In the first decade of the twenty-first century, as millions of Americans entered higher education, almost 30 percent of them went to for-profit colleges, and I enrolled at least a couple hundred of those students. I worked first at a cosmetology school and later at a technical college. I remember many of those students—their stories, their struggles, their daily successes—but Jason is the student who most changed my life. When I think of Jason now, I hope that he can’t say the same of my impact on him.
When we met, Jason was in his early twenties. He was a local boy, born and raised in a rural suburb of Charlotte, North Carolina. At the time, Charlotte was a thriving urban core in the U.S. South. Its national stature, good quality of life, and strong labor markets relied significantly on the banking industry. As the banks went, so too went Charlotte’s economic fortunes. When I met Jason, the banks were post–technology bubble but pre–global recession. I was an enrollment officer at the Technical College. It was one of a dozen for-profit colleges in the Charlotte area, each with slightly different branding. There was the for-profit college in high-end Southpark that only offered graduate degrees in business and technology. There was the all-male for-profit college over by the airport whose claim to fame was training mechanics to work at NASCAR. Then there were dozens of for-profit colleges in cosmetology, barbering, and what we would have once called secretarial programs.
Like those other brands, the Technical College was located in a business park. This one was sandwiched between the high-end part of town and the growing middle-class subdivisions filling up with black and Hispanic families using low down-payment mortgages to escape the center city. The entire school occupied two floors of a six-story building. I had worked previously in a similar role at a cosmetology school. Unlike the cosmetology school, the Technical College offered degrees instead of certificates: associate’s, bachelor’s, and master’s degrees in technology, business, and criminal justice. Technology and business were very broadly defined. Technology included a program in electrical engineering that emphasized electrical more than engineering. The students learned business technology and how to wire common electrical units like those in household appliances instead of learning the math of engineering a structure with electricity. The business degree was “applied,” meaning it included everything from how to write a business memo to how to use accounting software like Quicken. The master’s in business also included case studies in common business problems like managing bad publicity. Only the criminal justice curriculum was occupationally specific. The course had to qualify students to take the police exam, and, as a result, it had the most valuable real estate in the building. One entire classroom was set up like a crime scene.
When students like Jason came to visit, anyone who couldn’t specify an occupational interest or desired degree program was steered to technology or business. Only students who specifically asked for criminal justice were given information about that program. If you didn’t know what you wanted a degree in, or what kind of job you hoped to have, technology and business were deemed suitably general enough to indicate you’d like working in the sector, but also specific enough to sound like something you heard on the news was a “good job.” Jason didn’t know what he wanted a degree in, so I told him about technology and business. He chose technology because, he said, “I always upgrade my phone.”
Jason was newly married to his high school sweetheart, Bree, who attended each of his appointments with him. They held hands and prayed together before he enrolled. He was eloquent and earnest. They were members of one of the area’s non-denominational mega-churches that met in shopping centers and played rock music during worship. Between them, Jason and Bree had one truck, three jobs, and one high school diploma. She was working part time and hoping to work full time. They wanted a family and thought God was leading them to adopt a Kenyan child with special needs, as friends in their congregation had done. Jason had graduated from high school but suffered from severe test anxiety, which had caught up with him when he once enrolled in community college.
Jason’s test anxiety was common enough among prospective students at the Technical College. It was also a potential roadblock to the stated purpose of my job—closing the sale and helping the economy (more on this later)—because the Technical College required an online skills test during the enrollment process. This was fairly rare among for-profit colleges, most of which have very few admission criteria (they are typically called open-access schools). The Technical College used something called the Wonderlic Cognitive Ability Test, best known for being the test that the National Football League uses to assess the IQ of new players. The fifty-question assessment purports to scale group intelligence scores and peg them to the average school grade. For example, a 20 on the Wonderlic is roughly equivalent to a 100 on an IQ test, or the baseline for average intelligence. The Technical College paid for a version of the Wonderlic that then correlated the IQ score with scholastic skill levels and provided a General Assessment of Instructional Needs (GAIN) score. For example, if this score were a 5, it meant that the test taker had the IQ of the typical fifth grader. To “pass,” prospective students at the Technical College had to score at least a 6. Prospective students could take the online assessment as many times as necessary to get a 6, and scores generally improved the more the test was taken. If all else failed, ambitious enrollment officers coached prospective students to make sure they passed. To put “pass” in context: there was no real chance of failure. We never told the prospective student that. Instead, passing the Wonderlic became part of the motivational sales technique.
