Corrupt online universities steal financial aid

by Brody Burns

Artwork courtesy of Melodie Lapot
Artwork courtesy of Melodie Lapot

As the annual financial aid filing deadline approaches, along with the looming possibility of heavier financial burdens in your quest for higher education, it is important to realize any real possibility of receiving more federal financial aid is nearly nonexistent. You are screwed. Chances are the money you need will be fleecing the pockets of the shareholders from the numerous, for-profit, predominately online, higher education institutions that now litter the college landscape. And worst of all, this reality is fundamentally contrary to the goals the U.S. Department of Education, which strives to give financial aid to low-income college students. Education is not being realized. Debt, neglect and egregious profits are.

The rampantly growing number of for-profit higher education institutions has resulted in a market with total revenues exceeding $29 billion. This is larger than the entire gross domestic product of the African nation of Cameroon. One such local business is Bridgepoint Education, the proprietor of Ashford University. Bridgepoint is the embodiment of capitalist business growth. Its size is staggering: Revenues for last year exceeded $700 million, profits reached $216 million and its profit growth hit a high 264 percent. Taken from the companies’ December 2010 financial earnings report, it enrolled a total of 77,892 students nationwide. These dubious achievements have afforded Inc. Magazine to recognize Bridgepoint as the 2007 fastest growing private-sector employer in San Diego and the top company in the educational category. But the most interesting statistics about Bridgepoint and many of its for-profit brethren reveal it is almost entirely financed by the U.S. government, and the majority of its students will drop out of school before ever obtaining a degree.

No matter what its intent to educate is, in the end, Bridgepoint still gets its money.

The U.S. Department of Education published findings placing Ashford University as receiving 86 percent of its total funding from federal aid, from July 2008 until June 2009. During the following school year, 84 percent of the associate degree students and 63 percent of the bachelor degree students dropped out.

The horror doesn’t end there. According to The New York Times, 1,703 people are employed by Bridgepoint as recruiters; only one person is employed with the task of career placement. This is clearly not representative of a reputable educational institution. This might suffice for a used car lot.

The system works through the help of Federal Student Aid, an off-shoot of the U.S. Department of Education, enabling millions of Americans to continue their education in a higher-education arena, regardless of the profit intentions of the institution. Because of this lack of distinction, many of these for-profit machines have been granted the ability to blatantly manipulate the system and completely fail to educate any of their students while raking in billions of dollars. The formula is quite simple. Admit student, receive financial aid, bill the student, neglect the student’s education and move onto the next victim. There is no honoring their prescribed duty to educate, or to better the lives of those enrolled. The primary goal is financial growth.

Similar to the way many big banks did during the mortgage crisis, these behemoth companies should not be legally allowed to use predatory practices by finding students who in turn can default on their loans within three years. Furthermore, accreditation should not exist for universities if more than two-thirds of the student population flee your educational offering. This is unashamedly taking advantage of someone in a precarious situation, as well as the federal government. An educational institution that engages in these practices is not a school. It’s merely a business, and this distinction should disallow it from federal aid.

The siphoning of financial aid into these institutions affects collegiate students everywhere. Defaults cost taxpayers money, they affect interest rates and can change the way loans are administered to students everywhere. These findings alerted U.S. Secretary of Education Arne Duncan to supply the following response in a press release last year:

“While for-profit schools have profited and prospered thanks to federal dollars, some of their students have not. Far too many for-profit schools are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot use. This is a disservice to students and taxpayers, and undermines the valuable work being done by the for-profit education industry as a whole.”

If the multi-billion dollar disservice is so severe, then why does it continue? These practices should

result in a federal investigation, regulation and oversight. The financial aid mechanism is broken. The federal government should not continue to financially aid these institutions that are contributing to larger economic problems, leaving millions of Americans further in debt, and denying opportunities to students who desire to learn at reputable educational institutions. These leeches on the system must be burnt off.

—Brody Burns is seeking a master’s in business administration.

—The views expressed in this column do not necessarily reflect the opinion of The Daily Aztec.