New York City Department of Consumer Affairs Launches Investigations into Four For-Profit Colleges!

Dear Commons Community,

The New York City Department of Consumer Affairs has begun an investigation into four for-profit colleges over concerns about student dropout rates, loan-defaults, and recruitment policies. For-profit colleges have been under increased scrutiny at all levels of government in recent years, amid growing concern that many of their students are left shouldering unwieldy debt but unable to find good jobs, and that tax payers are left footing the bill. As reported in the New York Times:

“What we are concerned about,” said Julie Menin, the commissioner of consumer affairs, speaking about problems within the industry at large, “is that predatory, for-profit colleges are taking advantage of the ambition that so many New Yorkers with low incomes have for a better life, and cheating them out of their dreams and their money.”

The department issued subpoenas in February to Berkeley College, Mandl School, New York Career Institute and Technical Career Institutes, also known as TCI College.

At TCI, more than 77 percent of the school’s revenue is derived from federal student aid, according to federal data. At Mandl, that percentage is about 80. For-profit colleges are prohibited by federal law from receiving more than 90 percent of their revenue from federal student aid.
Ms. Menin said the Consumer Affairs Department had received hundreds of complaints in recent years about for-profit colleges. Department representatives said the four schools were chosen because they have high rates of student loan default, for example, and because students have complained about their recruiting practices, like repeatedly making phone calls to people who request information online, and then pressuring them to commit themselves during their first visit to the campus.

According to federal data, among students who began repaying certain federal loans in 2011, more than 24 percent of TCI students were in default over the course of three years. Of students who began repaying in 2010, that figure was nearly 39 percent. At Mandl, those figures were 17 and 27 percent; at two- and three-year for-profit colleges nationally, they were about 20 and 21 percent.

Some of the schools also have relatively low rates of first-time, full-time students who graduate within 150 percent of “normal time,” for example, within three years at a two-year school, according to federal data; the overall graduation rate at two-year for-profit colleges is about 63 percent. Rates at the four schools under investigation range from 24 percent at TCI to 60 percent at Mandl.

The subpoenas — which request documentation including recruiting procedures and proof of job placement claims used in marketing — seek to determine whether the schools have violated the city’s consumer protection laws. The Consumer Affairs Department holds no power over the schools’ accreditation, but if violations are found, it can level fines or take schools to court to try to recover tuition money for students.
New York Career Institute said it was cooperating with the investigation, and had no further comment. Calls and emails to the three other schools were not returned.

Noah Black, vice president of public affairs at the Association of Private Sector Colleges and Universities, an industry trade group, defended for-profit colleges, saying that their graduation rates were significantly higher than community colleges’ and that their default rates were lower.

“The community college comparison shows that it is the economic situation and background of the student, not the type of institution that they attend, that impacts the default rate,” Mr. Black said.

According to federal data, the default rates for students at for-profit and community colleges are almost identical. But while less than 17 percent of students at two-year public institutions received a federal loan in the 2011-2012 school year, more than 61 percent of students at for-profit schools did.

For-profit colleges enroll 12 percent of the nation’s students, but loans at those schools account for 44 percent of the defaults, according to the Institute for College Access & Success, an advocacy group that tracks college costs and student debt.”

If these allegations hold up, it will be another black mark against this sector of higher education that is already reeling from investigations and lawsuits brought upon it by federal and state authorities.


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