San Diego For-Profit Universities Making Tons of Money Handing Out Worthless Degrees

by on July 31, 2014 · 12 comments

in California, Civil Rights, Economy, Education, History, San Diego

Ashford University and University of Phoenix Worst Offenders Targeting Returning Vets

amPhxMagBy John Lawrence / San Diego Free Press

Everyone wants to better themselves, right, by getting a college education. Most of all the Iraq and Afghanistan vets transitioning into civilian life. To that end our politicians in Washington have crafted a GI Bill that allows them to do just that at taxpayer expense.

Problem is most of that money is being gobbled up by for-profit universities like the University of Phoenix and Ashford University which don’t even qualify for state financial aid. These universities attract and recruit students by advertising heavily and “selling” them on the value of one of their degrees.

When many of the students graduate, they can’t get a job based on a degree which potential employers say is worthless. And despite the GI bill, many of them take on additional student loan debt.

Investors looking to target the next profitable, gullible segment of the population have gone after those who think a college diploma will help them get ahead. They’ve advertised mightily and charged exorbitant tuition in order to get people, who have swallowed the conventional wisdom that a college degree is the be all and end all of the American Dream and of bettering one’s self, enrolled. And it’s a time proven adage that, if you want to make money, you have to advertise.

While traditional universities do little if anything in the way of advertising, for-profit universities advertise the hell out of their product – a college degree. You can sell anything from a proposition on the ballot (the Barrio Logan initiative that the Chamber of Commerce sold to San Diego) to politicians (those with the most ads win) to cars to peanut butter. Those without the money to do ads lose out whether they be products or politicians or ideas (British Petroleum really does care about the environment). The American unsophisticated public falls for the ads every time. This is why investors set out to sell the American public – especiallly returning GIs – on getting a college degree at their for-profit universities.

About a decade ago, a corporation called Bridgepoint Education Inc. purchased what was then called Franciscan University of the Prairies, a near-bankrupt, 300-student college located in Iowa that for decades had been run by a local order of Franciscan nuns.

The investor group, like several others, bought a nearly bankrupt college in order to get their legal accreditation status. That enabled Ashford’s students to tap federal financial aid dollars, the source of nearly 85 percent of the university’s revenues – more than $600 million in the last academic year. Ashford immediately moved most of its online operations to San Diego.

The football stadium in Clinton, Iowa goes unused since Ashford doesn’t even have a football team. They are all about using the capitalist system including mega advertising and IPOs to make profits. Incidentally, in 2009 Bridgepoint engineered an initial public stock offering that brought in $142 million. Not even Harvard or Stanford can say that.

ucsd vs phoenixAccording to Huffington Post:

Just as Wall Street managed to use simple things like home mortgages as raw material for complex and profitable investments, Bridgepoint has pulled off its own bit of alchemy here in Iowa: It has leveraged the purchase of a failing but accredited campus into a badge of authenticity for its entire sprawling operation — even as students have fared poorly, dropping out in large numbers and increasingly unable to pay back their federal debts.

The current scam involves duping returning GIs in order to capitalize on the Post 9/11 GI Bill. In July of 2008 that bill was signed into law, creating a new robust education benefits program rivaling the WWII Era GI Bill of Rights. Investors at for-profit universities like Ashford and University of Phoenix sensed a potential gold mine. The University of Phoenix’s San Diego campus has received over $95 million to educate returning vets since 2009, more money than the entire University of California system including all its extension programs has received.

The Center for Investigative Reporting (CIR) has concluded that the GI Bill which was designed to help veterans live the American Dream is instead supporting for-profit colleges that spend lavishly on marketing but can leave veterans with worthless degrees and few job prospects. One reason that the U of Phoenix has made so much money is that its degrees are so expensive.

An Associate’s degree costs about ten times what a similar degree at a community college (which doesn’t advertise) would cost. And taxpayers are picking up the bill for investor owned, for-profit colleges’ insatiable greed.

According to the CIR:

The University of Phoenix won’t say how many of its veterans graduate or find jobs, but the overall graduation rate at its San Diego campus is less than 15 percent, according to the U.S. Department of Education, and more than a quarter of students default on their loans within three years of leaving school.

Those figures fall short of the minimum standards set by the California Student Aid Commission, which dispenses state financial aid. The commission considers either a graduation rate lower than 30 percent or a loan default rate of more than 15.5 percent clear indicators of a substandard education.

No such restrictions govern GI Bill funds. And nearly 300 California schools that received GI Bill money either were barred from receiving state financial aid at least once in the past four years or operated without accreditation, CIR has found.

Part of the problem is that the American Dream, insofar as a college education is a part of it, has little more validity at this point than a Bronx cheer. The conventional wisdom is that a college education will help you get ahead. It’s just that not every college degree is worth the paper it’s written on.

