A Battle Over Standards
At For-Profit Colleges
For-profit colleges are booming. But a new fight between these
upstarts and the education establishment raises a key question: How much are
degrees from for-profits really worth?
Some angry graduates are suing for-profit colleges, claiming
that they were misled into thinking their course work would be accepted
elsewhere. Traditional colleges rarely recognize the work done by students at
for-profits, arguing their academic standards aren't high enough. So these
students often have to start over if they want to go elsewhere to complete or
advance their studies.
Now Congress appears poised to pass legislation that favors the
for-profits, a group of heavily marketed schools that are often owned by
publicly traded companies. Traditional colleges -- the public and private
nonprofit institutions from the Ivy League to state universities that long have
formed the backbone of U.S. higher education -- are fighting the changes.
The traditional colleges question the rigor of many of these
newer rivals, which offer degrees in such subjects as auto repair and massage
therapy but have also branched out into business and other courses of study. The
eight regional associations that have long set standards for traditional
colleges recognize only a few of the thousands of for-profit colleges. These
gatekeepers evaluate everything from the faculty's level of preparedness to the
quality of libraries. Meanwhile, some for-profit graduates have been left with
heavy debts and unfulfilled goals.
Terry Pitts dreamed of quitting his job as a prison guard and
becoming a lawyer. So he enrolled at Florida Metropolitan University in Tampa
for a bachelor's degree in criminal justice. Corinthian Colleges Inc., one of
the nation's largest chains of for-profit colleges, owns FMU.
Before graduating from FMU with a nearly straight-A average in
2003, the Gulf War veteran says he was dismayed to discover local law schools
wouldn't accept his degree. He says that three years earlier Dolly Brown, then
FMU's dean of students, assured him that he would have no problem using his FMU
degree to qualify for law school.
Now 35 years old and married with two children, Mr. Pitts works
as a construction foreman, lives in a mobile home and has $56,000 in student
loans from his FMU education. He says he can't afford the tuition for a
recognized bachelor's degree from another college. "I spent four years for
nothing," he says.
Across the country, former students of for-profit colleges have
filed at least half a dozen lawsuits, alleging they were misled about whether
other colleges would accept their course credits or degrees. FMU has faced four
such suits, including one filed on behalf of Mr. Pitts and about 100 other
former students. They say admissions officials, administrators and instructors
told them repeatedly they could take their work to traditional colleges.
Corinthian in a statement calls the complaints "baseless."
On its Web site, FMU says it is a "qualified institution of
higher learning with approved programs of study." There is no mention course
credits may not be transferable or that FMU degrees might not be accepted
But Corinthian, like many for-profit colleges, says it has told
students in writing before enrollment that it doesn't guarantee credits will
transfer. An independent arbitrator recently backed FMU's defense in a court
case. Through a spokeswoman, Ms. Brown, now a regional manager at Corinthian,
denies promising Mr. Pitts that other colleges would accept his work and says he
may have misconstrued a discussion about a state system that makes certain
credits easy to transfer.
Until recently, such disputes have had little impact on the
success of for-profits, whose enrollment is growing four times as fast as that
at traditional colleges. It now stands at 1.7 million students, up 42% from five
years ago, and accounts for 9% of all U.S. college and graduate students,
according to Eduventures Inc., a Boston research firm. Convenient campuses,
flexible hours and online courses have spurred this success. But multiple
lawsuits questioning the quality of the for-profits have weighed on the stock
prices of onetime highfliers, including Corinthian, Career Education Corp. and
Apollo Group Inc., which owns University of Phoenix.
With growing concern over the rejection of their students'
work, the for-profit industry is pushing a bill that would make it more
difficult for traditional colleges to reject course credits and degrees from
their schools. It is now pending before Congress as part of broader
The Republican leadership and Bush administration support the
legislation, including the credit-transfer provision and others that would
provide more financial-aid dollars to these institutions. Mr. Bush has generally
supported private initiatives in education, such as government-funded vouchers
that grade-school children can use to attend private schools. Supporters say the
for-profit colleges are providing a valuable service to students, many of them
low-income, who need skills and training they aren't getting from traditional
The Senate is considering similar legislation, which is
expected to pass by early next year. Traditional state and private colleges
could still reject credits and degrees from for-profits, but they would have to
provide more detailed reasons for rejecting the credits.
