Blowing up the Village to Save the Villagers: A Rant From Somebody Who’s Had Enough
By Glenn Bogart, J.D.
Does anybody remember Computer Learning Centers? It was a proprietary school with headquarters in Virginia. They had 25 campuses. CLC closed early in 2001, shortly after receiving a letter from the Department of Education demanding that they post a letter of credit in the amount of $38 million. They couldn’t do that, so, bye-bye.
The CLC collapse threw a lot of students out on the street – ditto for CLC’s employees. I was one of their vendors, and I got hosed truly and well, too. They owed me about $15,000 when they declared bankruptcy, which, of course, I was never able to collect. Not only that, but I got a demand from the CLC bankruptcy trustee to refund another $15,000 that CLC had paid me. Yikes! I’m just a small-business man, like George Jefferson.
So I became a victim of the cascading effect of corporate bankruptcies – in this case, caused entirely by the U.S. Department of Education.
Later, a Department of Education official expressed surprise. He said he had no idea that imposing this letter of credit requirement would lead to the collapse of the school.
Well, live and learn, right? Only, they don’t. Or maybe they do learn. They learn how to destroy schools.
Many years passed before the Department put another big proprietary school system out of business with an impossible letter of credit requirement. Then they did it to Corinthian Colleges, in 2014-2015.
A good friend of mine worked for the Corinthian corporate office. She is one of the most knowledgeable and competent people I know, who works, as I do, in the federal student aid field. She was responsible for responding to the Department of Education’s information requests. Those who follow these things may remember that the Department claimed it was Corinthian’s failure to respond on time to document requests that led to the imposition of a 21-day delay in releasing federal student aid funds – which was the beginning of the end for Corinthian. My friend says that’s nonsense – in some cases she had to request more time, but the feds agreed to extensions in those cases. I believe her. You see, I know she is competent and honest. Not so much with ED officials
The Department, to its credit in that case, did try to facilitate the transfer of most of Corinthian’s schools to a new owner, and many of those schools remain open to this day. But before Corinthian could arrange for a change of ownership for its Heald College group – possibly its most valuable group of schools – the Department issued another impossible letter of credit requirement, causing Corinthian’s collapse.
Now comes the ITT Tech case, a more recent (2016) forced collapse of a proprietary school corporation. In this case, the Department didn’t even go through the motions of trying to facilitate a change of ownership and control. Once again, an impossible letter of credit requirement was imposed – something like $144 million. It’s pretty tough to get that kind of letter of credit when you have only about $75 million in liquid assets. It’s pretty clear that the Department of Education no longer minds putting tens of thousands of students out on the street.
It is hard to see how this “protects” the students, as a Department of Education spokesman said in announcing the closure. It protects the students by putting them out on the street, you see.
So, at first (the CLC case, back in 2001) the Department claimed it didn’t know that letter of credit requirements could lead to school closure and bankruptcy. Then, they “cooperated” to some extent in facilitating the sale of many of the Corinthian schools. The cooperation happened because the sale was going to be to a favored nonprofit organization which had no experience in operating colleges. That nonprofit apparently didn’t want the Heald group. So, as soon as the nonprofit had all the Corinthian schools it wanted … boom! That’s my take, anyway. I could be wrong, but I doubt it.
And there’s more coming. Regulations are about to be finalized which will expand the Department’s authority to impose letter of credit requirements – as if they needed expanding, considering what they have done with the authority they already have. The name of the package is “Borrower Defense to Repayment,” but it is more about destroying more schools than helping borrowers.
In Dick Durban, Barack Obama, Hillary Clinton land, you have to blow up the village to save the villagers. Most of the villagers have no idea that it is the government that is responsible for disrupting their lives by destroying their schools. The politicians blame the schools for their own demise, and most of the villagers probably believe them, since nobody of note is out there saying: Wait a minute! These schools may have had some problems in putting together accurate graduation rate and job placement statistics, but look at the real student outcomes!
When Regency Beauty Institute closed, just this week as I am writing this, the Honorable Dick Durbin said the following:
“Another overcharging, under-performing for-profit ‘college’ has closed its doors. It won’t be the last. If you think the pace of closure of these half-baked excuses for higher education and training is becoming more frequent, you are not wrong. Now with the collapse of Regency Beauty Institute, another 700 students in Illinois and 6000 nationwide are left high and dry.”
“As I fight to spare these students from the burden of their for-profit college debt, we must remember that the ultimate losers are the taxpayers. We gave Regency $50 million in taxpayer dollars last year through federal grants and student loans. The Regency Institute operators took the millions, pulled the plug, and left the students and taxpayers high and dry. How much longer will Uncle Sam be Uncle Sucker when it comes to these for-profit scams?”
Don’t sugar-coat it, Dick. And I do mean, Dick. Thank God he is “fighting” to make the taxpayers foot the bill for student loans at schools the government has forced out of business. What a guy! A real man of the people.
For-profit schools have much better graduation rates and job placement rates than state-supported colleges. Chicago State University has an 11 percent graduation rate, and most for-profit schools are better than 50 percent in that metric. Indeed, most state universities don’t even keep track of job placement rates – they have no idea.
Yet for-profit schools are hounded out of business for making mistakes in calculating these rates – and even for making typographical errors on websites where the rates have to be displayed.
This is being done, in part, by the same 20-or-so radical state attorneys-general who have been hounding Exxon Oil and non-profits to which it donated in lawsuits contending that Exxon “hid” evidence of global warming from its stock-holders. Never mind that there has been no global warming for the past 15 or 20 years. Corporations: bad. Profit: bad. I say, bust these attorneys-general down to private, and send them to clean the latrines. But, I digress.
As for allegations that for-profit schools have “misled” prospective students – how many students even read the consumer information schools are required to post regarding graduation and placement rates? And if you don’t read something, how can you be misled by it? The government doesn’t care. As far as they are concerned, if you posted a rate that is 2 percent off because of a mathematical error or because of a disagreement on how the rates should be calculated, you defrauded all your students.
The for-profit haters have really gotten onto something here. First, you require all these statistics to be published by the schools, which are led by businessmen, educators, and hairdressers, not accountants. The people who put the numbers together at the campus level have even less of an idea of what the government is looking for. You have confusing guidelines on how to calculate the statistics, which the people putting them together can’t understand. Then, you call it fraud if somebody in the government can come up with a lower graduation rate or job placement rate than what the school reported. FRAUD! String ’em up!
Because, as I’ve said, you have to bomb the village to save the villagers. It may take a village to bring up a child. But it takes a government to destroy the village.
Glenn Bogart, J.D. is a Title IV compliance consultant who specializes in school compliance reviews and Department of Education program review responses and appeals. A former ED program review officer, he holds a bachelor’s degree in government from Southern Illinois University, and earned the Juris Doctor degree at Western New England College in 1986. He resides in Birmingham, Alabama, but travels all over the U.S.
Mr. Bogart started his consulting business in 1992, after having served briefly as director of internal audit and compliance at Phillips Colleges, Inc., and prior to that as corporate vice president for financial aid for another large group of proprietary schools. Over the years, he has contributed frequently to these pages.