How Corinthian Colleges Contributed to the Student Loan Debt Crisis (full documentary) | FRONTLINE

[Music] [Music] in the spring of 2012 holly harsh and brian french were both homeless and looking for ways to improve their lives we were addicted to methamphetamine for a while and we ended up in a bad place going homeless in a tent and it was like that for four years we just one day said we're done we had enough i had started getting online doing some research about government grants and i put in my email address phone number all the information that they ask for brian had stumbled on a lead generating website that collects information from visitors within 24 hours they got a sales call from corinthian colleges one of the largest for-profit schools in the country he has a deep accent and he tells me that they will grant me a decent amount amount of money and i thought we owe this to the kids to move forward in our lives the recruiter offered holly and brian money if they toured a few branches of corinthian including healed college in concord california which was near their encampment i felt that it's like we almost didn't have a chance to say no let's think about it um and i do if i remember correctly it was only three or four days that we started school after that and you said to them i'm homeless yes and she's like oh that's fine a lot of our students are homeless in the same situation in order to enroll holly and brian signed up for federal student loans totaling thirty thousand dollars all to be paid after they graduated but they had no money for housing so they simply moved their tent and belongings to a vacant lot next to campus and began going to class welcome to my school everything around 1.8 million students are enrolled in for-profit colleges across the country in mega schools like argosy devry and grand canyon university you've got 60 million dollars invested in i started reporting on this sector back in 2009 during the great recession how big can you go with unemployment up americans were choosing to go back to school in record numbers well the irony is uh dylan that when the economy is tough is when people actually look to go back to school and either upgrade their skills or maybe complete their base back then i had looked at the university of phoenix one of the largest universities in the world at its peak phoenix had enrolled over 600 000 students i spoke to a former high-ranking executive for the first 15 quarters we broke records and earnings every every quarter and instead of starting classes in september and january we started classes in january february and march sometimes two in april if we had more students then we could handle we'll build another site and handle some more we built campuses by a freeway because we figured that's where the people were so if you went by any major freeway in the southwest you're going to find the university of phoenix campus we put schools 20 minutes apart because that's about as far as somebody could drive at rush hour how much could a college administrator for the university of phoenix make the sky was the limit i shouldn't say this i shouldn't say this a free country i understand i understand it but it's posting and i won't save it no well in terms of how much you made you did very well i did more i did better than i ever imagined education stocks rallied today including carissian college in an otherwise flat market for profits had taken off education stocks are moving to the head of the class today 24 billion that's how much the biggest for-profit colleges took in last year in federally funded student aid money [Music] not just a job search a journey not just an interview for-profits were spending big money enticing students to sign up for loans whatever your business card says you're in the business of you at the time ad costs rivaled those of multinational brands which university revolutionized education in america to reach the working learner are you thinking about going back to school yes excellent what are you thinking about going forward the industry also employed an army of salesmen and recruiters the for-profits need to continually add students when you think about it for the university of phoenix for example in order to grow on top of the folks that are leaving you've got to add the equivalent of you know one to one and a half ohio states per year to satisfy their shareholders on a quarterly basis they've got to increase their enrollment they have to aggressively recruit marginal students because only one thing counts in this life get them to sign on the line which is dotted glengarry glenn ross it's that that sort of a heavy commercial environment in which you say whatever you need to say to close the deal the pressure to grow encourage dubious enrollment practices tammy barker was an enrollment advisor at ashford university they used to tell us you know dig deep get to their pain get to what's bothering them so that that way you can convince them that a college degree is going to solve all their problems the problem is is that for many of these students they think they're talking to an admissions advisor i think they're talking to someone with some sort of ethical standards and they don't realize that they're talking to a person who is selling them something and that they might be better off to just walk away many students assumed they were getting a quality education and a useful degree i love grand canyon and the community that it represents and also the christian background this school is just perfect just it's night classes i'm studying um merchandise product development and it is the coolest thing i've ever done in my life i love it in 2010 the top washington lobbyist for the sector told me it was all about providing new opportunities we educate the students that traditional higher education has given up on traditional higher education has become a very socio-demographically elite group of people so the only options lower income students and working adults have is either to go to a community college some of them