Student Complaints Rising at For-Profit Schools
No segment of higher education is growing faster than for-profit colleges. Enrollment has shot up from 365,000 a few years ago to five times that now, but complaints by dissatisfied students are also rising.
Congress holds hearings again in September after investigators went undercover.
Two years after graduation, Michelle Zuver doesn't know how her college debt reached $86,000. She was told the cost would be less for a criminal justice degree she says many police agencies don't recognize. Her degree came from Westwood College, a for-profit school with 17 campuses, reports CBS News correspondent Wyatt Andrews.
"It's definitely a false American dream," says Zuver. "I can't get a job, I'm in debt and living at home."
Justin Schulthies, another Westwood student, borrowed $84,000 and also says he was never told the true cost. He describes his degree in videogame design as almost worthless.
"I feel like I went to Wal-Mart and bought myself a degree," he says.
Widespread complaints like this - overpriced degrees, misleading claims, and an alarming level of student debt - led to some embarrassing revelations this year on the entire for-profit college industry, including Westwood. When the Government Accountability Office went undercover to investigate how 12 for-profit colleges recruited their students and found that every one - 12 of 12 - made deceptive claims and that four colleges encouraged fraud. In a video, a Westwood sales rep tells the GAO agent not to report a quarter-million dollar bank account in order to maximize his student loans.
"Just FYI, they don't need to know your cash," says the recruiter on the video.
In June, the Senate heard testimony on why these colleges recruit so aggressively.
"Excuse the language, but it's putting asses in classes," says Senate witness Margaret Reiter.
Turns out, the explosive growth and profitability of the industry, including its big names like Kaplan and the University of Phoenix, is being funded by students using taxpayer-financed grants and loans. The industry now educates 10 percent of all college students, 1.8 million. But those students get 23 percent of federal loans and grants, and are the most likely to default on those loans.
"The whole business model of the for-profit school industry depends on taxpayer money," says Sen. Tom Harkin (D-Iowa)
The for-profit college system does play a critical role in society. It serves older students, workers between jobs and adults upgrading their skills. But now to protect taxpayers against huge losses, the Department of Education wants some new rules, including one that would expel a for-profit school from the student loan system until more of their graduates start to pay. The industry is fighting that rule, calling it a penalty for serving low income students who can't attend state universities.
"We're always going to have higher default rates than those who go to much more highly selective traditional institutions," says Harris Miller, president and CEO of the Career College Association.
Westwood College declined our interview request but claims that most of its graduates have "positions in their field of study." Meanwhile Schulthies works in a mail room and Zuver works in retail.
"They've put me in a situation where if I'm lucky I'll recover around the age of 50 or 60," she says.
Westwood tells CBS News that Zuver got the information she needed on the cost and value of her degree but Westwood and the other colleges caught on tape by the GAO have promised major improvements in what they tell students what they disclose during recruiting, including more details on costs and whether the degree being offered is likely to result in a job.