To put “pass” in context: there was no real chance of failure. We never told the prospective student that. Instead, passing the Wonderlic became part of the motivational sales technique.
Jason was terrified of the Wonderlic. Per the instructions in the training manual, I told Jason that he could take the entrance test multiple times, until he passed. On his first try, Jason just barely made the cut-off score. He was stunned. Bree beamed. Then I told him what my supervisor had instructed us to tell those who passed: even she, who was enrolled in an MBA program at another local for-profit college, had failed it her first time. The point was that someone like Jason should be proud of his accomplishment and confident enough in his academic future to complete the financial aid paperwork. Happy to have cleared an academic bar he’d previously failed and anxious to earn a degree for a good job to support a young family, Jason had toured the campus, paid his enrollment fee, been tested, and officially become a Technical College student in a single appointment. It was a slam dunk.
Now, we had only to hold Jason’s hand until he completed his federal financial aid paperwork and showed up for the first day of classes. These were critical goalposts for both Jason and my employer. The Technical College didn’t get paid unless Jason completed his financial aid paperwork, and the first installment check from the government on Jason’s behalf was contingent on his showing up the first week of class. The enrollment staff was held accountable for the new students’ showing up on the very first day so as to maximize our “tuition guaranteed” numbers.
At Jason’s appointment with financial aid, he learned that after all his aid was applied he would have a tuition balance. The financial aid counselor gave him the standard options. He could make a payment plan. This was something like $400 or so a month, a car loan for a young couple that shared one truck. Needless to say, Jason and Bree could not afford the monthly bill.
Frankly, the financial aid representative did not push the payment plan. That was deliberate. The Technical College wasn’t fond of payment-plan students, because the staff had to spend valuable time chasing down those monthly payments. Plus, it was rumored that payment-plan students almost never showed up on the all-important first day of class. I don’t have data on that or a clear-cut reason for why it might be true. But, for a whole host of reasons, it isn’t hard to imagine that students who are likely to choose a for-profit college don’t have significant cash on hand. If they do, their lives are likely to present good reasons to spend that money on something else: food, rent, repairs. As any salesperson or behavioral economist can tell you, every point at which someone exchanges money for a good or service is a moment for them to reconsider their commitment to that purchase. The down payment on that payment plan may be one too many decision points for the likely students at for-profit colleges. Regardless, Jason didn’t have the money, the financial aid representative was glad, and off we went to the other options.
Jason could have a family member co-sign for an additional loan. He did not think anyone in his family, except for an aunt, would qualify. Unlike his student loan, the loan his aunt would be taking on had underwriting criteria. The aunt was elderly. She had good credit but was on Social Security. Jason and Bree worried that a loan payment would be too much stress for her. I thought the same thing about Jason and Bree. Sitting in on their financial aid appointments, I increasingly worried that Jason and Bree could not afford the tuition or the risk of the bachelor’s degree program he was signing up for. But I was not there to counsel them on their best options. I was there to close. Jason and Bree were prayerful. Consequently, they wouldn’t sign on to any of the options without a word from God. That meant they’d leave every appointment with nothing signed, but committed enough to make yet another financial aid appointment.
