Meet Michael Clifford
Watch College Inc. on PBS. See more from FRONTLINE.
Even in lean times, the $400 billion business of higher education is booming. Nowhere is this more true than in one of the fastest-growing -- and most controversial -- sectors of the industry: for-profit colleges and universities that cater to non-traditional students, often confer degrees over the Internet, and, along the way, successfully capture billions of federal financial aid dollars.
In College, Inc., correspondent Martin Smith investigates the promise and explosive growth of the for-profit higher education industry. Through interviews with school executives, government officials, admissions counselors, former students and industry observers, this film explores the tension between the industry --which says it's helping an underserved student population obtain a quality education and marketable job skills -- and critics who charge the for-profits with churning out worthless degrees that leave students with a mountain of debt.
At the center of it all stands a vulnerable population of potential students, often working adults eager for a university degree to move up the career ladder. FRONTLINE talks to a former staffer at a California-based for-profit university who says she was under pressure to sign up growing numbers of new students. "I didn't realize just how many students we were expected to recruit," says the former enrollment counselor. "They used to tell us, you know, 'Dig deep. Get to their pain. Get to what's bothering them. So, that way, you can convince them that a college degree is going to solve all their problems.'"
Graduates of another for-profit school -- a college nursing program in California -- tell FRONTLINE that they received their diplomas without ever setting foot in a hospital. Graduates at other for-profit schools report being unable to find a job, or make their student loan payments, because their degree was perceived to be of little worth by prospective employers. One woman who enrolled in a for-profit doctorate program in Dallas later learned that the school never acquired the proper accreditation she would need to get the job she trained for. She is now sinking in over $200,000 in student debt.
The biggest player in the for-profit sector is the University of Phoenix -- now the largest college in the US with total enrollment approaching half a million students. Its revenues of almost $4 billion last year, up 25 percent from 2008, have made it a darling of Wall Street. Former top executive of the University of Phoenix Mark DeFusco told FRONTLINE how the company's business-approach to higher education has paid off: "If you think about any business in America, what business would give up two months of business -- just essentially close down?" he asks. "[At the University of Phoenix], people go to school all year round. We start classes every five weeks. We built campuses by a freeway because we figured that's where the people were."
"The education system that was created hundreds of years ago needs to change," says Michael Clifford, a major education entrepreneur who speaks with FRONTLINE. Clifford, a former musician who never attended college, purchases struggling traditional colleges and turns them into for-profit companies. "The big opportunity," he says, "is the inefficiencies of some of the state systems, and the ability to transform schools and academic programs to better meet the needs of the people that need jobs."
"From a business perspective, it's a great story," says Jeffrey Silber, a senior analyst at BMO Capital Markets, the investment banking arm of the Bank of Montreal. "You're serving a market that's been traditionally underserved. ... And it's a very profitable business -- it generates a lot of free cash flow."
And the cash cow of the for-profit education industry is the federal government. Though they enroll 10 percent of all post-secondary students, for-profit schools receive almost a quarter of federal financial aid. But Department of Education figures for 2009 show that 44 percent of the students who defaulted within three years of graduation were from for-profit schools, leading to serious questions about one of the key pillars of the profit degree college movement: that their degrees help students boost their earning power. This is a subject of increasing concern to the Obama administration, which, last month, remade the federal student loan program, and is now proposing changes that may make it harder for the for-profit colleges to qualify.
"One of the ideas the Department of Education has put out there is that in order for a college to be eligible to receive money from student loans, it actually has to show that the education it's providing has enough value in the job market so that students can pay their loans back," says Kevin Carey of the Washington think tank Education Sector. "Now, the for-profit colleges, I think this makes them very nervous," Carey says. "They're worried because they know that many of their members are charging a lot of money; that many of their members have students who are defaulting en masse after they graduate. They're afraid that this rule will cut them out of the program. But in many ways, that's the point."