Traditional schools say it would be too expensive to evaluate
each transcript from a for-profit school to see if it passes muster. So they
argue that a rule against blanket rejection of degrees and coursework from such
schools would end up diluting the value of college degrees. For-profit schools,
which are heavy contributors to congressional campaigns, "are buying legislation
for their otherwise suspect goods," says Barmak Nassirian, associate executive
director of the American Association of Collegiate Registrars and Admissions
At the center of the debate is the little-known system for
ensuring quality control in U.S. higher education. Traditional colleges receive
stamps of approval from eight regional accrediting commissions, whose charters
typically date to the 19th century. These agencies are voluntary outfits
supported by dues from schools. They evaluate colleges on measures such as the
degrees held by faculty, professor-to-student ratios and the number of volumes
in school libraries. While 3,000 traditional colleges have this accreditation,
only about 90 for-profit colleges do.
Instead, more than 3,000 for-profits get their seals of
approval from newer so-called national accrediting bodies. Many of these groups
were created in the 1970s to certify trade schools. In their reviews, the newer
agencies focus more on schools' job-placement records than on academic
credentials, officials say. Corinthian says 80% of its graduates get jobs
related to their fields of interest.
'Costly and Anticompetitive'
In Congressional testimony last year, Corinthian Chairman David
Moore called the traditional colleges' rejection of credits issued by for-profit
schools "unfair, costly and anticompetitive." Only 18% of schools without
regional accreditation had their course credits accepted by traditional
institutions, according to a 2001 study by the Career Training Foundation, which
is funded by for-profits.
The U.S. Department of Education recognizes both the
traditional and the newer accreditation systems in providing government backing
for loans and other aid to students attending colleges. Schools with the newer
accreditation often tell prospects they are "fully accredited."
But students such as Christopher Dacus, who studied automotive
technology three years ago at for-profit Lincoln Technical Institute in Grand
Prairie, Texas, find that their credentials can have drawbacks.
Mr. Dacus attended a 10-month program at the school, a unit of
West Orange, N.J.-based Lincoln Educational Services Corp. Now 22, Mr. Dacus
says that before he enrolled, he asked if he could apply his work toward a
two-year associate's degree at a junior college. He says a Lincoln admissions
counselor whose name he can't remember replied that he could. But he says some
community colleges later turned down his Lincoln credits, citing the school's
lack of accreditation from one of the traditional regional groups.
Mr. Dacus says he later got a job at an auto dealer that
required no more than a high-school diploma. He and his family owe $16,000 in
government-backed student loans.
Scott Shaw, a Lincoln senior vice president, says Mr. Dacus
initialed and received forms among his enrollment documents explaining that the
transferability of his credits "may be limited."
In Tacoma, Wash., the for-profit Crown College faces two
lawsuits from former students who claim the school misled them about whether
coursework from the school, which is accredited by one of the newer bodies,
would transfer. In a court declaration related to the suits, David H. Elder Jr.,
a Crown instructor from 1999 through 2001, says students complained to him about
the transfer problem.
Mr. Elder says he asked John Wabel, Crown's owner, about the
transfer problems in May 2001. Mr. Elder says Mr. Wabel told him to "forget
about it" and said getting regional accreditation would be too expensive. Mr.
Elder says he was asked to leave Crown over the dispute.
Mr. Wabel says the conversation never occurred, and the school
denies the allegations in the suits, filed in Pierce County Superior Court in
Tacoma. Mr. Wabel says Crown discloses in writing that it doesn't guarantee
credits will transfer.
Few companies have faced as much controversy over transfers as
Corinthian, founded in 1995. The Santa Ana, Calif., company, whose shares trade
on the Nasdaq Stock Market, has 128 campuses in the U.S. and Canada. Swelled by
acquisitions of other colleges, Corinthian enrolls 66,000. In the year ended
June 30, its revenue was $964 million, up 21% from the previous year. But
profit, which had tripled between 2001 and 2004, dropped 23%, to $58 million.
The company blamed high turnover among admissions officers for a slowing in new
enrollments. From the company's initial public offering in 1999 until their peak
last year, shares rose in value about 10 times. Since then, amid the lawsuits
against Corinthian and other for-profits, as well as government investigations
of the industry, shares have lost more than half their value.
In Florida, many established institutions shun Corinthian's FMU,
which has 10 campuses with more than 11,000 students. The Tampa campus consists
of a two-story, blue-and-white building between a gas station and a self-storage
outlet. Across the street is the Wild Nights Gentleman's Club.
