How Corporate Schools Rip Off Taxpayers, Families and Students

In my book, Corporations Are Not People,  I talk about Bridgepoint Education, among other corporate school rip-offs of students and taxpayers. Taxpayers effectively transfer billions of dollars of student loans and government guarantees to corporate executives and Wall Street investors, and get very little in return.

A United States Senate investigation has reported that “over 87 percent of total revenues [to corporate schools] came directly from the federal government, but 57 percent of the students who enrolled between 2008-2009 have departed without a diploma but with a high probability of debt.” The sixteen largest for-profit schools had profits of $2.7 billion in 2009, with some corporations doubling profits between 2009 and 2010 alone.  In 2011, when the Department of Education proposed to apply minimal performance standards (based on actual student graduation rates) to corporations that take billions of taxpayer dollars, the corporations threatened a lawsuit claiming a Constitutional right to prevent that public accountability.

The Bridgepoint story is pretty illustrative. In the 2009-2010 year, Bridgepoint’s Ashford University received $613 million in federal student aid funds. “Ashford University” used to be Franciscan College, a non-profit school operated by the Sisters of St. Francis. They used to spend $5,000 per student on education. Then Bridgepoint, backed by a private equity firm, bought out the school, changed the name, raised the tuition to as high as $46,000, and lowered spending per student on education to about $700.

From 300 students at Franciscan University in 2005, enrollment (including on-line students) at the newly corporatized Ashford University went to nearly 78,000 by 2010. Most of these new recruits quickly drop out, but not before Bridgepoint collects a lot of money. 84% of students enrolled in an associate degree program at Ashford University are gone by the next year (63% of students in the bachelors degree program do not return the next year). Bridgepoint employs more than 1,700 people to recruit new students; it employs one person to help students with job placement.

Bad performance, right? Maybe if you’re measuring performance by how well the education’s going. But that’s not how corporate, for-profit schools measure performance.  Bridgepoint paid its CEO, Andrew Clark, $20.5 million in 2009, and a total of $36 million to its top five executives. The Sisters of St. Francis must be horrified.

Now Republic Report, a daily  eye-opener about corporate power, Congress and corruption brought to us by United Republic, is exposing how campaign contributions and corporate corruption of politicians drives this process. Check out Online Education Companies Donate to Congressman; He Introduces Bill Subsidizing Them. And then let’s do something.

About Jeff Clements

Jeff serves as President of American Promise. He has practiced law for three decades in public service and private practice, and is the author of Corporations Are Not People: Reclaiming Democracy From Big Money & Global Corporations. He is also the founder of Whaleback Partners LLC, which provides sustainable financing to businesses in the local agriculture economy. Previously, Jeff has been a partner in a major Boston law firm and served as Assistant Attorney General and Chief of the public law enforcement bureau in the Attorney General’s Office in Massachusetts. Jeff has helped to start and been a board member of many non-profit organizations and businesses. Today, in addition to the board of American Promise, he serves on the vestry of Trinity Episcopal Church in Concord, Massachusetts. Twitter: @ClementsJeff
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