After car accidents and back surgery left her unable to work in 2000, Patricia Ann Bowers decided to make productive use of her new, medically-imposed free time. “I decided that, being disabled, I should go for my dream of having my college degree in marketing,” Bowers said.
Bowers, now 54, had worked in marketing for Piper Aircraft in Florida for six years before the accidents. At first the marketing degree “was just a thought in my mind,” but then she saw some TV commercials for Everest College and started to wonder if online classes could be the path she needed.
“Just out of curiosity I called them up. I really didn’t expect anything to happen from the phone call,” Bowers told ThinkProgress, but the school kept calling for weeks. “They told me they could accomodate me, that I had enough funding.”
And Everest — a brand belonging to for-profit education giant Corinthian Colleges — was quite accommodating indeed, at least at the start. She started working on her Associates’ Degree in 2011, and had moved on to Bachelor’s classes starting in 2013.
On Father’s Day, 2013, Bowers’ youngest son killed himself. He was just 34. In the months that followed, Everest’s accommodating attitude evaporated.
“I tried to get a leave of absence,” she said, but “they made me keep my participation up to keep from getting kicked out of school.” Everest has no leave-of-absence policy, everyone told her, so she’d just have to stick it out. “Everyone including my professors encouraged me to stay in school, but this is my child we’re talking about,” she said. “They’re telling me, he wouldn’t want you to let your school go, making me feel like I’d be letting my son down if I grieved for him, that my education was more important than losing my child.”
Staff swore Bowers would be able to retake the classes at no additional cost if she failed them, and insisted she’d be better off educationally and financially if she pushed through and scored all Fs than if she got booted from the semester. But none of that proved true.
Retaking the classes that fall racked up more debt. She estimated she owes a total of $57,000 to the federal government for the loans that padded Corinthian’s bottom line, though she was never able to complete her Bachelor’s Degree or begin the Master’s she’d always wanted.
Today, the company is folding. Bowers is deep in debt and unable to complete her education at another school because Everest swallowed up six years’ worth of her college funding in just three years. And the federal government is helping ensure that Corinthian’s campuses get transitioned into a new brand of non-traditional colleges rather than letting the company collapse, which would help people like Bowers get out from under their debts.
The experience has left Bowers so deeply discouraged with the entire system of higher education financing in the country that she’s joining a radical, risky new attempt to force changes.
On Monday, Bowers and 14 other Corinthian students launched a debt strike, informing the Department of Education (ED) that they have no intention of repaying the debts incurred through their tortuous Corinthian experiences.
The “Corinthian 15” hope to convince many thousands more students buried in educational debt to band together and refuse to pay, triggering a broad reevaluation of how America finances higher education. Organizers from activist group The Debt Collective are helping to coordinate the strike and provide legal counsel to the strikers.
But this isn’t a conflict between students and a private company, or not merely that. It’s also a battle between the Corinthian 15 and the federal government. The strikers are not just fighting back against the company that buried them in debt, but against the government that is enforcing those debts. And beyond whatever ethical interest the public might have in these stories, we also have a financial one: the for-profit industry relies almost entirely on taxpayer money in the form of federal student loans.
Students and radical debt activists want ED to flat-out cancel the life-ruining debts that both current and former Corinthian customers carry. They haven’t yet gotten a toe-hold with the feds — these debts must still be repaid, under the terms of a ED-facilitated deal to sell Corinthian campuses to a debt collections company that will be making its first ever attempt to actually provide classroom education — but they’ve also only just begun to fight.
Bait & Switch
The company’s bait-and-switch approach to recruiting students — or making sales to customers — lured many ambitious people who thought they were investing in future economic security, workplace dignity, or job satisfaction. But ultimately, many of them were just buying a meaningless degree at a very high price.
Corinthian has a history of bribing temp agencies to hire graduates from some of its Everest College-branded programs. The hires allowed Corinthian to report misleadingly high job-placement rates for its graduates, even though the arrangement didn’t get anyone permanent work — graduates got a month of make-work assignments like pushing a broom for no apparent reason, then were fired unceremoniously. Lawsuits allege such bribery at a Decatur, GA branch of Everest and at multiple branches in California, and Corinthian staff in other states told the Huffington Post they were specifically instructed to find firms in their area that would hire graduates long enough to help Corinthian’s statistics, “and who cares if they stay?”
