Counterfeit Ed

Counterfeit Ed

How some for-profit schools sell vulnerable students on false hopes for a better life

The Set Up

How for-profit colleges convince students to take on mountains of debt for useless degrees

By this point in his life, 55-year-old David Guerra had hoped to be a manager at a nice residential building, with a staff of maintenance workers to oversee.

Every weekday morning, Guerra takes two trains from his home in Queens, N.Y., to a building on East 51st Street and First Avenue in Manhattan where a four-bedroom apartment sells for $7 million. Instead of running the show, though, he inspects boilers and mends broken heaters as the building’s handyman, a job he’s held in one form or another for more than 30 years.

After years of working hard in hopes of a promotion, Guerra decided to try a new track: In 2009, he signed up for a Facilities Management Technology program at the Technical Career Institute College of Technology, a for-profit college in the city, with the understanding that his degree would get him a job as a building manager.

David Guerra
Former TCI student

“Education makes you think not only how, but why," says TCI’s president John McGrath in a recruitment video on TCI’s website. "The person that knows how will most likely have a job, but the person that knows why will most likely be their boss."

Things didn’t go as Guerra had planned — “to be honest, in the end, I didn't learn anything at TCI. It took me two years just to get a title,” said Guerra. But he lost much more than money — in his view, he was robbed of an opportunity at a better life. After graduating with an associate’s degree from TCI, all he has to show for it is $36,000 in debt. He still works as a handyman and earns the same $729 per week he made before he started school in 2009.

“The biggest frustration for me is that TCI was supposed to open the door,” said Guerra. “But when I show people my degree, it doesn’t impress them.”

Guerra’s broken dream isn’t unique. His and many other similar stories add up to what critics and student advocates call the nightmare world of unscrupulous for-profit colleges. These schools – a $30 billion a year industry – pumped up by federal student loan funds, spend big bucks on recruitment campaign touting dubious claims of work placement – attracting growing numbers of disproportionately poor students of color looking to earn a better living. Many students, like Guerra, wind up with crushing debt and no closer to the job they wanted.

Government oversight has been scattershot, though the issue is starting to spur action nationally and locally, where for-profit schools enroll more than 100,000 students across Brooklyn, Manhattan, Queens and Long Island. In 2013, Guerra went to the New York Legal Assistance Group for help with his student loan repayment. That same year, NYLAG began collecting allegations from students who have attended the city’s many for-profit colleges, including TCI, Berkeley College and Apex Technical School. In July, the organization filed its first complaint against ASA College, a for-profit school with sites in Manhattan and Brooklyn.

In industry parlance, a for-profit college is a school that operates like a business, passing revenue earned from tuition on to the owners or shareholders of the school, or company. Many of the biggest for-profit schools around the country are publicly traded corporations, with huge companies like Wells Fargo owning shares. A subset of for-profits is made up of privately held companies like ASA and TCI that are usually owned by one person or a handful of people. As private companies, information about their operations can be hard to come by.

According to NYLAG and the eight plaintiffs named in the complaint, ASA's programs do not provide relevant training and produce graduates who can’t find work – all while collecting hefty tuition payments borrowed by low-income students.

NYLAG isn’t the first group to call foul on for-profit schools. As enrollment at for-profit schools has exploded over the decade – more than doubling between 2003 and 2012 – the Department of Veterans’ Affairs and the Consumer Financial Protection Bureau have been soliciting complaints from current and former students of for-profit colleges. Thirty-seven state Attorneys General led by Kentucky Attorney General John Conway have formed a working group to investigate for-profit colleges.

“The unfair and unethical business tactics of those schools are leaving too many students drowning in debt with worthless degrees, while taxpayers are left footing the bill for debts that are never repaid,” Conway said in a press release urging the federal government to hold these schools more accountable.

A bigger slice of the pie

For-profit schools once took in less than 2 percent of all students in the U.S., but today they make up nearly 9 percent of students and 20 percent of federal aid recipients.

Sources: Total undergraduate fall enrollment by school type calculated from the National Center for Education Statistics Digest of Education Statistics 2013; Pell grant and subsidized direct loan data from CollegeBoard Trends in Student Aid 2014.

