Is Ashford University the next ITT Tech?

Posted By Derek Johnson on September 20, 2016 at 2:02 pm
Is Ashford University the next ITT Tech?

To our readers: This is the first of three GoodCall articles examining the future of for-profit education and the effects of increased scrutiny on education outcomes.

For the past month, fallout from the federal government’s decision to cut off for-profit giant ITT Tech from access to future federal financial aid has rocked the education world. The decision elicited cheers from consumer advocates and concern from for-profit educators who worry whether their industry can survive increased scrutiny from government regulators.

A good example of this fretting can be found in a piece written by Dr. Wallace Pond, former CEO and director of EduK Group Inc., castigating the Obama administration for unfairly targeting for-profit schools:

GoodCall investigates logo“For those educators who work in private sector (for-profit) higher education, the last seven years have probably been the toughest stretch of their careers. Delivering a high quality educational experience with good student outcomes is a tough task even in the best of circumstances. However, when you go to work each day in the midst of a well orchestrated, government-led attack against the industry in which you work, it can be emotionally exhausting. This is particularly so when the basis of the attacks is purely ideological – in this case a deep bias based solely on tax status.”

In truth, it is the overwhelming evidence of predatory behavior and demonstrably worse student outcomes (student debt and default rates, dropout rates, job placement, post-graduation earnings) at for-profit schools that have created the impetus for the increased regulatory scrutiny. Nevertheless, after Corinthian Colleges and ITT Tech, many are wondering when the next large for-profit school domino will tumble.

The next ITT Tech?

Enter Ashford University. The San Diego-based institution, which serves more than 44,000 students, has taken a series of body blows since its 2005 purchase by for-profit Bridgepoint Education and may be in the government cross hairs as the next ITT Tech. In the past 10 years, multiple investigations and audits have flagged problems at the university, including the following:

  • In 2011, an audit by the Department of Education’s Office of the Inspector General found that the school had improperly kept at least $1 million in federal student aid that should have been returned to the government and that it had violated a federal statute that banned schools from rewarding recruiters based on how many students they enroll.
  • In 2014, the school paid $7.25 million (while denying any wrongdoing) to settle a lawsuit claiming recruiters “made false or misleading statements to prospective students” in order to increase online class registration.
  • In 2015, the university announced it would shut down its physical campus in Iowa, saying the move was for business reasons.  A year later, state regulators moved to cut the school off from further access to GI Bill benefits. The dispute remains in the courts. While for-profit schools are subject to regulations that cap the maximum share of revenue they derive from federal student aid, military education benefits technically do not count toward that percentage. In July, the Department of Education opened another investigation into potential violations of this cap. (Editor’s note: An earlier version of this article contained an incorrect timeline for this.)
  • Just last week, the Consumer Financial Protection Bureau ordered Bridgeport Education to pay an $8 million civil penalty and refund $23 million in private loans. In a release announcing the actions, CPFB director Richard Cordray said the schools under Bridgepoint misrepresented the total amounts that students were taking out in loans. “Bridgepoint deceived its students into taking out loans that cost more than advertised, and so we are ordering full relief of all loans made by the school,” Cordray said. “Together with our state partners, we will continue to be vigilant in rooting out illegal practices facing student borrowers in the for-profit space.”

Deceptive advertising and questionable enrollment practices bordering on fraud were what eventually buried ITT Tech and Corinthian Colleges. Bridgeport denies that Ashford has been found guilty of these. But combine the scrutiny of the college’s operations with its low graduation rate and student outcomes as defined by a prominent federal government tool, and there appears to be a solid foundation to ask whether the school should be cut off from future access to financial aid. According to the College Scorecard, just 19 percent of students graduate, average student debt is $32,000 and only 41 percent of former students are paying down their debt.

A new standard

Defenders of the for-profit sector have been quick to dismiss ITT Tech and Corinthian Colleges as bad apples who are not representative of the industry as a whole. In truth, what is so worrying to many for-profit educators is that the standards used by the government to punish those schools could very easily be applied to their universities.

Critics point out that the government is creating a new standard for what is considered unacceptable, and in a certain respect they are correct. For years, shoddy outcomes and fraudulent practices were insufficient reason to justify cutting a school off financial aid. Even when a school found itself under investigation by the federal government for defrauding students – as was the case with Corinthian Colleges – it continued to enroll students and collect federal student aid dollars.

That standard is no longer acceptable in the face of soaring cumulative student debt. Now a wide swath of the public and consumer advocacy organizations are demanding that the government do more to protect students and stop funding schools that serve little purpose other than to suck up taxpayer money. More than half of the 500-plus universities under investigation by the federal government for potential Title IV violations are for-profit schools.

It’s not that only for-profit schools engage in deceptive marketing or mishandle student aid. You can find similar examples in the public and private nonprofit worlds. Rather, it is the toxic mix of atrocious student outcomes combined with rampant predatory behavior and Title IV fund-hoarding that make these schools a “worst of all worlds” combo package for students. Listening to the stories of ITT Tech students dealing with the aftermath of the school’s closing, many seem more concerned that the government would allow universities with these outcomes to accept federal funding at all than they are about federal overreach.

Coming Wednesday in Part 2 of our GoodCall investigation: Judging by at least one member of her transition team, expect more of the same scrutiny of for-profits from a for-profit Hillary Clinton presidency.

Derek Johnson
Derek Johnson is a writer, journalist and editor based out of Virginia. He received a Master’s degree in Public Policy at George Mason University and a bachelor’s degree in Communication from Hofstra University.

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