CREDIT: Craig Hammond
Ami Schneider wears her degree from the The Illinois Institute of Art Schaumburg in a frame tied around her neck emblazoned with one word written in red paint — “worthless.”
Schneider, 29, is one of a growing group of graduates and former students of the Art Institutes (AI) who are protesting at for-profit college campuses across the country. They’re targeting open houses for interested students, handing out flyers to let parents know about the ongoing litigation against for-profit colleges, and advising students to spend some time investigating the schools they’re considering.
Protesters have been calling police stations ahead of time to ensure they aren’t encroaching on private property, but that hasn’t stopped some administration officials and security guards from coming outside and challenging protesters’ right to be there. Still, activists are determined. Last week, Schneider protested at the for-profit college she graduated from amid a heavy snowstorm.
CREDIT: Craig Hammond
In general, protests for debt forgiveness and awareness of for-profit college fraud have been on the rise. Groups such as the Debt Collective and the Million Student March — which ask for student debt forgiveness — are attracting an increasing number students who feel cheated by the higher education system.
“AI is for-profit, not for students,” one of Scheider’s signs reads.
Why for-profit colleges graduates are protesting
For-profit colleges market themselves as a less expensive option compared to public colleges, portraying themselves as places where working parents can balance their family and financial responsibilities with the desire to get an education. They tend to target low-income students, many of whom are trying to attend school while working and caring for their children.
However, many of these institutions are known for having a lower quality of education and hold limited career prospects for graduates, since employers tend to take them less seriously. Corinthian Colleges, for instance, was fined $30 million by the U.S. Department of Education after it found the company misrepresented its job placement rates — and counted jobs as being in a graduate’s field when former students were actually working at fast food restaurants.
There’s some evidence that graduates of for-profit colleges are really struggling financially. Student loan defaults have been rising, and most of that increase can be attributed to for-profit college graduates, according to a recent paper from the Brookings Institution.
In 1999, 29 and 24 percent of for-profit and two-year colleges, both public and private, defaulted within five years, respectively. But in 2009, 47 and 38 percent of borrowers in those categories defaulted within the same time frame. When looking at nontraditional borrowers required to start repayment in 2011, 21 percent of those borrowers defaulted within two years, compared to 8 percent of traditional borrowers. Repayment rates were dismal for many of the for-profit colleges, such as the University of Phoenix, which only had 1 percent of its total debt balance repaid in 2014.
CREDIT: Craig Hammond
That’s especially bad news for students of color who may opt for a for-profit institution. Black and Hispanic families have less wealth as well as less income, making it even more difficult to pay off student loans. When looking at income versus wealth, the racial gap in wealth is three times larger than the racial gap in income, when considering black and Hispanic families, according to a 2013 Urban Institute report. For black and Hispanic students, that wealth isn’t really protected by a college education, because debt weighs so heavily.
After some work by activist student groups such as the Debt Collective — an offshoot of Occupy Wall Street — began receiving major coverage in the media, the U.S. Department of Education began working on a process for refining the borrower defense to repayment option, which, although it’s existed for decades, hasn’t really been taken advantage of by borrowers. The department appointed an outside expert to manage the process, who has been releasing news about the ongoing process every couple of months.
A win that is really a loss for students
Last week, in a settlement with several attorneys general, a major for-profit college company agreed to pay out $102 million that will go to over 80,000 students for loan forgiveness. Education Management Corporation, or EDMC, has previously been accused of misrepresenting its educational benefits, giving inaccurate information about accreditation, and misrepresenting job placement rates. This is in addition to the $95 million settlement EDMC had to pay to settle a 2007 federal lawsuit under the False Claims Act.
On its face, it may seem like good news EDMC — which owns the Art Institutes, Argosy University, and Brown Mackie College — is making a settlement that will benefit students. But the devil is in the details.
The settlement only applies to students who fit certain criteria, such as the right attendance dates and the right number of credits that weren’t transferable to another college — and even then, those students only receive an average of $1,370 toward their student loan forgiveness. When some for-profit college graduates have more than $50,000 in student loans, that barely makes a dent in graduates’ overall financial pictures.
The settlement also provides a lot of protections for EDMC in exchange for that $102 million, which pales in comparison to the billions of dollars EDMC has benefited from through from the fraudulent activity it has been accused of. In the U.S. Department of Justice’s lawsuit against EDMC, it accused EDMC of fraudulently taking $11 billion in government aid and targeting low-income students to collect their aid money.
Another problem with the settlements is that for the U.S. Department of Justice settlement, the company can pay out the settlement money through 2022, and it’s unclear if the company will be around in six years. Enrollment in the Art Institutes has dropped in recent years, from 66,440 students in 2013 to 61,070 in 2014. In May, EDMC, announced it would gradually shut down 15 of 52 campuses of The Art Institutes, leaving 5,400 students without a college.
In addition, the Department of Education can’t use information from the case for testing its financial capability, administrative capability or for a program review of findings.
“EDMC gets an agreement from the department that they won’t use any of the findings associated with this settlement for basically all of the major accountability tools the department has,” said Ben Miller, the senior director for postsecondary education at the Center for American Progress. (Disclosure: ThinkProgress is an editorially independent site affiliated with the Center for American Progress.)
“They won’t use it for program review findings, and that matters because program review is where the Department of Education staff take a closer look at what a college is doing, so it’s a way to catch the more hidden forms of fraud,” Miller added. “So it’s paying a hundred million and getting protection against all of the other tools that could have been used against them, for this activity.”
CREDIT: Craig Hammond
One the lawyers for two plaintiffs in the EDMC case, Harry Litman, told the New York Post there was a push to get the settlement resolved because there was a fear that if the case went to court, the company would close.
