The ITT Fraud

By Anthony DiMaggio • Unz Review • September 5, 2016

The rapid decline of the ITT for profit-college may represent a pivotal moment in modern history, as seen in rising challenges to predatory capitalism. ITT is in deep trouble, subject to numerous lawsuits, from the Securities and Exchange Commission and Consumer Finance and Protection Bureau (CFPB) for defrauding students. The con that is for-profit education is finally being exposed, and these “higher learning” institutions are increasingly recognized for their rapacious treatment of students. Within this context, the Wall Street Journal seeks to reframe the attack on ITT as the work of the big, bad government, which is committed to stifling the liberties inherent in private enterprise. Contrary to the paper’s propaganda, however, the narrative of for-profit colleges as a beleaguered David facing the onslaught of a brutal government Goliath bears little resemblance to reality.

In a recent piece in their “Review and Outlook” section titled “Obama’s For-Profit Execution,” the Journal attacks the Obama administration for trying to “kill a company without proving a single allegation” in court. The paper laments the Department of Education for requiring ITT to increase its letter of credit from 10 percent to 20 percent, in light of the possibility that the corporation will lose its accreditation in the near future. A letter of credit refers to the collateral a for-profit institution must maintain to assure that it can pay back money owed to the federal government in the case of bankruptcy, which may be right around the corner for the ailing college.

The ITT accreditation fiasco arose when the Accrediting Council for Independent Colleges and Schools (ACICS) – the nation’s largest accrediting institution for higher education – alongside 20 state Attorney Generals, began a detailed investigation into students’ complaints of ITT’s predatory lending practices. Accreditation withdrawal threats are gaining steam in light of various government lawsuits filed against ITT over the last two years. The grievances against the for-profit are spelled out in the CFPB’s lawsuit. They include:

* Exorbitant tuition rates, accompanied by increased risk of student loan default.

* Dishonest lending, characterized by pressuring students to accept large privately-funded loans, without fully disclosing the details and loan terms to borrowers.

* Poor job prospects flowing from for-profit degrees with dubious value on the job market.

* The persistence of low educational standards, resulting in two and four-year educational institutions rejecting for-profit transfer credits.

None of these charges are particularly surprising for anyone who has paid attention to complaints against for-profit colleges.

What is particularly bizarre is the complete refusal of the Wall Street Journal to discuss any of the specific problems that have been well documented regarding ITT and other for-profit’s practices. The paper condemns the DOE for its “lawless” attack on ITT, independent of any effort to address why the school is under attack. Sadly, the Journalappears willfully blind to the realities of higher education. For one, a court conviction has never been necessary to pull accreditation from a learning institution with a troubled background, and it is certainly unrelated to states’ choice to investigate predatory lending in higher education. ITT will have its day in court, but this doesn’t mean it can or should avoid public scrutiny in the meantime, or avoid government regulations aimed at protecting taxpayers from the college’s looming bankruptcy.

The Wall Street Journal’s defense of ITT is symbolic of a larger political-economic culture in the U.S., in which pundits and intellectuals assume that for-profit institutions engage in valiant work by virtue of their for-profit nature, which ensures societal freedom and liberty. If ITT is inherently virtuous, as we know all corporations to be, why allow the bumbling regulators of the big, bad federal government to ruin such a valiant enterprise? If profits are next to godliness, then government bureaucratic efforts to interfere with the miracle of the “free market” are destined to fail and will only disrupt the wondrous self-regulating efficiencies inherent in capitalism. These free market fantasies have little to do with how for-profit colleges really work, yet such language is used to justify an industry that enriches itself by victimizing its clientele.

It’s difficult to characterize for-profits like ITT as anything less than parasitic institutions, praying on the ignorance and naiveté of first-generation college students seeking to improve their economic lot and career prospects. They are hardly “free market” entities, as they receive billions in guaranteed federal student loans. In light of the vacuum of government regulation, these corporations victimize students with impunity. Their educational “product” is widely regarded as sub-par among those in non-profit private colleges and public colleges and universities. Problems inherent in for-profits are explored below.