In order to receive taxpayer-funded student loan dollars, schools must maintain a sufficiently high job placement rate for graduates. Corinthian and other companies like it rely almost entirely on those public dollars for their revenue. In addition to keeping that multi-billion-dollar lifeline running, the inflated stats also help the company recruit new customers.
The reality of the job market for for-profit grads is far uglier; a for-profit degree gives you the same odds of landing a job as someone with zero college experience on her resume. Few know that better than 32-year-old Jeff Sutherland, an Army veteran with a wife, two small children, and nearly $40,000 in student debts he probably never should have owed.
Sutherland’s home in Mooresville, IN — “birthplace of John Dillinger,” he joked — is a humbler place than he might have wanted. “It’s not a derelict,” he said. It’s just a lot less house than he and his wife could’ve gotten if it weren’t for the debts Corinthian put on his credit report.
Sutherland left the Army in 2003 after a sledgehammer shattered his right elbow in an accident during field exercises at Ft. Bliss, TX. (“Don’t worry about it, I didn’t feel a thing,” he told me. “Morphine’s a wonderful drug.”) The accident made him eligible for a vocational rehab program meant to help him get work that would not exacerbate his injury. He got an associates degree at a nearby community college, but when his Veterans Affairs contact urged him to go on and finish his bachelor’s degree in business, the classes he needed were only offered during working hours.
Enter Corinthian. His wife had taken one semester of classes, “and they religiously called her, probably two or three times a week asking if she knew anybody else who would be interested in attending.” Once the recruiters got hold of Jeff, they painted an idyllic picture of how Everest’s online offerings could help him get the Bachelor’s that his VA benefits were going to pay for.
But when Sutherland took them up on the relentless sales pitches, it turned out his community college credits didn’t quite transfer in the way he’d been lead to believe. “They said they weren’t exact classes that matched up with what I had to take at Everest,” he said. The online college accepted Sutherland’s total credit hours but said they didn’t qualify him to skip Everest’s own pre-requisite courses, sending him back to the beginning. “I had to re-do English 111, even though my transcript from the community college showed a perfect A,” he said, and Everest’s classwork was so basic and inane that he never had to crack a textbook “unless a question was specifically based off one of their books.”
Worse, the damage Corinthian did to Sutherland’s credit never should’ve been necessary. According to Sutherland, the company told him that the VA’s checks weren’t coming in fast enough and that he needed to take out federal loans that dispersed money faster in order to avoid being dropped from school. When the military money eventually arrived, they’d cut Sutherland a check themselves, and he could use that check to pay down the federal loans. “They wanted me to act as the middle-man, is how I interpreted it.” Now, Sutherland’s got $37,000 in federal loan debt for redundant, facile online courses that did nothing to get him the better job he’d wanted. He eventually found such work on his own, getting hired by a company that “couldn’t have cared less about my degree” and which hired 7 other people with no college education on the same day.
So what did Corinthian do for him professionally, then? “Their career services referred me to a lawncare company who Everest’s career services told me was hiring a manager,” Sutherland said. “They set up an interview and everything. When I showed up, they were hiring for a utility position that paid $9 an hour, less than I was making then, and it wasn’t even in the same realm as what career services told me it was.”
A man with physical maladies went looking to invest in his own education so that he could get a less painful, better-paying job. Instead, he got a huge pile of debt that restricted his family’s ability to build wealth through a home, and a reference to go cut grass for a little over minimum wage.
Feds Ride To The Rescue — But Whose?
Corinthian’s reputation for inflated sales pitches to students like Sutherland ultimately caused its downfall. The question of how far the rot spread within the company’s national network of schools is key to understanding what’s happening as a new company takes over half of Corinthian’s schools.
Corinthian refused for years to cooperate with investigations into how Everest graduates fared in the job market. The resistance so frustrated the Department of Education (ED) that it restricted the company’s access to taxpayer money last spring. The feds had only meant to clip Corinthian’s wings but the move crippled the company, and its announcement that it would seek bankruptcy protections surprised even the ED officials who had made the decision.
What happened next is the crux of the current standoff between students-turned-activists like Bowers and the ED officials who oversee American higher education. Rather than letting Corinthian die, ED relaxed its grip on the company’s cash flow enough to keep Corinthian afloat, and set about finding a buyer for the 100-plus campuses and online colleges the company operated. Just months after deciding the company’s business practices merited putting a barrier between Corinthian’s coffers and taxpayer money, EDwas keeping the company on life support — and keeping its students on the hook for tens of thousands of dollars in debts.
