Barbarians in the Ivory Tower

America's for-profit colleges offer education only a con man (or a congressman) could love.

His tenure at the Art Institute came to an end on Easter when he was hurt in a serious car accident. Unable to type for six months, Pantzke decided he'd instead study photography on his own. In just 18 months at the Art Institute, he'd run up $26,000 in debt and burned through an additional $65,000 of his G.I. Bill benefits — with almost nothing to show for it.

Yet if Pantzke got away, there were plenty of other servicemen where he came from. A story by Bloomberg news caught a recruiter from Ashford University visiting a wounded warrior barracks at Camp Lejeune in North Carolina. It seems that injured veterans — notably those with head injuries — are particularly receptive to the for-profit sales pitch. The story's opening line said it all: "U.S. Marine Corporal James Long knows he's enrolled at Ashford University. He just can't remember what course he's taking."

Federal data shows that for-profits are increasingly targeting veterans. In 2009, they took in almost as much military money as public colleges — though they were educating just one-third of veteran students. Last year, eight of the top ten educational institutions collecting G.I. Bill benefits were for-profit, taking in a stunning $626 million.

Iraq war veteran Chris Pantzke ran up $26,000 in debt and burned through an additional $65,000 of his G.I. Bill benefits with almost nothing to show for it at the Art Institute of Pittsburgh.
courtesy Chris Pantzke
Iraq war veteran Chris Pantzke ran up $26,000 in debt and burned through an additional $65,000 of his G.I. Bill benefits with almost nothing to show for it at the Art Institute of Pittsburgh.
Barmak Nassirian, former official with the American Association of Collegiate Registrars and Admissions Officers: “Over-advertise, oversell, overcharge and under deliver. They found a system where the pitch goes to one guy and the bill to someone else.”
courtesy Barmak Nassirian
Barmak Nassirian, former official with the American Association of Collegiate Registrars and Admissions Officers: “Over-advertise, oversell, overcharge and under deliver. They found a system where the pitch goes to one guy and the bill to someone else.”

"I think sometimes the emphasis is on signing up the student as opposed to whether or not the student is really ready to be successful at that school," says Holly Petreaus, an official with the Consumer Financial Protection Bureau and wife of General David Petreaus. "The top ten recipients of GI bill aid, eight are for-profit schools, and they are very heavily engaged in marketing to the military — quite successfully, frankly."

It's all about the Benjamins

The University of Phoenix will never be confused with Yale. According to one 2010 report, 90 percent of its students fail to graduate within six years.

Still, by pure monetary standards, former CEO Todd S. Nelson was a success. During his tenure, he tripled revenue for the school's parent company, the Apollo Group. Enrollment surged to more than 300,000.

Unfortunately, he accomplished this the old-fashioned way — by cheating. Since 1992, it's been illegal to pay recruiters based on how many students they bring through the door. Phoenix did it anyway until two recruiters blew the whistle, initiating a suit that would ultimately cost the school $88.3 million in settlements and fines.

Under pressure, Nelson was forced out in 2006, walking away with a generous $18 million severance. Founder John Sperling put a polite spin on the exit, saying only that Nelson was "preoccupied" with stock price to the detriment of the school's long-term health.

Yet if Nelson's profit motives were too lusty for Phoenix, they were a match made in corporate heaven for Goldman Sachs. The Wall Street bank had partnered with two private equity firms to buy EDMC. Nelson was hired as the company's new CEO. Former Maine Governor John McKernan Jr. — the husband of U.S. Senator Olympia Snowe — was named chairman of the board. Over the next five years, the company's revenue would nearly triple to $2.8 billion.

Last year, Nelson took home $13.1 million in salary and stock. By the standards of for-profit executive pay, he was working on the cheap.

Gregory Cappelli, his replacement at the University of Phoenix, received $25 million last year. CEO Robert Silberman of Strayer Education raked in an astounding $41.9 million in 2009. Yet even this pales next Jonathan Grayer, the former CEO of Kaplan University, who walked away with a $76 million severance package — courtesy of Kaplan's parent company, the Washington Post.

By comparison, Harvard President Drew Faust collected a meager $875,331 in 2010.

Nelson's bad boy practices have predictably caught up with him. Last year, the Justice Department and attorneys general from five states charged EDMC with fraud for paying recruiters based on the money they generated. Six more states have joined the suit.

EDMC claims its sales pay is not just based on bodies enrolled, but such things as business ethics, professionalism and job knowledge. Kathleen Bittel would beg to differ. She was an EDMC recruiter when Nelson arrived, and will readily attest to the change in atmosphere.