can go to minority serving institutions and our option is the third option but for years for-profits had been charging students nearly five times as much as community colleges and gotten the bulk of their revenue up to 90 percent from student loans and grants this is the most heavily subsidized private business sector in america no one compares defense industry agriculture don't hold a candle to these boys hey ladies you have to hold the household down right why can't you get an education for yourself you still can work you can still take care of your kids i did it you can do it too but not all the promises were paying off the whole world opens up for you but you got to do something right now you can't wait back in 2010 i met three students who had enrolled at everest part of the for-profit giant corinthian they were hoping to become nurses but it wasn't going according to plan they said that we were going to be making 25 an hour and 25 to 35. they told me like how you know you're and they're gonna find us a job they're gonna find us uh they're gonna place us i got my license in december of 09 and i've been on countless interviews and they all ask if i've ever been in a hospital and i would have to tell them we never set foot in a hospital ever we went to a museum of scientology for our psychiatric rotation our pediatrics rotation we went to a daycare oh yeah that was our pizza we went to a daycare after our report aired john oliver picked up the story job hunting might be a little difficult our students from a corinthian college nursing program found we went to a museum of scientology for our psychiatric rotation what scientologists do not believe in psychiatry this is the next big scandal in america washington also started paying attention reminds me where we were two years ago with liar loans and no doc loans in the housing market where people started accepting people who couldn't prove their income couldn't prove employment but we sold them a 450 000 house and in a handful of hearings some for-profits were accused of employing false or misleading advertising and using illegal recruitment efforts 15 of the 15 schools the gao investigated found instances of fraud deceptive practices or made misleading statements to prospective students in this hearing they unveiled hard evidence and an assigning date right there for me okay now i'm not signing up for the school right now um yeah you're actually receiving your seat oh i was hoping i could talk to the financial people i didn't really even let you back there am i i mean i'd be on the hook for the 38 000. the thing about those tapes is that it was really hard in in the face of this evidence to deny that there was a problem there you should be ready to make the investment of time and money necessary to get you to where you should be at this point what are you really afraid of congressional investigators also found that for-profit schools were failing to prepare students for the workforce too many of the students who go to these schools are coming out with nothing other than big debt and no education no gainful employment at all in 2010 the department of education attempted to regulate the industry by implementing some new rules but the department ran into intense resistance the lobbyists for the for-profit industry and unfortunately many members of congress challenged those regulations critiqued those regulations this so-called quote gainful employment on quote regulation is another example of this big federal government run amok they were overwhelmed they ran into this withering artillery fire of lawyers coming after the administration and beat them back well they're doing everything they can to screw up education we finally get an interest the fact that the sector has declared an existential emergency around this the sector has every lobbyist in town former members of congress on its payroll to defeat this really kind of speaks volumes about the level of corruption and the kind of feeding frenzy we're talking about last week when the house of representatives voted to prevent the department of education from implementing tough new rules that could deprive certain schools from federal funding trump university it's been the subject of increased scrutiny today allegations of predatory behavior and negative press continue to dog the industry well the clintons got filthy rich off a for-profit university that took advantage of many poor people but since i last reported on these schools a lot has changed are the for-profit schools value stocks or value traps one of the big losers though that was apollo group that operates the university of phoenix for profits are no longer the darlings of wall street and enrollment is way down [Music] in san francisco i talked with trace erden a banker who kept buy ratings on several for-profits for much of the last decade they're into decline why mostly market conditions the economy recovers and everybody finds a job and then all of a sudden you know that that trade-off that said well hey wait a minute why should i borrow all this money so that i can earn the same amount of money that i can earn at java juice that doesn't make any sense you have termed these students that are signing up for these courses as subprime i knew that was going to come out yeah they were subprime borrowers i mean that's that's a that's a fair characterization of the types of students that are being served right these are unsophisticated students that have a great deal of risk now that's not true across the board with for-profit education but certainly when you're talking in the context of corinthian corinthian that's the for-profit chain that included everest college it's the school those three nursing students had attended we looked one of them up martha solomon and found her living in southern california martha had paid back the 28 thousand dollars she owed in student loans but at a cost that was money that could have gone towards my house or to for my kids it could have gone a lot of different ways but i just wanted to get rid of it