FRONTLINE also finds that the regulators that oversee university accreditation are looking closer at the for-profits and, in some cases, threatening to withdraw the required accreditation that keeps them eligible for federal student loans. "We've elevated the scrutiny tremendously," says Dr. Sylvia Manning, president of the Higher Learning Commission, which accredits many post-secondary institutions. "It is really inappropriate for accreditation to be purchased the way a taxi license can be purchased. ...When we see any problematic institution being acquired and being changed we put it on a short leash."
In College, Inc., correspondent Martin Smith investigates the promise and explosive growth of the for-profit higher education industry. Through interviews with school executives, government officials, admissions counselors, former students and industry observers, this film explores the tension between the industry --which says it's helping an underserved student population obtain a quality education and marketable job skills -- and critics who charge the for-profits with churning out worthless degrees that leave students with a mountain of debt.
At the center of it all stands a vulnerable population of potential students, often working adults eager for a university degree to move up the career ladder. FRONTLINE talks to a former staffer at a California-based for-profit university who says she was under pressure to sign up growing numbers of new students. "I didn't realize just how many students we were expected to recruit," says the former enrollment counselor. "They used to tell us, you know, 'Dig deep. Get to their pain. Get to what's bothering them. So, that way, you can convince them that a college degree is going to solve all their problems.'"
Graduates of another for-profit school -- a college nursing program in California -- tell FRONTLINE that they received their diplomas without ever setting foot in a hospital. Graduates at other for-profit schools report being unable to find a job, or make their student loan payments, because their degree was perceived to be of little worth by prospective employers. One woman who enrolled in a for-profit doctorate program in Dallas later learned that the school never acquired the proper accreditation she would need to get the job she trained for. She is now sinking in over $200,000 in student debt.
The biggest player in the for-profit sector is the University of Phoenix -- now the largest college in the US with total enrollment approaching half a million students. Its revenues of almost $4 billion last year, up 25 percent from 2008, have made it a darling of Wall Street. Former top executive of the University of Phoenix Mark DeFusco told FRONTLINE how the company's business-approach to higher education has paid off: "If you think about any business in America, what business would give up two months of business -- just essentially close down?" he asks. "[At the University of Phoenix], people go to school all year round. We start classes every five weeks. We built campuses by a freeway because we figured that's where the people were."
"The education system that was created hundreds of years ago needs to change," says Michael Clifford, a major education entrepreneur who speaks with FRONTLINE. Clifford, a former musician who never attended college, purchases struggling traditional colleges and turns them into for-profit companies. "The big opportunity," he says, "is the inefficiencies of some of the state systems, and the ability to transform schools and academic programs to better meet the needs of the people that need jobs."
"From a business perspective, it's a great story," says Jeffrey Silber, a senior analyst at BMO Capital Markets, the investment banking arm of the Bank of Montreal. "You're serving a market that's been traditionally underserved. ... And it's a very profitable business -- it generates a lot of free cash flow."
And the cash cow of the for-profit education industry is the federal government. Though they enroll 10 percent of all post-secondary students, for-profit schools receive almost a quarter of federal financial aid. But Department of Education figures for 2009 show that 44 percent of the students who defaulted within three years of graduation were from for-profit schools, leading to serious questions about one of the key pillars of the profit degree college movement: that their degrees help students boost their earning power. This is a subject of increasing concern to the Obama administration, which, last month, remade the federal student loan program, and is now proposing changes that may make it harder for the for-profit colleges to qualify.
"One of the ideas the Department of Education has put out there is that in order for a college to be eligible to receive money from student loans, it actually has to show that the education it's providing has enough value in the job market so that students can pay their loans back," says Kevin Carey of the Washington think tank Education Sector. "Now, the for-profit colleges, I think this makes them very nervous," Carey says. "They're worried because they know that many of their members are charging a lot of money; that many of their members have students who are defaulting en masse after they graduate. They're afraid that this rule will cut them out of the program. But in many ways, that's the point."