The Debt Collective and striking students insist the feds could’ve handled all this differently. Shutting Corinthian down fully would have made current students like Bowers eligible to have their student loan debts canceled, or “discharged” in the legal jargon. They would walk away without degrees, yes, but they would also be freed from life-altering mountains of debt.
Roughly half of Corinthian’s campuses remain in limbo, thanks primarily to California Attorney General Kamala Harris’ refusal to drop her investigation into the company’s operations in her state. But the other half have now been sold to a new company — one that has no experience running actual educational institutions before, but lots of experience collecting student loan debts aggressively and with little regard for personal hardships facing borrowers.
The Education Credit Management Corporation, better known as ECMC, just closed a deal to buy and rebrand 56 Corinthian schools under a new name: Zenith. The schools will operate as not-for-profits, slash tuition for future students, and provide scholarships where Corinthian offered predatory private loans.
It remains to be seen exactly what that will mean for students like Bowers and Sutherland. Both ED and ECMC officials argue Zenith will be a boon to them, citing the company’s promise to knock 20 percent off the top of the tuition that Corinthian charged and its plans for improving the quality of the instruction students get. But other details of how the company will manage student transitions remain murky.
Even if the new company is a model of fairness and transparency with students, providing a meaningful educational return on the investment they’ve made will be almost impossible. A for-profit degree is worth less than a community college degree in job interviews. While Zenith won’t be for-profit, it will be ECMC’s first ever foray into the teaching business — and the crop of students who are being ushered from Corinthian’s rapacious clutch into the new company’s more benevolent arms will likely still suffer from being associated with the most notorious for-profit college brand name.
Still, the Department of Education prefers this approach to simply canceling debts, reasoning that students like Bowers and Sutherland would be better off finishing their educations and climbing back onto the standard economic carousel of using education to get better wages that allow them to repay the money they borrowed to go to Corinthian and Zenith.
“Giving students an option to finish feels to us like the right thing to do,” ED Undersecretary Ted Mitchell told ThinkProgress in December. “So imagine being a month and a half out from getting your certificate and all of the sudden school’s closed. It’s cold comfort to know that you can apply for a loan discharge. Because the reality of it is, you’ve gotta start over.” At that time, he said, nearly 9,000 students were just months away from getting their degrees.
“That’s paternalistic twaddle,” according to Ann Larson. “I’ve talked to hundreds of students personally. I’ve not talked to a single student, current or former, who says that they want anything less than total debt discharge,” she told ThinkProgress. Larson works with Corinthian’s former customers as an organizer with The Debt Collective, a group seeking to reshape how people think about student debt and force a reckoning with the government over how higher education is financed. She’s helping to coordinate the debt strike launched Monday.
Rather than decide for students what is best, Larson said, the government should ask them. “They’re the most vulnerable people in society, low-income people who wanted to better their lives, support their families. They were lied to and defrauded and now they’re worse off,” she said. “Ask them what they want and give it to them, or at least take it into consideration.”
Ashlee Schmidt, a 25-year-old member of the Corinthian debt strike, is far more concerned with the long-term damage to her credit than the short-term satisfaction of students getting to the finish line on Corinthian degrees. “It’s about getting the debt cleared. When we went to school we had dreams, we wanted to do something better for our lives,” Schmidt said. “They pretty much took that away from us when they put us in debt. They made sure we can’t get out of where we are.” Asked what she wants the ED to take away from the debt strike, she was clear: “For one, give us back our freedom with our credit. Taking our credit from us like they did and lying to us was wrong.”
Larson and the students she works with have attended field hearings to tell the ED exactly what they want out of Corinthian’s dissolution. But the department came away unpersuaded.
The evidence of dishonest recruiting tactics and bribery by Corinthian was strong enough to underwrite multiple lawsuits, including an ongoing one that is preventing the company’s California campuses from being sold for now. But because the ED simply isn’t convinced the company’s sins were systemic, they aren’t willing to make a blanket pronouncement that people like Ann Bowers have been cheated, or that every Corinthian customer got a deal so raw as to justify the expense of wiping their credit clean.
The department calculates that it would have cost $600 million to cancel the federal loan debts of current students at just the 56 campuses ECMC is buying, according to a ED official. Factoring in past students and the other campuses, the cost would presumably grow well into the billions. That expense is what’s really driving the government’s apparent reversal of opinion on Corinthian from last spring’s crackdown to this winter’s gentle shepherding, according to Larson and her comrades.
