At the beginning of the summer of 2008, I returned home from college to find a new bed frame in my room. My mother had elevated my mattress from the floor onto a set of cinder blocks. It was meant as a joke—a Dickensian exaggeration of our money problems at the time. We were living in the cheapest unit of a ramshackle Victorian in Conshohocken (Lenape for “elegant land”), an old industrial town about 15 miles west of Philadelphia. The Conshohocken Victorian felt like a step up: Just a couple of summers earlier, we had been semi-homeless for a while; a bulging ceiling on the brink of collapse from a sewage leak had prompted my mother to break her lease on a studio. Friends took us in.
I still had one year of college left, and my finances, heavily dependent on student loans, were desperate. I needed a job. So when a friend told me about a telemarketing gig in an affluent town across the Schuylkill River, in an office near the grocery store where I’d shagged shopping carts during high school, I was excited. After years of landing only sweaty construction and retail jobs, I imagined a summer of leisurely (and prosperous) white-collar days and beer-league softball nights.
The job entailed calling college admissions officers, again and again, and pretending to be an applicant, never using my real name or describing my real background. They would be trying to sell me on their school. I would be monitoring their performance. The schools had an owner in common: a for-profit college conglomerate that I’ll call Big School.
Today, around 10 percent of all college students are enrolled in for-profit schools.
Today, around 10 percent of college students are enrolled in for-profit schools. Yet about 44 percent of all students who default on student loans also come from for-profit schools. That partly explains why my job existed. State and federal officials were noticing that students from the same schools were defaulting on their government-backed loans at unusually high rates, and for-profit schools were getting hit by lawsuits alleging shady recruitment practices, including violations of the False Claims Act, an obscure Civil War-era law that sets penalties for fraud where taxpayer dollars are involved. The company that hired me was therefore hired by Big School to make sure its admissions staff was not only making a smooth sale but sticking to the letter (if not so much the spirit) of the law.
Since the work would require a concentrated, constant stream of lies about who I was—all to see if some recruiter would lie to me about anything—my mother told me I was on a slippery slope to a career as a white-collar criminal. I took the job anyway.
Thus began a short summer of trying to dig myself out of a bad debt fix by helping Big School entice students into even worse debt fixes. When I eventually got the business into trouble, and got myself fired, it wasn’t because of principled opposition, either. But I’ll get to that.
We were five employees, all college-age, sitting in a gray, two-room office with narrow windows near the ceiling. Each of us had a computer, a phone book, and a tape recorder. With the recorder running, we’d call any one of dozens of for-profit colleges owned by Big School, a publicly traded entity that runs schools in and around the nation’s largest cities, including Chicago, New York, San Francisco, and Detroit.
When I called a Big School recruiter, I’d give him or her a fake name and a fake address—somewhere in the same region as the school but not in the same town (I couldn’t risk being asked if I had tried the new sushi place on Broadway, for example). I’d usually look up names and addresses in the cities where I pretended to be living, but then swap out a few key details so that fake me didn’t correspond to anyone real.
Then I’d try to sound interested in but hesitant about attending college. I often mentioned an interest in photography, drawing on my high school experiences photographing rotting apple cores for an art class. I’d also make up details like work experience and high school GPA, usually a low one. Most of my characters had made some past mistakes but yearned for a better life of the sort promised by a college degree.
The recruiters loved me. They’d tell me about their own lives and hopes and dreams. Many of them seemed to have messed around in high school, too, until some revelation—a billboard, a rap session with a family member—pointed them toward higher education in creative fields like graphic design or culinary arts. And now they were working as for-profit college recruiters.
I rated how well they made the sale and, more importantly, checked to see if they were overselling: making false promises about the financial aid I could receive or about the likelihood of me getting a job after I graduated.
At a minimum, we had to ask, “Will I get a job when I graduate?” and “Will the school help me pay for attending?” The wording could vary, but the substance of the question had to be unambiguous. This was to make sure that False Claims Act violations were not occurring. At this point, the voices of the admissions recruiters would usually change from cheery to starchy and more deliberate. Sometimes, although rarely, they would misstep and overpromise financial aid or job help, in violation of the rules. I would make a note of this and wrap up the conversation, passing along the report to my boss, who would submit it to Big School. Presumably, the offenders were reprimanded or fired. I didn’t ask.
For-profit colleges are older than the republic. The first attempt in North America was the College at Henrico, chartered by an early British Virginia colony for “the conversion of infidels,” as King James put it. (The infidels in this case, Powhatan Indians, promptly destroyed the colony.) At their best, for-profit schools offer people a chance to learn a steady trade—bookkeeping, nursing, mechanics, cosmetology—faster and more economically than is possible through a traditional liberal arts curriculum. They offer a convenient, if often pricey, route to higher wages for motivated students who couldn’t find a community college with the right program and a convenient location.
