Yet another bad rap for "For-Profit Schools."

Discussion in 'General Distance Learning Discussions' started by Koolcypher, Aug 3, 2010.

  1. CargoJon

    CargoJon New Member

    I am far from one to defend any of these shenanigans, and I'm not....but....

    I echo what an earlier poster said about people not taking the responsibility to investigate the costs of their programs and the credibility of their school before enrolling.

    When I went to UoP, they were one of the only accelerated online programs available. This was back in the dark ages of online education. Had I been going through my bachelor's degree now, I would have went quite a different way.

    When I researched where to get my MBA, I did a lot of research into the various schools, their programs, and THEIR COSTS. I could have easily gained admission to the Penn State or Arizona State (ASU has an excellent concentration in my industry, too), but they were just too darned much money.

    I think there is shared responsibility here. The salesy tactics employed by these schools is horrific, and the stupidity of some of these students to buy into this crap is almost as bad. I liken it to people who bought $400,000 homes on a $40,000 / year salary, because their mortgage broker told them the payment was only $800 / month. They forgot to actually look and realize there was a $300,000 balloon payment due in 8 years.
  2. Randell1234

    Randell1234 Moderator Staff Member

    You mean that was wrong? ;)
  3. Randell1234

    Randell1234 Moderator Staff Member

    I looked at their MBA program (when it was Florida Metropolian University) and they never pulled that sales stuff on me. Then again, I went in with a set of questions written down and said, "I just need answers to these questions to help me decide on a program. I will not sign anything this month, I am just collecting information. Is that clear?"

    They were nice, informative, and helpful.

    * Disclaimer - I teach for Everest now but I did not at the time.
  4. StefanM

    StefanM New Member

    However, I believe there is a social responsibility on the part of the "expert" to provide information, so I find more fault with the salesmen than the students.

    What is even more repugnant is that they are psychologically manipulating people into making decisions against their best interests. Additionally, the sales forces are in many cases preying on the uneducated and the economically disadvantaged. These students don't have the awareness that more informed students have, but that doesn't mean they deserve to be exploited.

    I saw these kind of aggressive tactics at UOP when I worked inside the devil's belly. It's downright evil, IMO. They never said it explicitly, but they might as well have said, "Hey, let's get as many poor black people to enroll as possible!" The way they preyed on historically under-served communities sickened me.

    Additionally, a lot of people encouraged people to enroll in health administration programs whenever students inquired about nursing programs (UOP didn't have a nursing program at my campus). I even saw counselors enrolling students into degree programs to "get their prerequisites out of the way," despite the fact that almost none of the classes they would be taking would be applicable to a nursing program (no science labs at all).

    Instances of outright fraud occurred as well (such as knowingly not listing schools previously attended because of transcript holds).

    Much of this occurred "under the radar" and, if caught, would have officially been squashed, but if they really wanted to stop it they could have. Anyone with a brain knew what was going on, but no one seemed to care.

    In the finance department, errors on the part of UOP would be passed along to the student, and we were expected to defend our errors that cost students thousands of dollars. The usual method was to encourage them to attend class to get more financial aid that they could use to pay off the debt. Of course, the right thing to do was to write-off the balance, but I could not convince my superiors on many occasions to do so because of "bad debt" concerns.

    And for the compensation, the set up essentially made it so that counselors could not receive good evaluations without meeting enrollment quotas. Some garbage points were thrown in for "soft skills," but you would not do well on your entire review unless you "hit your numbers."

    One time when I was in enrollment, I made 351 calls in a day. Some people I called every day for weeks in a row.

    I am not proud of my time at UOP, and I regret a lot of what I did. In fact, I developed anxiety and depression problems due to the stress of working at UOP.
  5. CargoJon

    CargoJon New Member

    Anyone who relies on a salesperson for "expert" information and believes that they are getting honest information from from a person whose job, and livelihood, depends on selling them something is setting themselves up for failure.

    People whose job it is to separate you from your money aren't experts, they're....well.....salespeople.