As the next start date loomed closer and Jason’s financial aid package was still not finished, my supervisor, Nicole, pressured me to tell Jason to do what he had to do to make a better life. She pulled me into her office and fired off a set of questions. Had I called the aunt? Did I make Jason bring his aunt’s Social Security number? Did I explain to Jason that if he doesn’t start he’ll never get his life on track? Dissatisfied with my answers—I hadn’t called his aunt; no, I didn’t ask for his aunt’s Social Security number; and, no, I didn’t tell Jason he was a loser—Nicole erased Jason’s tick mark beside my name on the office sales board. She threw open her office door and gathered the entire staff around her. I would be an example: we closed leads, but unless the federal financial aid paperwork and loan agreements were signed off on to satisfy all the tuition, we would all be out of a job soon. She held an impromptu mock session for the whole staff to guide us in reminding those prospects who were dragging their feet that they had told us they wanted better for themselves. It was time to put up or shut up to prove that they really wanted this. To the enrollment staff she said, “I don’t know about you, but I own stock. I need people working in this economy so my stocks do well and welfare doesn’t drag down the economy.” Closing helps the economy.
I wanted to help Jason, but the Technical College didn’t allow us. We sold, we didn’t counsel.
I can tell you that no matter what Nicole’s questionable applied economic theory said, Jason wasn’t the economy. Jason was a good kid who had text anxiety and no family wealth to buy test prep, tutors, or anxiety medication. And without the good credit borne of wealth, young Jason couldn’t make the financial commitment he had to make in order for me to close. I wanted to help Jason, but the Technical College didn’t allow us. We sold, we didn’t counsel.
One day I turned to a colleague to try to make sense of how I felt. Wasn’t I helping Jason change his life for the better? Michael was the most senior enrollment officer in the office. He had worked his way up to only conducting tours of area high school career fairs. He was spared the conversion statistics that ruled the rest of us, confined to the campus backroom where we shared office space. The rumor was that Michael was the only person who our supervisor, Nicole, was too afraid to “coach.” That could have been because he was a military veteran, which showed in ways both big and small. While the other enrollment officers’ desks were always littered with leads and files stuffed with enrollment paperwork, Michael’s desk had the minimalist order of someone who had once made hospital corners on a bed for the sake of national security. It was intimidating.
Michael also had two children preparing for college. One of our employee benefits allowed family members to take courses at the Technical College at a discount. Another colleague, Mary, had taken the job precisely so that her husband could earn a degree on the benefit and quit his job as a plumber. I asked Michael if he was encouraging his eldest son to do the same. He glanced away and said that, while he had thought about it, he had worked hard so that his son had better options. He wouldn’t stand in his son’s way if he wanted it, but enrolling in the Technical College was not the family plan.
For the first time, I thought carefully about the differences in how our scheduling team sent us prospective leads when they showed up for a campus tour. Prospects who arrived with their parents were moved along quickly, handed a brochure, and told to call us if they had any questions. I watched a senior recruiter pull a catalog from the office supply closet when the scheduler told her there were parents out front. For other recruits, the catalog was the last thing we would ever give them. A prospective student coming in on their own, without a parent, was a better prospect for us, because we could focus on the emotional appeal and not the details.
Not long after my conversation with Michael about the extent to which we were improving lives, the entire office was scheduled for an afternoon meeting with the bigwigs. The Technical College’s corporate director was coming to give us a state-of-the-company address. The director had an expensive-looking haircut and a crisp suit. He introduced himself by telling us that he had worked in finance for years and had never before witnessed what was currently happening in the economic markets. It was spring 2008. Access to credit was drying up, including the private student loans on which many of our students relied to cover the gap that Jason was struggling to fill. But, the director said, we shouldn’t worry. The company had negotiated a short-term credit solution that would allow us to offer company-backed loans to students like Jason. We should not expect the nosediving market to get in the way of closing.
