Pattern of problems at for-profits that closed in Memphis

This is an archived article and the information in the article may be outdated. Please look at the time stamp on the story to see when it was last updated.

MEMPHIS, Tenn. -- "Welfare mom with kids...pregnant ladies...recent incarceration!"

The On Your Side Investigators uncovered new details, including documents using the above phrases regarding the recruitment of students at for-profit colleges with campuses in Memphis.

WREG questioned state and federal authorities about the pattern of problems with for-profit schools, as well as what's being done to protect students and the taxpayers' dollars.

Undrea Anderson walked WREG back through the day that campus administrators at Anthem Career College told students the school was closing.

"Everybody's running around the building, they're crying, they're upset," she said.

More than a week later, Anderson called the On Your Side Investigators after she couldn't get official transcripts from Anthem and enroll in another school.

She and two of her classmates sat down with WREG to discuss their frustrations with how the process was handled.

Jasmine Pettis said, "I don't know who to go to, you know. Everybody's like not giving us an answer.  It's kind of hard to say where to pick up at."

"You call the schools, no answer, you go up there, chains on the doors, nothing," Jessica Burchett added.

When Anthem abruptly shut down in August, it wasn't simply a door closing for these former students. In a community where there are often obstacles around every corner, they say it was more like one slamming in their faces.

Burchett talked about her attempts to enroll in school since she graduated from high school in 2009.

"I finally got into a school, so I was trying my best to stick to it," she said.

It was Anderson's second time at Anthem.  She'd previously completed the Pharmacy Tech program, and said she wanted to continue her education and find a new job.

"This was my ticket to do something new," Anderson said.

Anthem was supposed to work out transfer agreements with other schools, but the women told WREG the transition was rough.

Anderson said, "If they cared, they would make sure that we were placed somewhere or we could be able to continue our education."

According to the former students, when trying to enroll at another school, financial advisers explained that all of their financial aid had already been used.

"They told me that the loan that I had wasn't going to cover anything for my next term," said Burchett, which would mean she would have to cover tuition and fees.

Burchett added, "So, I was going to have to pay out of my pocket over $3,000 that I don't even have."

Roughly a third of Tennessee's for profit schools are in Shelby County.

Anthem is the second to close in Memphis this year. Victory University shut down in May.

Closures are also happening in other states across the country. Find closings here

Dr. Richard Rhoda is the executive director of the Tennessee Higher Education Commission.

In the world of for-profit regulation, you have the federal government, accreditors, and state agencies like THEC.

The state agencies provide authorization for the schools to operate. Schools need authorization to get accreditation, and need accreditation to get federal financial aid.

WREG asked Rhoda, "Before the closings, were there red flags that you all did see, or should have seen?"

"I've asked the same question, I think we all have and the answer is no," Rhoda replied.

THEC also reviews complaints, conducts audits and collects data, including financial information about each school.

Rhoda said, "It's the consumer protection dimension of higher education."

With that said, are students and ultimately taxpayers are getting the protection they deserve?

Records show due to complaints, THEC audited both Victory and Anthem in recent years.

The audits are random, but schools are thrown in the potential, selection pool if THEC's gotten five or more complaints within the fiscal year.

Victory's accreditor,  the Southern Association of Colleges and Schools Commission on Colleges, also put the school on a warning status due to financial issues in 2012.

According to Rhoda, such problems don't always lead to closure, and it wasn't something his office could detect.

"So the kind of problems these two institutions had, those are really at a corporate level," he said.

Anthem's parent company filed for bankruptcy.

Burchett said she simply couldn't understand where the money was going.

"Y'all getting $20,000, $30,000 loans from us. When y'all getting all this money, how could you not afford to keep the school up?" she asked.

Most of that money comes from taxpayers.

In 2012, more than 85 percent of Victory's revenue came from federal financial aid, at Anthem's main campus in Arizona, that number was at 89 percent, which is just under the maximum of 90 percent allowed by law.

The same year a U.S. Senate committee investigation questioned how those dollars were being spent.

The report noted that as enrollment shot up at for-profit colleges during the 2000s, so did the schools' profits. In one year alone, the CEO of Strayer University had a compensation package worth more than $40 million.

