From Corinthian to the Art Institute: The For-Profit Exploitation of our Economic Futures
The crisis begins when we are graduating high school, faced with a bombardment of e-mails and information packets from hundreds of schools. Then come the questions: What field of study do we want to major in? Where do we see ourselves in five years? ten years? Do we want to attend a school in a rural or suburban environment, or a more dispersed urban campus? Many of us need guidance, so we turn to college counselors at our schools, and are assured that no matter what choice we make, money isn’t an issue, as the price of a college degree is certainly worth the salary that we will make after graduation. Many of us are listening to these advisers, valuing their opinions, unaware that many receive kickbacks from loan agencies, including all expense paid vacations, new technology, or even credit lines to schools based on how many students they referred for loan programs. It’s a game to them, a mere source of supplemental income, but an entire generation is underemployed and indebted to loan companies and the Department of Education.
Of course, there are affordable education options, like city or state schools, and students who earn scholarships or have the funds to pay for college are not involved in this massive crisis. In private schools, tuition is sky rocketing, as schools like New York University surpass $70,000 per year. Even as the cost of a quality private school education explodes, many of these institutions are held in high regard, and the degrees earned could indeed grant access to a high-paying job and comfortable post-graduate life. A recent report by the Federal Reserve of San Francisco indicates that earning a college degree still increases lifetime income by hundreds of thousands of dollars, indicating that taking out loans to pay for private school is still a worthwhile investment.
However, there are many schools which charge high tuition fees despite not being accredited, diminishing the value of their degrees in the labor market. You’ve likely come across advertisements for these programs on the subway, featuring smiling students dressed as a doctor or nurse, or sitting in a recording studio adjusting a sound board. The overarching theme of these displays is that graduating from these schools will improve your career. Maybe you saw their commercials while flipping through the channels, promoting impressive snippets of their post-graduate employment numbers. Don’t be fooled, these are for-profit schools, which as the name suggests, exist primarily to earn a large profit margin for shareholders and top executives. Predictably, rather than provide the best education, their motive is to accept as many students as possible.Corinthian Colleges, whose principal investor is Wells Fargo, was among the worst of these for-profit offenders. The Corinthian system included over 130 Heald College, Everest, and WyoTech campuses across North America, educating 72,000 students. For many years, they had promoted their programs as providing access to lucrative careers upon graduation, touting their misleading job statistics. Students were enrolling in these programs to improve their lives, and were either dropping out with tens of thousands of debt, or finishing their degrees before learning that their accomplishments were not as valuable as they had been tricked into believing. The numbers don’t lie: “Two-thirds of Corinthian’s associate degree students drop out; three-quarters of former students can’t pay down their loans, and 36 percent default within three years, the highest rate of all publicly-traded college businesses.”
Within the last few years, both federal and state governments began investigations into Corinthian Colleges, and in 2013, the California Attorney General, Kamala D. Harris, filed a lawsuit against Corinthian for “false and predatory advertising, intentional misrepresentations to students, securities fraud and unlawful use of military seals in advertisements.” This was only beginning as in September 2014, the Consumer Financial Protection Bureau (CFPB) filed their own lawsuit:
“…for luring tens of thousands of students to take out private loans, known as ‘Genesis loans,’ to cover expensive tuition costs by advertising bogus job prospects and career services. The lawsuit also alleges that Corinthian used illegal debt collection tactics to strong-arm students into paying back those loans while still in school. Under the Genesis loan program, nearly all student borrowers were required to make monthly loan payments while attending school. More than 60 percent of Corinthian school students defaulted on these high-cost loans within three years. Even for borrowers who did not default, interest rates were more than twice as expensive compared to interest rates on federal loans.”
As the immense pressure continued to build, Corinthian finally came to an agreement with the U.S. Department of Education in July 2014 to sell or close most of its campuses within the following six months. In November, they sold 56 of their campuses to Educational Credit Management Corp (ECMC) for $24 million.
