The Washington PostDemocracy Dies in Darkness

How one student got burned by a for-profit college and bailed out by Occupy Wall Street

*Correction: This post has been updated reflect that the 90:10 rule applies to the percentage of a for-profit college’s revenue that may be made up by federal financial aid, not the percentage of an individual student’s tuition. Also, Everest did assign Brown an internship, but she wasn’t able to find transportation to get there. 

Courtney Brown, 24, had been drifting since graduating from high school a few years ago in Kalamazoo, Mich. She worked at McDonald’s for a while — “that didn’t last long,” she says — before seeing an ad for something called the Everest Institute on television.

“The commercial looked really appealing, like something I could do,” Brown says. “You didn’t need any college. I want something that would go at my own pace.”

There was a branch campus in Kalamazoo, so she signed up for a pharmacy technician program. It was supposed to last 33 weeks, and cost about $17,000, with everything included. Brown took out a mix of federal and private loans to pay for it. After a couple of weeks, she didn’t like the pharmacy technician program and decided to switch to dental assisting.

The course went all right — not too easy, not too hard. But as the eight months came to a close, she couldn’t find an internship that was required to finish up and get her dental assistant certification.

“They don’t help you get them,” Brown says of Everest Institute, which assigned her an internship 30 minutes away in the smaller town of Battle Creek — where she wasn’t able to go without transportation. “You have to know people on the outside to get them, and I have no connection with dentists.”

Feeling like she had no options, Brown quit the program, just before finishing. And it wasn’t just her. According to the school’s own statistics, very few students who enroll in the dental assistant program actually finish in the anticipated 33 weeks. Across Michigan, just 8 percent finished on time at the Dearborn campus, and 0 percent in Southfield.

Of those that do finish, Everest offers relatively rosy statistics for graduates getting jobs — 81 percent, according to the state’s metrics in Dearborn, and 56 percent in Southfield.

But there’s no telling whether these figures are accurate, according to the federal Consumer Financial Protection Bureau. Yesterday, the federal agency sued Everest’s parent company, Corinthian Colleges, in a scathing complaint that details exactly how the chain of more than 100 for-profit schools lured in low-income students, saddled them with debt  and left them with a sub-par education that is little help in getting a job at the end of it. The investigation,  launched months ago, has left the chain on the brink of collapse; dozens of campuses have  closed — including Brown’s, in Kalamazoo — with more on the way.

Calls to Corinthian Colleges for comment were not returned before press time.

Everest’s tactics were extreme. But some of the fundamentals of its operation are endemic to the for-profit college industry.

At the heart of this business model is a simple ratio: 90:10. That’s the percentage of its revenue that Congress has mandated a for-profit college is allowed to make from federal financial aid, not counting those from the Veterans Affairs department, under Title IV of the Higher Education Act. In order to keep accessing a stream of publicly financed tuition dollars, Corinthian needed to make sure its students were getting enough money from private sources to make up at least 10 percent of the total.

So, Corinthian got into the lending business — even after third-party lenders stopped making loans to students with the kind of bad credit that its students usually had, the CFPB alleges. Corinthian created an elaborate system to buy the loans from the lender as soon as they were issued, the CFPB says, positioning itself as a creditor as well as an educator.

In that role, Corinthian could then force students to pay up by holding their education hostage. Repercussions mounted as borrowers got more and more behind: The complaint details instances where administrators would pull students out of class to scold them if they weren’t making payments, computer access was terminated  and students were prevented from registering. The outstanding balance on a total of nearly 130,000 private loans taken out between July 2011 and March 2014, the CFPB says, is $568.7 million. Everest says the average dental assistant student in Michigan takes on about $2,500 in private debt.

Courtney Brown says she initially managed to make her payments on time, with a little help from some generous friends. After she stopped going to class, having no way to get a job without a certification, she had to stop paying. She was able to put the federal loans in forbearance, but the school kept calling her about the money she owed them for her private loans, and Everest kept pushing her to re-enroll in the program. “I wouldn’t answer, because I didn’t have the money,” Brown says. “If I don’t have the money, why are you calling?”

That’s where Occupy Wall Street stepped in.

A few years ago, a group called Strike Debt that sprang out of the Occupy protests embarked on a novel strategy to highlight what it sees as the injustice of consumer indebtedness: Raising money to purchase loans that financial institutions have to sell for pennies on the dollar as a tax write-off once they become more than 180 days delinquent. Instead of taking people to court to try to collect that debt, which a normal debt buyer would do, the project — called Rolling Jubilee — just abolishes it. So far, the nonprofit has raised more than $700,000 for the purpose.

Until now, Rolling Jubilee had just purchased and destroyed medical debt, which people rack up quickly if they don’t have insurance. And it wasn’t able to buy the federally-backed student loans. But Rolling Jubilee could buy some of that private debt that Corinthian was peddling.

In August, according to the CFPB, the company offloaded $505 million in outstanding loans, which it sold for $19 million to another entity known in the complaint as “Company A.” From a different buyer — which Rolling Jubilee says it can’t disclose, according to the terms of its purchase agreement — Rolling Jubilee was able to acquire and abolish $3,856,866.11 in loans owed by 2,761 people. One of them was Courtney Brown.

Last week, Brown got a letter in the mail saying that the last $800 of her private loans had been wiped out. “When I got the letter from Rolling Jubilee, it was kind of a shocker. I thought it was a joke,” Brown says. “Then I spoke to someone on the phone, and they explained that it was the one debt that I had left.”

Despite the difference a few dollars can make in the lives of those whose debt has been washed away, the ex-Occupiers aren’t planning to continue that particular strategy. Donations for the fund closed in December, and there’s a little left over for a couple more debt purchases before it winds down completely — organizers say it was a public relations strategy to highlight how the debt market works, and isn’t a sustainable solution.

“We want it to roll into larger, more aggressive tactics,” says Thomas Gokey, one of the group’s founders. “We want to make all public higher education completely free — that’s a practical, achievable goal. We can’t wait for Congress to do it.” To that end, today, Strike Debt launched the Debt Collective, which plans to organize debtors across the country in resistance.

Meanwhile, Brown has gone back to school. This time, it’s a four-year degree at the public Western Michigan University, which she’s financing through federal student loans exclusively. She knows it’s expensive, too — but at least she’s more likely to get a job at the end of it.