A breakout report on Anthem showed unlike many of the other schools, it had faced declining enrollment, but was hoping for a turnaround.

Many for-profit colleges are either publicly traded or run by private equity firms.

The report also documents the higher than average loan default rates, shady recruiting practices, and steep tuition at for-profits compared to public colleges and universities.

The three students WREG interviewed were in a Medical Assisting program, which cost $22,855. The same degree at a two-year college in Tennessee is around $8,000.

The On Your Side Investigators also researched other programs. An Associate's in Paralegal Studies costs more $47,000 at ITT Tech, which is $31,220 at Vatterott Career College and $8,034 at Southwest Tennessee Community College.

"When the marketing approach that you see on TV or hear on the radio is don't go to someplace where you'll take unnecessary courses, come here, get out quickly, the price of that is a huge tuition," said Rhoda.

The report also suggests for-profits target young people who can least afford it.

It noted internal recruiting documents from Anthem that listed characteristics of a student: "single parent," "unemployed," "low-self esteem."

The common thread, according to the report, was preying on the potential students' emotions.

"It's just ridiculous and it's sad," Anderson said.

The U.S. Department of Education recently proposed new rules aimed at weeding out predatory practices at for-profits. The rules would require more transparency from the colleges, including more information about how students are obtaining gainful employment.

The On Your Side Investigators spoke with Secretary Arne Duncan about when the proposed rules might be finalized.

While he didn't offer a timetable, he told WREG,  "Where for-profit universities are giving people real skills that lead to real jobs, we want them to grow and prosper and serve more students. Where things are misleading and not leading to better employment and accountability, it`s leading to more debt, that's not fair to the young people or frankly to us as taxpayers."

Rhoda said from a big picture perspective, state agencies like THEC need more resources to do their job effectively. For example, THEC doesn't get state funding for its regulation of proprietary schools.

He said, "It's all paid for by fees generated from the institutions that are regulated."

Rhoda also says students simply need more education about financial aid.  He suggests counseling, similar to an approach being used with the Tennessee Promise program, where high school students can go to community colleges for free.

He says until reform happens, it`s up to students to do as much homework as possible.

"Students just need to be aware of the nature of the institution that they're thinking about," Rhoda said.

Anderson, Burchett, and Pettis have been able to enroll at another school. Their financial aid situation is uncertain. According to THEC, Anthem is supposed to have all of its accounts reconciled by September 30th.

Anthem didn't respond to WREG's requests for comment.

If for some reason students cannot find placement elsewhere, the government does offer loan forgiveness.

THEC has a page on its website dedicated to transcript requests and other Q&A for students of recently closed schools.

The U.S. Department of Education's website also features a section where users can research schools, tuition, and other information about colleges.

The National Center for Education Statistics also has interactive data through its College Navigator.

4 comments

  • Arguenot

    Seriously? How ignorant are the government agencies? These “students” get a fat check cut to them after tuition is paid to the schools, that are little better than sanctioned money laundering schemes. How many students actually obtain jobs? I bet the rate is less than 30%.
    This is another welfare program that throws our tax dollars away. How about providing these funds to kids who have actually applied to REAL colleges, but can not afford tuition?
    The rest, pay for a State Junior College…. Problem solved.

  • Michael

    Ask for all Federal Stafford loans to be discharged since the school closed down. Contact your Stafford loan provider (e.g. Nelnet, Sallie Mae, ACS or Great Lakes) and request the discharge paperwork. The guarantor should then pay off the loans due to the school closing.

  • nolongerforprofit

    Having worked at a for profit college for several years, my experience has been majority of students didn’t research school, didn’t care about cost and only concern was how much of refund and when they’d get it once tuition was paid. These same students then later cry and point fingers about how they can’t afford to pay back the loan, were forced to take out the loan and more. What they don’t mention to most people is that they also worked for an employer who paid a portion of their tuition and they still decided to take out federal financial aid.

Comments are closed.

Notice: you are using an outdated browser. Microsoft does not recommend using IE as your default browser. Some features on this website, like video and images, might not work properly. For the best experience, please upgrade your browser.