her degree from everest never resulted in nursing work so she was forced to start over i got my rn from citrus college it's a community college in glendora and from day one the start of that school was totally different from everest there's really no comparison for our psych rotation at citrus the rn program we went to a psych hospital and we were there for four weeks and we were able to interact with the patients we followed the nurses while they gave medication it was it was an actual psych hospital it wasn't a museum and how much did it cost you to get a degree from a community college my rn cost three thousand dollars but it's the education that you receive the money that you save is there's no there's no comparison [Music] stories like martha's got the attention of california's attorney general in 2011 kamala harris started investigating as we started diving into it it became clear that corinthian was engaged in extremely predatory behavior and conduct and so we sued this morning my office filed suit against corinthian colleges and um in what can only be described as a for-profit college predatory scheme a lot of what you charged was that there was a misrepresentation of job placement rates absolutely convincing students that if you sign up to receive an education we will ensure you will also get a job that was all uh i'm going to say a polite term that was wrong and it made inaccurate it was bs it was bs it absolutely was harris based her complaint on interviews with over a hundred employees and students including holly harsh and brian french the homeless students at corinthians healed college it's okay pretty girl hi holly and brian had dropped out of heald in their third semester but the bills kept on coming and i was just like how am i going to pay this yeah we still got bills coming out they still want their what is it 288 dollars a month that they want to get from us for you oh for me alone can you afford that no not really we're living paycheck to paycheck as it is and what i i say i got from healed was that at 16 000 t-shirt and that's what we got holly harsh brian french homeless recruited to sign up for government loans to go to school is that an extreme case are they outliers anyone is a target they were targeting the most vulnerable and desperate people people who felt that they were without resources this was by their own marketing materials and how do you explain that there are people that would want to take advantage of people like that it's great everest college is accredited by the west coast commission of non-accredited schools you can learn anything corinthian would fast become the poster child of predatory for-profits videos lampooning corinthian flooded onto youtube you're probably just sitting at home watching mori i like maury i want to know who the daddy is too make a decision make a choice gotta call everest you you still here by 2013 california's attorney general would share her findings with the department of education soon after officials in washington decided to cut off the flow of federal funds until corinthians could back up their claims of job placement the way financial aid typically works it's almost like they give the the institution a credit card and they can in anticipation of getting that bill paid by the department of education they can spend the money in advance what the department of education said is basically they took away the credit card and said no no we need to verify your expenses before we get reimbursed we're in the we're in the peak of sort of the highest amount of worry right now that erden was monitoring the company and he told me that for most of the previous year the ceo of corinthian jack massimino was downplaying his problems he would say it's going to be fine we're you know we we've put these things in place and it's all going to be good and you know the the students are coming trust me they're always extremely optimistic right so it's the job of people like me to try to filter that a little bit did you ask that question are you defrauding students well no i probably wouldn't have phrased it that way maybe you probably would have maybe i should have maybe i should have i then asked him about the department of education withholding funds from corinthian i knew something the department didn't know which was that withholding that much cash from them would precipitate a crisis right so i knew that part what i didn't see coming was that the department would actually do that to them without the influx of federal funds top executives at corinthians saw the writing on the wall and prepared to file for bankruptcy for-profit college provider abruptly closes its campuses kpx 5's kit on the morning of april 26 2015 thousands of students woke up to hear the news of today's school's out for good at corinthian colleges it was the largest college shutdown in history placed after the sudden closure of 28 corinthian college campuses school is over for thousands of southern california students they've just learned therefore students were left wondering what would happen next corinthian colleges goes under leaving 1.2 billion with a b in federal student loan dollars in play and the people who did it are on their estates or on their yachts enjoying the fruits of their labor that's one of the concerns these are federal loans these students have so as a taxpayer why shouldn't i be concerned about this officials at the department of education were trying to determine who should absorb the loss for all those students who had gone through corinthians exactly some of whom may be carrying quite a bit of debt and as we now know probably have very poor job prospects relative to what they were promised there was so many students so many campuses there was no policy that could really handle that sort of scale again remember that the times when campuses have closed before we're talking you know a few hundred students right a couple of campuses then the department of education would be on the hook for the billions of dollars that those students might have