Predator!

By Glenn Bogart, J.D.

You think you are a tax-paying institution of higher education (as opposed to the tax-consuming and tax-avoiding ones – state-supported and private nonprofit schools, respectively). But you’re not. You’re a “predatory for-profit school,” according to leading Democrats, academia, and the media. Steve Gunderson remarked on this recently. It’s what they call a “meme.”

There’s never been a cul-de-sac that wasn’t quiet; there’s never been a House Ways and Means Committee that wasn’t powerful – and now, there’s never been a for-profit school that wasn’t predatory.

“Predatory for-profit” is now a macro in every education reporter’s Word program. Type in “for-profit,” and the “predatory” adjective just appears automatically. Sort of like when you type (c) and you get ©. Microsoft has not yet made this automatic, but no doubt it will be in your next update.

I say, hold on a minute. I’ve been working for proprietary colleges for more than 30 years. The owners and presidents and deans and instructors at these schools are really nice people – even the three of my clients who’ve gone to prison are nice people. Let me tell you about them.

Here are your typical for-profit school financial aid criminals

One says he was falsely accused by some of his admissions reps, so the latter could get shorter sentences for falsifying high school diplomas. One pleaded guilty because the prosecutor threatened to put his son in prison, too (OK, that guy probably was guilty of falsifying grad rates – which the prosecutors boot-strapped to make it theft of financial aid funds).

One was imprisoned because he “knew, or should have known” that underlings were falsifying verification paperwork before files on drops and grads were retired (but also, and mainly, because he refused to tell prosecutors what they wanted to hear about his boss, the school owner).

Before that happened, I never knew one could go to prison because he “should have known” something, but didn’t. I always figured something like that would fall into the “incompetence” category. Now it can be criminal, though. Must be a sort of new thing.

I’ll bet you didn’t know you could be convicted of a felony and sent to federal prison because of things done by people you supervise, simply because a prosecutor conjectures that you “should have known” what was going on.

These are the financial aid criminals I know personally. There’s another one who was found not guilty when the Department of Ed tried to put him in prison for not paying refunds his predecessor should have paid. I’ve also worked for schools which have closed suddenly, because they were faced with HCM2 or preposterous letter-of-credit requirements. Have I spent a whole career enabling predators? Am I then a predator myself? Are you?

History of a putative predator

My career in proprietary education began when I worked as vice president for financial aid for a chain of schools that specialized in training nursing assistants. Half of the students weren’t high school graduates. They were overwhelmingly black mothers, some on welfare, high school grads or not. They were generally not of high intelligence, as measured by the Wonderlic assessment. But more than half of them graduated, and most of those got placed in jobs, after finishing the six-month program our schools offered.

It’s true that about 70 percent of them defaulted on their student loans. Of course, it didn’t help that our lender in the old Guaranteed Student Loan program never bothered to send them coupon books, unbeknown to us at the school. The school is long gone (taught out properly, by the way), but listen. I attended one of their graduation ceremonies. There was a lot more joy in the air than you’ll ever see at a graduation at a traditional university. I’m proud I had a part in making that happen. Previously unemployable people (mostly women, but a few men, too) got jobs. Not great jobs, by most people’s standards, but jobs nonetheless. For someone who previously had no chance at all of getting a job, suddenly to become employable – that’s a pretty good thing, no? And by the way, more than half of the money our students borrowed went to them for living expenses – it didn’t go to the school.

We were charging $3295 for a certificate program that enabled graduates to become nursing assistants. If I’d had parents in need of nursing home care, I would have been glad to know they were being cared for by graduates of the program I helped sustain with my work.

I don’t know what the default rate would have been if the lender had done its job, but probably it still would have been pretty high. Our graduates were lucky to command a salary $1 per hour more than the minimum wage, to start. If some or many of them decided it was more important to get shoes for the baby than to make a $50 student loan payment, I can hardly blame them.

They were still better off, and society was still better off, than before we “hoodwinked” them into enrolling, by suggesting they might benefit from the skills our school could teach them.

Nowadays, nursing assistants get much less than six months of training. Doesn’t that make you feel better about the prospect of life in a nursing home?

I remember once giving the financial aid orientation for new students at one of our schools, because the financial aid officer wasn’t available and I was. I begged these students to borrow as little as possible. Every one of them borrowed the max, though, so they could get that “living expense” bonanza of $1480 or so. But by law I couldn’t limit their loans. And 30 years later, that is still the case. Dumbest rule ever, so of course, it will never change. If you know anything about federal student aid, you know you must offer every student the maximum loan the law allows, and cannot reduce the amount requested unless, basically, the student tells you he or she doesn’t intend to pay back the loan.