Miller also pointed out that although EDMC colleges can still be investigated, many of the actors who are usually responsible for pursuing those investigations were involved in the settlement.
“The question is, ‘How is it going to be done and who is going to do it?’” Miller said. “The challenge here is if many attorneys general have given up on this company, who is going to keep pursuing investigations that document harm done to students or harm that results in student debt forgiveness?”
Why former for-profit college students won’t give up on debt forgiveness
Schneider, a first generation college student, who attended The Illinois Institute of Art Schaumburg, had to put off higher education in order to help her family financially and who continued to work while taking classes, is emblematic of many graduates of the Art Institutes. At 23, she was drawn to the college’s fine arts with digital photography program because it was close to her family’s home and she wouldn’t have to pay for room and board there.
But she quickly discovered that her curricula wasn’t going to prepare her for a career. After initially being told the program had a 100 percent job placement rate, she soon discovered that there were very few students in the last graduating class for her major and that they all worked in positions that did not require college degrees.
“I was pretty disillusioned and upset and as my curriculum went on and I got into my core classes for my major, I realized that they were extremely terrible,” Schneider said. “We were learning from tutorials that were free on the internet. We had teachers who didn’t seem to care.”
After she graduated, Schneider did find a job in her field but she was unable to keep up with the workload, which she said she was unprepared to do based off of what she learned at the school. After three months, she lost her job and is now a stay-at-home mom.
Schneider now has about $30,000 in student loans, which ballooned up from $20,000 after she was unable to make payments. Her mother has Parent Plus loans to the tune of $60,000. After defaulting on her loans, she tried to get an income-based repayment plan, considering that she is unemployed. After much wrangling with the student loan servicers, Navient and Sallie Mae, which she said lost her records several times, she finally managed to get an administrative forbearance — but now, the interest will accumulate.
According to a recent report from the Consumer Financial Protection Bureau, it’s not not unusual for student loan servicers to lose borrowers’ information or misinform borrowers on their repayment options. In the absence of information about income-based repayment plans or applying for a borrower defense to repayment, many borrowers fall prey to scams that offer costly services to file paperwork that can be done online for free.
“I tried to convince my mom to let me drop out but she didn’t really understand because she didn’t see how it could be a scam school. She said, ‘It’s a college. How can it be a scam?’” Schneider recalled. “In her generation, she thought going to college was the golden ticket to the middle class.”
CREDIT: edited photo by Craig Hammond
Jo Kirby, 30, is one of few Art Institute students who said she enjoyed her actual curricula at the Art Institute of Salt Lake City studying the culinary arts. But although Kirby’s experiences with her professors were positive, her relationship with the administration was very difficult and in 2009, she withdrew after only five months at the school.
“I had a 4.0 in all of my classes. The chefs were giving me good feedback and inside the kitchen and it was a positive experience most of the time. But outside the kitchen it was a pretty awful experience,” Kirby said.
Her problems with the administration began when the administration said she would lose her loans because she did not provide documentation that she completed high school. Kirby, who informed the school of her homeschooling when she first enrolled, rushed to make sure the relevant documents were provided to the dean, who was difficult to get in touch with.
But it wasn’t enough. She lost her loans and was informed that she would have to pay $12,000; her only alternative was take out private loans administered by the college, which would cost her $500 a month. Kirby didn’t have the money to make those payments. After many unsuccessful attempts to get in touch with the dean, Kirby decided she would withdraw from the program. Then she received a swift response.
It’s not unusual for former students and graduates of for-profit colleges to recount that staff at the school were very unavailable, if not impossible, to get a hold of after many months of emails and follow-up phone calls. Graduates have also been told that their respective schools don’t have documents on financial aid “going back that far” — or in the case of the graduates I spoke to, five to eight years ago. For-profit colleges are also known to spend very little on support staff in order to make more money. A 2012 Senate HELP report found that for 15 publicly traded education companies 22 percent of the college’s revenue went toward marketing and 19.7 percent toward profit.
Kirby is still paying. Although her $5,000 loan burden is much smaller than that of other for-profit college graduates, she said it still took her years to catch up financially. She now works at digital media company, a job she enjoys, but only after many years of taking any job to stay afloat financially.
“I left the industry. I couldn’t afford to stay for less than $10 an hour,” Kirby said. “I just wasn’t getting paid enough to try and rebuild. I gave up everything to collections and had to start over and six years later, I’m still fighting to get myself out of that hole.”
What comes next
Despite all of these challenges, the students who attended EDMC colleges aren’t accepting defeat.
According to activists for the investigation of AI, thousands of graduates of the college chain have submitted borrower defense to repayment applications documenting the fraud they say has been perpetrated against students. They have no other choice. U.S. Department of Education Secretary Arne Duncan made it clear during a recent press conference that former EDMC students would have to collect the evidence providing they were personally defrauded, saying EDMC only lied to the government. According to Schneider, that felt like “a slap in the face” for students.
Today, Kirby is determined to use her background doing the day-to-day books for an investment firm to analyze students’ financial records for evidence of fraud. She said she is continuing to gather information that shows strange patterns in students’ expenses and incorrect sums that suggest fraud against students. She is enlisting the help of attorneys now assisting the Debt Collective to make sure students accumulate records they can use to prove fraud.
“It fuels the fire to fight back,” she said. “I know I’m not getting a penny back but something needs to be done and [for-profit colleges] need to be stopped from doing this to other students.”
And although the settlement news is sobering, Schneider isn’t giving up on the idea that the college will soon be investigated for fraud against students.
“I’ve never really doubted in my mind that eventually we’ll have justice. There is so much evidence,” she said.