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For-profit colleges: Prospective students need to approach them with eyes wide open

Minnesota Attorney General Lori Swanson says would-be students should be skeptical about claims made by for-profit colleges and universities, as many have a “sales-oriented mentality.”

After spending more than $8,000, Carisa Halter dropped out of the Minnesota School of Business.
MinnPost photo by Bill Kelley

This special project on for-profit colleges and universities was produced in partnership with WCCO-TV, whose story, “For profit colleges under fire: ‘They’re selling a dream,’ ” can be seen on its website.

MinnPost journalist Sharon Schmickle directed MinnPost’s coverage, coordinating with WCCO and working with the authors of MinnPost’s stories — Matt Herbert and Elizabeth Hustad, who are students in the University of Minnesota School of Journalism and Mass Communication.

Part one of two articles

The timing seemed perfect. Carisa Halter had lost her job, a casualty of the Great Recession. On that same day, her mail brought an enticing brochure from the Minnesota School of Business.  

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It had been years since Halter’s last day in a classroom, and now opportunity appeared to be calling.

Every question Halter directed to the school drew a reassuring answer: Graduation rates were high. So were starting salaries and placement rates. The Elk River campus was close to her home in Zimmerman.

Everything about the medical administrative assistant program looked good — maybe, in retrospect, too good to be true.

After Halter started classes in 2010, she heard fellow students complaining that their credits wouldn’t transfer to other schools. Some couldn’t find jobs. And many were deep in debt.

“What did I get myself into?” Halter began wondering. “And how do I get out of it?”

After spending more than $8,000, she dropped out.

“I felt terribly guilty because it was money that came out of a one-income household,” Halter said.

It also was money that could have benefited her children. The school’s recruiters told her that graduates from her program had readily available jobs earning $36,000 to $45,000 a year, she said. Her plan had been to go to work after graduation and save money for her oldest daughter’s college costs. 

Instead, she had knocked an $8,000 hole in the family budget.

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“I cried over it,” Halter said. “I lost sleep. … I feel taken advantage of and lied to.”

‘Sales-oriented mentality’

Halter’s story reflects hundreds of complaints former students of for-profit colleges have filed with state and federal authorities.

Their outcry has prompted an investigation by the Minnesota Attorney General, a lawsuit against one Minnesota-based college system, and a U.S. Senate inquiry that found ample support for students’ claim that they had been deceived by recruiters about job prospects and led into enormous debt. 

Among the issues addressed in the U.S. Senate Health, Education, Labor and Pensions Committee’s 2012 report were aggressive sales tactics used to meet enrollment quotas; misleading statements to students about accreditation and the transferability of credits to other colleges; inadequate student support systems, contributing to high withdrawal rates; the charging of higher tuition than at comparable community colleges and flagship state universities; and more. 

The Senate investigation also had some positive findings about two Minnesota for-profit institutions, Capella University and Walden University.  

Students need to be skeptical about claims made by for-profit colleges with their “sales-oriented mentality,” said Attorney General Lori Swanson.

Attorney General Lori SwansonAttorney General Lori Swanson

“Colleges make more money the more students they bring in the door,” she said. “That can result in practices that are really more akin to how you might sell a used car as opposed to (asking), ‘Is this education in the best interest of this particular student?’ ”

That’s a question that every savvy student should ask, whether considering a for-profit college or not, countered Trenda Boyum-Breen, chief academic officer for Rasmussen Colleges, a for-profit system headquartered in Minnesota.

“I would offer that advice myself to students widespread,” Boyum-Breen said.

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For-profit colleges get a bad rap because they do business differently from public schools, said Steve Gunderson, president of the Association of Private Sector Colleges and Universities.

Swanson’s statements, Gunderson said, “suggest that there’s a one-size-fits-all concept of post-secondary education, and if it’s not provided by either nonprofits or the government itself with big subsidies, it’s not good.”

“The students we serve are not students, for the most part, who could enroll at or be accepted by a St. Olaf or University of Minnesota,” Gunderson said.

Leaders of Minnesota for-profits echoed Gunderson’s characterization of their students.

“These are adults,” he said. “They are often the first generation going to school. The majority of them are married, they have children, they are trying to improve their career skills so they can get a better job, a better income, so they can have a chance at life in the middle class. If we didn’t exist, there’s simply not enough tax dollars available today to provide access to these students elsewhere.”

For-profit education in Minnesota

One in seven Minnesotans who sought education beyond high school turned to a for-profit institution in recent years, according to a recent report by the Minnesota Office of Higher Education.  