But for-profit colleges are not always at their best. Every few decades over the past 150 years, the sector has taken a beating over deceptive marketing practices or low graduation rates. After the Second World War, when the G.I. Bill allowed soldiers to use federal education grants wherever they chose, fly-by-night for-profit schools proliferated, and, in the 1950s, investigations by the Feds led to a wave of shutdowns.
In the late 1980s, another series of scandals hit the industry, with revelations of people being plucked out of welfare lines and signed up for maximum federal loan amounts, sometimes even without the person’s consent. This led to the Higher Education Amendments of 1992, which, for the first time, made a college ineligible for federal loans if more than a quarter of its students defaulted on their loans within two years. This shut down many schools. But those that survived grew stronger. In the 1990s, DeVry, Apollo Group, ITT, and Education Management Corporation, among others, went public.
Working in favor of for-profit schools has been a growing consensus that only a college degree offers access to a middle-class existence. In the 1940s, only about a fifth of college-aged Americans pursued a higher education; by the 1970s, half of them did.
In 1994, at the time of its initial public offering, Apollo Group, which owns the University of Phoenix, operated 33 campuses with 27,000 students. By 2000, enrollment had almost quadrupled to 100,000. In 2006, Education Management had 70 schools serving upwards of 70,000 students; then Goldman Sachs acquired a 40 percent stake in the company, and, over the next three years, enrollment doubled. From 1990 to 2010, enrollment at for-profit colleges increased from around 200,000 students to nearly 2.5 million.
Forty-four percent of all students who default on student loans come from for-profit schools.
In 2002, the Bush administration loosened several legal restrictions on recruiting practices, making it even easier for these schools to attract students and, thereby, tuition—bankrolled by federal loans. More new student borrowers between 2003 and 2013 attended a for-profit college than any other kind of institution. The trend accelerated after the recession, as millions left a weak labor market to gain new skills in school. By 2009, the average compensation for CEOs at for-profit higher education companies was $7.3 million. Most of their schools were getting more than 70 percent of their revenue from federal funds loaned or granted to students; some, as much as 90 percent.
And who are their customers? More than half of the industry’s students last year came from households earning less than $40,000 per year. As of 2013, more than 40 percent of for-profit college students were Hispanic or black. In California in 2012, more black students were enrolled in for-profit colleges than in the University of California and California State University systems combined.
For-profit school alumni who began re-payment on their loans in 2011 have fared terribly since. Around 20 percent are in default, and their median income is $20,900. Most have gone into debt but failed to earn a diploma. As of 2013 (the latest year for which data is available), only 32 percent of the people who entered a for-profit school in 2007 had graduated. Only 17 percent of full-time students at the University of Phoenix who started school in 2008 graduated within six years.
No one at my job discussed the criticisms of for-profit schools much. We were just barnacles on the ship. But I doubt any of us felt great about our role in improving the sales pitch—and reducing the slip-ups—of Big School’s recruiters. (Except perhaps our boss, who seemed fine with it. “Seems to me to be quite an honorable endeavor, benefiting all concerned,” he told me recently when I got back in touch.) Not that I found the recruiters having to resort to lies very often. They were pitching a product—upward mobility via higher education—that the rest of society had already primed their customers to desire, no matter the cost.
For someone who spent his time at work feeling uncomfortable about his role in luring young people into debt, I gave oddly little thought to my own rapidly growing debt. My circumstances, I felt, were different: My school was better, my debt more easily payable. What’s more, the loans were easy to get.
When I applied to college, the most appealing acceptance letters had come from the University of Vermont and Carnegie Mellon University. The former came with a scholarship, plus a chance to establish residency in the state, amounting to a bill of under $15,000 per year. The latter offered no such incentives: charges were $40,960 for tuition, fees, room, and board for the first year, and they increased each year thereafter. But I knew Carnegie Mellon ranked high academically, and I didn’t think much about the financial consequences in practice. Debt was what everyone paid off with lucrative post-college careers.
The government deemed it unaffordable for my family to contribute anything to my tuition bill, and I received about $5,000 annually in Pell grants. But I relied mainly on loans to pay the rest of my way.
From Uncle Sam I got a Perkins loan (reserved for especially needy students) and a Stafford loan (for anyone who can demonstrate some need), around $10,000 combined annually. Interest rates for these were high—around seven percent. My grandfather co-signed one roughly $7,000 loan from Citibank (which later sold the debt to Discover). The interest rate was around three percent, probably thanks to my grandfather’s sterling finances. The largest loan I took came from an entity called the National Collegiate Trust, a subsidiary of a publicly traded corporation called First Marblehead, based in Massachusetts. That organization approved me for over $10,000 in loans just before I turned 19. I didn’t need a co-signer, to do an interview, or even to shake anyone’s hand. I signed on a dotted line. I would do the same several times more.
Despite the complicated mix of funding streams, the money was easy to come by. Since the 1970s, Congress has made it harder and harder for student loans to be forgiven through bankruptcy, to encourage banks to make what would otherwise be irresponsibly speculative loans to kids like me with no collateral or credit history. In 2005, Congress deemed student loans fully non-dischargeable through bankruptcy—placing them in the same league as child support payments and criminal fines.