Three years later, I would be in a sociology PhD program at Emory University. I would have a few economics courses under my belt, new analytical skills, budding research chops, and access to more information than I could have previously imagined. I would better understand what the executive from corporate was telling us that day. I would know that markets were contracting because the precursor to the mortgage crisis that ground the global economy to a halt in the fall of 2008 was beginning to show signs of what would come. As a budding sociologist, I would learn more about the structural dimensions of class and gender and race that made the students at the for-profit Cosmetology School where I first worked qualitatively different from the students like Jason whom I enrolled at the Technical College. I would understand the parents who refused to co-sign student loans because, while they believed in education, they were leery of financial contracts that to them looked like payday loans instead of investment portfolios.
I would also come to understand that the short-term loans the executive told me about that day, the ones that set off all my alarm bells and motivated me to quit, would one day be the subject of a federal investigation. The New York Times described how ITT Technical Institute had guaranteed debt taken on by a private student loan lender (PEAKS). Students who owed more than they could borrow were referred to PEAKS, often without knowing that ITT had a financial stake in PEAKS. Many of these students did not know the terms of private student loans. Those terms, unlike those for federal student loans, have fewer contingencies for repayment and are more expensive when it comes to interest and defaults. The Times noted, “Because the lender was unaffiliated with ITT, the loans qualified as private money under the 90-10 rule. The company, therefore, ensured that its students could keep tapping into federal grants for the other 90 percent of their education costs.” Evidence suggests that enrollment officers, like me, had no incentive to explain these loans to students—even when they were the only way to close with someone like Jason. The facts confirm that the Technical College had no practical way to make good on those loans when students like Jason inevitably couldn’t pay them. And, it’s worth noting that ITT Tech’s real violation wasn’t in offering these loans to students, but rather in misrepresenting them to investors. We are fine with caveat emptor (“buyer beware”) for students, but not for investors. It is a theme that plagues corporate higher education.
Copyright © 2016 by Tressie McMillan Cottom. This excerpt originally appeared in Lower Ed: The Troubling Rise of For-Profit Colleges in the New Economy, published by The New Press. Reprinted here with permission.
Tags: college admissions, for-profit colleges, higher ed reform
Lower Ed: The Troubling Rise of For-Profit Colleges in the New Economy
In the first decade of the twenty-first century, as millions of Americans entered higher education, almost 30 percent of them went to for-profit colleges, and I enrolled at least a couple hundred of those students. I worked first at a cosmetology school and later at a technical college. I remember many of those students—their stories, their struggles, their daily successes—but Jason is the student who most changed my life. When I think of Jason now, I hope that he can’t say the same of my impact on him.
When we met, Jason was in his early twenties. He was a local boy, born and raised in a rural suburb of Charlotte, North Carolina. At the time, Charlotte was a thriving urban core in the U.S. South. Its national stature, good quality of life, and strong labor markets relied significantly on the banking industry. As the banks went, so too went Charlotte’s economic fortunes. When I met Jason, the banks were post–technology bubble but pre–global recession. I was an enrollment officer at the Technical College. It was one of a dozen for-profit colleges in the Charlotte area, each with slightly different branding. There was the for-profit college in high-end Southpark that only offered graduate degrees in business and technology. There was the all-male for-profit college over by the airport whose claim to fame was training mechanics to work at NASCAR. Then there were dozens of for-profit colleges in cosmetology, barbering, and what we would have once called secretarial programs.
Like those other brands, the Technical College was located in a business park. This one was sandwiched between the high-end part of town and the growing middle-class subdivisions filling up with black and Hispanic families using low down-payment mortgages to escape the center city. The entire school occupied two floors of a six-story building. I had worked previously in a similar role at a cosmetology school. Unlike the cosmetology school, the Technical College offered degrees instead of certificates: associate’s, bachelor’s, and master’s degrees in technology, business, and criminal justice. Technology and business were very broadly defined. Technology included a program in electrical engineering that emphasized electrical more than engineering. The students learned business technology and how to wire common electrical units like those in household appliances instead of learning the math of engineering a structure with electricity. The business degree was “applied,” meaning it included everything from how to write a business memo to how to use accounting software like Quicken. The master’s in business also included case studies in common business problems like managing bad publicity. Only the criminal justice curriculum was occupationally specific. The course had to qualify students to take the police exam, and, as a result, it had the most valuable real estate in the building. One entire classroom was set up like a crime scene.