Enrollment at the biggest for-profits spiked after 2002, but declined after 2009. Still, more than 30,000 Minnesota undergraduates were enrolled in for-profit institutions during the 2010-2011 school year. After this year, enrollment is projected to grow modestly.

While the greatest growth is in two-year programs, several of the colleges started offering bachelor’s degrees in the late 1980s. And some now offer advanced degrees.

For-profit enrollments grew despite the fact that costs run higher in those schools.

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The average net price for a freshman year at a for-profit, two-year school ran $25,100 in the 2010-2011 school year, after factoring in federal, state and institutional grants, according to the Office of Higher Education. That compared with $13,000 at a public two-year school.

Average net price for full-time freshman students receiving federal grants and loans at Minnesota institutions
2010-11 (includes living allowance), Incomes $0-$75,000

Public, two-year$13,000
Private, for-profit, two-year25,100
Public, four-year12,900
Private, not-for-profit, four year19,200
Private, for-profit, four year22,300

Source: Minnesota Office of Higher Education’s Minnesota Measures 2012

It follows that Minnesota students at the for-profits took on more debt than their counterparts at other colleges. Ninety-one percent of students earning an associate degree at a for-profit in 2010 had taken out loans, and the average debt of those borrowers was $26,912. Just 64 percent of the associate degree earners in the Minnesota State Colleges and Universities system had student loans, and their average debt was $17,157.

Lawsuit: pressure tactics

Critics of the for-profit sector say that aggressive sales tactics are a major reason students land in those schools despite higher costs and debt loads.

Last month, five former students sued Globe University and the affiliated Minnesota School of Business, Inc. in Hennepin County District Court, alleging that Globe recruiters operate in a “boiler room culture” where they are pressured to enroll as many students as possible in order to draw in financial-aid dollars.

Three of the students — Melissa Beck, Sarah Beck and Reginald Holmes — attended Globe’s Sioux Falls, S.D., campus. The other two — Cherida Brom and Alexenderia Romig-Palodichuk — went to a campus in Woodbury, Minn.

The students allege that recruiters misled them about job placement rates, starting salaries and accreditation. They allege that most Globe credits do not meet quality standards for acceptance at other post-secondary institutions. As a result, they claim, transfer students must start from scratch, repeating classes they paid to take at Globe.

Further, they say that degrees awarded to Globe graduates are “essentially worthless” because employers view them as inferior, and most graduates end up with jobs they could have obtained without attending Globe.

“They misrepresent their accreditations. They misrepresent their transferability of credits – they say they transfer when they don’t,” said attorney Scott Carlson, referring to for-profits that have come under fire. “They misrepresent job placement rates – they inflate them; they say that they’re much higher than they actually are, and they do the same thing with regard to starting salaries.”

Students attracted by for-profits are “the most vulnerable people in society,” said Clayton Halunen, another attorney on the Globe case.

“These are people who, this is really their last chance,” he said. “They barely made it through high school, they could be single mothers … especially veterans, they’re (targeted) because they get the GI Bill. It’s like free money.”

Hannah Von Bank worked briefly as an admissions counselor for Minnesota School of Business in 2012. In an affidavit filed in connection with the students’ lawsuit, she said she was under intense pressure to make sales quotas and to “hound” prospective students and their families with repeated phone calls in which she was told to overstate starting salaries they could expect upon graduation.

In an interview, Von Bank said that training for the job included practice at finding prospective students’ “pain points,” vulnerable areas such as a need to feel successful. She was supposed to target those vulnerable spots in her pitch to students, she said.

“I quit pretty fast,” Von Bank said. “I had been really passionate about helping students. … At the Minnesota School of Business, I basically was scamming people out of money, and I didn’t feel like I was helping anybody.”

Such complaints are coming from a handful of people out of tens of thousands of satisfied students and employees, said Jeanne Herrmann, Globe’s chief operating officer. 

Several students interviewed at Globe’s Woodbury campus spoke highly of their instructors and the education they were receiving.

“I’m confident in what we do on a daily basis and the students we serve, and feel proud to serve them,” Herrmann said.

U.S. Senate investigation

Because of the lawsuit, recent criticism has focused on Globe University and its affiliates.

However, the 2012 report by the U.S. Senate Health, Education, Labor and Pensions Committee cited negative trends across much of the for-profit higher-education sector.

While the sector trumpets its independence from government, for-profits increasingly rely on taxpayer dollars – the industry took in 25 percent ($32 billion) of all federal education benefits in 2009-2010, the report said. Even with the aid, 54 percent of students who enrolled during a one-year period between 2008 and 2009 had left school without a degree by mid-2010, it said.