    I find equal fault, although I will call the salesmen worse because their motives are less pure than the fool who is simply naive.
  6. SoldierInGA

    SoldierInGA New Member

    Someone asked me the other day about their chance to obtain a commission with a degree from Ashford while another was going to Grand Canyon. While they might be ok schools, the overall preying strategy gives me a bad taste in my mouth and doesn't make for a good reputation over all. Congress needs to tighthen the spigot on these schools to avoid them using federal financial aid awarded to regular students and military recruits as an easy money making stratagem.
    It's mindboggling how these "universities" were able to grow their enrollement numbers so much in such a short time. You cannot expect the federal government to be the perennial golden goose for every industry, but it's sadly what it's turning out to be...all at the expense of a couple of generations of taxpayers.

    I found this in a WSJ blog today:

  7. cjzande

    cjzande New Member

    This one utterly blows me away. When my husband and I applied for a loan years ago, the bank told us "Congratulations. We've approved you for up to $XXXX." They gave us a confirmation letter - I know that's not what it's really called, but it's been so long, I've forgotten the "official" name - we could show Realtors and sent us on our way. We were *stunned*. It was a ridiculously high amount. My husband said thanks, and we went out and bought a house for less than half of the "up to" total.

    A couple of years ago, an acquaintance told me she'd bought "more house than she could probably afford," but it was okay because she had the option ARM thing and even though her rate would go up in two years, it was presumed she'd have a salary raise to match it, or that she'd just "re-finance it." I remember thinking then she was counting on some big ifs, and sure enough - her house went into foreclosure not too long ago.

    I'm not saying there aren't brokers out there who don't/didn't prey on people, but, yeah, there's got to be some personal responsibility in there, too. It's really fairly simple math in the end - figuring out what you can genuinely afford.
  8. CalDog

    CalDog New Member

    Home mortgages and student loans are nothing new; they've been around for decades. Yet it's only within the last 5-10 years that the issue of ridiculously excessive borrowing has risen to the forefront. Why is that? Was there some kind of sudden national erosion in intelligence or personal responsibility?

    It may be tempting to assume that the answer is "yes", but there's actually another factor involved. The rules of the lending game changed, for both mortgages and student loans. And under the new rules, there were incentives for excessive lending.

    For example, under the old rules, student loans could be discharged in bankruptcy. So if you wanted an excessive loan for a BA in basketweaving, the lender simply wouldn't give it to you. Why not? Well, obviously the combination of high debt and low future earning power was problematic from a financial perspective. Given these conditions, you might well go bankrupt after college, and then the loan would never be repaid. Common sense, right?

    But under the new rules, you remain on the hook for your student loans for the rest of your life -- even if you are forced into bankruptcy, you still have to keep paying. So the lender's incentive now is to provide the cash needed for that expensive private basketweaving degree -- regardless of the future financial implications. The lenders will get their money back sooner or later -- they can literally take it out of your Social Security payments late in life if necessary. You can't escape, unless you flee the country or commit suicide.

    Sure, borrowers need to have personal responsibility for the risks they are taking. But "common-sense" lending would return instantly, if the lenders faced some risk as well.
    Last edited by a moderator: Aug 7, 2010
  9. Vincey37

    Vincey37 New Member

    Almost all for-profit revenues come from federal loans, not private ones. While irresponsible student loans from private lenders may be an issue, I don't think it is a large part of the problem.
  10. CalDog

    CalDog New Member

    I was ranting about the problem of private student loans, which is in fact a separate issue from the problem of misleading marketing by for-profit schools. Student loan debt is not an exclusively for-profit or non-profit concern; it is quite possible to accumulate excessive debt at either type of school.

    It's probably true that most of the revenues at for-profit schools come from federal loans. For example, ACICS-accredited Ascension College in Louisiana lost its eligibilty for federal loans on Friday, July 30. The school's response was to close permanently on Saturday, August 1.