In January 2002, FMU applied for membership to the Southern
Association of Colleges and Schools, the traditional regional accreditor of
institutions such as Duke University and the University of Florida. That August,
Ann B. Chard, associate executive director of the regional association's
accrediting commission, replied with a seven-page letter indicating FMU fell
short, according to a copy filed as an exhibit in one of the court cases.
Ms. Chard's assessment cited FMU's "disproportionate number" of
part-time faculty members -- 417 part-timers versus 134 full time. Ms. Chard
also listed more than 50 faculty members who, in most cases, appeared "to lack
the formal academic hours/degrees required." At FMU's Brandon location in
suburban Tampa, one instructor had a nursing degree but taught medical law and
ethics. The letter also questioned the size and staffing of the schools'
In March 2003, FMU withdrew its accreditation application to
the Southern Association. Anna Marie Dunlap, Corinthian's senior vice president
for investor relations, says Corinthian was concerned that the accrediting
agency required it to freeze expansion during the review, which can take years.
Ms. Chard says FMU withdrew so early in the process that "no
conclusions can be reached" about whether FMU could have gained membership.
Last September, many prospective FMU students received an
anonymous email accusing the school of misleading students about accreditation
and transferring credits, according to a lawsuit FMU filed against two former
admissions reps and five "unnamed co-conspirators." The suit, filed in
Hillsborough County Circuit Court in Tampa, accuses the former employees of
theft of trade secrets and defamation.
The email said an FMU degree could be "a very expensive
mistake," according to a copy filed in court. "You will have great difficulty
finding another school that will accept any of the work that you have done
Stephen Backhus, a former FMU admissions rep named in the suit,
says he wrote and sent the email. He says he felt guilty about enrolling
students. "I couldn't take it anymore," he says. FMU fired Mr. Backhus in
October last year for his role in contacting students.
Corinthian's Ms. Dunlap says the email was "filled with
distortions and inaccuracies." While the company doesn't track numbers of those
who have successfully transferred their credits, she provided names and details
of seven students who transferred to schools with traditional regional
accreditation. One was Dorian Matthews, 30, who received a bachelor's in
accounting from FMU in Tampa in 2000, then an MBA from the University of Tampa
in 2002. In an interview, Ms. Matthews described the transition between the
schools as "fine and dandy."
Grant Donaldson, director of public affairs at University of
Tampa, says the school generally accepts credits only from regionally accredited
schools and doesn't tend to accept coursework from FMU but has made exceptions
for strong applicants.
Corinthian says it will "go to bat" to help students get their
coursework accepted elsewhere and that those who fail to win over other schools
may have weak grades or references. The company also says it provides students
with enrollment papers and course catalogs that state the school "neither
implies nor guarantees" its credits will be accepted elsewhere. In court, FMU
has provided copies of these disclosures initialed by former students, including
Mr. Pitts and others suing the school.
Corinthian also says students, when enrolling, agreed to submit
to a private arbitration panel, rather than sue in court. In one case, filed in
Broward County Circuit Court in Fort Lauderdale last year, the company succeeded
in sending the dispute to a panel. In July, an arbitrator ruled in Corinthian's
Mr. Backhus and former students say these disclosures were
buried in the fine print. They say the language -- that credits aren't
"guaranteed" to transfer -- understates the rarity of getting the work accepted
elsewhere. Some former students, such as Mr. Pitts, say they don't remember
signing such disclosures at all. They also contend conversations with school
staff and others contradicted the written material.
Five years ago, Beverly James-Snyder, a student suing FMU, says
she told the college before enrolling that she planned to go to law school. She
asked whether she could transfer credits to University of South Florida, where
she wanted to get her bachelor's degree. Edward Whittle, an instructor, told her
local schools would "have to accept my credits without question," according to
Ms. James-Snyder's sworn statement filed in court.
Through Corinthian's Ms. Dunlap, Mr. Whittle says he doesn't
recall the conversation but says his "automatic response" to such questions is
that "there is no guarantee credits can be transferred."
Ms. James-Snyder, now 40, completed her associate's degree in
paralegal studies in 2002. But when she tried to enroll at University of South
Florida that year, "they laughed me out of their office," she says. She now
studies at University of Phoenix, a for-profit school with regional
accreditation that accepted only a third of her FMU credits. She owes more than
$20,000 in loans for FMU.
On the wall of her home office, Ms. James-Snyder used to hang
certificates she earned for making the FMU honor role, with her 4.0 grade-point
average. She has taken them down. "This degree isn't worth the paper it's
written on," she says.
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--October 03, 2005