Some investigations have resulted in school shut downs. More than a dozen states from California to Wisconsin investigated the for-profit giant Corinthian Colleges – which had more than 70,000 students at its peak – for abuses ranging from misrepresentation of job placement rates to false advertising and aggressive recruiting. The school was forced to close when the U.S. Department of Education took the unusual step of waiting a few weeks to release student loans while it finalized its investigation.

Over Promising, Under Delivering

Schools advertise degrees that unlock doors but what they get often means little in the job market

Guerra spotted TCI’s signs one day and decided to stop in. The school had a program called “building facilities management” and Guerra thought he had finally found what he’d been looking for: A way to gain the pride and security of proving for his family beyond living paycheck to paycheck. He asked what paperwork he needed to sign up.

Guerra said he was asked only for his income tax return. “They told me it was for a scholarship,” he said.

He was not eligible for a scholarship. Instead, Guerra said he was told to fill out paperwork for loans. “It was just like that,” he said, snapping his fingers. In 10 minutes, he had enrolled.

Eileen Connor
Senior staff attorney, NYLAG

For-profit schools argue that their poor graduation and loan repayment rates are low because of the population they serve – and market to: often single parents with part-time jobs, and lower income and years older than traditional college students.

In New York, the Attorney General’s office has opened investigations into several of the state’s for-profit colleges. Of the institutions under review, which include a beauty school and Donald Trump’s real estate seminars offered under Trump University, only one case had reached a conclusion as of January 2015 – last year the state settled with Career Education Corporation for over $10 million for misrepresenting job placement rates, with more than $9 million paid in restitution to students.

In 2012, state politicians amended the Higher Education law to enable authorities to better monitor for-profit schools, and impose fines when necessary. Just a year earlier, the city rolled out the Know Before You Enroll Campaign to inform would-be college students about for-profit schools and to collect complaints. Since the campaign’s inception, ASA has received 26 complaints and TCI 15 – the most of the city’s more than 400 for-profit colleges. (TCI did not respond to requests for comment).

“When I meet with these people, it's very clear to me that there's exactly one purpose why they went to a school, which is to get a job,” said Eileen Connor, a senior staff attorney at NYLAG. “It's difficult with education to really quantify what a good outcome is, but in this case it's not difficult. The outcome is the job that the student was expecting to get and needs to get.”

Eileen Connor
Senior staff attorney, NYLAG

Job Placement? What Job Placement!

Many modern for-profit schools started as trade schools (some still are), and continue to offer the same type of education: career-focused, with courses like criminal justice and medical assistance. According to ASA’s website, students can expect to learn how to file patient records or draw blood, taught as part of the associate’s degree in Medical Assisting. Ostensibly, this gives graduates the knowledge they need to transition into jobs.

Yet students who attended a for-profit college were more likely to be without a job six years after starting the program than to comparable students who attended community colleges or other public or private non-profit institutions. Students from for-profit colleges earn annual wages, on average, that are $1,800 to $2,000 lower than the wages of students who had gone to other colleges.

Last year, Harvard researchers used fake resumes to apply to nearly 2,500 jobs, listing either a for-profit school or a non-selective public university under the education section. Work histories were kept the same. Researchers found that fictitious candidates with a degree from a for-profit school were 22 percent less likely to get called for an interview. Compared to candidates with only a high school degree, for-profit graduates were barely more qualified in the eyes of employers – they were about one percentage point more likely to get a call back.

“What it tells you is that employers really do think less of graduates of for-profit schools not because they have worse work experience or look worse in other ways,” said lead researcher David Deming.

For-profit schools go to great lengths to advertise the benefit of their programs, occasionally shading the truth or skirting it entirely. Brochures for programs offered by for-profit schools, including ASA and TCI, claim that courses will prepare students for certain fields or exams. In actuality, many of these jobs require no special training and in some cases all someone would need is a G.E.D.

Completion of ASA’s associate’s degree in health information course, according to the school website, prepares a student to pass industry certification exams. But in order to be a Registered Health Information Technician (RHIT), a student must have studied at a college accredited by the Commission on Accreditation for Health Informatics and Information Management Education – an accreditation ASA does not have.

