Career Education Corp will not be helping California's unemployment numbers
next year. This week
California
Watch reported that Career Education Corp will be closing more than a
quarter of its 95 campuses and eliminating 900 jobs in its network of schools
dedicated to providing career instruction for students across the country. They
will be closing six schools in California alone and another seventeen in other
states where their enrollment is declining. It is instructional to look at what
is happening at these for-profit schools as it is a cautionary tale for career
education and education in general.
A major push in education now is to privatize it. Let the free market
compete to improve education. I am a proponent of the free market. In the
end it does produce the higher quality product than the government produced
product which has no market forces imposed on it. But the free market is primarily
focused on making a profit and there are only so many levers a company can pull
to make that happen: lower costs of production, raise prices, increase sales to
achieve economies of scale or get government to grant you a monopoly. These do not seem to be a good fit to education, but maybe that's just me.
Career Education Corp. was working on the model that tried
to maximize the number of customers they had. They have 95 school campuses in 23 states and
5 countries. Their network members are listed below.
Until recently they paid recruiters incentive compensation to bring in students.
The more people a salesperson could get enrolled, the more he or she was paid.
This worked well until the U.S. Department of Education placed a ban on incentive
compensation last year. “To the extent that was an effective strategy for
increasing new enrollments, that is kind of what blows a hole in their business
model,” said Kevin Kinser, a professor of higher education policy at the
University at Albany, State University of New York.
You can't blame the DoEd for cutting off the gravy train. That was just providing responsible oversight to protect the consumer and the taxpayer. It also helped plug a hole that DoEd had in their fiscal outflows. They provide financial aid to students receiving career training. The problem was there were a lot of them starting such programs, but not finishing, not getting jobs and not paying back those loans. It appeared that career education centers, like Sanford Brown were not delivering the product they said they would, - well trained employable graduates.
And the career colleges could not seem to meet the Feds minimum requirement that no more than 90% of their revenue come from federal financial aid. Six of them in Career Education Corp’s network, last year, were in violation of that requirement.
Think about that for a moment. Career education, the be all and end all of education focus in America now, could not get enough money from private lenders to cover a mere 10% of their revenue. Is that because private lenders have decided career education is not a good investment? Possibly. Is that because the federal government has made it prohibitive for private lenders to get into tuition lending? Much more likely. In either case the federal government may soon have a monopoly on career education which is another lever in turning a profit. And how is that working for the students?
In short, not so good. Career Education Corp, like other career education centers such as University of Phoenix which said last month that it will close 115 locations, and Corinthian Colleges Inc. which disclosed this year that it will close three Everest College locations and sell four others, is but one of a number of for profit career education providers experiencing declines in both enrollment and profits. These are businesses whose stated purpose, at least, is to teach people a marketable skill and help them get jobs. Yet most of them are seeing tremendous challenges with job placement after graduation. In 2010, Career Education agreed to pay $40 million to settle a class-action lawsuit in which former students said the California Culinary Academy had misled them with its claim that 97 percent of graduates got jobs in the field. When the company released its new job placement rates - which officials said are accurate - most of them had rates that fell below the minimum rate of 65 percent required by the Accrediting Council for Independent Colleges and Schools.
You can say that these businesses were shysters and were out to hustle the public. You could assume that they only had the goal of turning and profit, not providing quality education. By their own admission they were not worried as much if students completed the coursework or got jobs afterwards. "Our goal is to
no longer put disproportionate emphasis on starts and population,”[emphasis added] said Career Corp CEO Steven H. Lesnik. “Our goal is not only to provide high-quality career-focused education, but to evaluate where there are identifiable employment needs that coincide with our program offerings and students’ education.” But such schemes are usually short lived and tend not to grow nearly as broad as the private for-profit career school system is. One additional thing this system has going for it is government support, not only in financing but also in philosophy. The whole focus of k-12 education is college and
career readiness. When Uncle Sam is championing your business sector it should be a winning business model. Unfortunately it’s not.
Enrollment is down 23% in Career Education’s network. Some of that is due to students’ wariness of taking on student loans. Since for-profit tuition tends to be higher than state run schools, the concern over student debt hits them harder. Is there any logical reason to believe that this dynamic would not also be present in private education provided in the k-12 system by, say, for-profit charters? Career colleges have been around a lot longer and have worked some of the kinks out, though obviously not all. They are heavily regulated as various attempts to game the system were tried and eventually controlled. Shouldn’t similar regulations be applied to charter schools to take advantage of career schools’ learning curve?
In the bigger picture is the overall success or failure of the education sector in helping get people off the unemployment ranks and into jobs that will help the economy grow. We heard this phrase ad nauseam during the campaign cycle, “We have to make sure our education system is providing our students with the skills they will need to make it in the 21st century global economy.” If a company, whose sole mission is to train people for jobs doesn’t even have a 65% success rate in getting its graduates into jobs, a company whose time horizon is only two years out, cannot predict which jobs are going to be needed so they can train people for those jobs, how successful is a public school system ,whose time horizon is twelve years, going to be in predicting what jobs will be open when those students graduate and training students with those specific skills?
If nothing else, it looks like training people with specific job skills and promising them a job because they have demonstrated competency in those skills is not enough to get people employed and fix our economy. Yet our government tells us we need to spend more money on doing just that, investing in education. I’m not convinced that is a good investment. Are you?
Post note: Career Education Corp operates two campuses in Missouri: Sanford Brown in Fenton, and Missouri College in Brentwood.