    However, the problems with for-profit schools can also be attributed to particular incentives. If they receive federally-guaranteed payments for every student (which they do), and if they keep their teaching expenses low enough to guarantee a profit from those payments (which they do), and if their most important goal is to maximize profit (which it is) -- then obviously they have a strong incentive to market their programs as aggressively as possible.
  11. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    While it's not the only factor in people taking on too much debt, in the last few decades I actually think there has been a general erosion of personal responsibility in the U.S.

  12. CalDog

    CalDog New Member

    There is less concern about aggressive or misleading marketing at non-profit schools, because the non-profits have different incentives. Non-profits typically have higher expenses for teachers and facilities; their tuition revenues don't fully cover these costs, so the schools generally lose money on every student that they educate. Non-profit schools stay afloat through other means, such as state/local taxes (at public schools) or endowments/alumni donations (at private schools). Since they typically lose money on each student, non-profits have little incentive to expand enrollments, and so they have little need for aggressive marketing tactics.

    Most non-profits are content to hold enrollments stable, even if applications increase. This approach minimizes the financial losses (which is obviously a worthwhile goal), and it also allows the schools to be perceived as more selective and prestigious (which, for non-profits, is also viewed as a worthwhile goal).

    In fact, many non-profits practice the exact opposite of aggressive marketing -- they actually turn away prospective paying customers. Some non-profit colleges and universities reject the majority of their applicants, with admissions rates below 10% at the most selective schools.
  13. CalDog

    CalDog New Member

    OK, maybe you're right. Maybe borrowers have lost their traditional sense of ethics and responsibility, and this is why ridiculous mortgages and student loans have become such a problem. But if so, what is to be done about it?

    We could try some kind of massive national campaign to renew evey American citizen's sense of personal ethics and responsibility. For example, perhaps some sort of class or seminar on this topic could be required for anyone who wanted to take out a home loan. We could put warning labels, like the ones on cigarette packs, on loan documents. We could run public-service announcements on TV and radio. This approach might make a measurable difference to the attitudes of prospective borrowers, if you gave it a few decades. Anti-smoking and anti-drunk-driving campaigns have historically worked in this way.


    But we could also solve the problem of ridiculous loans much more quickly and easily by focusing on lenders, rather than borrowers. If lenders faced a real risk of default, then the problem of excessive borrowing would disappear overnight.
    Last edited by a moderator: Aug 7, 2010
  14. SteveFoerster

    SteveFoerster Resident Gadfly Staff Member

    I realize this is an unfashionable suggestion, but another choice is not to bail out those who make irresponsible decisions from the consequences of their actions. And I mean that from Wall Street on down to the little guy.

  15. CalDog

    CalDog New Member

    In the case of student loans, there is no way (under current law) for the borrower to default. So from the lender's perspective, there are no "consequences of their actions". The lender can make irresponsible decisions with impunity. The borrower can't, but the lender can.

    The market for student loans would function better if both parties were subject to penalties for irresponsible decisions -- not just one.
    Last edited by a moderator: Aug 7, 2010
  16. b4cz28

    b4cz28 New Member

    We will see debt forgiveness in a few years on student loans.
  17. Randell1234

    Randell1234 Moderator Staff Member

    Sure - housing loan forgiveness, credit card forgiveness, student loan forgiveness...let's just keep creating a society that can go through life without consequence and responsibility...yup...that is what we need.
  18. CargoJon

    CargoJon New Member

    Yup, because the guy that gives out the most, gets the most votes. :mad:
  19. Anthony Pina

    Anthony Pina Active Member

    Of course, we would need to start with the most egregious example of fiscal irresponsibility and questionable business ethics: The U.S. Congress. It is ironic that it is this same body that is so busy finding fault with others. If our legislators were really so concerned about safeguarding our taxes, then they would modify many of their own practices.
    Last edited by a moderator: Aug 7, 2010
  20. Anthony Pina

    Anthony Pina Active Member

    Having said that, I was also appalled by the report. At my (for-profit) institution, admissions officers and financial aid officers would be fired for engaging in activities like those. Falsifying FAFSAs and other acts of fraud are inexcusable and those engaging in these acts should be punished.

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