Joe Cooper enrolled in ASA’s criminal justice program in 2011 after he read the course could help him become a police officer. The cut-off age for the Police Academy exam is 35, information that no one at ASA passed on to 48-year-old Cooper. Although Cooper says he was happy with the classes, but he has only been offered the same type of security jobs he had before school. Any jobs ASA’s career services department found for him have been almost half of what he made – $25 per hour – before attending.

“You can’t call me and say, I’ve got something for you, and then I look at, it’s like $14 an hour. I’m like, are you joking?” said Cooper.

The Money Trail

When for-profits defraud their students, it's taxpayers on the hook

In 2012, for-profit colleges reported $17,000 in revenue for every full-time student. The same colleges spent $14,545 per student overall, with only $3,542 going to the cost of instruction, compared to $7,389 at public schools.

A majority of for-profit colleges’ revenue is made up of federal student aid in the form of student loans and grants regulated by Title IV of the Higher Education Act of 1965. Between 2005 and 2006, TCI received a total of $20 million in Title IV funding. That same year, TCI improperly paid $440,487 in student loans for students who had withdrawn after their first semester, in order to avoid changes to their student loan default rate and to maintain federal loan eligibility, according to a US Department of Education audit.

“The way the business model works is the students are effectively accessing an entitlement program – so if you can find a warm body to come in the door, you can get a certain amount of money from them,” said Ben Miller, an education policy analyst at the New America Foundation, a non-profit think tank.

For the 2010-2011 fiscal year, ASA reported $78 million in revenue, half of which was from federal loans, another $27 million from federal need-based grants and $15 million in need-based grants from the state. But stories from former teachers call into question the school’s spending.

When Stephen Hirst speaks about the two years he taught English and composition at ASA, he starts by describing the classrooms: partitioned by flimsy dividers, making it hard to hear over the noise of the neighboring class.

Hirst, who has an MFA in creative writing from Eastern Washington University, said he met with administrators to talk about his concerns: No paper. Copiers were always breaking. Sometimes teachers didn’t get textbooks until weeks into a course.

The starting rate for a teacher at ASA is $25 to $30 an hour, and tenure is rare. Greig Roselli, who taught English at ASA for two and a half years, said administrators told him repeatedly that he was being considered for a full-time position, but a promotion never materialized.

“Every time I asked, I was told to fill out a new form or write another letter of inquiry,” Roselli said. He didn’t see an increase in his pay rate of $30 an hour during his time at the school.

Forms were a constant battle. Administrators told Hirst that one of his most important tasks was logging attendance, and he was often nagged about filing “at-risk reports,” paperwork that identified students in danger of failing.

Stephen Hirst
Former ASA teacher

Students often walked into classes several weeks into the course. If a course was 15 weeks long, said Hirst, a student could come in as late as six weeks. The administration simply told him to catch the student up.

ASA President Shchegol disputed the complaints: “We do a lot for our students. We create a unique environment.”

ASA teachers and administrators agree one thing: faculty members are qualified.

“Our faculty performs better than faculty at NYU,” said Shchegol.

“That’s not official,” he added.

Despite employing teachers seemingly up for the task, students’ needs were still not being met. Hirst told the story of an older student who wanted to earn a degree so he could quit his job picking up trash in Herald Square. Hirst ran into him years after he graduated.

“He was still there, picking up trash in Herald Square,” he said. “He said hi to me, but could see it in his eyes. You know, ‘Thanks for nothing.’”

Always Be Closing

For-profits' relentless sales tactics prey on low-income students looking for a better life

Jean-Pierre LaCour, an educational counselor at The Center for Achieving Future Education at BronxWorks, a social service organization, sees the effects of for-profit college marketing every day.

ASA College, until recently, regularly parked its truck right outside BronxWorks’ doors, creating a direct clash between ASA’s pitch and the information LaCour and his colleagues offer just steps away.

“I had to tell ASA to move their truck away from our building,” LaCour said.

The ASA truck now parks a few blocks away at a nearby subway stop with tables full of pamphlets and recruiters.

