BUZZFEED: The Problem With Too Big To Fail Colleges

Career College Central Summary:

  • ITT Educational Services, one of the country’s largest for-profit college operators, has fallen into a financial and regulatory spiral that many observers say it is unlikely to emerge from. The company, which had 51,000 students as of March, is slowly running out of options to stay afloat.
  • Except, of course, for one: Enroll more students.
  • The government, experts say, has yet to figure out how to deal with companies in situations like ITT’s: large school chains in perilous financial situations that continue to enroll students and collect loan dollars and financial aid, potentially putting a growing number of students at risk as their schools step onto shakier financial and regulatory ground.
  • Students, lawmakers, and investors are still reeling from the collapse of Corinthian Colleges, which sold off the bulk of its campuses before stranding 16,000 remaining students last month when it abruptly went out of business. But ITT’s troubles draw attention to what may be an even bigger problem: a cadre of other massive for-profits in circumstances perilously close to those that toppled Corinthian.
  • Critics call the Department of Education’s oversight systems inadequate, saying that it takes too long to intervene in cases where evidence of wrongdoing has stockpiled. In Corinthian’s case, several investigations by state attorneys general had catalogued false promises of jobs and deceptive enrollment tactics dating back to 2006. But by the time it reached an agreement with the Education Department last year to sell off or close its campuses, it had been in financial distress for years and had no money left with which to pay penalties or restitution to students.
  • “What the Department of Education is going to be confronting, time and time again, is the phenomenon of ‘too big to fail’ by the time they’ve caught up to the facts,” said Barmak Nassirian, a policy analyst at the American Association of State Colleges and Universities and a longtime critic of the industry. “In a more perfect world there’d be early warning systems and real money to go after when there’s wrongdoing.”

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