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For-Profit Colleges Cheat Students and Get Away With It

Barmak Nassirian: Calls for-profit education "a parasitic industry."

Diana Medina's prospects seemed bright. She graduated with honors from Pahokee High School in Palm Beach County and earned a graduate degree in health science education from the University of Florida. But then, after she put her career on hold to raise a child, she entered the tricky world of for-profit education.

In November 2009, looking for a leg up in getting hired, she searched Google for a place that could give her advanced training with flexible hours. She found MedVance, a trade school that teaches health-care skills such as x-ray technology and medical billing. And that's where her education hit the skids.

Critics say the school, which is based in Baltimore and has Florida campuses from Port St. Lucie to Miami, deceptively lured students into expensive educational programs that ultimately proved worthless.

An admissions rep, who turned out to be little more than a pushy salesperson, steered Medina toward the Medical Office Administration program even though she said she wanted to study pharmacy. It cost around $12,000. The rep told her she'd be able to get a starting salary of $50,000 or more after graduating.

"I was duped," Medina says. "The program was not worth $12,000. The teachers were not really teaching. It's like the students were running the classroom. It wasn't a learning environment."

After a two-year investigation, the Florida Office of the Attorney General recently agreed not to pursue charges against MedVance if the firm provided $600,000 in scholarships and free retraining to scores of students. Similar probes into other for-profit institutions of higher learning — Kaplan University, Everest Institute, the University of Phoenix, and Argosy University — are still open, with no sign of a resolution. If the MedVance settlement is a sign of what's to come for those investigations, the state's for-profit schools will get off with the deal of the century.

Across the country and in Florida, for-profit schools have been around for decades. Unlike traditional universities, they aren't responsible to the state board of regents or nonprofit overseers. They are inspected but in some cases have as much in common with a huge car lot as Harvard University.

One key to the business is student aid. To these schools, every American is worth around $117,000. That's the total amount each person is eligible for in government financial aid. Under federal regulations, for-profit schools are required to collect 10 percent of all tuition in cash; the rest can be financial aid. The industry makes roughly $30 billion a year off American taxpayers under this arrangement.

To get in on the gravy train, for-profit schools need accreditation only from some supposedly neutral body. But Congress neglected to indicate who should do that accrediting, resulting in a system loaded with charlatans. Some agencies are little more than rubber-stamp factories.

"It never occurred to [Congress] that [accreditation] would get corrupted," says Barmak Nassirian, a former official with the American Association of Collegiate Registrars and Admissions Officers. "This is basically a parasitic industry that is preying upon not just some of the most vulnerable members of our society but [those] who are actually attempting to better themselves."

For-profit schools have been the target of increasing scrutiny, if little corrective action. In August 2010, an official from the U.S. Government Accountability Office testified before Congress about investigations into 15 schools. The agency had sent in undercover applicants and reviewed finances. The results were maddening.

"Admissions or financial aid representatives at all 15 for-profit colleges provided our undercover applicants with deceptive or otherwise questionable statements," GAO Managing Director Gregory Kutz testified. "These... included information about the colleges' accreditation, graduation rates, and its students' prospective employment and salary qualifications."

The agency also discovered that for-profit institutions had greatly inflated costs. "We found that tuition in 14 out of 15 cases, regardless of degree, was more expensive at the for-profit college than at the closest public colleges," Kutz testified.

A couple of months later, then-Florida Attorney General Bill McCollum announced that his office would launch its own investigation. Plenty of people came forward to tell their stories.

"Hypocritical and disgusting" is the way Mark Stegall, a senior admissions adviser for a Kaplan University branch in Orlando, described his work environment, according to thousands of pages of records from the investigation, obtained by New Times. Supervisors told reps to pick a famous university in the student's home state and claim that Kaplan's accreditation was as good or better. Stegall would tell students they couldn't even discuss money until they committed to enrolling and then would break down a $63,000 tuition into cost per credit hour so it didn't sound so high. "We would go into stories... about how it would change your life and where would you be living if you had that kind of money... That was the disgusting part of the job," Stegall said. Poor students were especially good targets.

"If [the applicants] were already well-off, I may as well end the call, [because] they wouldn't qualify for financial aid, and as soon as they saw how much it was going to cost them for an online degree, they would be smart enough not to do it," Stegall said.

According to other statements from the attorney general's record, after the MedVance admissions "interview," students were sent to a financial aid department. Lying was encouraged. One student recalled an adviser named Kiki telling her to list three extra family members as financial dependents on her federal loan application so she could qualify for more money.

Students were required to pay for MedVance-branded uniforms and wear them to every class. But after showing up, they were treated to an amazing lack of accountability. One student told investigators he remembered breaking up a fight between a teacher and another student, going long stretches without a teacher in the classroom, and learning nothing. Students were shuttled off to area clinics and hospitals for "externships," in which they performed free labor, such as filing or desk work, that often had little to do with their education.

Medina, who already had a master's degree, told investigators that students sometimes made up their own test questions. "I had one teacher [who] taught medical terminology," she recalled. "She couldn't even pronounce the words."

The stories above are fairly common — and they're all part of the public record. So what punishment have Florida's most powerful consumer advocates meted out for such abuse of tax money and ambition? Not much.

In June, the AG and MedVance announced they had reached a settlement: The school will offer free retraining to students who were duped by the subpar offerings and contribute $600,000 to scholarship programs that can be used at schools around the state, including MedVance.

That number is tiny when compared with the millions MedVance and other companies like it garner in revenues. The settlement doesn't require MedVance to pay students for the money they borrowed for tuition. It does provide unhappy students with the option of entering an "expedited" legal arbitration process to seek damages — but with some serious limitations. Claims are limited to $75,000, and students must pay for their own lawyers.

Dozens of disgruntled current and former MedVance students, including Medina, have sued the school's parent companies in both Palm Beach and Miami-Dade counties.

The limit on attorney's fees is essentially a gift to MedVance. The American Arbitration Association, a group of legal officials charged with resolving these disputes, calls it "substantial deviation from the rules." The association is asking MedVance to drop that limitation — and saying that if it doesn't, it may refuse to handle all consumer complaints involving the school, forcing students to seek damages in court.

That could threaten the private suits against MedVance, which are in arbitration, as well as any pretense that the AG's settlement might help students recover damages.

President Obama has even become involved in the case, though timidly. In July, the U.S. Department of Education prohibited basing salespeople's pay on enrollment. It also tried to rein in federal lending with new rules that would make a school ineligible for student loan money if too many of its students were struggling to repay loans. The rules were set to go into effect this summer, but last month, a federal court judge in Washington, D.C., blocked the regulation.

Meanwhile, thousands of alumni are still looking for something to do with their costly degrees. Diana Medina told investigators in November 2010, three months after she graduated, that she hadn't been able to find a job with her medical-assisting degree and didn't expect to. "I'm in contact with at least five other students, and they have not found jobs," she said. "I feel that this education is a joke."


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