TRIBUNE PHOTO: JONATHAN HOUSE - Oregon Culinary Institute founder Ray Gauthier says Oregon needs to better regulate for-profit schools. Here, OCI instructor Dan Brophy critiques the performance of students during a breakfast prep.In 2010, the U.S. Department of Education issued a “program integrity” rule in an attempt to increase state oversight of for-profit colleges. Among the provisions was a requirement that all students enrolled in for-profits be made aware of where they can file a complaint with the state agency that accredits such schools.

In Oregon, that agency is the Office of Private Postsecondary Education, part of the Oregon Higher Education Coordinating Commission. Officials in the office have told the Tribune that in recent years, “virtually” no complaints have been received, and no investigations have been conducted.

Students and school counselors approached by the Tribune said they had never heard of the office, and had no idea where they would take complaints against for-profit colleges. Even HECC executive director Ben Cannon acknowledges that is probably the case.

“The fact that the vast majority of students don’t know this resource is available to them is problematic,” Cannon says.


For-profit colleges often leave Oregon students with debt, worthless credits

But the commission’s complaint procedure is daunting. The HECC website doesn’t have a clear complaint procedure for students at degree-granting for-profit colleges. And complaints about career schools can’t be made online. Instead, students must complete a four-page form and mail it to the agency.

The form asks students to detail whether they have tried to resolve problems with teachers, school directors and school owners. It asks students to attach documents such as enrollment agreements, advertisements and financial papers. And it tells students that, “Unless the complaint is a violation of a state or federal law or administrative rule, the decision of the school is final.”

Inhibiting complaints

The Oregon complaint process is anything but student-friendly, according to David Halperin, a Washington, D.C., attorney and author of “Stealing America’s Future: How For-Profit Colleges Scam Taxpayers and Ruin Students’ Lives.” The legal language in the form, Halperin says, reads as if HECC is trying to scare students away from filing complaints rather than encourage their input so the state can uncover disreputable schools.

“It makes them feel they are likely to be rejected,” Halperin says of the Oregon form. What the online form doesn’t do, he adds, is give the impression that the agency intends to advocate for students. Cannon says that even if students at for-profits were registering complaints, there isn’t much the agency could do about it. He says that Oregon law only allows his commission to look at whether a school is likely to remain solvent, not whether it is turning out students with too much debt, or taking in students who don’t graduate or get decent jobs after graduation.

So if an Oregon student alleges a for-profit school provided a subpar education or misled him or her during recruiting, there is little recourse, according to Cannon.

Asked whether that was a problem, Cannon responded, “I certainly believe there’s cause for concern. And certainly reason for some very significant consideration about whether our authorities are sufficient.”

In fact, Oregon administrative rules give HECC broad power to investigate for-profit career schools. HECC can impose civil penalties for schools making misleading claims, among other violations, and it can initiate suspension and revocation proceedings. With degree-granting for-profits, if a school fails to satisfy even one of a long list of requirements, HECC can take away their authority to grant degrees.

Oregon not alone

A state that fails to help students who have been preyed upon by for-profit schools is far from unusual, according to Halperin. Still, some have been making progress.

Last month, the Attorney General in Massachusetts found that two schools operating there—Lincoln Institute and Kaplan Career Institute — inflated their job-placement rates. Kaplan agreed to pay $1.375 million to former students and Lincoln another $1 million. But, Halperin says, Kaplan has received about $1.54 billion in a single year through federal student aid to its students. The fine, he says, won’t act as much of a deterrent.

“It’s just the cost of doing business,” Halperin says.

States don’t have much incentive to act as advocates for students at for-profit schools, especially with agency budgets under constant review, says Tom Harnisch, a policy analyst for the Washington, D.C.-based American Association of State Colleges and Universities.

States not at risk

“The issue is states don’t have much skin in the game,” Harnisch says. “The students who are getting ripped off are taking out federal student loans and getting federal Pell Grants. Most states don’t offer much in the way of student financial aid.”

The result?

“There’s a lot of finger pointing in this,” Harnisch says. “The states may say, ‘You know what? It’s federal grant money, the federal government should be looking after this more.’ Or, ‘These schools are accredited. If you have a problem with what they’re doing, you should be talking to the accreditors.’ ”

According to a National Consumer Law Center report titled, “State inaction: gaps in state oversight of for-profit higher education,” the federal government is supposed to ensure that its financial aid goes to schools that are eligible according to federal rules. Accrediting bodies are responsible for checking on schools’ educational standards.

