PLUS or minus? The effect of graduate school loans on access, attainment, and prices. National Bureau of Economic Research Working Paper 31291. (link)

Graddy-Reed, A., Feldman, M., Bercovitz, J., & Langford, W. S. (2021). The distribution of indirect cost recovery in academic research. Science and Public Policy, 48(3), 364-386. (link)

Kelchen, R., & Liu, Z. (2022). Did gainful employment regulations result in college and program closures? Education Finance and Policy, 17(3), 454-478. (link)

Ward, J. D. (2019). Intended and unintended consequences of for-profit college regulation: Examining the 90/10 rule. Journal of Student Financial Aid, 48(3), Article 4. (link)

College pricing, tuition revenue, and endowments

Baker, D. J. (2020). “Name and shame”: An effective strategy for college tuition accountability? Educational Evaluation and Policy Analysis, 42(3), 1-24. (link)

Baum, S., & Lee, V. (2018). Understanding endowments. Urban Institute. (link)

Delaney, T., & Marcotte, D. E. (2023). The cost of public higher education and college enrollment. The Journal of Higher Education. (link)

Kelchen, R., & Pingel, S. (2023). Examining the effects of tuition controls on student enrollment. Research in Higher Education. (link)

Knox, L. (2023, December 4). Seeking an enrollment Hail Mary, small colleges look to athletics. Inside Higher Ed. (link)

Ma, J., & Pender, M. (2023). Trends in college pricing and student aid 2023. (link)

Webber, D. A. (2017). State divestment and tuition at public institutions. Economics of Education Review, 60, 1-4. (link)

Financial aid policies, practices, and impacts

Anderson, D. M., Broton, K. M., Goldrick-Rab, S., & Kelchen, R. (2020). Experimental evidence on the impacts of need-based financial aid: Longitudinal assessment of the Wisconsin Scholars Grant. Journal of Policy Analysis and Management, 39(3), 720-739. (link)

Billings, M. S., Clayton, A. B., & Worsham, R. (2022). FAFSA and beyond: How advisers manage their administrative burden in the financial aid process. Journal of Student Financial Aid, 51(2), Article 2. (link)

Dynarski, S., Page, L. C., & Scott-Clayton, J. (2022). College costs, financial aid, and student decisions. National Bureau of Economic Research Working Paper 30275. (link)

LaSota, R. R., Polanin, J. R., Perna, L. W., Austin, M. J., Steingut, R. R., & Rodgers, M. A. (2022). The effects of losing postsecondary student grant aid: Results from a systematic review. Educational Researcher, 51(2), 160-168. (link)

Page, L. C., Sacerdote, B. I, Goldrick-Rab, S., & Castleman, B. L. (2023). Financial aid nudges: A national experiment with informational interventions. Educational Evaluation and Policy Analysis, 45(2), 195-219. (link)

Student debt and financing college

Baker, D. J. (2019). When average is not enough: A case study examining the variation in the influences on undergraduate debt burden. AERA Open, 5(2), 1-26. (link)

Black, S. E., Denning, J. T., Dettling, L. J., Goodman, S., & Turner, L. (2020). Taking it to the limit: Effects of increased student loan availability on attainment, earnings, and financial well-being. American Economic Review, 113(12), 3357-3400. (link)

Boatman, A., Evans, B. J., & Soliz, A. (2017). Understanding loan aversion in education: Evidence from high school seniors, community college students, and adults. AERA Open, 3(1), 1-16. (link)

Dinerstein, M., Yannelis, C., & Chen, C. (2023). Debt moratoria: Evidence from student loan forbearance. National Bureau of Economic Research Working Paper 31247. (link)

Levine, P. B., & Ritter, D. (2023). The racial wealth gap, financial aid, and college access. Journal of Policy Analysis and Management. (link)

Free college/college promise programs

Carruthers, C. K., Fox, W. F., & Jepsen, C. (2023). What Knox achieved: Estimated effects of tuition-free community college on attainment and earnings. The Journal of Human Resources. (link)