Of the 30 colleges examined, three – Capella University, Rasmussen College and Walden University – are based in Minnesota.

Trenda Boyum-Breen
MinnPost photo by Sharon Schmickle
Trenda Boyum-Breen

Rasmussen had one of the worst retention rates of colleges examined in the investigation, led by Sen. Tom Harkin, D-Iowa. The report says that 63.2 percent of Rasmussen students withdrew, many after only five months of study.

Rasmussen’s Boyum-Breen said the economic downturn negatively impacted graduation rates, not only for Rasmussen but for all colleges.

“Those graduation rates, to me, are not something to be shy about,” Boyum-Breen said. “We definitely want to improve them and are making those measures.”

One way Rasmussen has attempted to improve graduation rates is to restructure courses so that those within a certain program “line up,” allowing students who don’t reach an advanced degree – such as a bachelor’s – to at least receive a certificate or associate degree, Boyum-Breen said.

Federal student aid programs are intended to support educational opportunities for students. But the report says that for-profit education companies direct much of that revenue to marketing, recruiting new students and profit. It says that Rasmussen, for example, spent $4,801 per student on instruction in 2009, compared with $6,261 on marketing and $9,017 on profit.

But ambitious recruiting is common at nonprofit schools as well, said Boyum-Breen, who worked in a public college system for years.

The committee reported positive findings too. Because of low student default and withdrawal rates, Minneapolis-based Walden University won a largely favorable review. As of 2008, 3 percent of Walden’s students had defaulted on loans after three years, well below the average 12.3 percent default rate.

Capella, too, had a low three-year default rate of 6.5 percent.

Walden, an online college, also won points for reasonable pricing. The cost for a master’s degree in education at Walden was less than half that for the University of Minnesota’s online master’s program. And the for-profit’s bachelor’s degree programs were similarly priced to those in the public sector, the report said.

Even though Walden and Capella received praise for their low default rates and graduate degree programs, the HELP Committee found that undergraduate programs at these colleges were not up to par. For 2008-2009 enrollment, only 47.3 percent of students seeking bachelor’s degrees were still enrolled at Walden as of 2010, compared to nearly 60 percent for the school’s doctoral programs. Similarily, only 38.3 percent of Capella’s bachelor’s degree seekers were still enrolled by mid-2010, compared to 58 percent of its doctoral students.

The two colleges also spent more per student on marketing than they did on academics, the report said.

Job placements

The Office of Higher Education report says 79 percent of the 2010 graduates of for-profits were working in Minnesota a year after they left school – not counting those who joined the military, went on to higher education and took jobs out of state or working for the federal government.

By that measure, for-profit graduates were nearly as likely to land jobs as those who graduated from state colleges. But the state didn’t look into the quality of the jobs, said John Armstrong, a researcher on the report.

And former for-profit employees said that is the defining question for prospective students.

Heidi Weber of Prescott, Wis., is a former teacher and dean for Globe University. After she blew the whistle on questionable practices in 2011, Globe fired her. A Washington County jury recently awarded her $400,000 in her wrongful termination case against Globe.

“I had a student who was a nursing assistant in a nursing home before she started taking classes,” Weber said. “When she graduated, she still was a nursing assistant in a nursing home. They counted her as placed because she was working in her field of study.”

The same was true for graduates of business programs, she said: “I heard time and time again that the graduates were working as cashiers at Walmart, and they were counted as placed in their field because Walmart is a business.”

Weber said she often heard from frustrated, under-employed graduates.

“I would listen to all of these student stories and relay them,” she said. “I remember coming home to my husband and saying, ‘This is horrifying. It can’t be true.’ ”

But it was true, Weber said.

Targeting women and veterans

The prospect of going to classes while raising three kids didn’t seem practical for Kelly Charpentier-Berg until she looked into Kaplan University’s online programs.

Her inquiry about a psychology degree triggered a flurry of phone calls from Kaplan.

“They called me at least twice a day for three weeks until I signed up,” said Charpentier-Berg of Coon Rapids.

Charpentier-Berg said she felt targeted as a woman whose income made her eligible for federal grants and loans. In 2008, 70 percent of undergraduate students at for-profit colleges were women, while 59 percent of all Minnesota undergrads were women.

“They made a point of making sure it was a student mom that called me the third time,” she said, to deliver the message, “I’m doing this. If I can do this, you can do this.”

“They make sure the person calling you is finding a way to identify with what your plight is,” she said, and for many young mothers, that plight often is limited resources and limited access to information.