Exorbitant Tuition Costs and Predatory Lending

According to ITT’s own statistics, its students are paying astounding prices, between $45,000 and $53,000 in tuition for Associate’s degrees (see: http://programinfo.itt-tech.edu/posi/cost.pdf). By comparison, the National Center for Education Statistics estimates the average cost for an Associate’s Degree in the U.S. is $9,888,including room and board, tuition, and fees. I taught for half a decade at an Illinois community college, and tuition for an Associate’s Degree totaled $6,900 in 2016 dollars, or 13 to 15 percent of the cost of various ITT Associate’s Degree. Total tuition for Bachelor’s Degrees from ITT come in at a whopping $76,000 to $89,000, depending on the degree. By comparison, I taught for years at a major state university in Illinois, where four years of credits for a Bachelor’s degree now costs $44,430. Illinois state universities have seen significant spikes in tuition costs in the last few decades, but even these prices pale in comparison to ITT’s highway robbery.

When I attended undergraduate and graduate school at various public universities in the Midwest, the terms of student loans were made perfectly clear prior to receiving any federal financial assistance, because of the financial aid counseling process all students had to complete. I left the financial aid office with little uncertainty regarding what I was borrowing (whether I had the life experience to fully understand the dangers of taking on a mountain of debt is another story). But lending practices are lax at many for-profits. For example, the CFPB lawsuit alleges: “ITT used its financial aid staff to rush students through an automated application process without affording them a fair opportunity to understand the loan obligations involved. In some cases, students did not even know they had a private student loan until they started getting collection calls. The loans were high-cost. For borrowers with credit scores under 600, for example, the costs of the private student loans included 10 percent origination fees and interest rates as high as 16.25 percent.”

Poor Job Prospects and Low-Value Degrees

For-profits depict themselves as providing a fast-track for students to earn vocational degrees that put them on the path to career success and increased earnings. These promises are a conscious misrepresentation of for-profit degrees. These degrees are seen by other colleges and universities, and by employers as sub-par at best, indicating little value added in terms of enhancing students’ skill sets or increasing their odds of landing in a vocational career-path.

For-profits offer degrees as diverse as two-year Associate’s and certifications, to Bachelor’s, Master’s Degrees, and PhDs. But these degrees are the laughing stock of the academic community. For example, an online Bachelor’s or Master’s at ITT will do little to increase one’s chances of getting accepted into a nationally ranked graduate program in the social sciences, and this is well known in the discipline. A PhD from the University of Phoenix is not considered a credible candidate for a tenure track position as a sociology or political science professor. Simply stated, for-profit degrees are the snake oil of higher education. They evoke little but ridicule from serious academic institutions.

Echoing the above points, ITT’s problems with job placement are well documented. For example, the school places less than half of its criminal justice grads into jobs upon graduation. To make matters worse, without overarching federal benchmarks establishing how to measure job placement, for-profits are free to manipulate their figures for what constitutes a criminal justice occupation. And manipulate they do. ITT includes a number of positions in its criminal justice placements that have no business being designated so. These include: health care workers, AmeriCorps instructors, assistant store managers, auto claims representatives, and customer service representatives (see: http://programinfo.itt-tech.edu/ind/bscj/). Such is the nature of predatory “education” in a system that lacks basic federal regulations and standards.

Non-Transferrable Credits

Because the academic standards at for-profits are so low, community colleges and two and four-year liberal arts colleges and universities often refuse to accept their courses for transfer credit. Numerous students I taught in community college struggled to transition from the for-profit they previously attended. They simply weren’t prepared to succeed in an institution that held real academic expectations, after having been coddled and passed through at a for-profit. Put simply, these colleges do nothing to provide students with the skills needed to succeed in educational institutions with higher levels of expectation. In contrast, transferring credits is usually a non-issue between community colleges, liberal arts colleges, and four-year universities. State-regulated articulation agreements ensure that classes taken at one college or another are able to transfer across institutions, so long as the classes taken are designated as articulated. For example, in Illinois, the Illinois Articulation Initiative specifies specific courses across each discipline that will transfer without question as students look to move from a two-year to four-year institution or vice-versa. At the community college I worked in, there was an articulation agreement with most surrounding state universities, in which schools agreed to automatically transfer in students with junior status if they had earned an Associate’s Degree. In short, the transferrable credits issue remains a huge problem with for-profits. These schools cannot guarantee the kind of rigor present at other open and selective enrollment institutions.