Gándara, D., & Li, A. Y. (2020). Promise for whom? “Free-college” programs and enrollments by race and gender classifications at public, 2-year colleges. Educational Evaluation and Policy Analysis, 42(4), 603-627. (link)

Monaghan, D. B. (2023). How well do students understand “free community college”? Promise programs as informational interventions. AERA Open, 9(1), 1-13. (link)

Murphy, R., Scott-Clayton, J., & Wyness, G. (2017). Lessons from the end of free college in England. Washington, DC: The Brookings Institution. (link)

Perna, L. W., Leigh, E. W., & Carroll, S. (2018). “Free college:” A new and improved state approach to increasing educational attainment? American Behavioral Scientist, 61(14), 1740-1756. (link)

Map of college promise/free college programs (Penn AHEAD) (link)

Returns to education

Conzelmann, J. G., Hemelt, S. W., Hershbein, B. J., Martin, S., Simon, A., & Stange, K. M. (2023). Grads on the go: Measuring college-specific labor markets for graduates. Journal of Policy Analysis and Management. (link)

Darity, Jr., W. A., & Underwood, M. (2021). Reconsidering the relationship between higher education, earnings, and productivity. Postsecondary Value Commission. (link)

Deterding, N. M., & Pedulla, D. S. (2016). Educational authority in the “open door” marketplace: Labor market consequences of for-profit, nonprofit, and fictional educational credentials. Sociology of Education, 89(3), 155-170. (link)

Ma, J., & Pender, M. (2023). Education pays 2023: The benefits of higher education for individuals and society. The College Board. (link)

Webber, D. A. (2016). Are college costs worth it? How ability, major, and debt affect the returns to schooling. Economics of Education Review, 53, 296-310. (link)

Predatory Colleges, Converted To Non-Profit, Are Failing (David Halperin, Republic Report)

[Editor's note: This article originally appeared on Republic Report.] 

About a dozen years ago, owners of some of the biggest, worst-acting for-profit colleges began concocting, with their eager, high-paid lawyers, schemes to convert their schools into non-profits. The apparent aims were to evade the heightened government regulations applied uniquely to for-profit schools in order to guard against waste, fraud, and abuse — and to escape the growing stigma that the industry’s predatory behavior had placed on for-profits.

The clever schemes have come in various colors, yet most of them potentially allowed the sharp operators to keep making big money off the schools they no longer formally owned but, one way or another, still controlled. These dubious deals, mostly blessed by servile government departments and accrediting agencies, have made a mockery of non-profit rules, and, much worse, have helped sustain another decade of predatory college abuses against students and taxpayers, resulting in the waste of billions of dollars and the ruining of the financial futures of tens of thousands of people — veterans, single moms, and others — who sought better lives through higher education.

Yet, just as the private equity owners of the University of Phoenix, historically one of the biggest for-profit schools, are now trying to execute yet another dubious version of this scheme — getting a pile of cash by unloading the school on Scott Green, the hubristic president of the University of Idaho, and potentially allowing the current, high-paid executive team to stay employed — it seems, increasingly, that many of these non-profit conversions are not just harmful to the public but also ultimately unsustainable for the operators.

Here’s what’s been happening lately:

— Last week, the Federal Trade Commission sued Grand Canyon University and its CEO, asserting that the school deceived doctoral students about the costs and course requirements of programs — and about the school’s claimed nonprofit status. The FTC also alleges that Grand Canyon engaged in deceptive and abusive telemarketing.

The FTC lawsuit follows an October announcement by the U.S. Department of Education that it is imposing a $37 million fine on Grand Canyon based on similar allegations.

