Milwaukee pulls back welcome mat from predatory colleges

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The Milwaukee Common Council has passed a resolution that denies city financial help to for-profit colleges that do not meet the U.S. Department of Education's federal financial aid standards. The resolution requires for-profit colleges to prove they are in ongoing compliance with Department of Education regulations pertaining to program integrity in order to receive financial breaks such as below-market rates on land or building leases. The education businesses would have to show compliance over the life of the loan or benefit.

The council's action is a tremendous victory for students, parents and taxpayers, says Michael Rosen, president of AFT Local 212, which represents faculty at Milwaukee Area Technical College. The local, and especially Rosen, vociferously criticized special allowances that brought the for-profit Everest College into the city in 2010, allowing it to set up shop right next to a public housing development, and blocks from MATC. Within two years, Everest went bust, leaving in its wake a trail of disappointed students, lacking degrees but burdened by debt.

That scenario is a common one where big for-profit enterprises like Corinthian College, the owner of Everest, are concerned, Rosen asserts. "Thousands of Milwaukee-area students were lured by deceptive advertising into taking out huge loans they will never be able to pay back to attend for-profit colleges," he says. "Their business model preys on young people's desire to pursue an education that leads to employment and a middle-class life. All too often, for-profit college students are left unemployed, with broken dreams, credits that do not transfer, and huge debts, while the corporations that run these diploma mills make huge profits and pay their CEOs exorbitant salaries. These students want to get out of poverty, and the for-profits leave them even poorer."

The growth of the for-profit college industry has raised concern nationally, triggering investigations by Congress and the federal Government Accountability Office, and attempts to restrict them through Education Department regulations and Consumer Financial Protection Bureau oversight. That growth has been driven by easy access to government-sponsored debt in the form of Title IV student loans, where the credit is guaranteed by the government.

In the past 10 years, the for-profit education industry has grown five to 10 times the historic rate of traditional postsecondary education. For-profit colleges enroll only 10 percent of the nation's students but claim nearly 25 percent of the $89 billion of federal Title IV student loans and grant disbursements. In Milwaukee, says Rosen, for-profits like Everest College, which closed with a dropout rate of more than 50 percent and a job placement rate of less than 6 percent, have anchored developments that received public support.

"Government, the students and the taxpayer bear all the risk, and the for-profit industry reaps all the rewards. This is very similar to the subprime mortgage sector in that the subprime originators bore far less risk than the investors in their mortgage paper," Rosen points out.

An important advocate in Milwaukee's stand against the for-profits has been Alderwoman Milele Coggs, whose district is home to MATC and the now-defunct Everest College. She was the lead sponsor of the resolution, which passed unanimously. [Barbara McKenna]

June 12, 2013