For-Profit Colleges Are Scandal Machines

This corrupt higher education "industry" ought to be put out of business

People walk past the Art Institute of Philadelphia operated by the Education Management Corporation in Philadelphia on Nov. 16, 2015. The Obama administration has reached a $95.5 million settlement with a Pittsburgh firm that runs for-profit trade schools and colleges. The Justice Department settlement resolves allegations that Education Management Corporation used enrollment incentives to pay its recruiters and exaggerated its career-placement ability. (AP Photo/Matt Rourke)

The nation’s for-profit, private college industry is a study in horror.

Start with the fact that it actually calls itself an “industry.” Excuse me, but education is a social investment—not an industrial product.

Next, this so-called “private” industry depends almost wholly on government money. It generates practically none of its revenue from the free market. Instead, it cons students into taking expensive government-backed loans to invest in educations that seldom deliver increases in their earning potential.

“For-profit” colleges are just that. They maintain that their obligation isn’t to serve students or society, but to deliver profits to their corporate shareholders. These things are scandal machines, as proven by the latest for-profit college conglomerate to be exposed as a fraud.

Education Management Corporation (EDMC) operates four college systems, offering courses online and in office buildings in 32 states. EDMC gives its recruiters extravagant financial incentives to pressure low-income people into taking-out huge federal education loans in order to pay for courses at the corporation’s colleges.

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EDMC has been sucking up more than a billion dollars a year from these students, who generate some 90 percent of its revenue. But its courses are mediocre to worthless, leaving graduates in unbearable debt and unable to get jobs with salaries high enough to pay off their loans.

Bear in mind that this sleazy fraud isn’t the work of some fly-by-night hucksters. EDMC is largely owned by Wall Street giant Goldman Sachs.

Thanks to some former students and a couple of corporate whistleblowers, EDMC has now been exposed and is paying a price for its extortion. Its stock price has fallen from $22 a share to—get this—9 cents. And it’s also been hit with a $90 million federal penalty for fraud.

The whole system of corrupt for-profit colleges ought to be put out of business.

Jim Hightower is a columnist for OtherWords, radio commentator, writer, and public speaker. He’s also editor of the newsletter, The Hightower Lowdown, and a member of the Public Citizen board. This article was previously published on OtherWords.org.