Sure a college degree from Stanford or the University of California at San Diego may help you get ahead as long as it’s in the right fields. But college degrees from the likes of the University of Phoenix and Ashford University will likely hang on the wall while the graduate works his or her minimum wage job at McDonald’s or WalMart.

The University of Phoenix’s San Diego campus doesn’t even look like a college. It’s a few mid-rise office buildings in a suburban office park, indistinguishable from the life insurance company that occupies the glass-and-steel structure across the street.

Like all of the other campuses in this for-profit college chain, the buildings here are leased, not owned, so the parent corporation (the Apollo Group, Inc.) can quickly respond to changing market conditions. And the faculty have the status of temp workers. No instructor has tenure. The vast majority of them are part time. Since U of Phoenix is all about profit, they can be here today when the getting is good and gone tomorrow when the profits dry up.

Of the $1.5 billion in GI Bill funds spent on tuition and fees in California since 2009, CIR found that more than 40 percent – $638 million – went to schools that have failed the state financial aid standard at least once in the past four years. Four of those schools were University of Phoenix campuses, which together took in $225 million.

Among the others are massage schools, paralegal programs and auto repair academies. More than a third – 121 schools – have no academic accreditation, like the Institute for Advanced Study of Human Sexuality in San Francisco and the Pacific Coast Horseshoeing School in Amador County.

Some progressive Democrats in Washington have tried to tighten up the standards set forth in the GI Bill to no avail since the for-profit university lobbyists have been so successful at getting their way. In 2012, Iowa Sen. Tom Harkin issued a scathing 5,000-page report detailing the practices of 30 large for-profit education firms. But Republicans, who are all for profit making at the expense of everything else were not impressed.

indicators educationAccording to CIR:

Since the new GI Bill became law, the University of Phoenix’s corporate parent has spent $4.8 million on lobbying Congress, the White House and the federal VA, according to official lobbying records.

Bridgepoint Education, owner of the almost exclusively online Ashford University, has put $4.6 million toward lobbying; Corinthian Colleges Inc. spent $4.4 million. Education Management Corp. – which controls the for-profit schools South University, Brown Mackie College, Argosy University and the Art Institutes chain – spent $2.8 million.

So lobbying and advertising are the main educational tools that for-profit universities use to ensure that the profits keep coming even while gullible veterans and other American citizens are recruited by so-called advisors to pursue a “higher” education at the likes of Ashford University and the University of Phoenix. At the state level their lobbyists have also been successful. In California, legislation to prevent schools with low graduation rates and high student loan default rates from receiving GI Bill money was gutted of those measures.

At the San Diego campus of the University of Phoenix the overall graduation rate is less than 15%. More than a quarter of its students default on their student loans within three years of getting their worthless degrees. The defaults add huge amounts to their student loan debt which cannot be gotten out of by means of bankruptcy. Student loan debt now totaling over a trillion dollars nationwide will follow them the rest of their lives and even take a bite out of their social security payments when they’re old and gray.

California state legislators want for-profit colleges to tell them how many of the veterans graduate and how many find jobs they get based on their degrees. Needless to say lobbyists for the for-profit universities are fighting this every step of the way.

California Attorney General Kamala Harris is investigating Bridgepoint, parent corporation of Ashford University. SEC filings show that San Diego-based Bridgepoint Education spent $871 million on marketing and recruiting over the last three years and took in $336 million in profit. Combined, that was more than the firm spent on instruction.

The company has been accused of making false statements to students in order to get them to enroll. “As far as I’m concerned, Ashford committed fraud,” said Patrick Keane, a 20-year Navy veteran from Iowa who spent his GI Bill funds on a teaching program at the online college only to find no schools would recognize the degree.

High power recruitment techniques are used by so-called “enrollment advisers” whose main job is to get potential students to sign up. Former Marine Cpl. Moses Maddox said the University of Phoenix also targets veterans’ vulnerabilities. Maddox served in Iraq during the 2004 siege of Fallujah.

When he returned home, he went to work for the University of Phoenix’s parent company as a recruiter, calling up to 100 veterans a day. “My job was to assess their fear and then harp on that fear, capitalize on that fear and get them to buy,” said Maddox, 33. He said he was so disgusted by the company’s recruiting practices that he quit and rejoined the military for 16 months.

It’s safe to say that for-profit universities like Ashford and University of Phoenix are more interested in their bottom line profits than in their students’ educational and job prospects. They profit by capitalizing on the conventional wisdom that you need a college degree in order to get ahead and on selling a phony version of the American Dream.

{ 12 comments… read them below or add one }

Tyler July 31, 2014 at 9:54 am

The biggest cases I’ve investigated over the last 5 years have dealt with these for-profit universities, notably Kaplan (Washington Posts), DeVry, ITT Tech and Bridgepoint. Some of the stories I have been told by former students and employees are some of the most disgusting things I’ve ever heard. Admissions “advisors” (really sales) are given packets that teach you how to prey off of the fears of potential students. I had one interview with a former student who did a 3 year program to be a probation officer and after the 3rd year was told she was not able to do so because she was bi-polar. She had proof that in her application process 3 years prior she had specifically asked whether she would qualify. These stories are dime a dozen. The saddest thing is these kids and adults are paying out of state tuition for degrees, as this article states, are absolutely worthless.