LaCour faults ASA and other for-profit programs for targeting people like his clients: young people of color who come from lower-income communities and see education as a means to a better future.

“Basically, they’re set up to serve as a predator to our community,” LaCour said.

Across the country, publicly traded for-profit education companies spend on average 23 percent of their total revenue on marketing and recruiting, or $2,622 for every student. A 2010 report found that 30 publicly traded for-profit companies employed one recruiter for every 49 students enrolled.

Jay Taylor
TCI student

While schools are heavily equipped for marketing, they’re aiming for a certain demographic. Nearly half of the students at for-profit colleges are black or Hispanic, compared to about a fifth of students at other schools (ASA’s students are 39 percent black and 40 percent Hispanic, while TCI’s student body is 42 percent black and 34 percent Hispanic).

Know Before You Enroll

New Yorkers have filed more than 800 complaints against local schools. Almost half of the schools were in Manhattan, and many are for-profits. Students tend to come from parts of the city with high poverty.

Sources: Complaint data as of Oct 17, 2014 from NYC Department of Consumer Affairs Freedom of Information request. Download the complete list of complaints here. Zip codes with most complaints defined as the 50 zip codes with the highest per-capita complaints, normalized by population data from 2012 US Census. High-poverty zip codes are defined as having more than 20 percent of the population below the poverty line. The 25 schools with the most complaints are shown.

NYLAG and Connor allege that for-profit schools in the city often advertise in places where people might be especially desperate for a way to quickly better their lives: homeless shelters and probation offices.

While Shchegol confirmed that representatives of the school are on the street, he said they do not actively enlist students.

“If you’re walking and thinking about going to college, and you see a college information station, you’re going to come and talk to a live person and ask questions. Is it recruitment? The same thing in the paper. People see the ad, they like it, they call. They don't like it, they don't call,” said Shchegol. “Were making it convenient for them, that’s all.”

Garvin Gittens’ became the subject of another kind of marketing effort when his image was plastered all over the subway in 2011 after he became one of the faces of New York City’s Know Before You Enroll campaign. Gittens graduated from the now-defunct for-profit school Katherine Gibbs with an associate’s degree in graphic design and more than $20,000 in debt.

“I saw the ad on TV about Katherine Gibbs and they made it enticing,” said Gittens. “I went down there and enrolled and they made the process pretty easy. Taking the class, going through, they promised job placements after you graduated.”

When Gittens applied for the bachelor’s degree program at the School of Visual Art, administrators told him that they couldn’t accept the credits he’d earned in the two years he spent at Gibbs – the school hadn’t been accredited, leaving him holding a useless degree.

Garvin Gittens
Former Katherine Gibbs student

The Mayor’s Office of Adult Education launched The Know Before You Enroll campaign in 2011 to educate consumers about for-profit school fraud. But constant turnover in city offices – the Mayor’s Office of Adult Education became the Office of Capital Development, and then when Mayor Bill de Blasio took office in 2014 it became the Office of Workforce Development – has put the campaign on hold.

Doomed to Repeat It

How did we get to this point?

The history of for-profit colleges has followed a cyclical pattern for the last 70 years. Almost as soon as there is real money to be made, scandal soon follows.

The modern American version of a for-profit college originated in the late 18th and early 19th centuries, when schools opened in response to a need for business and trade training outside traditional college settings. By 1890, about 81,000 students were enrolled in 250 proprietary schools across the country.

Even at their earliest, for-profit schools made claims to educational utility, ease and flexibility. In 1771, a builder named Thomas Nevell launched what may have been the nation’s first architectural program, which “a person of a common capacity” could complete in “two months at most.”

The language has shifted only slightly for modern for-profit schools looking to attract students with promises of accessibility and convenience. ASA College’s website has a checklist detailing why students should consider enrolling, highlighting attractive features like day, evening and weekend classes and the opportunity to “earn your college degree in just 16 months,” assuming no remedial courses are required. TCI’s page emphasizes flexibility and convenience, assuring students the program is structured “so that you can attend class and achieve your goals while recognizing that you may have a busy, multi-faceted lifestyle.”

