The closure of ITT Technical Institutes, a national chain of career schools with a 50-year legacy, is fueling a debate over the federal government’s aggressive policing of for-profit higher education and whether it could destroy the industry.
Education officials are holding for-profit colleges such as ITT accountable after years of consumer complaints about shoddy programs, deceptive marketing and high loan-default rates.
The government — which has been targeting problems at for-profits for more than a decade — has handed down a series of regulations and sanctions that have put some companies on the brink of ruin.
To some experts, the collapse of ITT this week, brought on by sanctions curtailing its access to federal financial aid, is further evidence that the Education Department is going after the industry by pushing tough employment and student loan regulations — rules aimed specifically at for-profits — and by wresting power from the accrediting agency for such schools.
“The administration wants improved student outcomes,” said Michael Tarkan, senior research analyst at Compass Point. “And, yes, some of the larger for-profits have been caught in the crossfire, but those are some of the ones that have had pretty weak student outcomes.”
The for-profit higher education industry consists of more than 3,500 vocational, technical and career schools that are focused on job training. More than 1.1 million students were enrolled in such schools in the spring semester of 2016, roughly 6 percent of the total college population, according to the National Student Clearinghouse.
Education Secretary John B. King has said the administration is not singling out any group of schools but instead is working to ensure that students — and billions of dollars in taxpayer money — are not put in jeopardy.
“We take our enforcement responsibilities seriously,” King told reporters recently. “That’s why over the last seven years the Obama administration has taken a number of actions to protect students, borrowers and taxpayers from the illegal behavior of some institutions and programs.”
Marquee names in the for-profit industry, such as DeVry University and the University of Phoenix, are the subject of ongoing government lawsuits or investigations. And many of these companies point a finger at the federal government for their shrinking footprint: More than a hundred campuses run by for-profit companies have closed in the past two years, including locations of the Art Institutes, Le Cordon Bleu and Brown Mackie College.
“It’s the worst political and regulatory environment for career schools that I’ve seen in my 27 years in the industry,” said Eric Juhlin, chief executive of the Center for Excellence in Higher Education, which runs career schools Stevens-Henager College and CollegeAmerica. “It has never been this coordinated, this systematic.”
Others in higher education say the administration’s actions are long overdue and that the crackdown is just weeding out the worst actors in the for-profit industry. The industry’s greatest nemesis is not the government, they say, but economic head winds that are lowering enrollment and rendering unsustainable a business model once beloved by Wall Street.
“We’re seeing a slow-motion train wreck here,” said Barmak Nassirian, director of federal relations and policy analysis at the American Association of State Colleges and Universities. “The government hasn’t really done anything. I’d love to have cops on the beat who can prevent crime, not chase after perpetrators after the mayhem.”
For-profit colleges experienced remarkable growth in the past decade, with private equity firms pumping in money as students dependent on federal loans and grants poured into training programs. State and federal authorities say some schools — with profits in mind — lured in vulnerable students with promises they could not keep. Students took on debt for programs that failed to land them jobs earning enough to repay the loans. And as the economy recovered and allegations of abuse mounted, fewer people were willing to take a chance on for-profit schools.
“The take-all-comers-and-offer-low-wage-certificates model really doesn’t work anymore,” said Ben Miller, senior director for postsecondary education at the Center for American Progress. “It’s the place where the marginal decision of do I go to college or do I enter the workforce is the strongest. So as the economy got better, there are fewer people in that category.”
ITT Tech had double-digit percentage declines in enrollment for several quarters. It made fatal mistakes by starting an in-house student loan program that suffered heavy losses and by repurchasing a lot of its shares, said Trace Urdan, a research analyst at Credit Suisse.
He said the schools most at risk of suffering a similar fate are the ones battling poor enrollment, weak balance sheets and regulations on student employment, mainly small, regional career schools.
“We could see something on the scale of ITT in aggregate, through a lot of smaller schools being pushed out,” Urdan said.
Government enforcement moves, he said, could put real pressure on some career colleges. Education officials may soon bar the Accrediting Council for Independent Colleges and Schools (ACICS), an agency that overwhelmingly accredits for-profit colleges, from serving as the gatekeeper between colleges and billions of dollars in federal financial aid.
If that were to happen, the nearly 300 schools the council oversees might have a difficult time finding another agency willing to accept them, Urdan said. Without an accreditor, students at those schools would be unable to access federal loans and grants, which could drive the schools out of business.
The decision on the accrediting council “is as much driven by the department’s decision to eliminate some of these schools in an orderly process as it was about going after ACICS,” said Steve Gunderson, president of Career Education Colleges and Universities, a for-profit trade group.
Gunderson said the government is under no obligation to keep any school in business, but it does have a responsibility to students seeking a shot at a career that can land them in the middle class. Yet the Obama administration, he said, is “sacrificing a whole generation of students to advance their ideological hostility” toward for-profit schools.
At stake is the education, time, money and future of millions of students who for myriad reasons chose trade, vocational and other for-profit schools to put them on a path to better employment. Students such as Sen Wynn.
Wynn, 29, was set to graduate with a bachelor’s degree in cybersecurity from ITT Tech in Chantilly, Va., in October, until a classmate emailed to say the school had closed. She was devastated. Not only did Wynn miss out on a chance to graduate, but she also lost her job interning as a computer tech at the school.
“This has been really hard,” Wynn said. “I had no idea this was going to happen.”
Even though Wynn completed all of the credits for her degree, she is hoping Northern Virginia Community College will let her transfer, even if it means having to take more classes.
Education officials are asking community colleges near ITT locations to accept academic credits from the career school, a request that plays into suspicions that the Obama administration wants community colleges to supplant for-profit schools. The administration has pushed the idea of providing free community college to the nation’s high school graduates.
Juhlin, of the Center for Excellence in Higher Education, believes the administration wants to redirect all federal aid dollars to public institutions, a charge education officials have denied.
He is suing the Education Department over its refusal to recognize his chain as a nonprofit under the federal financial aid program. Education officials have accused his company of trying to skirt regulations, but Juhlin says his case is part of a broader effort to undermine career colleges.
“I’ve gone from spending 80 percent of my time on trying to run good schools, improve the education and deliver better outcomes,” he said, “to spending 80 percent of my time responding to lawsuits, drafting motions, testifying before state regulators.”
ITT also accused the department of having an agenda because of its flat rejection of proposals to sell campuses, much like Corinthian did after facing government sanctions. Education officials helped broker the controversial sale of those schools, leaving the department open to a barrage of criticism.
In ITT’s case, Undersecretary Ted Mitchell said the department “never saw a path forward” for a sale. “The department is learning about the need for being proactive,” Miller said. “ITT is the result of learning from Corinthian, where they lingered far too long so the results of when it collapsed were worse than they needed to be.”
Gunderson said one of the technical schools his organization represents wanted to take over a few ITT locations but wasn’t given a chance by the department. He declined to identify the school because he said career colleges are “scared to death that anything they do will cause the department to go after them.”