But only state agencies, the Law Center report says, have the legal authority to truly oversee for-profit colleges to make sure they protect students as consumers.

For instance, many for-profit colleges don’t have proper accreditation, so students find they cannot transfer credits to other schools. Only states can take on schools that misrepresent their accreditation, according to the Law Center. But few do.

School data unreliable

Disclosure law is another area in which state oversight is lacking, according to the Law Center analysis. For-profit schools must report data on key measures such as student completion and job-placement rates, as a part of federal disclosure regulations. But most of that data is self-reported by the schools, which have every incentive to inflate their numbers. Only state agencies can ensure that the data schools post is accurate, according to the Law Center.

Many states provide an online page for students to compare for-profit colleges. Oregon does not. HECC executive director Cannon says his staff has concluded that the annual data provided by the colleges isn’t reliable. He says his staff hopes to strengthen reporting requirements and might have something posted a year from now.

“I completely agree that students should be able to get (information) online,” he says.

The Law Center also recommends that state agencies charged with overseeing for-profits spend at least 60 percent of their budget on investigation and enforcement.

TRIBUNE PHOTO: JONATHAN HOUSE - The for-profit Art Institute of Portland in the Pearl District is the focus of student complaints, but those complaints have not made it to the state agency with the authority to insist on changes or close the school down.

Other states do more

California has made some progress in regulating for-profit schools. In 2011, Gov. Jerry Brown signed a bill that ties California financial aid to student loan default rates at schools. As a result, more than half of the for-profit colleges in California are now barred from offering students state grants. The University of Phoenix, a national for-profit with campuses and online students, lost about $20 million per year in California state financial aid as a result.

Maryland revamped its regulations in 2011, strengthening rules against deceptive recruiting and establishing a for-profit student protection fund paid for by the colleges.

But for-profit colleges retain considerable political muscle, making it hard for regulators to get tough on them, says David Dies.

He should know. As executive secretary of Wisconsin’s Educational Approval Board, Dies has led one of the more aggressive state oversight agencies in the country. As a result, his board was nearly disbanded this year by a heavily lobbied Legislature.

The Wisconsin board gets about 50 complaints a year from students at for-profit schools. About half warrant a formal investigation, and in about half of those cases, the board finds in favor of the student.

The Wisconsin board also looks at financial statements of all the schools and assesses their financial stability. That led to the closing of the Everest College campus in Milwaukee.

Dies says that although he had concerns about its viability, he could not stop Everest from opening a college to train low-income students to work in health-related fields. Soon, however, board investigators noted that the school enrolled up to 150 medical assistant students, but that there were not enough externships in the area to accommodate them. Basically, Dies says, the school was turning out medical assistants who would not be able to find jobs in the area.

“Within a year and a half we said, something is wrong here,” Dies recounts. Everest officials proposed a corrective action that Dies calls “a piece of junk.” Parent company Corinthian Colleges then decided to close the Milwaukee school. Corinthian also agreed to write off the debt of many of the students. Two years later, Corinthian declared bankruptcy and Dies says the closure of the Milwaukee campus saved a number of Wisconsin students a great deal of grief.

Wisconsin also hosted an Anthem College campus, where surgical technology, massage therapy and medical assisting were taught. When the school shut down (as it did in Oregon) the Wisconsin oversight board took possession of the medical equipment, transferred it to another site, and convinced the Anthem teachers to complete the semester with their salaries paid by a state fund established with money contributed by the state’s for-profit schools.

The Wisconsin board even takes on relatively minor complaints from students at for-profit schools. When four students wrote that the director of a small pet-grooming school mistreated an animal and called a student with a disability “a dummy,” a board investigator helped the students get a partial refund and directed the school to address the problems.

The Wisconsin and Oregon oversight boards are responsible for protecting a similar population of students and have comparable staffing numbers. Dies, incidentally, managed to fight off attempts to shut down his board.