FRONTLINE also finds that the regulators that oversee university accreditation are looking closer at the for-profits and, in some cases, threatening to withdraw the required accreditation that keeps them eligible for federal student loans. "We've elevated the scrutiny tremendously," says Dr. Sylvia Manning, president of the Higher Learning Commission, which accredits many post-secondary institutions. "It is really inappropriate for accreditation to be purchased the way a taxi license can be purchased. ...When we see any problematic institution being acquired and being changed we put it on a short leash."
From Wikipedia, the free encyclopedia
Student
A student is a learner, or someone who attends an educational institution. In some nations, the English term (or its cognate in another language) is reserved for those who attend university, while a schoolchild under the age of eighteen is called a pupil in English (or an equivalent in other languages). In its widest use, student is used for anyone who is learning.
Education
"Educate" redirects here. For the journal published by the Institute of Education, see Educate~.For the stained-glass window at Yale University, see Education (Chittenden Memorial Window).Children in a kindergarten classroom inFranceChildren at an elementary school inXinjiang, ChinaGirls at a secondary school in IraqEducation in its broadest, general sense is the means through which the aims and habits of a group of people lives on from one generation to the next.[1] Generally, it occurs through any experiencethat has a formative effect on the way one thinks, feels, or acts. In its narrow, technical sense, education is the formal process by which society deliberately transmits its accumulated knowledge,skills, customs and values from one generation to another, e.g., instruction in schools.
Student Loan
A student loan is designed to help students pay for university tuition, books, and living expenses. It may differ from other types of loans in that the interest rate may be substantially lower and the repayment schedule may be deferred while the student is still in education. It also differs in many countries in the strict laws regulating re-negotiating and bankruptcy.
Contents [hide] [edit]United StatesIn the United States, there are three types of student loans: two of them are federally subsidized and unsubsidized sponsored by the federal government and the other type is private student loans.[1]The unsubsidized program allows students to borrow money with interest accruing during school and subsidized loans allow them to defer interest accrual until they are no longer in school. Student loans may be offered as part of a total financial aid package that may also include grants, scholarships, and/or work study opportunities. Private lenders are also currently guaranteed a return on their investment due to legislatively enacted changes in 2005, prohibiting the discharge of any student loan, unless the debtor is able to demonstrate "undue hardship."[2]
[edit]Income Based RepaymentThe Income Based Repayment plan is an alternative to paying back student loans, which allow the borrower to pay back the loan based on how much he/she makes, and not based how much money is actually owed.[3]
[edit]QualificationMost college students in the United States qualify for some type of student loan, although the amount they can borrow may vary based on several factors. Income level, parents' income level, and other financial considerations are all weighed to determine the amount they are eligible to borrow under the federal student loan program.
[edit]RepaymentA student loan has major differences over conventional loans - 6% interest rates (higher than most home loans) and inability to negotiate. The interest rate on a student loan will generally be at least two percentage points lower than the going market rate for conventional loans, but this will vary somewhat.
Repayment typically begins anywhere from six to twelve months after a student leaves school, regardless of whether or not they complete their degree program. In some cases, repayment begins if course load drops to half time or less, so it is important to check the exact terms and conditions of any student loan.
The student may have multiple options for extending the repayment period, although an extension of the loan term will likely reduce the monthly payment, it will also increase the amount of total interest paid on the principle balance during the life of the loan. Extension options include extended payment periods offered by the original lender and federal loan consolidation. There are also other extension options including income sensitive repayment plans and hardship deferments. Extensions and consolidation will also add to the principle, many times the unpaided interest and penalties becomes capitalized.