When students like Jason came to visit, anyone who couldn’t specify an occupational interest or desired degree program was steered to technology or business. Only students who specifically asked for criminal justice were given information about that program. If you didn’t know what you wanted a degree in, or what kind of job you hoped to have, technology and business were deemed suitably general enough to indicate you’d like working in the sector, but also specific enough to sound like something you heard on the news was a “good job.” Jason didn’t know what he wanted a degree in, so I told him about technology and business. He chose technology because, he said, “I always upgrade my phone.”
About this Excerpt
This is an edited excerpt from a new book by Tressie McMillan Cottom, Lower Ed: The Troubling Rise of For-Profit Colleges in the New Economy.
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Jason was newly married to his high school sweetheart, Bree, who attended each of his appointments with him. They held hands and prayed together before he enrolled. He was eloquent and earnest. They were members of one of the area’s non-denominational mega-churches that met in shopping centers and played rock music during worship. Between them, Jason and Bree had one truck, three jobs, and one high school diploma. She was working part time and hoping to work full time. They wanted a family and thought God was leading them to adopt a Kenyan child with special needs, as friends in their congregation had done. Jason had graduated from high school but suffered from severe test anxiety, which had caught up with him when he once enrolled in community college.
Jason’s test anxiety was common enough among prospective students at the Technical College. It was also a potential roadblock to the stated purpose of my job—closing the sale and helping the economy (more on this later)—because the Technical College required an online skills test during the enrollment process. This was fairly rare among for-profit colleges, most of which have very few admission criteria (they are typically called open-access schools). The Technical College used something called the Wonderlic Cognitive Ability Test, best known for being the test that the National Football League uses to assess the IQ of new players. The fifty-question assessment purports to scale group intelligence scores and peg them to the average school grade. For example, a 20 on the Wonderlic is roughly equivalent to a 100 on an IQ test, or the baseline for average intelligence. The Technical College paid for a version of the Wonderlic that then correlated the IQ score with scholastic skill levels and provided a General Assessment of Instructional Needs (GAIN) score. For example, if this score were a 5, it meant that the test taker had the IQ of the typical fifth grader. To “pass,” prospective students at the Technical College had to score at least a 6. Prospective students could take the online assessment as many times as necessary to get a 6, and scores generally improved the more the test was taken. If all else failed, ambitious enrollment officers coached prospective students to make sure they passed. To put “pass” in context: there was no real chance of failure. We never told the prospective student that. Instead, passing the Wonderlic became part of the motivational sales technique.
Jason was terrified of the Wonderlic. Per the instructions in the training manual, I told Jason that he could take the entrance test multiple times, until he passed. On his first try, Jason just barely made the cut-off score. He was stunned. Bree beamed. Then I told him what my supervisor had instructed us to tell those who passed: even she, who was enrolled in an MBA program at another local for-profit college, had failed it her first time. The point was that someone like Jason should be proud of his accomplishment and confident enough in his academic future to complete the financial aid paperwork. Happy to have cleared an academic bar he’d previously failed and anxious to earn a degree for a good job to support a young family, Jason had toured the campus, paid his enrollment fee, been tested, and officially become a Technical College student in a single appointment. It was a slam dunk.
Now, we had only to hold Jason’s hand until he completed his federal financial aid paperwork and showed up for the first day of classes. These were critical goalposts for both Jason and my employer. The Technical College didn’t get paid unless Jason completed his financial aid paperwork, and the first installment check from the government on Jason’s behalf was contingent on his showing up the first week of class. The enrollment staff was held accountable for the new students’ showing up on the very first day so as to maximize our “tuition guaranteed” numbers.