Over the next three years, the sales staff increased from 950 people to more than 2,600. "Once Goldman Sachs took over and they brought in [Nelson], everything changed," she says. "Everything became much more cut throat. It was just more oppressive and very high pressure... They were watching you constantly. We used to joke it was like being on the cotton plantation and they were the overlords coming by on their horses. The only thing they were missing were the whips — but they had the whips verbally."

Like Lawrence, Bittel had studied psychology and proved adept at forging bonds. She'd gone back to school in her forties to support her family of four after her husband got cancer. She understood the difficulties of raising kids, working full-time and going to college. At first, she admits to "drinking the Kool-Aid," believing Argosy's online program could help people like her.

But after six months on the job, she was allowed to take Argosy courses for free. That's when she discovered she'd aided a bait-and-switch. Many of the features she heralded to students were barely functional or didn't exist. The Worldwide Professionals Network, where students could find graduate mentors in their field, was nothing more than a bulletin board. Promised MP3 downloads of classes also didn't exist.

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14 comments
calhouncounty
calhouncounty

Bobby is a National Collegiate Scholar who uses baby-talk: "I'm like" and "she's like" when he speaks? How is Eastern Michigan any better than Ashford?

jesskalinowsky
jesskalinowsky

Could be we do not have the complete story, maybe they were sued?  I certainly hope so, as it is disgusting that people want to take advantage of a minor child like that!

counsel
counsel

The "Whatever" Press

 

Seriously?  You couldn't find a lead story that even mentions Texas, much less Houston?  At least it wasn't another rapper piece.

jesskalinowsky
jesskalinowsky

This is SO infuriating!!!! Someone should sue Ashford socks off, if they are still in business. A minor cannot sign a contract like that, and if there was forgery involved send the whole bunch to prison.  The University of Phoenix does the exact same thing, and have gotten away with it for years.  They tell you your credits are transferable, they are NOT transferable. They tell you an Associate Degree is transferable , it is NOT.  They advertise people getting advanced degrees, most employers scoff at a degree from University of Phoenix.  It is a serious FOR BIG PROFIT SCHOOL will to twist words and put a spin on them that makes them sound legit, THE ARE NOT legit!  Their classes are a joke!  Their teachers are a joke.  I took some of their classes, but thankfully my employer was footing the bill, and I did not lose a penny. The classes/courses I took were a total waste of time! NOT one was transferrable.. The University of Phoenix LIES to the potential student. They LIE to Vets!  It is a SCAM OF A UNIVERSITY!    

Hanabi-chan
Hanabi-chan topcommenter

Hey counsel? Just because the story does not mention Texas in a particular instance does not mean that the issue has no bearing on our state. The problem of for-profit "colleges" is nationwide.  We have offices for some of them here in Houston. The commercials play here.  Are you not paying attention?

 

 

Hanabi-chan
Hanabi-chan topcommenter

 @jesskalinowsky I was surprised that no one has sued Ashford for that. I am not a lawyer, so anyone who is knowledgable can answer that question. I was under the impression that if a contract signed by a minor is not valid.

jbottoms
jbottoms

 @Carlos I am so glad to see this article and to hear from you, Carlos, I was almost (thankfully, not) taken in by the smoke and sugar blown in my face by Ashford's salespeople (er, umm, ahem!) i mean <making air-quote> "academic advisors" ... real slick bunch, hard to resist with noses that would make Pinoccio jealous.

counsel
counsel

 @Hanabi-chan It's a local free press.  You pretty much proved my point exactly. 1) It's old news, 2) that it has some tenuous "bearing" on the state might have been worth mentioning in the article and you still didn't understand you were validating my comments each time you went to outside sources to come up with that.  The could have made the effort to come up with one of the local dupes for one of their many anecdotes just to make the effort to tie it in locally. Didn't.  The author, of course, has no ties to Houston other than the Press fobbing off their writing to him.

 

Turn the paper over to Downing, Spivak, and Malisow.

smoothopr_2
smoothopr_2

The Strayer,PHoenix are along the Beltway 8

clarice.jovan
clarice.jovan

 @Hanabi-chan I agree. This can definitely be disputed in court. I wish the family the best of luck. 

Hanabi-chan
Hanabi-chan topcommenter

There..not their damnit! Stupid Mondays!

Hanabi-chan
Hanabi-chan topcommenter

I just saw an ad for Ashford over the weekend. First time, aside from this article, that I heard of this place. 

 

I think their is a  Phoenix building on Space Center Blvd near Bay Area in Clear Lake. Or they are just the major tenant.

 
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