The Master Promissory Note is an agreement between the lender and the borrower that promises to repay the loan. It is a binding legal contract. Direct student loans can be obtained by filling out the government FAFSA form, and each school will determine eligibility of a student for direct federal loans.[citation needed]
[edit]CriticismA man at the Occupy Wall Street event inNew York protesting student loan debt, September 19, 2011In coverage through established media outlets, many borrowers have expressed feelings of victimization by the student loan corporations.[4][5][6] There is a comparison between these accounts and the college credit card trend in America during the 2000s, though the amounts owed by students on their student loans are almost always higher than the amount owed on credit cards.[7] Many anecdotal accounts of the hardships caused by excessive student loan debt levels are chronicled by the organization Student Loan Justice which is founded and led by consumer rights advocate and author, Alan Collinge. [8]
The legislation which covers repayment of student loans is 11 U.S.C. § 523. This legislation directs that student loans are not discharged in any bankruptcy proceeding unless the bankrupt can demonstrate "undue hardship" which is left to the sole discretion of the particular judge hearing the case. [9] There are many documented cases of Americans committing extreme actions because of large student loan balances. This seems particularly true in the case of private loan balances.[10] After the passage of the bankruptcy reform bill of 2005, even private student loans are not discharged during bankruptcy. This provided a credit risk free loan for the lender, averaging 7 percent a year. [11]
In 2007, the Attorney General of New York State, Andrew Cuomo, led an investigation into lending practices and anti-competitive relationships between student lenders and universities. Specifically, many universities steered student borrowers to "preferred lenders" which resulted in those borrowers incurring higher interest rates. Some of these "preferred lenders" allegedly rewarded university financial aid staff with "kick backs." This has led to changes in lending policy at many major American universities. Many universities have also rebated millions of dollars in fees back to affected borrowers.[12][13]
The biggest lenders, Sallie Mae and Nelnet, are frequently criticized by borrowers. Despite the fact that Representative and Speaker of the U.S. House John Boehner is one of their biggest political allies,[14] these lenders often find themselves embroiled in lawsuits, the most serious of which was filed in 2007. The False Claims Suit was filed on behalf of the federal government by former Department of Education researcher, Dr. Jon Oberg, against Sallie Mae, Nelnet, and other lenders. Oberg argued that the lenders overcharged the U.S. Government and defrauded taxpayers of millions and millions of dollars. In August of 2010, Nelnet settled the lawsuit and paid $55 million. [15]
The New York Times recently published an editorial endorsing the return of bankruptcy protections for private student loans in response to the economic downturn and universally increasing tuition at all colleges and graduate institutions. [16]
[edit]AustraliaTertiary student places in Australia are usually funded through the HECS-HELP scheme. This funding is in the form of loans that are not normal debts. They are repaid over time via a supplementary tax, using a sliding scale based on taxable income. As a consequence, loan repayments are only made when the former student has income to support the repayments. The debt does not attract normal interest, but grows with CPI inflation. Discounts are available for early repayment. The scheme is available to citizens and permanent humanitarian visa holders. Means-tested scholarships for living expenses are also available. Special assistance is available to indigenous students.[17]
There has been criticism that the HECS-HELP scheme creates an incentive for people to leave the country after graduation, because those who do not file an Australian tax return do not make any repayments.
[edit]United KingdomMain article: Student loans in the United Kingdom[edit]See alsoLook up student loan in Wiktionary, the free dictionary.
Student
A student is a learner, or someone who attends an educational institution. In some nations, the English term (or its cognate in another language) is reserved for those who attend university, while a schoolchild under the age of eighteen is called a pupil in English (or an equivalent in other languages). In its widest use, student is used for anyone who is learning.
Education
"Educate" redirects here. For the journal published by the Institute of Education, see Educate~.For the stained-glass window at Yale University, see Education (Chittenden Memorial Window).Children in a kindergarten classroom inFranceChildren at an elementary school inXinjiang, ChinaGirls at a secondary school in IraqEducation in its broadest, general sense is the means through which the aims and habits of a group of people lives on from one generation to the next.[1] Generally, it occurs through any experiencethat has a formative effect on the way one thinks, feels, or acts. In its narrow, technical sense, education is the formal process by which society deliberately transmits its accumulated knowledge,skills, customs and values from one generation to another, e.g., instruction in schools.
Student Loan
A student loan is designed to help students pay for university tuition, books, and living expenses. It may differ from other types of loans in that the interest rate may be substantially lower and the repayment schedule may be deferred while the student is still in education. It also differs in many countries in the strict laws regulating re-negotiating and bankruptcy.
