For-Profit School Sued for Deceiving Students and Facilitating Unfair Loans
AG Alleges School Used Aggressive Deceptive Marketing Tactics to Increase Enrollments, Secure Federal Student Loan Funds and Hike Profits; Restitution Sought for Affected Students
BOSTON – A for-profit school operating in the Boston area has been sued over allegations that it misrepresented its training programs and job placement rates in order to increase profits, and pushed students into high-interest subprime loans, leaving many students without employment and unable to repay their debt, Attorney General Martha Coakley announced today.
The complaint, filed today in Suffolk Superior Court, alleges that since 2009, Corinthian Colleges, Inc. and Corinthian Schools, Inc., which operate Everest Institute, have misled Massachusetts students in order to increase profits for shareholders at the expense of students and taxpayers.
“We allege that this for-profit school aggressively recruited and misled students by falsely promising high quality, successful training programs, and instead left them with exorbitant student loan debt and without proper training or a well-paying career,” AG Coakley said. “Our office will continue to investigate the for-profit school industry as we continue to see students and taxpayers suffer the consequences of high default rates, inadequate training, and mounting debt.”
The complaint alleges that Corinthian, which subsists largely on taxpayer-backed loans to students, focused intently on recruiting new students regardless of their qualifications or whether the students were likely to complete or benefit from Corinthian’s programs. This includes using deceptive marketing and high pressure enrollment tactics, steering some students to additional private subprime loans, as well as providing poor instruction.
The complaint addresses diploma programs in dental assistant, medical administrative assistant, medical assistant, medical insurance billing and coding, and massage therapy, offered at Corinthian’s Everest Institute locations in Brighton and Chelsea. As of March 2013, Corinthian operated 97 campuses in the United States and 16 in Canada, with a total enrollment of 87,776 students.
The complaint against Corinthian seeks restitution to affected students, civil penalties and fees, along with injunctive relief to prohibit future deceptive practices.
Corinthian allegedly told prospective students that a very high percentage of its Massachusetts students obtain well-paying employment in their fields of study, but the complaint alleges few students in fact obtain jobs in their fields of study.
Corinthian also allegedly told prospective students that its programs had placement rates ranging from 70 to 99 percent, when actual placement rates in certain programs were between 20 and 30 percent. Additionally, Corinthian allegedly hid that it had failed its accreditor’s standards for placement from 2008 to 2011, and allegedly counted temporary jobs lasting longer than one day as a placement, including students who assisted at a two-day health fair. One student even reported that in order to receive her diploma, she was forced to falsely fill out a form stating that she had obtained a job.
According to the complaint, Corinthian deceived students by falsely promising prospective students they were “guaranteed” jobs after graduating. Corinthian, on its Everest website, has long represented “we help our graduates find jobs after graduation.” In fact, the complaint alleges that Everest provides little or no help to students looking for jobs. One student noted “my problem was with the job placement department. Every time I called I would leave a message never to have it returned.”
Corinthian also allegedly misled students about the salaries they could expect after attending the school. One student in the medical assistant program was reportedly told the salaries of graduates start at $17 or $18 per hour, while a second “was told [that the] pay rate was $21-$22.” The actual average wage for entry-level medical assistants in Massachusetts is significantly less (approximately $14 per hour).
HIGH PRESSURE ENROLLMENT TACTICS:
Corinthian allegedly engaged in harassing and deceptive enrollment tactics, which included having recruiting agents make hundreds of calls per week to prospective students, often numerous times per day. Corinthian’s recruiters allegedly made a litany of promises in order to get consumers through the door. As one student noted “[the recruiter] called me every day at any time during the day or night to tell me that car[eer] will change my life. Guess what? It didn’t! I’m working at my city grocery store.”
Corinthian’s recruitment tactics also involved creating a false sense of urgency to pressure prospective students to enroll immediately. Corinthian sent mailings to prospective students stating that there was “LIMITED SPACE AVAILABLE” and that students should “call so we can reserve a pending spot for you.” In reality, Corinthian’s Massachusetts locations did not turn students away because of limited space, and classes started once – sometimes twice – per month.
