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July 30, 2014

Senator Tom Harkin has been a vocal critic of for-profit colleges (Senate Democrats/Flickr CC).

Earlier this month, the U.S. Education Department froze funding to Corinthian Colleges, one of the country's biggest for-profit higher education institutions, for reporting inaccurate job placement and graduation figures. Critics have long argued the for-profit industry misuses federal aid money at the expense of students and taxpayers. WGBH's On Campus took a closer look at the numbers.

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Last year Corinthian issued more than $1.4 billion in government-backed loans to its 70,000 students across the country.

In Massachusetts, Corinthian has two campuses, including the Everest Institute in Boston's Brighton neighborhood. 

On a recent afternoon, student Shana James was getting out of her lab. The 22-year-old said she was shocked to learn that Everest was going to close. Now, to complete her medical assistant degree, Shana will have to commute to the Institute's other Boston campus in Chelsea.

"If I had known that they were going to be closing, I probably wouldn't have enrolled,” James said. “It's going to take me almost two hours to get to school, and I have a three year-old daughter that I have to care for, that I have to bring to daycare every morning, so I don't even know how that's going to go for me."

It's also going to take Shana a long time to pay off her student loans. As the first in her family to go to college, Shana took out nearly $21,000 to pay for her degree.

Corinthian students who won't be able to finish their programs can request a refund. But Shana is expecting to complete her work, so it's unlikely she'll get any money back. Still, she's worried about the value of her degree.

"I think that's quite unfair to the students that came in in January not knowing that their school was closing, and they have all this money to pay," said James.

While for-profits serve only ten percent of college students, they get about 25 percent of all federal student aid. Critics of for-profit colleges say Corinthian and other institutions, like the University of Phoenix, are contributing disproportionately to the growing student loan debt bubble: more students than ever are going to college, but graduates aren't earning enough to pay off their debt.

"These schools are portrayed as being part of the private sector, but they exist almost entirely on government money. And yet they produce, for the most part, pretty poor outcomes for their students," said Cornell economist Suzanne Mettler.

Mettler thinks for-profit colleges receive too much government money with little accountability, and that comes at the expense of students who are facing few opportunities for success.

"These schools cater particularly to people who would probably be the first in their family going on for advanced education beyond high school,” Mettler said. “And these colleges seek them out and recruit heavily. And yet they find themselves in these schools and suddenly they are responsible for much more student loans than they imagined."

Listen to our extended interview with Cornell's Suzanne Mettler

In many cases, Mettler says, students come out worse off than if they had never gone to school because they have trouble finding gainful employment.

Lawmakers in Washington are listening.

“The for-profit colleges are both driving up the amount of student loan debt out there and they're driving up the number of defaults," said Massachusetts Senator Elizabeth Warren.

Warren believes for-profit schools are loading up low-income students with debt that they can't possibly repay.

"When that happens the students get hurt, the taxpayers get hurt. But the colleges just keep on taking federal dollars with almost no consequences,” Warren said in a telephone interview. "I was glad to see the Department of Education move on Corinthian and I hope this signals that they're going to be tougher on the for-profit colleges."

The Department of Education would not talk on tape for this story, but officials did point to the most recent data showing 22 percent of student borrowers at for-profit colleges defaulted on their loans within three years. That's compared to 13 percent of borrowers at public and private colleges.

Supporters, though, worry that more worthy institutions could be swept up in a broad attempt to blame for-profit colleges for the student loan debt crisis.

"As with any industry, there's a wide range of players," said Howard Horton, president of the for-profit New England College of Business and Finance.

The school has about 1,500 students, mostly working adults, many from the banking industry, hoping to get ahead in their careers.

"There's a big difference between a student who's getting a certificate in health care assisting and one that's getting an MBA," said Horton.

Unlike most for-profit colleges, Horton says the college's students are required to take an admissions test. But, like other for-profits, the school does admit nearly all of those who apply. Its admissions rate hovers around 97 percent.

When asked how he makes sure he is not engaging in high-pressure sales tactics, Horton said it involves training all of his admissions representatives.

“You need to make sure that they understand the programs, the costs, the unique situation of the students that they're recruiting and whether they're capable of doing the work," said Horton.

Back at the Everest Institute, Shana James expressed her concern over job prospects. She wonders whether her for-profit education has been compromised.

"If a school is closing, obviously there is something wrong on the school's part,” James said. “And I feel like that can probably alter my chances of getting employment.'”

Shana wants to find a job in one of Boston's many hospitals, and although student loan burdens continue to rise faster than wages, she hopes to earn enough and avoid bad credit. After she graduates, Shana expects to bring in $12 an hour while dropping more than $100 each month on loan payments.

confronting cost, student loans, for-profit, increasing access and success, corinthian

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