Contents [hide] [edit]United StatesIn the United States, there are three types of student loans: two of them are federally subsidized and unsubsidized sponsored by the federal government and the other type is private student loans.[1]The unsubsidized program allows students to borrow money with interest accruing during school and subsidized loans allow them to defer interest accrual until they are no longer in school. Student loans may be offered as part of a total financial aid package that may also include grants, scholarships, and/or work study opportunities. Private lenders are also currently guaranteed a return on their investment due to legislatively enacted changes in 2005, prohibiting the discharge of any student loan, unless the debtor is able to demonstrate "undue hardship."[2]
[edit]Income Based RepaymentThe Income Based Repayment plan is an alternative to paying back student loans, which allow the borrower to pay back the loan based on how much he/she makes, and not based how much money is actually owed.[3]
[edit]QualificationMost college students in the United States qualify for some type of student loan, although the amount they can borrow may vary based on several factors. Income level, parents' income level, and other financial considerations are all weighed to determine the amount they are eligible to borrow under the federal student loan program.
[edit]RepaymentA student loan has major differences over conventional loans - 6% interest rates (higher than most home loans) and inability to negotiate. The interest rate on a student loan will generally be at least two percentage points lower than the going market rate for conventional loans, but this will vary somewhat.
Repayment typically begins anywhere from six to twelve months after a student leaves school, regardless of whether or not they complete their degree program. In some cases, repayment begins if course load drops to half time or less, so it is important to check the exact terms and conditions of any student loan.
The student may have multiple options for extending the repayment period, although an extension of the loan term will likely reduce the monthly payment, it will also increase the amount of total interest paid on the principle balance during the life of the loan. Extension options include extended payment periods offered by the original lender and federal loan consolidation. There are also other extension options including income sensitive repayment plans and hardship deferments. Extensions and consolidation will also add to the principle, many times the unpaided interest and penalties becomes capitalized.
The Master Promissory Note is an agreement between the lender and the borrower that promises to repay the loan. It is a binding legal contract. Direct student loans can be obtained by filling out the government FAFSA form, and each school will determine eligibility of a student for direct federal loans.[citation needed]
[edit]CriticismA man at the Occupy Wall Street event inNew York protesting student loan debt, September 19, 2011In coverage through established media outlets, many borrowers have expressed feelings of victimization by the student loan corporations.[4][5][6] There is a comparison between these accounts and the college credit card trend in America during the 2000s, though the amounts owed by students on their student loans are almost always higher than the amount owed on credit cards.[7] Many anecdotal accounts of the hardships caused by excessive student loan debt levels are chronicled by the organization Student Loan Justice which is founded and led by consumer rights advocate and author, Alan Collinge. [8]
The legislation which covers repayment of student loans is 11 U.S.C. § 523. This legislation directs that student loans are not discharged in any bankruptcy proceeding unless the bankrupt can demonstrate "undue hardship" which is left to the sole discretion of the particular judge hearing the case. [9] There are many documented cases of Americans committing extreme actions because of large student loan balances. This seems particularly true in the case of private loan balances.[10] After the passage of the bankruptcy reform bill of 2005, even private student loans are not discharged during bankruptcy. This provided a credit risk free loan for the lender, averaging 7 percent a year. [11]
