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For-profit schools hit with lawsuits, subpoenas

Mar. 5, 2014 - 11:33AM   |  
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An ongoing push against for-profit colleges and universities by some government officials appears to be gaining momentum, with state and federal organizations launching subpoenas and lawsuits.

The Consumer Financial Protection Bureau announced Feb. 26 that it filed a lawsuit against ITT Educational Services Inc., the parent company of ITT Tech, saying in a written statement that the company “exploited its students and pushed them into high-cost private student loans that were very likely to end in default.”

In addition, Kentucky Attorney General Jack Conway said subpoenas have been issued in recent weeks against ITT and three other companies involved with for-profit higher education. They include:

Career Education Corp., parent company of American Intercontinental University, Colorado Technical University, Le Cordon Bleu and other institutions.

Corinthian Colleges Inc., parent company of the Everest schools, Heald College and WyoTech.

Education Management Corp., parent company of Argosy University, The Art Institutes, Brown Mackie College and South University.

Prominent veterans service organizations last year called the continued focus on for-profit institutions “a distraction” and “partisan.” But some of the same groups now praise government officials for directing their attention to the actions of particular schools, instead of merely criticizing for-profit education in general.

“It’s not about just for-profits. It’s about holding [individual schools] accountable for their actions,” said Steve Gonzalez of the American Legion.

Whether public, private or for-profit, Gonzalez said, “if they have committed an act that is illegal in any way and the attorneys general can prove ... that they have committed an illegal action, then I will hope that they will be held accountable.”

While government officials are now flagging particular schools, their attention appears to still be focused on for-profit education, rather than public or private nonprofit schools.

“Left unchecked, the abuses of the for-profit school industry promise to produce a new generation of graduates with few employment prospects in their desired field and who will instead endure a future of financial insecurity,” Illinois Attorney General Lisa Madigan said in a news conference.

“It is time that for-profit schools understand that putting profits ahead of student success is an indefensible business practice, and that we will hold them accountable for it.”

ITT issued the following written statement in response to the Consumer Financial Protection Bureau’s actions:

“We don’t comment on pending litigation, other than to say that we believe that the bureau’s claims are without merit and that we intend to vigorously defend ourselves against the charges.”

Education Management Corp. declined to comment on the subpoena, and Corinthian did not respond to a request for comment by press time.

Career Education Corp. spokesman Mark Spencer said in an emailed statement that higher education is already “heavily regulated.”

He added: “We intend to cooperate with the attorneys general in connection with their inquiry. Our focus will continue to be on providing high quality education and job placement services to our students so that they may enjoy all of the benefits of a postsecondary education.”

Daniel Kemp, a spokesman for Kentucky’s attorney general, said investigations have focused on for-profit schools because they tend to be more expensive and more likely to use high-pressure recruiting, while tending to produce sub-par retention, graduation and default rates.

William Hubbard, a spokesman for Student Veterans of America, suggested that those who feel mistreated by their schools should use the federal government’s new complaint tool, available online at www.benefits.va.gov/gibill/feed back.asp.

Hubbard added that a joint initiative with his group and the Veterans Affairs Department should be completed soon, and it will provide military-specific data on student success rates at particular types of schools.

While the Million Records Project won’t detail the information by individual schools, it could help show whether for-profit institutions in general underperform public and private nonprofit schools and thus merit such scrutiny, he said.

“We think we’ll have some interesting findings,” Hubbard said.

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