At Jason’s appointment with financial aid, he learned that after all his aid was applied he would have a tuition balance. The financial aid counselor gave him the standard options. He could make a payment plan. This was something like $400 or so a month, a car loan for a young couple that shared one truck. Needless to say, Jason and Bree could not afford the monthly bill.
Frankly, the financial aid representative did not push the payment plan. That was deliberate. The Technical College wasn’t fond of payment-plan students, because the staff had to spend valuable time chasing down those monthly payments. Plus, it was rumored that payment-plan students almost never showed up on the all-important first day of class. I don’t have data on that or a clear-cut reason for why it might be true. But, for a whole host of reasons, it isn’t hard to imagine that students who are likely to choose a for-profit college don’t have significant cash on hand. If they do, their lives are likely to present good reasons to spend that money on something else: food, rent, repairs. As any salesperson or behavioral economist can tell you, every point at which someone exchanges money for a good or service is a moment for them to reconsider their commitment to that purchase. The down payment on that payment plan may be one too many decision points for the likely students at for-profit colleges. Regardless, Jason didn’t have the money, the financial aid representative was glad, and off we went to the other options.
Jason could have a family member co-sign for an additional loan. He did not think anyone in his family, except for an aunt, would qualify. Unlike his student loan, the loan his aunt would be taking on had underwriting criteria. The aunt was elderly. She had good credit but was on Social Security. Jason and Bree worried that a loan payment would be too much stress for her. I thought the same thing about Jason and Bree. Sitting in on their financial aid appointments, I increasingly worried that Jason and Bree could not afford the tuition or the risk of the bachelor’s degree program he was signing up for. But I was not there to counsel them on their best options. I was there to close. Jason and Bree were prayerful. Consequently, they wouldn’t sign on to any of the options without a word from God. That meant they’d leave every appointment with nothing signed, but committed enough to make yet another financial aid appointment.
As the next start date loomed closer and Jason’s financial aid package was still not finished, my supervisor, Nicole, pressured me to tell Jason to do what he had to do to make a better life. She pulled me into her office and fired off a set of questions. Had I called the aunt? Did I make Jason bring his aunt’s Social Security number? Did I explain to Jason that if he doesn’t start he’ll never get his life on track? Dissatisfied with my answers—I hadn’t called his aunt; no, I didn’t ask for his aunt’s Social Security number; and, no, I didn’t tell Jason he was a loser—Nicole erased Jason’s tick mark beside my name on the office sales board. She threw open her office door and gathered the entire staff around her. I would be an example: we closed leads, but unless the federal financial aid paperwork and loan agreements were signed off on to satisfy all the tuition, we would all be out of a job soon. She held an impromptu mock session for the whole staff to guide us in reminding those prospects who were dragging their feet that they had told us they wanted better for themselves. It was time to put up or shut up to prove that they really wanted this. To the enrollment staff she said, “I don’t know about you, but I own stock. I need people working in this economy so my stocks do well and welfare doesn’t drag down the economy.” Closing helps the economy.
I can tell you that no matter what Nicole’s questionable applied economic theory said, Jason wasn’t the economy. Jason was a good kid who had text anxiety and no family wealth to buy test prep, tutors, or anxiety medication. And without the good credit borne of wealth, young Jason couldn’t make the financial commitment he had to make in order for me to close. I wanted to help Jason, but the Technical College didn’t allow us. We sold, we didn’t counsel.
One day I turned to a colleague to try to make sense of how I felt. Wasn’t I helping Jason change his life for the better? Michael was the most senior enrollment officer in the office. He had worked his way up to only conducting tours of area high school career fairs. He was spared the conversion statistics that ruled the rest of us, confined to the campus backroom where we shared office space. The rumor was that Michael was the only person who our supervisor, Nicole, was too afraid to “coach.” That could have been because he was a military veteran, which showed in ways both big and small. While the other enrollment officers’ desks were always littered with leads and files stuffed with enrollment paperwork, Michael’s desk had the minimalist order of someone who had once made hospital corners on a bed for the sake of national security. It was intimidating.