Grand Canyon CEO Brian Mueller has responded to the FTC and education department investigations with a remarkable series of pronouncements suggesting that the moves against his self-proclaimed Christian university are rooted in religious or ideological bias. But, in reality, Grand Canyon’s troubles with regulators began not in the Biden administration, which has cracked down on for-profit college abuses, but under Trump education secretary Betsy DeVos, a Christian conservative who staffed her office with former for-profit college executives and did almost nothing else over four years to hold predatory colleges accountable.

Grand Canyon in 2018 had restructured itself into two entities: a non-profit college, GCU, and a for-profit company, Grand Canyon Education (GCE), that gets paid to provide a range of services to the school. Even though the IRS already had declared GCU a legitimate non-profit, the DeVos Department of Education in 2019 rejected the school’s bid for preferred non-profit status under federal education rules, concluding that “the primary purpose” of the Grand Canyon conversion to non-profit was “to drive shareholder value for GCE with GCU as its captive client — potentially in perpetuity.” The DeVos team couldn’t help but notice that Brian Mueller is the well-paid head not only of the non-profit school but also of the for-profit company has been getting about 95 percent of the non-profit college’s revenue.

Together, the Department and FTC actions call into question not only the integrity of Grand Canyon’s recruiting and academic operations, but also its effort to be accepted as non-profit.

— Last month, the Department of Education took another step to hold accountable the non-profit Center for Excellence in Higher Education, whose schools, the largest of which was Independence University, shut down in 2021. The Department demanded $23 million from CEHE to pay for “closed-school discharges” — reimbursement for cancellation of federal student loan debts that former students had owed the government. The Department in July already had cancelled $130 million in federal loan debt from former CEHE students, citing school misconduct; the Department could potentially seek to recoup all those funds from CEHE.

The ultra-wealthy Ayn Rand disciple Carl Barney owned the schools until 2012, when he sold them at a hefty valuation to CEHE, a small non-profit that he controlled. Seemingly sleepy career officials at the Department of Education approved the transaction in the Obama years, but public scrutiny raised doubts about the appropriateness of the deal.

Like Grand Canyon, CEHE’s abuses were by no means limited to the terms of the non-profit conversion. In 2020, a Colorado court found the company had engaged in systematic deceptive practices. Barney’s schools, the court concluded after an extensive trial, used a detailed playbook to manipulate vulnerable students into enrolling in high-priced, low-quality programs; directed admissions representatives to “enroll every student,” regardless of whether the student would likely graduate; greatly overstated starting salaries that graduates could earn; and falsely inflated graduation rates. CEHE has been pursuing an appeal, but in 2021, the accrediting agency for the schools withdrew approval, citing performance failures, and the Department of Education soon after tightened the screws on federal aid, precipitating the schools’ closure.

CEHE is a mess. It no longer runs any schools or gets any federal aid; instead its functions seem to be limited to trying to get former students to pay back the sketchy, high-interest private loans the school peddled, and engaging in legal disputes with the federal government; these include a pending fraud lawsuit filed by a CEHE whistleblower and joined by the Justice Department, an investigation of CEHE’s private loans by the Consumer Financial Protection Bureau, and a lawsuit for $500 million brought by CEHE against the government alleging the schools were “a victim” of a campaign by the Department of Education “in coordination with ideological confederates… to cripple and close as many private career colleges as possible.” The Department also has suspended CEHE CEO Eric Juhlin from federal contracting.

— Another of the worst predatory for-profit schools is Ashford University, whose corporate owner Zovio pursued several different schemes for a non-profit conversion before finally selling the college to the University of Arizona, whose president, Robert Robbins, had been pressured by state regents to expand its online offerings.

Zovio’s scheme was to hide behind the prestige and political power of a big state university and yet keep getting for itself hundreds of millions off the school, now called University of Arizona Global Campus, through a long-term contract to provide recruiting, academic, and other services.

But that plan was thwarted after a California judge, in 2022, found Zovio liable for blatant deceptions of Ashford students and imposed $22 million in penalties. By law, the California judgment should compel the Department of Education to terminate federal aid to the school. Although Zovio pursued an appeal, it was discredited, bowed out of its contract to serve UAGC, transferred its infrastructure to the University of Arizona, and shut down.

