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Barbarians in the Ivory Tower 

America's for-profit colleges use students in their greedy quest for federal bucks -- then leave them holding the debt.

Thursday, Aug 16 2012
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But a saleswoman for the Art Institute of Pittsburgh, also owned by EDMC, convinced him that her school's online photography program was perfect for his situation.

He struggled immediately, getting migraines from staring at his computer. "There would be several days I'd get up at roughly 8 a.m. and wouldn't go to bed until 4 a.m.," Pantzke says. "That's how bad it was because I was falling so far behind." He punched a hole in the wall next to his laptop and "dishes took flight."

In one online class, the teacher didn't have Internet access for more than a third of the course. Only after pestering three different advisers was Pantzke finally put in touch with the school's Disability Services Office. Despite the recruiters' original promise of specialized help, the Art Institute balked at his request for additional tutoring.

click to flip through (4) ILLUSTRATION BY VLAD ALVAREZ
  • ILLUSTRATION BY VLAD ALVAREZ
     
 

Then Pantzke appeared on PBS' Frontline for a story about for-profit colleges. Shortly before the Frontline piece aired, a vice president contacted Pantzke, asking him to sign a release saying "that I was doing fine and things were going great."

He refused, but soon he noticed a miraculous lift in his academic fortunes. Despite turning in one slapdash assignment he knew wasn't any good, he received an A. "Once I started making waves, I started passing my classes with A's and B's," he says. "I don't know if my grades were true, and it made me doubt my photography ability."

His tenure at the Art Institute came to an end on Easter, when he was hurt in a serious car accident. Unable to type for six months, Pantzke decided he'd instead study photography on his own. In just 18 months at the Art Institute, he'd run up $26,000 in debt and burned through an additional $65,000 of his GI Bill benefits — with almost nothing to show for it.

Yet if Pantzke got away, there were plenty of other servicemen where he came from. A story by Bloomberg News caught a recruiter from Ashford University visiting the Wounded Warrior Barracks at Camp Lejeune in North Carolina. It seems that injured veterans — notably those with head injuries — are particularly receptive to the for-profit sales pitch. The story's opening line said it all: "U.S. Marine Corporal James Long knows he's enrolled at Ashford University. He just can't remember what course he's taking."

Federal data show that for-profits increasingly are targeting veterans. In 2009, the for-profits took in almost as much military money as public colleges — although they were educating just one-third of veteran students. Last year, eight of the top 10 educational institutions collecting GI Bill benefits were for-profit, taking in a stunning $626 million.

"I think sometimes the emphasis is on signing up the student as opposed to whether or not the student is really ready to be successful at that school," says Holly Petraeus, an official with the Consumer Financial Protection Bureau and wife of Gen. David Petraeus. "The top 10 recipients of GI Bill aid, eight are for-profit schools, and they are very heavily engaged in marketing to the military — quite successfully, frankly."

It's all about the Benjamins

The University of Phoenix will never be confused with Yale. According to one 2010 report, 90 percent of its students fail to graduate within six years.

Still, by pure monetary standards, former CEO Todd S. Nelson was a success. During his tenure, he tripled revenue for University of Phoenix's parent company, the Apollo Group. Enrollment surged to more than 300,000.

Unfortunately, he accomplished this the old-fashioned way — by cheating. Since 1992, it's been illegal to pay recruiters based on how many students they bring through the door. Phoenix did it anyway, until two recruiters blew the whistle, initiating a suit that ultimately cost the school $88.3 million in settlements and fines.

Under pressure, Nelson was forced out in 2006, walking away with a generous $18 million severance package. Founder John Sperling put a polite spin on the exit, saying only that Nelson was "preoccupied" with stock price to the detriment of the school's long-term health.

Yet if Nelson's profit motives were too lusty for Phoenix, they were a match made in corporate heaven for Goldman Sachs. The Wall Street bank had partnered with two private equity firms to buy EDMC. Nelson was hired as the company's new CEO. Former Maine governor John McKernan Jr. — the husband of U.S. Republican Sen. Olympia Snow — was named chairman of the board. Over the next five years, the company's revenue would nearly triple to $2.8 billion.

Last year, Nelson took home $13.1 million in salary and stock. By the standards of for-profit executive pay, he was working on the cheap.

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