Like many for-profit colleges, TCI College’s claim to a 100-plus-year history warrants a closer look. Through a series of mergers and turnovers, it is possible to trace the school of today to one founded in 1909, but TCI bears little resemblance to the original school – a vocational school to train radio engineers founded by the Nobel Prize-winning inventor of the radio, Guglielmo Marconi.

ASA College does not lay claim to a long institutional history. Founded in 1985 by Russian immigrants Alex Shchegol and Leon Rabinovich, the school was originally called Advanced Software Analysis and offered classes in computer programming. After 14 years of expansion, New York authorized the school to confer various degrees in accounting and medical assisting. Rabinovich ended up leaving ASA to found a second for-profit education venture, the Globe Institute of Technology. The former business partners were involved in a lawsuit in 1999, in which Shchegol accused Rabinovich and his Globe colleagues of supplying defamatory information to New York’s Russian language press.

Read more about the history of for-profit regulation...

Clouded Oversight

In order for a college in the U.S. to receive federal student loans, that school must receive accreditation from one of 52 organizations that have been approved by the Department of Education. Most accrediting agencies function as private, non-profit agencies – a system that’s been separate from the government since 1919 when accrediting agencies were created.

Typically, accreditation involves self-studies by the institution, peer-reviews and a judgment by the accrediting body. Accreditors are required to report some information to the department and the public, but they are otherwise independent and opaque.

ASA and TCI are both accredited by the same regional organization: The Middle States Commission on Higher Education. MSCHE requires a 10-year review cycle including a self-study and on-site evaluation by a team of peer judges.

Some experts place blame on the accrediting agencies themselves, which are tasked by the Department of Education with evaluating a school’s ability to deliver on the services it has promised, and its efficacy in doing so. One of the questions often raised is how a system where schools pay the evaluators to receive accreditation can remain unbiased.

“Their (business) model is predicated on approving schools,” said Miller, the policy analyst at New America.

A majority of the funding for accrediting agencies comes from membership dues from schools the agencies’ accredit. In fiscal year 2015, a school with $50 million in expenses – about the size of ASA – and five 500-student branch campuses would be charged $11,788 in dues. Schools are charged thousands more for on-site evaluation visits including travel expenses, follow-up meetings and other procedural steps.

Richard Pokrass, a spokesman for MSCHE, said the idea that the regional peer-review process leads to leniency is baseless. The process is designed to prevent a “You scratch my back, I’ll scratch yours” mentality, he said.

Pokrass noted the review process is more than just an obligation every couple years. The commission looks at financials annually, monitors media reports about its members and communicates with institutions about areas that need improvement, he said.

Peer reviewers are typically from another state and can’t be in the same system or a direct competitor of the school they are evaluating. After the team submits its report, the information is reviewed carefully by a committee and then by the commission, Pokrass said.

“The commission feels that the schools it accredits are achieving a level of quality,” he said. “It’s not just a matter of an institution saying, ‘We’re doing a good job and here’s our evidence’ and the commission rubber-stamping it – that’s not the way it works.”

Shchegol emphasized his school’s accreditation in response to NYLAG’s suit that alleges the school fudged its job placement numbers.

“They’re saying we lie to our students but we have accreditation from Middle States and ACAC [The American Council for Accredited Certification],” said Shchegol. “How can we lie?”

Here Comes the Bill

Despite repeated attempts at regulation, for-profits cost taxpayers $30 billion a year

Rodney Williams graduated from ASA in 2011 with a two-year degree in criminal justice and $28,083 in student loans. According to NYLAG’s suit, which names Williams as a plaintiff, the 36-year-old secured two externships, including one in a NYPD precinct in Harlem, but could not find steady employment after graduating. According to the suit, Williams called ASA for help, but the school did not help him find a job “in any way.”

But Williams said ASA representatives did call him in 2012, when he was at risk of defaulting on his loans. The school asked Williams, who was homeless, to come into the school to talk about putting his loans in forbearance.