My debt grew and grew, until the summer of 2008, when credit tightened in response to the housing crash. The cash I needed to finish school would have to come from my summer job. So I showed up, Monday through Friday, in the gray-toned office of my middle-class dreams, and rated how for-profit college recruiters sold me on their school, for $12 an hour.
One day that August, I made a call and told the recruiter that my name was Stan Jansen. (That wasn’t exactly the last name; I’m changing it here, slightly, for reasons that will become apparent.) “I live near Duluth,” I said.
It would have been a perfectly ordinary lie—my usual combination of slightly altered name and address—except this time I’d screwed up. I had flipped through the phone book, seen Stan Jansen’s name, and then forgotten to give a decoy address. The admissions officer promptly sent a very large box of promotional material to Stan’s actual place of residence.
A week or so later, my boss, a bespectacled, 40-ish guy with a slight South Philadelphia accent, called me into his office. He told me that someone named Stan Jansen had just received a strange package with a letter about attending art school. I gathered that Stan’s wife was a prosecutor who’d battled organized crime and that Stan was a semi-retired police officer. (My Googling in years since suggests that she was a public defender, not a prosecutor, so I suspect my boss got some details wrong, but that’s not really the point.) Supposedly, both Stan and his wife had moved to the far, barren north of the state of Minnesota after she had tangled with vengeful mobsters. The letter from the for-profit college recruiter made them fear they’d been targeted in some sort of retribution scheme, perhaps identity theft. Jansen called Big School; he was angry. Big School called my boss; they were angrier. My boss called me into his office; he was angriest. He wasted little time in showing me the door.
My mom, who was furious that I’d taken a job that required so much lying in the first place, was now furious that I was unemployed. We’d been boasting to friends and family that I finally had a steady desk job. Now we avoided everyone for a few weeks. I spent the rest of the summer out of work, counting my dwindling pile of money.
The bill for senior year once again exceeded what my financial aid package could cover, and my bank account was empty. I was left with two options: sell the car I was using to get to my off-campus job during the school year, or hit up my retired grandparents for some of their nest egg. I did both. Today, I have over $70,000 in student debt.
I wish anyone involved in my indebtedness—my family, Carnegie Mellon, the federal government, the state of Pennsylvania, or even the Middle States Commission on Higher Education (which accredits both Carnegie Mellon and many of the for-profit schools I called as a fake prospective student) had asked me what I planned to major in and what career I aspired to. Then, maybe, when I’d said “English” and “writer,” they’d have denied me a $5 loan for cab fare home, or told me they’d rather see an armed robber in their office. I would have had to seek out a solid, affordable state school. I would not have tens of thousands of dollars in outstanding loans.
“Will I get a job when I graduate? Will the school help me pay for attending?”
College is an investment, and all investments entail risk. Expenditures may not pay off. Borrowed money may just leave the borrower in even worse shape. Because of how our system of higher education is structured, however, we expect students to take on such risks. We insist that college is a must-make, can’t-lose investment, when, for some people, it’s a shouldn’t-make, can’t-win investment. And the dollar amounts at stake keep getting higher.
I am one of the lucky people. My degree is still a good one, and I’m blessed with a salaried position in a competitive field of my choosing. But millions of Americans are not so fortunate.
Student-loan debt in the United States now tops $1.2 trillion, and the alumni of places like Big School are especially hard-hit. The authors of a Brookings Institution paper released in September found that most for-profit college students are raised poor, are poor when they enroll in college, and remain poor years after leaving school, usually without a degree—and almost always saddled with debt. Many of these students were talked into attending their schools by the sort of recruiters whom I spoke to during my work for Big School.
The Obama administration has made some efforts to address this vast, tangled problem, going after for-profit colleges by implementing the so-called gainful-employment rule, which can bar schools from accepting federal aid if their graduates’ annual loan re-payments exceed 12 percent of their total earnings. It has also taken major steps toward enrolling students in income-based re-payment plans that limit the percentage of their monthly income that can go toward debt payments. Many college companies, including Big School, are facing multimillion-dollar lawsuits from the Department of Justice over their recruiting practices—the practices I was screening for in the summer of 2008.
But executive actions and rule changes can be rolled back or neglected by future administrations, and tuition and debt keep climbing. When loans to the less fortunate become a means to extract what little wealth they can hope to amass in life, we have a problem.
The autumn after my tango with Big School, I spent three afternoons a week taking a bus to the heart of Pittsburgh, to a small office where I had a work-study gig tutoring K-12 students from low-income neighborhoods. I’d board the 71C in suburban Shadyside and ride it to the decaying blocks of downtown. As we rode along Forbes Avenue, I’d see Big School’s name emblazoned in magenta on a billboard with homeless people huddled at its foot. I’d pass it every week for the rest of the year.
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