That targeted pitch is part of the strategy Von Bank said she saw as an admissions counselor.

“They definitely target demographics — of a lot of military, single mothers or anyone who would qualify for a lot of federal financial aid,” she said.

Kelly Charpentier-BergMinnPost photo by Bill KelleyKelly Charpentier-Berg said she felt targeted as a woman whose income made her eligible for federal grants and loans.

Another target group is veterans returning from duty that made them eligible for education benefits, said Attorney General Swanson.

Federal rules limit the amount a college can collect from student financial aid – generally 90 percent of the student’s education tab. But the so-called 90-10 rule doesn’t usually apply to veterans’ benefits.

“So we’ve also been looking at some particular concerns involving members of the military and veterans,” Swanson said.

National concern over aggressive recruiting of veterans prompted President Barack Obama to sign an executive order on April 26, 2012, to “ensure all of America’s service members, veterans, spouses, and other family members … are protected from aggressive and deceptive targeting by educational institutions.”

The order restricts targeting of military veterans for their GI benefits, cracks down on deceptive online recruiting and provides data to inform veterans about higher education institutions.


Weber was named faculty member of the year in 2009, shortly after she began teaching in Globe’s medical assistance program. In 2010, she was promoted to dean of the program.

Her misgivings started with little things “that added up over a long period of time.”

“Admissions folks sat within earshot,” she recalled. “I remember sitting there and grading papers and hearing what they would say to students … that accreditation doesn’t matter … and thinking, ‘Gosh, that’s not right.’ ”

Again, in Minnesota, she heard that admissions pitch: “We are accredited and that’s all you need to know. Employers don’t look at accreditation.”

Weber said she complained to a campus director, saying “Accreditation does matter, and there is a law saying we have to be transparent.”

Globe COO Herrmann said the institution makes its accreditation clear to students. “We certainly let them know who our accrediting body is,” Herrmann said. “We very purposefully choose to be nationally accredited because it matches our mission; it is about preparing students for the work force.” 

Meanwhile, Weber said, Allina Health had contacted her to say the company was considering rejecting graduates from her program because accreditation standards had declined.

Allina spokeswoman Gloria O’Connell confirmed that it did, at one point, stop hiring recent graduates of Globe’s medical assistant program. “We do hire former graduates that have experience,” she added. Naomi McDonald, Globe’s director of media relations, said the problem has been resolved. However, O’Connell responded and said “nothing has changed.” 

Questions of accreditation can be confusing for students because the process can take many forms. Some colleges are accredited with national organizations while others are backed by regional accrediting organizations.

Weber said she has heard recruiters at for-profits say national accreditation is superior.

The reverse is true, according to the U.S. Government Accountability Office. It reported that credits earned at nationally accredited institutions will be more difficult to transfer to other institutions.

But Gunderson said times are changing, and national accreditation is becoming a better fit: “Today, in an era of online education where almost every school has students do online programs in almost every state, the idea of a geographically based accreditor is confusing at best.”

‘No one explained it to me’

After completing 68 credits at Kaplan, Charpentier-Berg asked questions she wished she had asked at the beginning. She learned that she couldn’t be licensed to practice psychology in Minnesota with her bachelor’s degree from Kaplan, she said. She’d signed financial-aid forms, and she knew she qualified for a Pell Grant; what she hadn’t realized is that she also had taken on loans of $15,000.

“No one explained it to me,” she said.

When her computer broke there was no help available and she couldn’t complete her course work in the online program. And Kaplan dropped her, she said.

Soured on for-profits, Charpentier-Berg turned to Anoka Ramsey Community College, where she recently completed an associate degree. Although Kaplan is regionally accredited, none of her credits transferred initially, she said, because they didn’t meet the core requirements for her program. Eventually some of them are transferring toward her bachelor’s degree where she has more leeway to take electives, she said.

Stephen White, vice president of communications for Kaplan, said in an email that the transferability of credits is always up to the receiving institution. “It depends on the school to which the student is applying.”

Some for-profits and their accrediting agencies have blamed the public higher-education system for rejecting their credits.

Anoka-Ramsey is part of the MnSCU system, which takes the position that “it is important for students to get credit for all coursework … that meets our academic requirements,” said spokesman Doug Anderson. Faculty must determine that the credited courses are academically equivalent.

Beyond the credit question, Attorney General Swanson stressed that students should be cautious consumers when it comes to choosing any college.

The “Do Your Homework” checklist published with this article offers specific tips on checking out colleges.

Friday: Is oversight of for-profit colleges and universities rigorous enough?