More regulatory tools here

On the plus side, Cannon says Oregon law allows the commission to regulate a higher percentage of for-profit colleges than agencies in some states, because it gives the commission authority over online schools based elsewhere that are serving Oregon students. Also, he says, the Legislature has increased the commission’s authority to require colleges to post surety bonds, so if a school goes bankrupt, students will get reimbursed for prepaid tuition.

Teachers at Oregon for-profit schools must be approved by the state — something that isn’t required in all states.

Juan Baez-Arevalo, HECC’s director of private postsecondary education, which has direct oversight of for-profits, says much of his office’s attention in recent years has been directed at helping students at for-profit colleges that closed. When Heald College shut its Portland campus, the agency helped 309 students get their student records and transition to other schools.

Baez-Arevalo says his office was concerned about Heald a year before it shut down, and made the school post a surety bond so that after it closed, students had tuition money returned to them.

Cannon says that even if HECC is given the authority he says he needs to more thoroughly regulate for-profit colleges in Oregon, the task won’t be an easy one.

“Regulation goes all the way from mom-and-pop businesses that are trying to do the right thing, through big national for-profit chains that are part of a larger holding company,” he says. “We have to be careful not to develop laws that are insufficiently flexible.”

TRIBUNE PHOTO: JONATHAN HOUSE - Ray Gauthier owns four for-profit colleges and wants the state to rid the industry of schools he says give the rest a bad name.

School owner says state inaction hurts all

Ray Gauthier is upset about the lack of oversight of Oregon’s for-profit colleges. Which is surprising, given that Gauthier co-owns four of them, including Portland’s Pioneer Pacific College and the Oregon Culinary Institute.

Gauthier wants better oversight because he’s tired of people assuming his colleges, or all for-profit colleges for that matter, are run on the same principles as the predatory schools that exist primarily to make money off federal financial aid. He says he’s not alone.

“Everybody who is doing this for the right reasons is in favor of strong regulation,” Gauthier says.

Gauthier says he knows of three or four for-profit schools currently operating in Oregon that “absolutely should be shut down.” And he’s aware that the Oregon Office of Private Postsecondary Education, which oversees for-profit colleges, hasn’t investigated any of them.

“I would like to see investigations,” Gauthier says. “I would like to see when somebody does something bad, let’s go kill this guy, rather than write 100,000 rules that apply to everybody.”

Gauthier says the Oregon Legislature’s inclination to write new statutes isn’t the answer. That just makes burdensome and unnecessary work for administrators at small for-profit schools. He says the Oregon Higher Education Coordinating Commission simply needs to start investigations, and it needs to close down schools that are burdening students with debt they’ll never be able to pay off and graduating students who aren’t finding jobs in their fields.

“We want less regulation on process and more regulation on outcomes,” Gauthier adds. “People who start should graduate. It’s measurable.”

DOJ backs local student in fraud complaint

There are two agencies authorized to investigate complaints from Oregon students who think they’ve been defrauded or misled by for-profit colleges. Only one of them — the Oregon Department of Justice — has taken action against a school on behalf of a student in recent years.

Two years ago, Southeast Portland resident Malcolm Strand felt he had been cheated by Penn Foster, an online for-profit career school based in Scranton, Penn. While the state agency that directly oversees for-profit colleges — the Office of Private Postsecondary Education — requires that an intimidating four-page complaint form be submitted by mail, Strand wrote a simple one-paragraph complaint to the Oregon Department of Justice. He explained, that, after attending Penn Foster, he discovered the credits from his classes there would not be accepted at Portland Community College, where he was continuing his education.

“If you go to the Penn Foster website it sounds as if everyone accepts their credits,” Strand wrote. The Department of Justice spent a year investigating the claim and, according to DOJ spokeswoman Kristina Edmunson, found that Strand was right.

“Basically this school was unaccredited,” Edmunson says.

Two months ago, the DOJ reached a settlement with Penn Foster that stipulates the school will clean up its advertising, stop telling students their credits will be accepted everywhere else, return the $1,900 tuition that Strand had paid the school, and stop hounding him for more payments.

In addition, Penn Foster must give $50,000 to an Oregon nonprofit that helps educate disadvantaged youth. And Penn Foster is required to pay the costs of the DOJ investigation —$22,000.

Edmunson says the Justice Department has received only a few complaints about for-profit colleges operating in Oregon, but is open to further investigations.

“We want to hear from folks if there are specific complaints here in Oregon,” she says.

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