But, with Zovio out of the picture, what was obvious to some even before the deal closed seems to have played out: Most of what Arizona had purchased, most of what made money, was not some supercharged high tech education platform but instead a predatory playbook and a staff trained to execute it. UAGC may not be able to pay its bills even if it keeps up with Ashford’s old predatory practices, but it almost certainly can’t do so if it tries to go straight. In November, President Robbins admitted that the University of Arizona’s overall financial situation is fragile, with cash reserves below minimum levels. Robbins said the school had “overinvested,” and school document revealed that one such exertion was the deal to buy Ashford, which “added $265.5 million in operating costs…”

Arizona’s financial woes from the Ashford deal may grow. Former Ashford students say they were ripped off and, as a result, have applied to have their federal student loans cancelled under a provision of law called borrower defense to repayment. In August, the U.S. Department of Education said it would cancel $72 million worth of loans because of Ashford’s deceptions. The Department also said it would use its legal powers to recoup those funds from Ashford’s owner, meaning the University of Arizona. UA says in response it had “absolutely no involvement in, and is not directly or indirectly responsible for, the actions of Ashford and its parent company” and will be “assessing its options.” But, reading the school’s agreement with Zovio, Arizona may be out of luck on that score.

— In contrast to Zovio’s fate, Graham Holdings has not been forced out of the 2017 deal in which it sold predatory for-profit Kaplan University to an Indiana state institution, Purdue University. Graham continues to hold a contract to provide a wide range of services to the school, now called Purdue University Global — a deal that Purdue is locked into for a 30-year term.

The Graham/Kaplan schools repeatedly faced law enforcement problems for predatory abuses against students before the sale. But the schools did better exercising political influence: The company’s head, Donald Graham, is a hyper-connected Washington insider; the business, long run by his family, was previously called The Washington Post Company, before it sold the newspaper to Jeff Bezos. Graham exploited his power and connections in DC to become the most effective lobbyist pressuring the Obama administration and Congress not to push too hard on for-profit college accountability; his protege Jeffrey Zients held key positions in the Obama White House, as did Anita Dunn, whom, once she left government, Graham hired to tell his schools’ supposedly compelling story to lawmakers. Dunn and Zients are now perhaps the two most powerful staffers in the Biden White House.

Having utilized his tight connections to key Democrats in the Obama years, Graham then took advantage of the lax regulatory environment under Republicans Trump and DeVos to do his troubling non-profit conversion deal with another top Republican politico, then-Purdue president Mitch Daniels, a former Indiana governor and White House official, who may have been dazzled by Graham’s big money ties, including his status as an ex-Facebook board member, and seen Kaplan as the road to a high-tech future.

But this effort to put state college lipstick on a for-profit pig may be failing as well. As Forbes noted last month, Graham Holdings‘ November filing with the SEC says Purdue Global owes the company $127.8 million — perhaps more than the school, structured as a non-profit associated with Purdue University, would be able to pay. Cutting costs at the school in order to pay Graham Holdings’ fees would likely mean lower-quality educational programs. Boosting enrollment for lower-quality programs would likely mean accelerating the deceptive recruiting practices, targeted at low-income Americans, that sullied Kaplan in the first place. Doing all of that at a time when the Biden administration, to its great credit, is working diligently to hold predatory schools accountable would be risky.

Don Graham’s best shot at continuing to make millions off Purdue Global may be for his long-time allies in the Biden administration to fail this year, and give way again to a president Trump, who once ran his own scam real estate school and likely would identify with Graham’s sense of victimhood about the persecutions of great for-profit educators.

