How One For-Profit College Resorted To Bribery To Protect Its Brand

CREDIT: Wall Street Journal

student debt

CREDIT: Wall Street Journal

For-profit colleges that lure students with the promise of improved job prospects have gone to great and potentially illegal lengths to inflate statistics about how their students fare after graduation, according to a Huffington Post report that draws on court documents.

The for-profit higher education company Corinthian Colleges, Inc. paid temp agencies to hire its graduates in Georgia and California as recently as 2011, the documents show. The payoffs allowed schools like Everest College to report inflated employment rates for their graduates, thereby drawing in more tuition payers and mollifying criticism that had threatened the company’s access to federal financial aid dollars.

“I was directly told, ‘You need to find a company that is willing to take on your students for a short period of time, and who cares if they stay?'” one former Everest career services officer told the Huffington Post’s Chris Kirkham, who spoke to at least a half-dozen former Everest College career services employees. Those interviews depict “a culture of data manipulation inside the company,” Kirkham writes, “one where hitting monthly employment targets took priority over finding quality positions for students.”

In some cases that unscrupulousness and manipulation gave way to outright bribery. An Everest campus in Decatur, Georgia, offered nearby companies $2,000 for each Everest graduate they hired and kept on for at least 30 days. For Everest alums like Eric Parms, that meant they got let go after a couple months of work — and $17,000 in student debt that will stick with Parms even to the grave, as student loan debt is not dischargeable in bankruptcy and can be legally transferred to next of kin in the event of a student borrower’s death. (Bankruptcy law lets people get rid of debts run up at gambling parlors or through credit card overconsumption, but not borrowing done to advance their education.)

A representative of Corinthian Colleges, which owns Everest, told Kirkham that the bribes program in Decatur didn’t break the law or “violate any accreditation or regulatory standards,” and noted that the company stopped the payments in 2011 and shuttered the Decatur campus a year later. But a California lawsuit against the company cites internal emails that show the same pay-to-play system was in place at two California campuses — Everest College Hayward and Everest College San Francisco — in 2011. Corinthian’s staffer defended the company’s overall record placing graduates into jobs, but did not comment on the ongoing California case, Kirkham reports.

The for-profit education industry is only one factor in pumping up the student loan bubble that is currently putting a $43.5 billion annual drag on the economy. The private student loan market, which picks up what government loans won’t cover, is another significant contributor. But there is five times as much outstanding student loan debt owed to the government as there is to private lenders, and default rates within the standard federal student loan programs are astoundingly high mostly because of the weak economy and under-enrollment in programs meant to help struggling graduates.

Still, companies like Corinthian have abundant incentives to behave badly when it comes to goosing graduate employment stats, which are not only key to their accreditation but to their access to financial aid money. The company was born out of a federal crackdown on the National Education Corporation (NEC), whose students were defaulting in such large numbers that the government threatened to stop approving loans taken out by the company’s students. NEC sold off many of its schools, Kirkham writes, giving rise to Corinthian and other companies.

Legislation pending in Congress would also bar schools from receiving taxpayer-funded student loan money if more than two-thirds of their graduates fail to actively repay their loans — a threshold that for-profit schools might struggle to meet. The student loan crisis has drawn legislative attention to reforming the system, which could mean further scrutiny for companies like Corinthian that have made a tidy profit by offering struggling people a shortcut to prosperity in tough economic times.