Lawsuit: Predatory Private Colleges Targeting Veterans

Although the former Corinthian Colleges, once one of the nation’s largest for-profit colleges, closed its doors last year, many of the problems incurred by its former students persist. The now-defunct college is the only questionable actor among for-profit colleges.

To date, investigations, and lawsuits have focused on a growing list of other for-profit schools and colleges including but not limited to Computer Systems Institutes, DeVry University, ITT Tech, Marinello Schools of Beauty and Trump University.

With tuition costs higher than many public colleges and universities, many for-profit college students are financially forced to take on private student loan debt at interest rates that exceed those of federal student loans. Others are advised to add related charges to credit card accounts.

One of the worst financial abuses perpetrated are against the men and women who sought to successfully transition from military to civilian life. Many veterans enrolled and even graduated from for-profit institutions, like Corinthian, but now find there are three strikes against them: the promised better careers and high earnings never materialized, and thirdly, educational benefits that underwrote a portion of the so-called educational cost have now been suspended.

In response, eight state Attorneys General have challenged the Department of Veterans Affairs (VA) to “restore the educational and vocational rehabilitation benefits that thousands of veterans are deprived of due to misleading advertising, or enrollment practices of predatory institutions, such as Corinthian Colleges, Inc.” These Attorneys General (AGs) represent the states of California, Connecticut, Illinois, Kentucky, Massachusetts, New Mexico, Oregon and Washington.

“Most of the student relief flowing from enforcement actions against predatory educational institutions has, however, pertained to student loans – not the hard-earned benefits of our nation’s veterans,” wrote the AGs.

Two taxpayer funded programs, the Post-9/11 G.I. Bill and the Vocational Rehabilitation and Employment (VR&E) program are at the heart of the AGs’ concerns. G.I. Bill benefits, funded by Title IV federal student aid, provide up to $21,084 per year for tuition; additional funding covers housing, books and supplies. VR&E benefits are awarded for service-related disabilities that can include job training and education, workplace accommodations and career coaching.

Legally, for-profit colleges may receive up to 90 percent of their annual revenues from Title IV. VR&E assistance is not included as part of Title IV. If both Title IV funds – which also include Pell Grants — are combined with VR&E benefits, taxpayers are almost completely funding for-profit enterprises.

“[T]he VA’s decision to provide funds to Corinthian for student veterans’ attendance at these programs should be deemed an administrative error,” said the AGs. “This administrative error deprived student veterans of their right to use their benefits at an institution that was free of erroneous, deceptive, and misleading advertising, sales, and enrollment practices.”

For the Federal Trade Commission (FTC), the apparent lack of actual benefits derived from enrollment at DeVry are at the heart of a lawsuit filed in late January. Its complaint charges that one of DeVry’s key claims was deceptive — that its graduates had 15 percent higher incomes one year following graduation.

FTC also cited how DeVry promised that its graduates would find jobs in their fields of study and would earn more than those graduating with bachelor’s degrees from other colleges or universities. In most cases, these promises never materialized.

On March 10, according to FTC, DeVry filed a motion to have the case dismissed. On May 2, a hearing will be held to hear oral arguments from both sides.

“Millions of Americans look to higher education for training that will lead to meaningful employment and good pay,” said FTC Chairwoman Edith Ramirez. “Educational institutions like DeVry owe prospective students the truth about their graduates’ success finding employment in their field of study and the income they can earn.”

In at least one case, ‘university’ was used in the name of a for-profit enterprise even though it lacked a required state charter to do so.

According to New York Attorney General Eric T. Schneiderman, between 2005 and 2011, Trump University operated as an unlicensed educational institute that promised to teach real estate investment techniques. The office’s investigation revealed that participating consumers paid up to $1,495 for a three-day seminar. While in attendance, they did not receive the real estate training promised but were encouraged to sign-up for programs ranging in costs from $10,000 to $35,000.

In 2005, the New York State Education Department advised the enterprise of its state law violation. The enterprise’s name was not changed until 2010. Through it all, it never received a license to operate in the state.

“More than 5,000 people across the country who paid Donald Trump $40 million to teach them his hard sell tactics got a hard lesson in bait-and-switch,” said AG Schneiderman.

The pending lawsuit filed in Manhattan’s New York Supreme Court, seeks full restitution for consumers defrauded of more than $40 million.
A separate but similar 2010 cased filed in San Diego filed against Trump University is a second class-action lawsuit, and is scheduled for a May 6 pretrial hearing.

As for the now-defunct Corinthian Colleges, recent news accounts reveal how the purchaser of the former colleges, nonprofit Zenith Education Group, has failed to correct many of the problem students continue to face. While ownership may have changed and enrollment dropped, other issues like allegations of fraud and mismanagement by the same people who worked under Corinthian persist.

In response the Department of Education confirmed to Associated Press on March 15 that the law firm hired to monitor the college turnaround was fired and further that a replacement will be hired.

Last fall the Center for Responsible Lending released research that found how high-cost, for-profit colleges make millions each year by targeting students of color. As students of color enroll more often at for-profit colleges, they are also disproportionately harmed.

The quest for financial justice continues....

Charlene Crowell is a communications manager with the Center for Responsible Lending. She can be reached at [email protected].