Consulting biz predation

During the original default rate hysteria, in 1992, I decided I would be better off consulting for a bunch of schools, rather than being an employee of one. That way, if a school went down, I wouldn’t lose all my income.

My main job used to be performing compliance reviews, or you might call them mock program reviews, for schools wanting a little extra assurance that their auditors weren’t missing anything important. I would also take on appeals of final program review determinations, emergency actions, termination actions, OIG audits and “inspections,” and occasionally, adverse actions from accrediting agencies.

And my consulting career was pretty good for a lot of years. I didn’t make a fortune, but I didn’t starve, either, and I had a great time helping to keep schools in compliance, and defending them against unfair adverse actions. I would even say I saved some of them. One of those was Strayer University, back when Ron Bailey owned it. Remember the Office of Inspector General “inspections” in the early 1990s? Strayer had one, and termination was recommended. I wrote a response, and nothing further happened. Ah, the good old days.

Geez, I’m sounding like Rumpole of the Bailey here, reminiscing over old triumphs. But it’s true – in those days, the authorities actually looked for real compliance violations and we could duke it out in a reasonably fair forum.

It’s a lot easier now for the Department to shut down a school. All it takes is a bad “composite score,” a letter of credit requirement, and/or HCM2. The school’s actual compliance with the rules of administering the Title IV programs (as opposed to rules of “financial responsibility”) is rarely at issue when a school loses its eligibility nowadays.

I haven’t seen a termination hearing in years. They don’t have to terminate you. If they did that, they would have to give you a hearing, where the burden of proof is on them.

Instead, they can just put you on “provisional certification” and cut you loose with a letter. A perceived compliance problem might cause a school to be placed on HCM2, but it’s the HCM2, not the compliance problem, which is more likely to result in the death of the school.

I haven’t done many compliance reviews recently. The corporate clients are either out of business or have in-house people to do that. The smaller operations still in business are struggling to survive and can barely pay for their required CPA audits, much less, pay for someone like me to come in and point out errors that could be trouble in a program review.

There is still a little business for me in helping schools on HCM2 to try to figure out how to satisfy their Department of Education payment analysts. Now there’s a thankless job. I have three of those schools as clients right now, and I’ll be appealing their final program review determinations if those FPRDs are ever issued, and if the schools still exist by the time they are issued. HCM2 may very well strangle them first – just as it is designed to do. Pay the students first, then beg for reimbursement from some goofball at the Department of Education, who will find and use any excuse not to pay you. It’s amazing any school can survive this. (See last month’s piece on HCM2.)

The predator’s confession

Ninety-eight percent of my clients over the years have been proprietary schools. I worked for Computer Learning Centers, an early letter-of-credit victim. When they went bankrupt, I had to go bankrupt, too, because not only could they not legally pay me what they owed, but the bankruptcy court ordered me to pay back the money CLC had paid me in the 90 days before their bankruptcy was filed. I was destroyed, financially. Lost my house, and moved into a mobile home. A predator getting his just deserts, I guess. I started over. But I stayed right here in the for-profit sector, because I believe in it, and I came back.

I worked for Corinthian on one short gig. I worked for Education Corporation of America for many years. I have a closed-school collection second to none. But many of my other clients still exist and are still educating the people who choose to attend their schools. Most of those students like their schools. You’d never know it, though, from what you read in the press.

I’ve worked hard to help these “predatory for-profit” schools. I’ve made a little money doing that. Not much, I must admit. Call me a predator if you wish.

I don’t regret any of it – because the people who run these schools and work at these schools have done the best they could to educate people who had little chance of success anywhere else. I could have stayed on as a program reviewer at the Department of Education and made a whole lot more money (and a really good pension), but I chose to help schools instead of persecuting them. I’m glad I did. And I’m still standing, although I’m not well off.

I hope the puritan profit-haters don’t succeed in destroying our sector altogether. We do good work, and should not be the least bit ashamed.

Our schools are known for giving “marginal” people a chance to become educated. Marginal people drop out and default on loans a lot. We work hard to alleviate that, but the fact is that this will always be a problem. Destroying our schools simply puts these marginal people out on the street, or forces them into community colleges where they are even more likely to fail (assuming there is even room for them). Look at community college graduation statistics and compare them to the graduation statistics at for-profit schools. Ours are not always wonderful, but theirs are much worse.

No, I’m not a predator, and neither are you. Be proud of what you do. I am.

The views expressed by contributors are their own and not the views of CER.

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 University 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.