“Think about who’s profited from Corinthian for the past 2 decades,” she said. “Why are investors who have profited from these students’ dreams for years not on the table? People have been profiting off of this for two decades, and now that question is: should taxpayers pay this money? That’s ridiculous.”
Concrete Ideas And Vague Promises
Ann Bowers hated the idea of transitioning Corinthian to new ownership even before she joined the debt strike. “I feel like all the states should follow California’s example when dealing with them,” she said in November. “Make them close, not let them basically change names and open up with another dirty partner or whatever you want to call it.”
ED Undersecretary Mitchell, however, dismissed the idea of debt discharges for these students. “Our experience is that only around 6 percent of students who are eligible for that discharge actually apply for it,” he said, noting that the department will work proactively to improve that rate should the remaining Corinthian schools end up closing down. But for everyone else, he said, discharge wasn’t a good idea. “It goes back to the nature of this population. This population has been often mis-served by these institutions for a long time, and they’re more likely to just walk away,” Mitchell said. “We were trying to avoid that outcome for them.”
Instead of focusing on student testimonials about what they wanted, the government spent its energy hunting for a buyer who would behave virtuously where Corinthian had not. “Our theory of action on this,” ED Undersecretary Mitchell said, “is that if we could find a buyer who was going to really do right by students, that that would be a better option. And we believe that ECMC is a buyer of that caliber.”
Mitchell’s upbeat thinking about ECMC comes from a mixture of concrete ideas and vague promises. The tuition writedowns will bring the price of these degrees closer to what community colleges charge for equivalent credentials, for instance, though community college will still be a far better deal.
ECMC is also hiring an independent monitor to watch out for students’ interests, Mitchell said, and it is voluntarily identifying the worst-performing Corinthian degree programs and shutting them down rather than trying to salvage them. That is theoretically good news for people who caught an ad for Corinthian’s criminal justice degree programs during re-runs of CSI: Miami and then took out loans to pay for one of the company’s most notoriously useless credentials.
It does not, however, guarantee that those most-victimized Corinthian students will actually get a good deal out of ECMC. Mitchell said the company has promised to give such students the option of having their tuition refunded or of receiving a voucher for new courses of equivalent value to the now-worthless ones they already paid Corinthian to take. But the company isn’t talking about how it will explain students’ options to them, and the overall style of those conversations could have huge influence over how someone makes the choice between voucher and refund.
And even a refund check isn’t the same as discharging the debts. The same economic vulnerability that defines this student population in Mitchell’s eyes also makes it unlikely that a refund check from ECMC will go straight to repaying student loans.
Jeff Sutherland, the Corinthian student who ended up in massive debt even though his benefits as a military veteran were supposed to cover the cost of his education, knows that all too well. The military benefits took over a month to process, so Corinthian had him take out loans instead. That way the company could get paid quickly, and then send him a check once the military benefits processed a month or so later.
Those reimbursement checks rarely went to paying back the federal loans, Sutherland said, since that borrowing was far less pressing than the other expenses facing his family. “I had checks at that time coming back to me in amounts of $4,000 to $5,000,” he said, and he was earning around $400 a week at that time. “When you’re making that amount of money and you get a $5,000 check in the mail, it’s, ‘hey, I can afford to finally get my car fixed.’”
Such problems will plague any refund checks ECMC cuts to Corinthian students too. And if ECMC is indeed presenting a menu of options to these students — something a company representative declined to discuss in any detail, saying “we’d like to communicate with students directly about their options before speaking about this process” — then there will be a significant incentive for the company to steer students away from refunds. Vouchers keep these people enrolled, after all, while refunds cost the company money.
Assume, though, that ECMC is as virtuous as it could possibly be in handling transitions for current Corinthian students. What of the tens of thousands of past students, owners of worthless degrees and owers of massive federal loan debts themselves?
The ED’s decision that Corinthian’s sins were not pervasive enough to justify a wholesale discharge of student debts means that former students are without recourse. Unless, of course, they turn to radical measures like The Debt Collective’s strike.
‘You Are Not A Loan’
The conventional wisdom is that a person must always repay his debts down to the last penny. But in fact the marketplace doesn’t quite operate that way.
An entity will try to collect what you owe it for a while. But unpaid consumer debts of all kinds eventually get resold in a secondary market, for cents on the dollar. That gives the original creditor a better-than-nothing return on the debt, and entitles the collections company that buys the debt to come after you for the full 100 percent. Such companies are notoriously unscrupulous, unregulated, and uninterested in moral questions, as the New York Times has documented in profiles of collectors.