A high percentage of students who fail to pay back their federal loans can lead to ineligibility for federal student aid – a death sentence for for-profit schools that rely on federal funds for revenue. Legislators passed a law to this effect for the first time in 1990, marking the end of a for-profit boom.

“Some for-profit trade schools with high loan default rates received substantial proceeds from such loans while providing students with little or no education in return,” wrote the GAO in a report that led to the policy shift.

Beginning in 1991, schools were judged using two-year default rates – students’ default rates two years after graduation. Default rates to about 5 percent by the early 2000s. Not only were the worst schools forced to close, but schools also learned how to manipulate the default rates while following Department of Education guidelines.

Students like Williams, who can’t pay back the money given to a school in their names, are a threat to a for-profit school’s existence. But if they participate in forbearance or deferment programs – options put into place for struggling borrowers – they aren’t counted as defaulters.

The Higher Education Opportunity Act of 2008 increased the default window to three years. When the window was widened, for-profit default rates jumped from 15 percent to 22.7 percent, compared to 7.2 to 11 for public schools and 4.6 to 7.5 for non-profits.

“They were doing a lot to keep people out of the two-year window,” said Kevin Kinser, an associate professor focusing on for-profit higher education at the University of Albany. “When [the government] switched to three-year, they caught some people who they had basically ignored because they were outside the window.”

But the three-year rate is almost as easily manipulated, said Kinser. A student who has been unable to find work can postpone payments for three years through deferment alone. Forbearance through the loan provider can add another five years, and a loan isn’t counted as in default until a borrower fails to make a required payment for 270 days. That’s more than eight years that students could avoid default, even if they had been unable to make payments since they walked across the stage, diploma in hand.

Once the metric changed, the new three-year rate also began dropping for for-profit schools, falling from 25 percent for the 2008 cohort to 19 percent for 2011, while the overall rate barely changed at all. The percentage of borrowers in deferment or forbearance has also jumped over the years, from 10 percent in 1996 to 22 percent in 2007. More than half of all for-profit borrowers are in such programs today.

Default Rates: gaming the metrics

1 When default rates soared past 20 percent in the late 80s, Congress blamed for-profit education. New rules were passed to penalize schools with high two-default rates.

2 More than 1,500 for-profit schools lost funding, and other schools found creative ways to hold down default rates. The GAO recommended changing the calculation to exclude students in deferment or forbearance.

3 Instead, Congress addressed the problem by expanding the default measurement window from 2 years to three years in the Higher Education Opportunity Act of 2008. Experts say that the metric is still easily gamed.

4 In the three years since the three-year rate was instituted, default rates at for-profit schools have dropped nearly 6 percentage points, with some schools' rates falling by 10-30 percentage points.

Sources: Two-year national student loan default rates from the Department of Education; back-calculated 3-year total and proprietary school rates 2004-2007 from Department of Education via ; three-year total and proprietary school rates for 2008 from Department of Education via The Project on Student Debt three-year total and proprietary school rates 2009-2011 from Department of Education via AccessGroup.

Sometimes institutions hire third-party “default management” companies to track down at-risk students and encourage them to move themselves out of the two or three-year window by entering forbearance or deferment. Before its downfall in late 2014, Corinthian Colleges achieved a notable reduction in its three-year default rate, from 36.1 percent in 2008 to 18 percent in 2010, by investing $10 million in default management strategies – including knocking on doors and offering McDonald’s gift cards to students to convince them to contact default management workers.

ASA College reported a similar drop in October 2014, from 37.3 percent in 2009 to 22.4 percent in 2010 to 6.3 percent in 2011. “It’s one of the best in the country,” said ASA President Shchegol. “People pay back when they have money. People pay once they have jobs.”

Deferment rates and forbearance rates are not available by institution for comparison, but Kinser said that the sudden drop was “remarkable.”

“It’s not the most robust number in the world, but it’s still pretty dramatic that they’d be able to bring it down that much,” he said. “It’s so dramatic, that you’d think they’d be able to say, here’s what we did, here’s what we put in place to manage this.”

