For-profit college giant Career Education Corp. announced that it will close 23 of its 90 campuses and eliminate 900 jobs after the company reported a net loss this quarter of $33 million and a 23 percent drop in new student enrollment.
The company, which owns six campuses in California, has not said which of its campuses will close, but stated in a disclosure to the U.S. Securities and Exchange Commission that it wants to invest in campuses that have the strongest likelihood of delivering solid job placement rates for students and are the most efficient.
The company has not yet notified the campuses that will close but will begin to in the next 30 days, Chief Financial Officer Colleen O’Sullivan said in a conference call Friday.
In California, Career Education runs the California Culinary Academy in San Francisco, the International Academy of Design & Technology in Sacramento, the Brooks Institute in Santa Barbara and Ventura, and two Le Cordon Bleu campuses in Los Angeles and Sacramento.
The Academy of Art University has sued the California Student Aid Commission, arguing the state agency should not have ruled the San Francisco college's students ineligible for Cal Grants in the 2012-13 academic year.
Under new rules signed into law in June, California colleges must have a student loan default rate of 15.5 percent or less and a graduation rate of 30 percent or higher for students to qualify for Cal Grants, which do not have to be repaid. The law exempts colleges where less than 40 percent of students borrow federal student loans, such as community colleges.
The goal of the new eligibility rules was to focus the state's limited financial aid dollars on colleges that provide a significant return on taxpayers' and students' investments in terms of jobs and degrees. The Academy of Art was one of 154 institutions [PDF] kicked out of the program this fall – most of which are for-profit colleges.
The Academy of Art serves more than 18,000 students, providing associate, bachelor's and master's degrees in the arts, as well as certificate programs.
According to figures from the college, about 100 new Academy of Art students who would have been eligible for Cal Grants worth up to $1,473 this fall will not receive them, and 350 returning students who would have been eligible for up to $9,223 will see their Cal Grants reduced by 20 percent.
Among the findings of a U.S. Senate committee’s recently released investigation of the nation’s for-profit college industry is a stark assessment of the huge gap between what it costs to get a degree or certificate from a career college and the price tag of a comparable program at a public college or university in California.
The two-year investigation [PDF] by the U.S. Senate Health, Education, Labor and Pensions Committee took a sweeping look at 30 for-profit education institutions nationwide, combing through financial statements, internal company documents and other data to create a picture of a sector that it says fails to provide adequate return on investment for students and taxpayers.
Republicans on the committee criticized the report as biased, as did organizations representing the for-profit sector. Steve Gunderson, president of the Association of Private Sector Colleges and Universities, said in a statement that the report "twists the facts to fit a narrative."
The high price of tuition was one piece of the committee's report. Overall, the investigation found that bachelor’s degree programs at career colleges cost 20 percent more, on average, than comparable programs at flagship public universities.
Associate degree programs at for-profits averaged four times the price tag of community college programs.
Foster City-based Internet marketing company QuinStreet has agreed to hand over one of its websites to the federal government and pay $2.5 million to settle claims it violated consumer protection laws by deceptively marketing for-profit colleges to military veterans.
California Watch first reported earlier this month that Kentucky Attorney General Jack Conway was leading an investigation of QuinStreet together with attorneys general in several states.
The investigators claimed QuinStreet websites were preying on veterans by giving the appearance of being owned or endorsed by the government or the military, when in fact the company was using the sites to generate leads for the company's for-profit college clients.
Under the terms of the voluntary settlement agreement announced yesterday, QuinStreet will transfer the website GIBill.com to the Department of Veterans Affairs and will post several disclosures on the hundreds of other websites it operates.
"We felt it was important to do this," Conway said. "We’ve had some of these schools engage in false and deceptive advertising to try to get leads and to try to get their hands on these benefits. ... What I just don’t understand is, when did taking taxpayer dollars to pay for education of those who have served us – when did that cease to be a public trust?"
One of the agencies that accredits San Francisco's California Culinary Academy is questioning the veracity of the college's reported job placement rates – ordering the school's parent company to provide audited placement data by September in order to maintain its accreditation status.
The Accrediting Commission of Career Schools and Colleges issued the order to Career Education Corp., a Schaumburg, Ill.-based for-profit college company, earlier this month. California Culinary Academy is one of 10 schools included in the directive, according to a recent company filing.
The move marks another round of scrutiny of the claims Career Education makes about job opportunities students have after attending its schools. Career Education agreed in 2010 to pay $40 million to settle a class-action lawsuit in which former students said the California Culinary Academy had misled them with its claim that 97 percent of graduates got jobs in the field.
