After for-profifififififit schools go bust, students left in limbo

WASHINGTON — The forprofifit college boom has gone bust.

Closures of high-profile schools such as ITT Technical Institute have left thousands of students in limbo while raising questions about the future of an industry that provides much of the training for vocational, technical and other mid-level skilled jobs.

For-profifit schools are facing major challenges on several fronts after a period of meteoric growth.

Federal and state offifficials have fifiled suits or launched investigations into allegations of predatory lending and false advertising by some leading chains. At the same time, the Obama administration is trying to reshape the industry by pushing new regulations that would tie student debt limits to job prospects and make it easier for students to have their loans forgiven if they were defrauded — with the school potentially on the hook for the tab.

For-profifit schools began aggressively expanding their numbers and enrollments in 2000 as online education became more widespread, attracting students who were more likely to be low-income, minority and part- timers.

Those schools ratcheted up their growth even more after the Great Recession, wh e n ma n y A me r i c a n s sought new skills in hopes of finding better jobs in a tough labor market. Wall Street drove education company stock prices sky-high.

The problems that followed, including high default rates on student loans and accusations of predatory lending, triggered a crackdown by the Obama administration.

I T T ’s pare nt c ompany blamed the administration’s actions for the closure of the chain’s 137 campuses Sept. 6, meaning 35,000 students who were preparing to start classes last month won’t get the degrees they were seeking.

Alvaro Laborin, a 36-yearold Navy veteran from Los Angeles, said he spent the last few years working all manner of odd jobs — bartender, mechanic, Uber driver, even a walk-on Hollywood extra — to be able to afffffffffffford cybersecurity classes at an area ITT campus.

“It felt like home to me,” Laborin said. “This school h a s b e e n a r o u n d s i n c e before I was born and now it’s gone?”

He was among about 20 ITT students at a clinic last week at the offices of the Legal Aid Foundation of Los Angeles to fifigure out their options. They include trying to transfer ITT credits to other schools or seeking forgiveness on student loans.

Laborin wasn’t sure if he would try to attend another for-profifit school or try a public community college. But he said he would not quit on his goal of a college education.

“I’d rather be in debt up to my neck for the rest of my life than give up now,” he said. “When things like this happen, you have to either change or be the one who gets left behind.”

Less than 18 months ago, thousands of students at another high-profile forprofifit chain were forced into the same situation. Corinthian Colleges Inc. closed the doors on its remaining campuses following government allegations of falsifified job placement rates.

Many s t u d e n t s a t I T T, Corinthian and other forprofifit schools paid for their education by taking out federally backed and private student loans. And though borrowing has shot up at all colleges and universities in recent years, students at forprofifit schools led the way.

Their federal student loan originations increased tenf o l d f ro m 2 000 t o 2 01 1 , according to new research from the Federal Reserve Bank of New York.

Those students were more likely to default. Many either didn’t fifinish school or graduated but were unable to land well-paying jobs in their fifield.

“They’ve done their part of the bargain. They took out the loans to pay for their education. They graduated and what the school promised them wasn’t true,” said Debbie Cochrane, vice president of the Institute for College Access and Success, a nonprofifit group that advocates for broader access to higher education.

Since 2004, annual default rates for students at four-year for-profifit schools have been two to three times those of public or nonprofifit private institutions, the New York Fed researchers found.

Despite the high-profile closures, the industry is still large. In 2015, there were about 3,500 for-profifit institutions, including two-year and four-year vocational and technical schools. That’s an increase of 36 percent since 2000, according to the New York Fed data.

About 1.6 million students a t t e n d e d t h o s e s c h o o l s . Enrollment nearly quadrupled from 2000 to 2011, with a surge after the Great Recession began in late 2007.

Although enrollment has declined since 2011, a sharp increase in heavily debt-saddled students has drawn the ire of consumer groups and liberal activists who have accused the schools of predatory lending.

Steve Gunderson, president of Career Education Colleges and Universities, a trade group for the for-profifit college industry, acknowledged that there have been problems.

“This sector grew too fast and too much during the recession. We practiced open enrollment and admitted students even if they weren’t ac ademically prepared,” he said. “A lot of students dropped out, had debt and default. We shouldn’t walk away from that.”

But Gunderson and others in the industry have said the Obama administration has unfairly targeted for-profifit schools through enforcement actions and new regulations.

The moves threaten opportunities for students to get trained in fifields that public and private nonprofifit colleges often don’t offffffffffffer, such as truck driving, cosmetology, automotive repair and medical office work, said Gunderson, whose association does not include ITT Technical Institute.

In August, the Education Department barred ITT from enrolling new students who used federal financial aid because of “signifificant concerns” about the chain’s operations and financial viability.

In 2015, the Securities and Exchange Commission fifiled fraud charges against ITT Educational Services and the company’s two top executives. The SEC said ITT hid from investors the poor performance and looming fifinancial impact of two private student loan programs the company guaranteed.

And in 2014, the Consumer Financial Protection Bureau sued ITT for predatory lending, accusing the company of pushing students into highcost private loans that were likely to end in default.

Other big players are also facing problems. In January, the Federal Trade Commis- sion filed suit against the operators of DeVry University, alleging its ads deceived potential students about their job and earnings prospects. And the FTC has been investigating the Universit y of Phoenix for similar deceptive marketing practices.

O n t o p o f t h a t , o t h e r changes will make it more diffifficult on for-profifit schools.

In June, a federal panel recommended the shutdown of the Accrediting Council for Independent Colleges and Schools, which provides the accreditation necessary for many schools to have access to federal fifinancial aid. If the recommendation is approved by Education Department offifficials, those institutions will have to find another accreditor — and that could be diffifficult.

At t h e s a me t i me, t h e Obama administration has toughened regulations of for-profifit schools. New rules for schools that offffffffffffer career training — for-profits and public community colleges with non- degree programs — would limit the amount of debt that students can take out relative to the incomes they can expect to earn with their education.

And t h i s s u mmer, t h e Education Department proposed new rules that make it easier for students to have loans forgiven if they were defrauded or deceived. The school could be required to pay offff the loan balances for claims that are upheld.