These companies rely on a rule that states no more than 90% of their income can come from federal student aid and grant money. Their income statements show that they are following the rules, but their accounting departments are simply moving numbers around and declaring revenues at the wrong times to make it look like they are following the 90/10 rule. If it wasn’t for the endless amount of federal student aid this country gives out, these companies would have gone under long ago. As the article also states, you can’t get out of these debts through bankruptcy. The American taxpayer is essentially footing the bill for these companies that destroy tens of thousands of lives.


Aging Hippie July 31, 2014 at 10:03 am

I have not found my fully-accredited online degree to be worthless at all; on the contrary it has hugely increased my income and choice of positions. Of course, I was able to avoid borrowing any money in the process, which the school resisted mightily but did actually permit eventually.


Marc Snelling July 31, 2014 at 10:08 am

These guys are predators for sure. Somehow someone at U of Phoenix got my contact info years ago. No matter how many times I say I am not interested he keeps contacting me – for over five years now. Regular universities graduating people in professions that have no job opportunities is bad enough. These guys are just like the predatory lenders trying to hawk credit cards to students. Autodidacticism never looked so good.


peachy August 3, 2014 at 5:58 pm

Thank you, John Lawrence, for setting the record straight here regarding the ever-proliferating predatory diploma mills that steal from our taxes for their “scholarships” and contribute to the lack of funding for our legitimate, and excellent, public institutions of higher learning, in particular our world-renowned California Community Colleges. As a former secondary teacher, I have seen countless hopeful students get suckered into these dead-end but slickly- and aggressively-advertised scams. It is urgent that the information in this article be distributed as widely and as aggressively as the faux-university hype because the truth here is not obvious to the potential marks.


Emmanuel August 8, 2014 at 10:56 am

I would also add National University to the list. Even though they are regionally accredited (last time I read) their quality in education doesn’t match the community colleges or a “traditional” 4 year university. Let’s please not blame republicans or democrats for these predatory “colleges”, because the government hands out the money without enough oversight and the private businesses capitalize from all those millions of dollars given out by the government.


peachy August 8, 2014 at 11:56 am

Indeed. Thanks for adding NU, Emmanuel. I remember the very beginnings of that outfit, and it was commercial, not academic: for business, not education . Also, purely anecdotally, but based on 25 years of close observation, I and others have seen that there is qualitative knowledge-base difference between teachers coming out of NU and those from the real universities.


Aging Hippie August 8, 2014 at 12:55 pm

My manager at a previous job had a degree from DeVry, another fully accredited online school. It worked well enough for him to get a job as a manager in an IT department.

I have a degree from American Intercontinental University, it’s fully accredited, and I got it online. It cost about $35,000 10 years ago, it’s almost certainly made me 10 times that in the 10 years since.


peachy August 8, 2014 at 1:17 pm

Has money become the one and only purpose of education? A sad state of affairs.


sean M August 8, 2014 at 4:18 pm

A degree’s value is inversely related to the school’s acceptance rate.


peachy August 8, 2014 at 10:39 pm

Sean, could you please post the references to the data on this? Thanks.


Bob g August 11, 2014 at 7:41 pm

Lots of misinformation and rhetoric here. Even your terms are outdated. These schools provide a valuable service and valuable degrees. Anyone saying that their degree was not recognized, save a limited group of programs in particular states, is lying or leaving something out. You can’t even enroll in a program not accepted by the state in which you reside. I have helped in excess of 300 students GRADUATE. I have watched generational poverty and lack of education purged from whole families. I have had a student admitted to the Kennedy School of Government at Harvard based on his degree here. That said, there are management and advisers in the industry who see themselves as at all cost salesmen, but they do not last. I am going on a decade of service and have never seen my students as numbers. As for acceptance rates; who are we as Educators and administrators to limit who can try to change their lives with education? An access based vision for higher education can be misconstrued as greedy I suppose, if your vision is limited.


Bob g August 11, 2014 at 8:23 pm

“Sure a college degree from Stanford or the University of California at San Diego may help you get ahead as long as it’s in the right fields. But college degrees from the likes of the University of Phoenix and Ashford University will likely hang on the wall while the graduate works his or her minimum wage job at McDonald’s or WalMart.”

This passes as journalism? I hope you didn’t pay Stanford money for your degree! So only degrees from far more expensive elite institutions can help you get ahead? How many can attend these elite schools? My students pay 750.00 per class and many land 70k -90k positions. It is not as much the degree as it is the person wielding it.


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