By Professor
Doom
There’s so much fraud and corruption going
on in state and non-profit schools that I usually don’t discuss the immense
frauds going on in the for-profit schools. However, for-profits are big enough
that it would be a disservice not to at least mention them from time to time:
they have so many students that it’s clear not nearly enough people know what
goes on in for profits.
So today I’ll talk a bit about ITT Tech.
I’m sure my gentle readers have seen the commercials, promising high paying
jobs to students that complete their program. Now, I’m all for jobs training
programs, especially for jobs that, according to the want ads, are actually
available (unlike the many public college graduates with degrees in fields with
no job demand whatsoever…Urban Studies, for example). ITT Tech might well be expensive,
but at least they are selling a valid product, in theory.
Now, ITT Tech is a big school, but not as
big as I thought, considering the nationwide TV ads:
This alone is just fascinating. There are
many state universities with tens of thousands of students. These universities
have one main campus, maybe a couple of satellite campuses, operate in a single
state, and don’t spend hundreds of millions on nationwide advertising.
Considering the state schools are on tax-free land, they should have much,
much, much, lower overhead costs than, say ITT Tech with its 135 campuses
spread around the country, each servicing a few hundred students on average, paying
for those campuses every month, and still turning profits. Why then, are state
schools perpetually cash strapped?
Someone should really look at the finances
here, because it’s not all about the tuition, there are obviously some good
business ideas at ITT Tech that should be adopted at state schools (I suspect
ITT doesn’t employ legions of very highly paid administrators).
Ok, that’s probably giving ITT too much
credit for good business practices:
Right now, the SEC is just freezing up
ITT’s financial aid payments (i.e., taking them out of the student loan scam).
This is an act which would totally annihilate state schools, forcing them to
shut down. ITT, amazingly enough, has the cash reserves for this to only be an
inconvenience:
“ITT was required during this process
to provide the department with a letter of credit in the amount of
approximately $80 million, which will remain in place for at least the next
five years,” she said in a written statement. “The letter of credit will
protect students and taxpayers if there are unpaid federal student aid
liabilities during this extended period.”
We really need to consider just how much
money flows from student loans:
The SEC’s charges center on the
company’s PEAKS and CUSO loan programs. Students borrowed $441 million under the
two programs beginning in 2009, according to the SEC, with $300 million loaned
out under PEAKS.
There’s a lawsuit over these loans, but I
love ITT’s response to the lawsuit, which alleges ITT pressured students into
taking out high interest, high risk loans. ITT’s response:
“…it is legally flawed and falls
outside the consumer protection agency’s jurisdiction.”
So, yes, the loans are high interest, and
yes the loans are high risk, but there is nothing wrong, legally speaking,
about pressuring suckers students into taking them, and it’s not
something the consumer protection agency should be concerned about. Hmm, if
taking out a loan for ITT’s “education” is high risk, I guess that means you’re
probably not going to get the high paying job in the commercial. Eh, it’s not
like TV commercials have much of a reputation for being honest, so I can see
ITT’s point here.
The interesting thing about this,
however, is that ITT was backing its own loans (which go on top of the Federal
loans). Yes, those loans are high interest, probably so high that ITT might not
even care about whether the principal is ever repaid but still…that’s a sign of
integrity. Why don’t state schools back their own loans? Oh yeah, the purpose
of many state schools, especially community colleges with questionable
education, is to suck out that money from the Federal government.
The SEC’s problem, however, isn’t
questionable education:
…according to the SEC’s 56-page complaint, the loans had “performed so abysmally, with extremely high default rates, that ITT’s guarantee obligations began to balloon.”
The SEC feels that the executives of ITT
weren’t forthcoming with the economic disaster hitting ITT. As much as I’m down on for-profits, I once
again find myself siding with ITT. The economic downturn has devastated the job
market, despite what government unemployment numbers say. ITT may very well
have made those loans in good faith (and backed those loans with its own money,
I emphasize). ITT may have charged a lot for those loans, but it’s not ITT’s
fault the economy is in serious trouble now, causing so many defaults on the
loans…that’s what happens when the economy turns down.
ITT
backed their student loans with their own money, and are now losing their
shirt. Hey, is anyone connecting the dots as to what will happen with all the
student loans backed with taxpayer money? We’re talking well over a trillion
dollars, folks.
“does this whole thing offer any
relief for the students who took out loans through ITT tech. If so where can a
person go to get some of this relief. I was an ITT student and the interest
rates on the loans I got through them were insane and are still crippling me
financially. I was a young kid when I took out the loans and didn't know any
better.”
--from the comments section. To judge what the government did with Corinthian, there’s not much hope the ITT students will get fair treatment. Of
course, this happens at state schools too…
So, as near as I can tell, ITT is a pretty
decent for-profit school (that’s faint praise, I admit), albeit expensive, and operating
like any other business. The SEC is quibbling over whether the executives told
investors things weren’t rosy, but that’s pretty hypocritical coming from a
government entity. They’re trying to make this into something bigger, however:
“It makes you wonder, if these guys at the top are willing to lie to their auditors, who else are they willing to lie to?” she said.
Absolutely, it’s quite possible ITT is
lying about quite a few other things, but, um, just how many major scandals are
going on at state schools? UNC, just as one example, engaged in fraud for over a decade, with many documented lies to
auditors at accreditation, and I sure don’t see the SEC looking into UNC to see
what other lies UNC might be telling.
Not everyone is willing to cut ITT as much
slack as I do:
--the gentle reader needs to note
that many of the accusations being said here apply on some level to many
schools, including those not for profit.
As
much as I’d like to slam another for profit school, I have to wonder if maybe
something else is going on here, because there are an awful lot of logs in the
eyes of state schools to have such concern over a splinter in the eye of ITT
tech.
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