— Finally, there is ultra-wealthy Arthur Keiser and his Keiser University, whose 2011 conversion from for-profit to non-profit was comparable to Carl Barney and CEHE: a sale of the for-profit school owned by Keiser, at a remarkably high valuation, to a non-profit controlled by Keiser. In addition to the inflated loan payments Keiser has since received from the non-profit, there are a range of businesses owned by Keiser that sell various services to the non-profit. Even worse, as we have documented, there is a highly questionable mingling of resources and personnel between the non-profit Keiser University and Southeastern College, another for-profit school owned by Arthur Keiser and his wife.

Keiser University seems to have come the closest to thriving after a shady non-profit conversion, but its troubles are now growing.

Arthur Keiser has gone all the way to the U.S. Supreme Court, with his expensive lawyers trying, but so far failing, to block a landmark court settlement aimed at cancelling the student loan debt of hundreds of thousands of ex-students who have filed borrower defense claims, saying they were deceived by their schools. His complaint is that Keiser University was, for purposes of the deal, unfairly placed by the U.S. Department of Education on a list of presumptively bad-acting colleges when, he insists, “There’s no evidence of misconduct.”

But Keiser’s claim of innocence is just another deception.

Like all the other schools with troubling conversions, Keiser University also has repeatedly gotten in trouble with law enforcement, and settled claims, including with then-Florida attorney general Pam Bondi and with the U.S. Justice Department, over allegations of deceptive and unlawful recruiting practices. And recent staff members have told us about predatory behavior still happening at the school, including recruiting of low-income people seemingly unprepared for college programs and of people with insufficient English language skills to understand the course work.

Keiser University also has been in trouble recently with three different accreditors of specific school programs, who have placed the school on warning, probation, or show cause status due to concerns about matters including program effectiveness and certification exam passage rates.

The non-profit conversion also has, finally, gotten Keiser University in trouble; the school admitted under congressional questioning in 2021 that the IRS imposed a penalty on the school for improperly steering profits to Arthur Keiser by entering into leases above fair market value with Keiser-related for-profit companies. Senior Democrats in Congress, including senators Dick Durbin (D-IL) and Elizabeth Warren (D-MA) have called on the U.S. Department of Education to investigate Keiser’s schools, which have received billions in taxpayer-funded student financial aid.

And, in November 2022, the Department determined that Keiser University’s accreditor, SACS, was out of compliance with numerous federal regulations and directed it to provide more information regarding its oversight of Keiser University and the school conversion to non-profit.

As part of the Department of Education’s regular oversight process for accreditors, I recently wrote to the Department, for a second time, urging it to hold SACS accountable unless it takes steps to address the conversion deal and predatory practices at Keiser’s schools. I hope that will happen, and that the Department itself will take steps to protect students by imposing conditions on Keiser’s future receipt of federal aid.

— Conversion from for-profit to non-profit has not prevented serious financial and / or legal problems at all of the schools we’ve discussed. In recent years, government regulators, accreditors, courts, and students have seen through the conversions, recognizing that predatory for-profit schools — with greedy owners, deceptive practices, poor value educational programs, and low return on student and taxpayer investment — remain predatory schools even when dressed up as non-profit colleges or big state universities. (The conversion of another huge predatory chain, EDMC, to non-profit also has been a disaster.)

Yet somehow the president of the University of Idaho, Scott Green, continues to insist he will be serving his school, and students, by acquiring, through an affiliated new non-profit, the giant for-profit University of Phoenix from huge private equity firm Apollo Global Management. Green remains determined to buy and run Phoenix despite Phoenix’s long and continuing record of abuses and law enforcement problems, despite the enormous potential liability Idaho might assume for debt cancellation for former Phoenix students, and despite opposition from many leaders in his own state, as well as advocates for students across the country. If Green — whose team keeps claiming, falsely, that Phoenix is under honest new management — and the Idaho state board of education can’t look objectively at the evidence that past conversions have been a moral disgrace, and a disaster for school operators, as well as students and taxpayers, then others in his state, the University of Idaho’s accreditor, and the U.S. Department of Education, should act to block the deal.