The saga of Corinthian continued to unravel, and this past February, the CFPB secured $480 million in debt relief for current and former students who took out these “Genesis Loans”. The agreement, which also applied to ECMC, included increased consumer protections, a ban on offering private loans for seven years, and an end to improper debt collection practices. In April, the Department of Education took even further action, fining Corinthian $30 million due to their unscrupulous practices. Here is one example they provided from Heald College:
“The investigation found that Heald paid temporary agencies to hire its graduates for as few as two days and then counted them as placed in their field. It also revealed that Heald College counted placements that were clearly out of a student’s field of study as in-field placements, the Education Department said.”
As of Monday, all 36 of their campuses have been shutdown, following an order from the U.S. government. Even though the CFPB attained debt forgiveness for many Corinthian students, and the schools have been sold with an agreement not to engage in these predatory practices, there are still thousands of students left with massive debts and the inability to make payments to recover their crippled financial futures. If the federal government concluded that Corinthian broke multiple laws, and already forgave a portion of the student debt, then why should students pay the remainder? What could students do when they determine that their debt is no longer legitimate?
They went on strike.
With the help of Debt Collective, a group that spawned from Occupy Wall Street, Corinthian students have organized a historic example of debt resistance. Known briefly as the Corinthian 15, their movement soon blossomed into the Corinthian 100, as they stopped paying their debt and began making noise, including a trip to Washington DC, where they met with officials from the CFPB, the Department of Education, and the Department of the Treasury. The first coordinated student debt strike in American history had been born.
Here is the statement from the Corinthian Collective, in their own words:
“We trusted that education would lead to a better life. And we trusted you to ensure that the education system in this country would do so. But Corinthian took advantage of our dreams and targeted us to make a profit. You let it happen, and now you cash in.
Each month you force us to make payments into an immoral system that profits from our aspirations.
We paid dearly for degrees that have led to unemployment or to jobs that don’t pay a living wage. We can’t and won’t pay any longer.. “
While what is happening at Corinthian is very important, they are certainly not the only school that has used these deceptive practices to financially destroy the lives of people who genuinely wanted to work toward successful careers. Another example is The Art Institutes, owned by the Education Management Corp (EDMC), and primarily funded by Goldman Sachs. ‘EDMC operates 109 campuses spread across 32 states, along with an online division, and had over 151,200 enrolled students as of October 2011. About 53 percent are at the 51 campuses of the Art Institutes, which offers associate’s, bachelor’s, and master’s programs in fields including graphic design, media arts and animation, web development, film and video production, culinary arts, fashion, and interior design.’
Recently, EDMC has also been in trouble with the federal government, which includes a complaint from the U.S. Department of Justice in August 2011, which states that “EDMC falsely certified compliance with provisions of federal law that prohibit a university from paying incentive-based compensation to its admissions recruiters that is tied to the number of students they recruit.” Additionally, they have been investigated by the Attorney Generals of Colorado, Massachusetts, and many others, due to claiming fraudulent accreditation, recruiting students based on misleading job statistics, and other shady business practices. in July 2014, The City Attorney of San Francisco won a $4.4 million settlement against EDMC for understating the costs of their programs and inflating post-graduation job placement rates, similar to Corinthian.
All the focus has been on Corinthian Colleges and the their students who are resisting their unjust student debt, but EDMC are clearly also for-profit offenders, facing the same legal and financial issues. For some reason, EDMC hasn’t received as much publicity as Corinthian, despite the fact that these students fell for the same predatory debt trap.
Student debt, particularly among students who attend for-profit colleges, is an issue that deserves far more attention from both the media and political sphere. These institutions are gambling with the economic futures of thousands of students and they need to be held accountable. We won’t stand for this exploitation of the younger generations whose only crime is wanting to work hard to improve their life, and we will no longer sit on the sidelines.
Today begins the campaign against EDMC, and more specifically the Art Institutes, in the hopes that we can bring further attention to this major issue effecting our futures. Have you ever been a student of the Art Institutes or another EDMC-owned school? Are you having trouble paying your debts and has it negatively effected your life? We want to hear your story. Connect with us at Info@Angrymillennials.com. We will be writing more articles about Art Institutes in the near future, including stories from students. Be sure to tweet at @Art_Institutes with #AiJustice, and sign this petition, asking for student loan forgiveness up to $70,000.
Also, be sure to check out the Debt Collective, who is doing very good organizing around student debt.
You are not alone. This is only the beginning. We can fight back!