Senator Tom Harkin (D-Iowa) of the Senate Health, Education, Labor and Pensions (HELP) Committee, released the results of the two-year congressional probe of 30 companies in the for-profit college industry this past Sunday. But this doesn’t mean that concerns about and investigations into the for-profit education industry are over. Last week, the United States Department of Justice (USDOJ) announced a new inquiry into the recruitment practices at Universal Technical Institute (UTI), which offers automotive technician training programs. The new investigation was spurred by the firing of a former employee, who claims that the school violated federal rules outlawing incentive compensation for recruiters and argues that the college retaliated against him in violation of whistleblower protection laws.
Such incidents will sound painfully familiar to those who have followed Congress’s for-profit college investigation for the past two years. According to The New York Times, the report shows that among for-profit colleges, which promote themselves as career-driven and able to help students to secure employment,
“Enrolling students, and getting their federal financial aid, is the heart of the business, and in 2010…the colleges studied had a total of 32,496 recruiters, compared with 3,512 career-services staff members. Among the 30 companies, an average of 22.4 percent of revenue went to marketing and recruiting, 19.4 percent to profits and 17.7 percent to instruction.”
The following discoveries were also included in the Harkin report:
- “More than half of the students who enrolled [in for-profit colleges] in 2008-9 left without a degree or diploma within a median of 4 months.”
- “For-profit colleges also ask students with modest financial resources to take a big risk by enrolling in high-tuition schools. As a result of high tuition, students must take on significant student loan debt to attend school. When students withdraw, as hundreds of thousands do each year, they are left with high monthly payments but without a commensurate increase in earning power from new training and skills.”
- “Many for-profit colleges fail to make the necessary investments in student support services that have been shown to help students succeed in school and afterwards, a deficiency that undoubtedly contributes to high withdrawal rates.”
Impact of the Report
The release of this damning report will probably spur continued oversight and criticism of for-profit colleges. The new Universal Technical Institute investigation may be just the beginning of a new round of investigations, especially into smaller institutions, to ensure that they are following federal regulations. Like the accusations of the former UTI employee, reports of corruption and legal violations were one of the main reasons the investigations started in the first place, in addition to the pleas of students struggling to pay back their student loans while unemployed.
The prevalence of compensation incentives for enrolling high numbers of students, such as trips to Hawaii, cash bonuses, and other benefits, were among the original complaints. Incentive compensation was banned in Title IV of the Higher Education Act (1992) for many reasons, but the ban was designed primarily to prevent aggressive and unscrupulous recruiters from pressuring students to enroll even if they are not qualified for college-level academic work, who might rack up high student loan debts, fail out of the college, and have no way to pay back those loans.
The ban was strengthened last year at the height of the for-profit college investigation, when the DOJ found that many of the leading for-profit higher education companies, such as Kaplan and EDMC, had routinely violated the law. Though the Association of Private Sector Colleges and Universities sued to prevent the implementation of this and other regulations, they were unsuccessful and the incentive-compensation ban was maintained in June 2012, after a federal appellate court upheld most of the new program integrity regulations put in place by the U.S. Department of Education.
Problems at Universal Technical Institute
Despite the similarities, there is at least one difference between the previous investigations and this new one: the previous was done in secret, with federal investigators posing as students and, among other things, applying for financial aid and submitting plagiarized or inadequate academic work. The results of the investigation were on the front pages of newspapers and websites for months, as one horror story after another emerged in congressional hearings. The regulations created in the wake of this were intended to improve services to students and are the standards being applied to this new inquiry, which is being conducted openly and with UTI’s cooperation. Perhaps this hails the start of a new era in transparency among for-profit colleges and universities, a positive result of the congressional inquiry that can only help the industry’s reputation.
It is dismaying, however, that some schools seem to continue to violate the law. In the case of UTI, a brief Internet search indicates why UTI may have been engaging in the illegal practices. In 2006, CNN Money suggested that UTI stock was worth a second look despite persistent issues that pulled the value of its stock down:
“Problems with their call center resulted in lost opportunities with potential students. Marketing and advertising shifted away from a more effective local focus UTI had employed in the past. And student enrollment growth rates slowed. The issues are no secret and management is addressing each one. UTI hired a new call center, as well as a new ad agency. They installed new leadership at an underperforming campus. In addition, while the sector as a whole has been pulled down by regulatory issues, UTI’s record is clean.”
That clean record seems to have been lost since then in UTI’s quest to increase profits and win back their stockholders. Students certainly have taken note, as there are countless complaints on various Internet sites, and even a “Students Against Universal Technical Institute” Facebook page, which calls for UTI students to enter into a class action lawsuit against the company.
If claims like this against for-profit colleges persist, the Harkin report’s inclusion of a statement acknowledging the need for for-profit colleges and universities that can offer educational opportunities outside of already over-burdened public institutions will fall on deaf ears. Since the start of these investigations, for-profit colleges have made many positive changes, and the report also argues that some of the responsibility for these problems was due to Congress, which “failed to counterbalance investor demands for increased financial returns with requirements that hold companies accountable to taxpayers for providing quality education, support, and outcomes.” However, the bad press garnered by the evidence of persistent problems with pro-profit colleges, and incidents like the UTI investigation, will continue to harm the reputations of these colleges themselves.
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