Corinthian’s recruiters allegedly enrolled students knowing that they would be unable to obtain employment in their fields of study due to criminal backgrounds, inability to speak or understand English, or lack of high school diplomas. One student even reported that Corinthian provided her with correct answers to ensure that she passed a test intended to measure her ability to benefit from the program. Corinthian also allegedly told prospective Massachusetts students that Everest credits transfer to any accredited school, when in fact few schools accept credits from Corinthian’s Everest campuses.
According to the complaint, in some classes students received little instruction of any kind. As one student noted, “My instructor did not teach us. This was basically a hangout place for people.” Another student stated, “A typical day consisted of discussing a lecture assignment: we would answer among ourselves… the instructor just sitting there in her chair doing nothing.” Although Corinthian advertised its programs as providing “high quality private education” with “professional level standards for conduct and behavior,” students reported that classes were reportedly subject to constant disruptions and teachers and administrators made no effort or failed to maintain control of the environment.
PRIVATE SUBPRIME LOANS AND HIGH COST OF PROGRAMS:
Although most of the debt that students incurred attending Corinthian’s schools comprised federal loans, Corinthian also created, guaranteed, and steered students into a private subprime loan program with interest rates as high as 18 percent. According to the complaint, by January 2013, 70 percent of students who obtained these private loans in 2008 and 2009 had defaulted. The complaint alleges that Corinthian knew or should have known generally that Massachusetts students were unable to repay these loans in accordance with their terms, and that such loans were structurally unfair. The complaint alleges that Corinthian created this subprime loan program in order to satisfy the federal requirements that 10 percent of student funding come from private sources.
Corinthian’s tuition prices are among the highest among for-profit schools, according to the complaint. Currently, while Corinthian’s diploma programs typically cost between $16,000 and $19,000, Massachusetts community colleges offer similar programs for less than half this price. Corinthian’s steep costs are unaffordable for many graduates, especially those unable to obtain employment despite Corinthian’s promises.
Today’s matter is being handled by Assistant Attorney General Peter Leight, Division Chief Glenn Kaplan, Mathematician Burt Feinberg, Legal Analyst Jennifer Snow, and paralegal Erica Harmon, all of the Attorney General’s Insurance & Financial Services Division.
AG COAKLEY’S INVESTIGATION OF FOR-PROFIT SCHOOL INDUSTRY:
Today’s action is a result of AG Coakley’s comprehensive and ongoing investigation into the for-profit education industry.
In January 2014, AG Coakley held hearings on her proposed amendments to existing consumer protection regulations to better protect students from potentially unfair or deceptive practices.
In November 2013, the AG’s Office filed a lawsuit against American Career Institute (ACI), alleging the school falsified student signatures, enrollment records, attendance, and grades to receive government-funded student loan proceeds, and failed to provide students the course material and training for which they incurred tens of thousands of dollars in debt.
In October 2013, AG Coakley reached a $425,000 settlement to reimburse former students of Sullivan & Cogliano Training Centers, Inc., a Brockton-based for-profit career school, for allegedly misrepresenting job placement numbers and making other misleading statements about its medical field training programs. The settlement resolved the AG’s lawsuit filed in April 2013.
In April 2013, AG Coakley launched Eliminate Deceptive Education Business Tactics (D.E.B.T.), an extensive consumer protection campaign with free educational trainings across the state and a new website offering resources for consumers related to for-profit schools. To inquire about a free training or to obtain educational materials, consumers may email AGOEliminateDebt@state.ma.us.
In March 2013, AG Coakley signaled her support for proposed federal legislation which would stop for-profit schools from spending taxpayer money on marketing.
In June 2012, AG Coakley obtained $225,000 for the state in a multistate settlement with QuinStreet which resulted in the deceptive for-profit marketing website GIBill.com being taken down and handed over to the U.S. Department of Veterans Affairs.
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