Diploma Mills by A. J. Angulo

Author:A. J. Angulo
Language: eng
Format: epub
ISBN: 9781421420073
Publisher: Johns Hopkins University Press

FIGURE 4.3. For-Profit Enrollments in US, 1970–1990. Sources: US Department of Education, National Center for Education Statistics, Higher Education General Information Survey (HEGIS), “Fall Enrollment in Colleges and Universities” surveys, 1970 through 1985; Integrated Postsecondary Education Data System (IPEDS), “Fall Enrollment Survey” (IPEDS-EF: 90–99).

Two attention-grabbing cases from the 1990 Nunn hearings highlighted this breakdown in checks and balances. The American Career Training Corporation (ACT), the first case, represented problems having to do with rapid growth and industrial-sized fraud in the sector. During a three-year period (1985–1988), ACT’s guaranteed student loan volume increased virtually tenfold—from $4.7 million to $45.5 million. By the end of the decade, the institution had received $153.3 million in revenue from guaranteed student loans. The huge expansion of loan receipts at this one institution didn’t necessarily present a problem, but its interests and operating culture did. According to one whistleblower, “There is no way to escape being a slave to the quarterly reports. Quality education and higher earnings are two masters. You can’t serve both.” Former ACT employees described the way their institution focused on recruitment and ignored instructional quality, retention, or placement of graduates. The institution provided perks, rewards, and incentives to increase recruitment and enrollment numbers, but the same wasn’t provided for the other ACT divisions. A former financial aid administrator described feeling “a little strange that the instructors never had a contest, or that the placement office never was rewarded if they placed a high number of graduates.” Resources at ACT went toward increasing revenue at the expense of operations. In the late 1980s, instructor pay increased 1.4 percent while advertising and marketing increased by 33.8 percent. Classroom resources, meanwhile, declined from 0.4 percent to 0.3 percent during the same period. The institution also practiced what industry experts called “front-end-loaded” tuition. Under this system, students took out loans and grants to pay for the bulk of tuition payments up front, with the expectation that most would drop out. Up-front payment maximized ACT’s returns and minimized its losses in instructional expenses. With this increased revenue, witnesses contended, FPCUs could purchase their credibility from one of a number of accreditation agencies. The seven largest agencies doubled their combined revenue from $8.5 million to $17 million through membership dues during the late 1980s. Accrediting organizations depended on members for their survival. Competition for members between agencies was fierce and ultimately lowered standards as FPCUs could go “shopping” around until they found one willing to accredit them.27

ACT had also succeeded in increasing its own bottom line through fraud. Investigators discovered truckloads of documentation with student financial aid paperwork containing such phony addresses as “403 Cant Read, Pritchard, Alabama.” These documents lacked signatures and verification of whether such students ever existed. Despite the evidence and years of investigation, it became clear to Rebekah Poston, ACT’s former attorney, that the US Department of Education was outmatched and without the staff necessary to adequately address the company’s violations. “It was not the amount of manpower I would have expected,” she later stated.

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