In one sense, The Debt Collective is an online community of like-minded would-be changemakers. But while that shallow description is accurate, it sells the group — and the idea that animates it — many miles short.
The Debt Collective amounts to a wholesale rejection of how American capitalism treats consumer debt, and of how American society has always defined the responsibilities of borrowers and lenders to one another.
The secondary debt market is key to the work these activists are doing. Rolling Jubilee, an allied entity, uses donor funds to buy debts in the secondary market, just like a collector would. But instead of collecting, they simply cancel the debts, and let the borrower know they no longer have to pay. It’s an eye-opening experience that reveals the vast gap between what we think debt is worth and what the actual market value of the stuff really is.
Monday, Rolling Jubilee canceled $13.3 million in student loans that it had bought for a single dollar. Debts that looked big enough on paper to just about buy Tom Brady and Gisele Bundchen’s Manhattan condo turned out to be worth the cost of a small coffee at McDonald’s.
The move pushed the total student debts canceled for Corinthian students to nearly $20 million. That work “is punching through the phony morality around debt,” activist Thomas Gokey told ThinkProgress back in the fall when The Debt Collective cancelled its first round of Corinthian students’ debts.
But the Rolling Jubilee tactic targeted private student loan debts, and the buy-and-cancel trick won’t work on the federal loans that make up the vast majority of students’ debts. Federal student loans don’t get resold at a discount because they retain their value fully no matter how long they go unpaid. They are almost impossible to discharge in bankruptcy — thanks to years of legal campaigning to curtail borrowers’ rights by ECMC itself, back when collecting on behalf of the feds was its only line of business — and they are the only kinds of debts for which someone can have their Social Security check garnished. If your kid dies with student loan debts, you may find yourself getting collections letters in between condolence cards from friends.
Since the Jubilee tactic can’t offer further comfort to Corinthian students, The Debt Collective has escalated things with the Corinthian 15 debt strike. “The idea of the strike is to get the Department’s attention,” said Strike Debt activist Luke Herrine, and to draw in enough other participants that ED can’t ignore the campaign. “The basic idea is to have strikers talk to people in their communities about both the strike and what’s going on with Corinthian, [ED’s] role in it, and then to sort of build numbers.”
The group cannot bring federal education officials to their knees financially, Herrine said, but “for them it’s a matter of PR and being unable to keep up the facade of being supportive of students and looking out for their best interests and quote-unquote supporting their choice.” The group is providing extensive legal counsel to anyone who joins the strike and advising them on how to contest things like credit report mark-downs and tax refund garnishments. All the while, the group is building evidence that might help win case-by-case debt discharges from the federal government under a little-used administrative process.
It will be a long fight, and less up-hill than up-mountain. The movement has roots in the Occupy Wall Street protests of nearly four years ago, and is probably the single biggest legacy of Occupy. The basic idea has cropped up under a few different organizational names since then, like Strike Debt and Rolling Jubilee, but those groups all have overlapping memberships and interlocking purposes. The Debt Collective is the newest of these, and its motto is “You Are Not A Loan.”
The radicals may get some assistance from more mainstream sources, too. At least one state Attorney General has asked the feds to forgive Corinthian students’ debts. And some progressive Democrats in the Senate are already putting heat on the Obama administration and officials like Ted Mitchell.
Sen. Richard Durbin (D-IL) told Buzzfeed in December that he “begged” the administration not to intervene in Corinthian’s collapse, and is “puzzled and upset” by the decision to seek a virtuous buyer and keep students locked in.
That same month, Sen. Elizabeth Warren (D-MA) penned a letter to Education Secretary Arne Duncan demanding that the department forgive federal student loan debts tied to Corinthian “immediately.” It was no lone-wolf effort from the progressive champion: 12 other Democrats in the upper chamber of Congress signed onto the letter as well.
Such voices have an easier time reaching the right ED ears than the gripes of folks like Jeff Sutherland, the disabled veteran who owes the ED $37,000 in federal loans for a Corinthian education he’ll never finish. He says the company “cared about how much money I would make them as opposed to the quality of education I would receive and what my job prospects were after graduating.”
And what would he say if a prospective student asked him about enrolling at a place like Corinthian? “I would tell somebody to walk away at a very swift pace,” Sutherland chuckled. “Run.”
This piece has been updated to clarify the nature of the Rolling Jubilee debt cancellation tactic.