The suit also claimed that California Culinary Academy deceived students by promising robust career placement services that never materialized.
In 2011, the New York attorney general issued a subpoena requesting information on several aspects of the company's operations, including its employment outcomes. Also last year, another accrediting agency, the Accrediting Council for Independent Colleges and Schools, issued a show cause order demanding that the company provide more accurate job placement data.
Attorneys general in 15 states are investigating QuinStreet, a Foster City-based Internet marketing company that connects its for-profit college clients with service members and veterans looking to spend their military education benefits.
In their inquiry, the investigators expressed concerns that QuinStreet's marketing websites, such as www.GIBill.com and www.ArmyStudyGuide.com, mislead consumers into believing that the sites are affiliated with the government or that the for-profit colleges recommended by the sites are the only ones that accept subsidies such as the GI Bill or Tuition Assistance, which is for service members on active duty.
According to QuinStreet's most recent quarterly report filed May 8, Kentucky Attorney General Jack Conway is leading the multi-state inquiry into the company, with attorneys general in Alabama, Arizona, Delaware, Florida, Idaho, Illinois, Iowa, Massachusetts, Minnesota, Nevada, North Carolina, Oregon, South Carolina and Tennessee joining the investigation.
Conway is also leading a group of 26 state attorneys general who are investigating the for-profit college industry in general.
Today, Laura Metune became the new chief of the California Bureau for Private Postsecondary Education, the beleaguered state agency charged with overseeing the state’s vocational and for-profit colleges. Gov. Jerry Brown appointed Metune to the $110,580-a-year post earlier this month.
Metune's appointment comes after a Bay Citizen investigation revealed the bureau had failed to properly oversee the state's 1,300 technical, vocational and other private postsecondary schools.
The investigation found that the bureau failed to vigorously investigate complaints, monitor the quality of educational programs, and track or penalize unaccredited schools. The Bay Citizen also found more than 130 postsecondary schools operating with expired state approvals.
After The Bay Citizen published its reports, Karen Newquist, the head of enforcement for the bureau, resigned. Joanne Wenzel, who had overseen the bureau for the past two years, will continue to serve as its deputy chief. And the state took the unusual step of shutting down a school featured in one of the articles.
Evan Westrup, a spokesman for Brown, said Metune was selected to “tackle the challenges of the bureau.”
As the cost of higher education continues to increase and federal and private student debt nears the $1 trillion mark, lawmakers and regulators are zeroing in on private student loans.
A bill introduced by state Senate Majority Leader Ellen Corbett, D-San Leandro, and advanced this week through the Senate Education Committee would require universities to provide clear information to students about private student loans.
Meanwhile, Kentucky Attorney General Jack Conway, the leader of a group of 23 state attorneys general investigating the nation's for-profit college industry, revealed earlier this month that the group will focus its probe in part on institutional lending – the private loans that for-profit colleges increasingly extend to students.
Federal loans only cover up to a certain amount of tuition and other educational costs. Some college students finance the rest of the cost by taking out private loans, which in general tend to have higher rates and less favorable terms than government loans.
While the federal Truth in Lending Act requires lenders to disclose rates and terms, Corbett's bill would go further, requiring California colleges and universities themselves to clearly distinguish private loans from federal loans in individual financial aid awards in the institutions' award packages, publishing the rates and terms.
California's recently formed Bureau for Private Postsecondary Education has significant weaknesses in its oversight of for-profit colleges, advocacy groups told lawmakers at a hearing this week.
The agency's lax approach limits its ability to police abuses in the for-profit sector, said Jamienne S. Studley, CEO of Public Advocates Inc., a nonprofit law firm and advocacy group in San Francisco.
During the joint information hearing of the Assembly Higher Education Committee and Senate Committee on Business, Professions and Economic Development, Studley recommended that the bureau strengthen its approval process, demand more disclosures from approved institutions, verify information received from colleges and more.
Nationally, for-profit colleges have the highest share of students who default on their student loans. The sector enrolls 1 in 10 college students in California, but receives more Cal Grant dollars from the state than all the community colleges combined.
A 2010 report from the College Board shows the six-year graduation rate for first-time, full-time students is 22 percent at four-year for-profit colleges, compared with 55 percent at public four-year institutions and 65 percent at private four-year colleges.
Studley, who has served as president of Skidmore College in New York and was deputy general counsel at the U.S. Education Department in the Clinton administration, compared some for-profit colleges with payday lenders.