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Why so many students from for-profit schools are left in debt limbo

January 16, 2017 at 6:25 PM EDT
Students who attend for-profit college and training programs are more likely to borrow, borrow more and struggle to repay their loans. Not only that, but the overall graduation rate at for-profit institutions is just 27 percent. Meanwhile, a number of schools have shuttered, leaving former attendees with debt and no way to pay it back. Special correspondent Lizzie O'Leary reports.
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JUDY WOODRUFF: Student loan debt is an issue facing many Americans, and can take years to pay off.

In particular, the problems some students face at for-profit schools are getting closer scrutiny.

Marketplace’s Lizzie O’Leary has the story. It’s part of our series How the Deck Is Stacked. It’s in partnership with “Frontline” and Marketplace, and funded by the Corporation for Public Broadcasting.

LIZZIE O’LEARY: Before she became a mother, New Yorker Danielle Adorno (ph) dreamed of working as a pastry chef. When she came across ads for the Art Institute of New York, it seemed like a great fit. And she says school administrators promised her a lot.

DANIELLE LOPEZ, Student Loan Borrower: They were very adamant on like their job placement rates, boasting over like 90 percent job placement, boasting about their chef instructors working at Nobu and all these high-end restaurants. You would think, oh, OK, I’m going to get the quality education that I’m looking for, because that’s what it’s about, quality.

You know, I figure, if I’m going to pay that much — that amount of money for such a short program, I’m going to be getting something out of it. And that wasn’t what happened.

LIZZIE O’LEARY: She claims the school never helped her get work in her field. And she says employers don’t value the degree in the way she thought they would. She’s no longer paying her loan company her $25,000 debt.

DANIELLE LOPEZ: They don’t deserve a single penny out of me, because I didn’t get the education I paid for.

LIZZIE O’LEARY: You did sign a contract when you took out that money.

DANIELLE LOPEZ: I did. And I also thought if — I feel like it stopped being about education and started becoming about consumerism. I’m paying you for a service. I paid you for an education. I paid you to train me. I paid you to give me this 90 percent job placement rate that you boasted about. You told me you were going to place me in a job.

And, instead, I got a program that was shutting down.

LIZZIE O’LEARY: The Art Institute’s parent company, Education Management Corporation, was the target of a federal investigation. Department of Justice officials say the company acted as a recruitment mill. It reached a $95.5 million false claims settlement. But there was no determination of liability.

LORETTA LYNCH, U.S. Attorney General: This kind of abuse hurts not only taxpayers, but also the students.

LIZZIE O’LEARY: The Art Institute of New York’s Web site says it is no longer accepting students. And the campus has been put on probation by their accreditor.

In the last few years, the Obama administration put many new regulations in place to address aggressive marketing and job placement claims by several for-profit schools.

PRESIDENT BARACK OBAMA: Too many of these for-profit colleges — some do a fine job, but many of them recruit kids in. The kids don’t graduate, but they’re left with the debt.

LIZZIE O’LEARY: Earlier this month, the Department of Education released a report saying many for-profit graduates aren’t earning enough to reasonably repay their loans. One out of four career training programs are at risk of losing their federal funding.

The University of Phoenix has 215,000 students, the largest for-profit college in the country.

Stephen Trimble was 27 years old when he decided to take classes at the University of Phoenix outside Philadelphia.

STEPHEN TRIMBLE, Student Loan Borrower: I didn’t have a degree. And I thought that getting one would allow me to advance in my career better, faster. It would allow me to earn more money.

LIZZIE O’LEARY: Trimble took out a private loan for $30,000 in 2008 to study business management, but dropped out before finishing, and then fell behind on his payments. He says that had a domino effect.

STEPHEN TRIMBLE: It’s decimated my financial life. My credit score is probably 150 to 200 points lower than it should be. I couldn’t get a mortgage if I wanted one. My house is in my wife’s name.

LIZZIE O’LEARY: Trimble and Adorno are part of the group of Americans who turned to for-profits schools during the great recession.

SANDY BAUM, Urban Institute: There was very rapid growth in the for-profit sector, much of it big companies. The University of Phoenix is a prime example. They signed up all kinds of people who had no idea what they were getting into. So, that’s a problem.

LIZZIE O’LEARY: Finishing school is a challenge for many students enrolled in these kinds of programs, according to Sandy Baum, a senior fellow at the Urban Institute.

SANDY BAUM: On average, people who go to for-profit institutions are much more likely to borrow, to borrow more, and not to be able to repay their loans. It’s pretty clear from the data that the crisis is centered around people who start college and don’t finish.

LIZZIE O’LEARY: Trimble is not alone. The overall graduation rate for private for-profits is 27 percent, vs. 58 percent for public and 65 percent for private nonprofit schools.

The university touts success stories like Gail Marquis, former Olympic athlete and Wall Street banker, profiled here in this advertisement.

GAIL MARQUIS: My schedule is not a 9:00-to-5:00, but I was able to balance my life, my work, and the schooling.

LIZZIE O’LEARY: Like many for-profits, the student population at the University of Phoenix is largely first-generation college students, minority, and female.

Phoenix declined PBS NewsHour’s interview request, but suggested we speak with Steve Delahunty, one of their satisfied alumni. He graduated with a masters in technology management.

STEVE DELAHUNTY, University of Phoenix Graduate: When you speak about the standards that the for-profit universities are looking at, they’re being held to some standards in terms of return on investment for the federal dollars that people are using to go to these institutions that a state school and a private school are not held to.

But the for-profit’s being judged by the people and whether or not they’re getting good jobs out of that, when, in fact, of course, with the tuition at like a private college is way more expensive than a for-profit college.

LIZZIE O’LEARY: The University of Phoenix stands by their educational model and told PBS NewsHour in an email — quote — “For more than 40 years, University of Phoenix has provided high-quality, career-relevant higher education for working adults, an underserved segment of Americans.”

Phoenix also points to Department of Education statistics showing the school’s average annual cost is below the national average for large private institutions. The school also says the salaries of its alumni who had federal financial aid 10 years after graduation are — quote — “above the national average.”

For the full statement from the University of Phoenix, go to the PBS NewsHour website, PBS.org/NewsHour.

The recent closure of schools like ITT and Corinthian means many former students have been left with debt and few job prospects. The Obama administration implemented a debt forgiveness program for students who believe they were defrauded or that their schools violated state law.

So far, the Department of Education has approved loan discharges of at least 28,000 former Corinthian students. But there are many other former for-profit school students in limbo, like Danielle Adorno. She applied for loan forgiveness multiple times, with no resolution so far.

We’re going to have a new president January 20. Do you think about that at all?

DANIELLE LOPEZ: I don’t anticipate anything beneficial coming out of it. He ran a for-profit school himself. He got sued for his for-profit school. I don’t think he has our best interests at heart.

LIZZIE O’LEARY: President-elect Trump has not yet made clear where he stands on the matter of for-profit schools or whether he would roll back the Obama administration’s policies. That leaves lots of questions about what may happen to Adorno and many others.

For the PBS NewsHour, this is Lizzie O’Leary in New York.

Editor’s Note: The University of Phoenix provided the NewsHour with this written statement:

“For more than 40 years, University of Phoenix has provided high-quality, career-relevant higher education for working adults, an under-served segment of Americans often overlooked by traditional institutions of higher education. As recently as September 2016 the Department of Education produced evidence of the value of University of Phoenix degrees when their College Scorecard found that the University’s average annual cost is below the national average for large, private institutions, while available data indicates that the salaries of University of Phoenix students, 10 years after entry to the University and who used Federal financial aid to attend University of Phoenix, are above the national average.”

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