Michael also had two children preparing for college. One of our employee benefits allowed family members to take courses at the Technical College at a discount. Another colleague, Mary, had taken the job precisely so that her husband could earn a degree on the benefit and quit his job as a plumber. I asked Michael if he was encouraging his eldest son to do the same. He glanced away and said that, while he had thought about it, he had worked hard so that his son had better options. He wouldn’t stand in his son’s way if he wanted it, but enrolling in the Technical College was not the family plan.
For the first time, I thought carefully about the differences in how our scheduling team sent us prospective leads when they showed up for a campus tour. Prospects who arrived with their parents were moved along quickly, handed a brochure, and told to call us if they had any questions. I watched a senior recruiter pull a catalog from the office supply closet when the scheduler told her there were parents out front. For other recruits, the catalog was the last thing we would ever give them. A prospective student coming in on their own, without a parent, was a better prospect for us, because we could focus on the emotional appeal and not the details.
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Not long after my conversation with Michael about the extent to which we were improving lives, the entire office was scheduled for an afternoon meeting with the bigwigs. The Technical College’s corporate director was coming to give us a state-of-the-company address. The director had an expensive-looking haircut and a crisp suit. He introduced himself by telling us that he had worked in finance for years and had never before witnessed what was currently happening in the economic markets. It was spring 2008. Access to credit was drying up, including the private student loans on which many of our students relied to cover the gap that Jason was struggling to fill. But, the director said, we shouldn’t worry. The company had negotiated a short-term credit solution that would allow us to offer company-backed loans to students like Jason. We should not expect the nosediving market to get in the way of closing.
Three years later, I would be in a sociology PhD program at Emory University. I would have a few economics courses under my belt, new analytical skills, budding research chops, and access to more information than I could have previously imagined. I would better understand what the executive from corporate was telling us that day. I would know that markets were contracting because the precursor to the mortgage crisis that ground the global economy to a halt in the fall of 2008 was beginning to show signs of what would come. As a budding sociologist, I would learn more about the structural dimensions of class and gender and race that made the students at the for-profit Cosmetology School where I first worked qualitatively different from the students like Jason whom I enrolled at the Technical College. I would understand the parents who refused to co-sign student loans because, while they believed in education, they were leery of financial contracts that to them looked like payday loans instead of investment portfolios.
I would also come to understand that the short-term loans the executive told me about that day, the ones that set off all my alarm bells and motivated me to quit, would one day be the subject of a federal investigation. The New York Times described how ITT Technical Institute had guaranteed debt taken on by a private student loan lender (PEAKS). Students who owed more than they could borrow were referred to PEAKS, often without knowing that ITT had a financial stake in PEAKS. Many of these students did not know the terms of private student loans. Those terms, unlike those for federal student loans, have fewer contingencies for repayment and are more expensive when it comes to interest and defaults. The Times noted, “Because the lender was unaffiliated with ITT, the loans qualified as private money under the 90-10 rule. The company, therefore, ensured that its students could keep tapping into federal grants for the other 90 percent of their education costs.” Evidence suggests that enrollment officers, like me, had no incentive to explain these loans to students—even when they were the only way to close with someone like Jason. The facts confirm that the Technical College had no practical way to make good on those loans when students like Jason inevitably couldn’t pay them. And, it’s worth noting that ITT Tech’s real violation wasn’t in offering these loans to students, but rather in misrepresenting them to investors. We are fine with caveat emptor (“buyer beware”) for students, but not for investors. It is a theme that plagues corporate higher education.
Copyright © 2016 by Tressie McMillan Cottom. This excerpt originally appeared in Lower Ed: The Troubling Rise of For-Profit Colleges in the New Economy, published by The New Press. Reprinted here with permission.
Tags: college admissions, for-profit colleges, higher ed reform