NYLAG’s suit against the college puts forward an answer. According to the complaint, ASA launched an intensive program in 2011 to bring down high default rates, paying employees $100 for each borrowing student they were successfully able to coax into forbearance. The complaint alleges that employees were trained to push students into forbearance even if other programs would be more in their interest, and did so by misleading students and sometimes violating federal law. The campaign stopped in March 2013.

Nothing to Show for It

Tens of thousands of dollars later, for-profit students are no closer to a brighter future

To counter the debt that cripples students of predatory schools, the US Department of Education recently announced a new regulation called gainful employment. In July 2015, stricter rules will decide what schools may have access to federal aid money through student loans.

The rule uses the debt-to-income ratio of a program’s graduates to determine how well a program has prepared graduates for the field. Three years after graduation, former students of a certificate or career-training program may not pay more than 20 percent of their discretionary income or eight percent of their total earnings toward their student loans. It is estimated that 1,400 programs will not be eligible to receive federal aid due to this new rule and that 99 percent of these programs will be at for-profit institutions.

When the government announced the first round of gainful employment rules in 2011, for-profit schools met the regulations with fervent opposition, sending letters and emails to Congress and urging students to do the same. Once the government released the new rules, the industry quickly went to court. Just one day before the rules were supposed to go into effect, a federal district court judge struck down a key part of the law – that 35 percent of a school’s graduates must be actively paying down their loans in order for the school to be eligible to receive federal student aid money– citing the arbitrariness of the repayment percentage.

In July of 2015 a new set of rules will go into effect and opponents quickly moved to block these rules too. The Association of Private Sector Colleges and Universities, a coalition of for-profit schools, has filed a lawsuit against the Obama administration. APSCU President Steve Gunderson said the organization wants to protect the rights of students whose higher education choices will be limited by this new rule.

APSCU, which counts ASA among its members, stresses that for-profit colleges fill a void in the education system.

“We feel that every college in America ought to be judged by outcomes, not by incomes,” said Gunderson. He said that the gainful employment regulations’ focus on three years after graduation isn’t fair because that’s not enough time for a student’s education to have made a large mark on their socioeconomic standing.

Critics of for-profit schools say this is a smokescreen to hide bad practices.

“It's a little bit of a weird argument because you're talking about schools that especially recruit in this demographic, and then try to hide behind it,” said Miller of New America.

“Higher education access is about actually giving them access to a quality education at an affordable price and helping to see them through,” he said. “None of them actually talk about serving this demographic. It's more that this is the demographic that you can convince to go there.”

Last year, New York City passed a law that will allow the government to access wage data of employees after they graduate from schools or job training centers. City officials hope to use the data as a metric for whether programs offered by for-profit, non-profit and public colleges are working. But city officials modeled this wage data analysis, still in its very early stages, after the gainful employment rule – and critics of Obama’s new rule are again left wanting more.

Not the American Dream They Were Promised

In the meantime, David Guerra is trying to manage his debt. On a recent Friday he met with a financial counselor in NYLAG’s offices. A whiteboard covered in notes referenced cases in various states of progress: Active, Developing, Monitoring. A huge binder full of research sat on a sagging prefab bookshelf on the wall.

Jeff Garofano, a financial counselor at NYLAG, pulled up Guerra’s loan information. In the years since graduating from TCI, he had postponed paying. The deferred interest added to the loan premium now brought his total balance due to over $36,000.

His rent is $1,600 and he supports his wife and adult son on a monthly salary of just over $3,100, making his monthly student loan payments of $329 difficult to pay.

Garofano thought Guerra might be eligible for a new Obama initiative called Pay As You Earn, which would dramatically lower his monthly payments. Guerra and his wife perked up – they needed lower payments. So together, Guerra and Garofano called the loan servicer.

After 20 minutes on the phone it became clear that Guerra was not eligible. Garofano slumped in his chair. The interpreter delivered the news to Guerra who, too, began to deflate in his seat.

“Education is supposed to be the way to better your life,” said Guerra, holding his wife’s hand. “It’s supposed to be worth the pain.”

About Counterfeit Ed

An investigation by students at the CUNY Graduate School of Journalism found that despite state and city regulations, for-profit schools continue to sell vulnerable students career-focused curriculum without the payoff of a better life.