outstanding in loans and they were not particularly enthusiastic about taking on that that sort of burden instead of refunding the students the department midwifed a sale of 53 corinthian campuses what they told me at the time was we were afraid to turn loose on the economy or into community colleges and other universities so many students at one time too big to fail sadly that's what it sounded like i never never bought it from the start just didn't make any sense the buyer was a non-profit specializing not in education but in student debt collection well i i don't get it i don't get it so this debt collector that collects bad debt for the department of education buys a whole slew of corinthian colleges yes with the department of education which is the regulator and the enforcer and the sheriff in town actually stepping in to broker the deal we are everest we are wyatek we are zenith education group a non-profit that's putting student success first the ceo of zenith and the general counsel of the parent company ecmc agreed to sit down for an interview you raised a lot of eyebrows when you made this deal you're a debt collecting company but you're going into the business of education in a sector that is rife with high debt load well the ultimate proof will be in the pudding our goal is to make sure that we can provide an affordable education of high quality so that when a student comes out of one of our programs they have no more than four or four thousand five hundred dollars in debt uh we think that's affordable for a job that pays 20 25 bucks an hour uh so are we there yet not quite but we've made a lot of progress but your experience was in debt collection what experience did you have in running a school in in the particulars of running a school we brought folks in from the outside that had that experience so ecmc had no experience in running a school let alone a set of colleges that's great i then asked them about a report zenith had commissioned that detailed all the problems at corinthian and i quote talking about corinthian students were misguided resources misdirected questionable loans issued and admissions departments pushed to recruit anyone with a pulse so i want to talk about these abuses and what you've done to change things we commissioned the ideo report because we want to be different than the previous owners you know from the point that we acquired these schools in february of 2015 fully 60 percent of those employees are no longer with us the senior management completely re redone as i mentioned before completely new marketing team you say that you your entire marketing team has been replaced what about the compliance department so uh our senior leadership all but one never drew a dime of pay from corinthian and that includes the person who runs compliance so we're in the process really of reinventing the leadership of zenith education while it's true that the top manager for compliance was replaced nearly one-third of the staff in that department remains in place zenith also kept most school administrators and teachers does it concern you that zenith is operating corinthian with the same personnel that were there well the key thing is that schools that zenith runs have to serve students well there's a monitor in place to help ensure that that occurs and we're going to do all we can to make sure that they're serving students well how would you grade the department on monitoring and [Music] investigating the abuses that we all know have gone on at these for-profit schools so it's an incomplete i think we're making progress certainly compared to where we were when the administration began but more to do brand new regulations will hold these schools accountable for the value of their degree in 2015 after five years of legal battles the obama administration finally implemented a gainful employment rule under this new rule schools have three years to prove that they place students in jobs which pay enough for them to afford their student loans it'll take years for the final judgment to come in so we're we're going to regulate through the rear view mirror absolutely this was one of my main objections to what they did the american public are not supposed to be lab rats on whom we experiment and then pass judgment on providers post facto you wouldn't do that with food you wouldn't do that with drug safety the assumption is that the burden always ought to be on the provider to put enough evidence on the table that what they're selling to public what they're financing with public dollars is wholesome and and at the very least not damaging the department of education has also launched a new enforcement unit promising to more closely monitor for-profit schools and this past month the department sanctioned another school students at itt technical institute fear that school may not be around much longer today that itt technical institute can no longer enroll new students who use federal loans i spoke to one itt student who told me he had already borrowed twenty thousand dollars to train as an architectural designer i had to get in debt you know i don't have no rich uncle who got blown give it to me with a civil spoon even though it might cost a little money the long run it'd still be worth it you know i won't have to be dependent upon welfare or anything like that as i get older i have a trailer to my belt well you haven't heard that the school's having any troubles or might close or might be closed down by the government well i hope i'll be able to learn the program before they do that because i really need i really need to learn it just last week itt closed not available [Music] so for more on this and other frontline programs visit our website at pbs.org frontline [Music] front lines a subprime education is available on dvd to order visit shoppbs.org or call 1 800 play pbs frontline is also available for download on itunes [Music] you

Channel: FRONTLINE PBS | Official

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Length: 29min 24sec (1764 seconds)

Published: Thu Jun 02 2022