In 2007, the Attorney General of New York State, Andrew Cuomo, led an investigation into lending practices and anti-competitive relationships between student lenders and universities. Specifically, many universities steered student borrowers to "preferred lenders" which resulted in those borrowers incurring higher interest rates. Some of these "preferred lenders" allegedly rewarded university financial aid staff with "kick backs." This has led to changes in lending policy at many major American universities. Many universities have also rebated millions of dollars in fees back to affected borrowers.[12][13]
The biggest lenders, Sallie Mae and Nelnet, are frequently criticized by borrowers. Despite the fact that Representative and Speaker of the U.S. House John Boehner is one of their biggest political allies,[14] these lenders often find themselves embroiled in lawsuits, the most serious of which was filed in 2007. The False Claims Suit was filed on behalf of the federal government by former Department of Education researcher, Dr. Jon Oberg, against Sallie Mae, Nelnet, and other lenders. Oberg argued that the lenders overcharged the U.S. Government and defrauded taxpayers of millions and millions of dollars. In August of 2010, Nelnet settled the lawsuit and paid $55 million. [15]
The New York Times recently published an editorial endorsing the return of bankruptcy protections for private student loans in response to the economic downturn and universally increasing tuition at all colleges and graduate institutions. [16]
[edit]AustraliaTertiary student places in Australia are usually funded through the HECS-HELP scheme. This funding is in the form of loans that are not normal debts. They are repaid over time via a supplementary tax, using a sliding scale based on taxable income. As a consequence, loan repayments are only made when the former student has income to support the repayments. The debt does not attract normal interest, but grows with CPI inflation. Discounts are available for early repayment. The scheme is available to citizens and permanent humanitarian visa holders. Means-tested scholarships for living expenses are also available. Special assistance is available to indigenous students.[17]
There has been criticism that the HECS-HELP scheme creates an incentive for people to leave the country after graduation, because those who do not file an Australian tax return do not make any repayments.
[edit]United KingdomMain article: Student loans in the United Kingdom[edit]See alsoLook up student loan in Wiktionary, the free dictionary.
- College tuition in the United States
- EdFund
- Free education
- Higher Education Price Index
- Post-secondary education
- Private university
- Student benefit
- Student debt
- Student loans in the United States
- Tuition agency
- Tuition center
- Tuition fees
- Tuition freeze
- ^ Kantrowitz, Mark (2010-03-26). "Student Loans - The New York Times". Nytimes.com. Retrieved 2010-09-07.
- ^ http://www.studentloanborrowerassistance.org/bankruptcy/
- ^ http://studentaid.ed.gov/PORTALSWebApp/students/english/IBRPlan.jsp
- ^ "Student Loan Stories . NOW on PBS". Pbs.org. Retrieved 2010-09-07.
- ^ "Anderson Cooper 360: Blog Archive - Student Loan Nightmare: Help Wanted « - CNN.com Blogs". Ac360.blogs.cnn.com. Retrieved 2010-09-07.
- ^ Fetterman, Mindy (2006-11-22). "Young people struggle to deal with kiss of debt". Usatoday.Com. Retrieved 2010-09-07.
- ^ by Kurt SollerFebruary 17, 2009 (2009-02-17). "Credit Card Issuers Still Target College Students". Newsweek. Retrieved 2010-09-07.
- ^ http://www.studentloanjustice.org/
- ^ "Liz Pulliam Weston: Good and bad student loan debt - MSN Money". Articles.moneycentral.msn.com. Retrieved 2010-09-07.
- ^ "College grads take extreme measures to repay student loans". http://www.walletpop.com. Retrieved 2011-4-15.
- ^ Collinge, Alan. The student loan scam : the most oppressive debt in U.S. history, and how we can fight back. Boston, MA : Beacon Press, c2009. ISBN 9780807042298 http://lccn.loc.gov/2008012230
- ^ "Cuomo: School loan corruption widespread". U.S.A. Today. April 10, 2007. Retrieved 2008-04-08.
- ^ Lederman, Doug (May 15, 2007). "The First Casualty". Inside Higher Education. Retrieved 2008-04-08.
- ^ Edsall, Thomas B. (2006-01-29). "Controversial Industries Have Backed Boehner". The Washington Post.
- ^ Field, Kelly (August 15, 2010). "Nelnet to Pay $55 Million to Resolve Whistle Blower Lawsuit". The Chronicle of Higher Education. Retrieved 2011-14-07.
- ^ "Relief for Student Debtors". The New York Times. 2011-08-26.
- ^ "Paying for your studies (HELP loans)". Goingtouni.gov.au. Retrieved 2010-09-07.