The attacks on ITT are plainly verifiable – especially claims of high tuition costs and poor job placement rates – simply by looking at ITT’s own publicly-available data. Furthermore, the problem of non-transferrable credits is apparent for anyone to see based on looking up state articulation rules for which courses at various colleges do and do not transfer to other schools (schools at my old community college were clearly marked as articulated in the course catalog). Students can call up various higher learning institutions they are interested in transferring to and see if for-profit credits will be accepted. Contrary to the Wall Street Journal’s claim, there is nothing in any of these charges that needs to be verified in a court of law in order to demonstrate malfeasance on the part of the for-profits. This data is all widely available in the public domain, and demonstrates in black-and-white the predatory nature of for-profits like ITT.

In a saner world, the Obama administration would have wiped out the for-profit racket years ago. A Democratic majority in Congress (from 2009 to 2010) should have passed legislation prohibiting a dime of federal dollars to flow to for-profits. If these schools are such a great example of the virtues of free markets operating independently of government, then they should have to operate fully independent of government subsidies. In light of their horrific academic records, Obama would have been well in the right to refuse free taxpayer dollars to predatory institutions. Instead, the DOE under Education Secretary Arne Duncan implemented largely toothless regulations that did little to reel in the for-profits. For-profits would only lose federal aid eligibility if 1. Fewer than 35 percent of their graduates were repaying their loans within two years of completing their degree; and 2. If graduates’ loan repayments on average reached beyond 30 percent of discretionary incomes. Amidst these tepid regulations, for-profits were allowed to extend their influence over American higher education, contributing to a wholesale decline in educational quality and standards.

The overarching significance of the ITT fiasco relates back to the private assault on the commons. Parasitic corporations that profit from higher education at the expense of students have no place in post-secondary education. But they’ve been allowed to blossom under a neoliberal system that assumes government is automatically “bad,” that public goods are not worth defending because they are wasteful and inefficient, and that the commons are a relic of a bygone era. Across the mass media, in private think tanks, and among business and governmental elites, taxpayer funded goods such as public higher education are increasingly seen as an unnecessary burden. The costs of higher ed are being shifted from society to individual “consumers” (students), who are supposed to pursue degrees narrowly aimed at careerism and earnings (hence the growing popularity of the dictum “learning means earning”), and are divorced from learning how to become active citizens sharing collective social responsibilities. Education “reformers” passionately maintain that tenure, taxpayer-funded education, and public sector unionism are pernicious forces that must be eradicated from the face of the earth. Eliminating protections for the public and for workers will supposedly usher in a golden era of education, one that will ensure college completion and career success.

But ultimately, the scandal that is the for-profits has demonstrated the tremendous importance of the commons and public goods. Community colleges produce a far superior experience compared to the ITTs of the world, and at a radically lower price for those interested in vocation or transfer credits. Community colleges are defined by tenure track positions and often include unionized protections that ensure job stability for faculty and guaranteed health and retirement benefits. By contrast, for-profits offer none of these things. They have eliminated tenure entirely. They pay legions of adjuncts on a piecemeal, per-course basis, and pay wages that ensure employees are eligible for every existing welfare benefit. These institutions serve no one, save their shareholders and executives. They’re a model for how not to run higher education.

Fortunately, Americans appear to be growing wise to the for-profit scam. Many realize these degrees have little value. DOE statistics suggest that the number of for-profit institutions declined by 5 percent from 2014 to 2016, with the number of students in these colleges falling by nearly 11 percent from 2014 to 2015 alone. Enrollment in the highest profile of all for-profits – University of Phoenix – declined by half between 2010 and 2015. The declining enrollment at colleges like ITT and Phoenix is significantly larger than anything seen at community colleges, and four-year public and private non-profit liberal arts colleges and universities.

The era of the corporate welfare queen, for-profit college may be coming to a close. Long-delayed government action has exposed this industry and its pernicious effects on higher learning. Increasingly, Americans are wondering whether education is a good from which private corporations should profit – especially if those profits come at the expense of a quality education.

Anthony DiMaggio holds a Ph.D. from the University of Illinois, Chicago. He is an Assistant Professor of Political Science at Lehigh University, and is the author of Selling War, Selling Hope: Presidential Rhetoric, the News Media, and U.S. Foreign Policy Since 9/11 (SUNY Press, paperback, July 2016). He can be reached at: ard416@lehigh.edu