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A Worst-Case Scenario at a For-Profit Institution

Rhetorical Queston: Why did Mark Gabis donate $2,400 to House Education Committee ranking member George Miller in 2010?

Course costs range from $325 to $410 per quarter hour, which works out to more than $34,000 a year tuition. The Lexington Herald Leader pointed out that t some for-profit colleges, up to 90 percent of revenue comes from federal financial aid, so this becomes one more scam the taxpayer is financing.

By Frank Donoghue

A very interesting legal situation concerning for-profit colleges is currently brewing in Kentucky. Though The Chronicle has reported on it, I believe it deserves additional commentary. On July 27, Kelly Field wrote a story entitled Kentucky Attorney General Accuses For-Profit College of Fraud. The facts of the story are simple, and should be familiar to any student of the for-profit education industry: Jack Conway, the Kentucky attorney general who is leading a multi-state investigation into allegations of consumer fraud by for-profit colleges, is suing Daymar College, a proprietary institution with 11 campuses in Kentucky.

In his complaint, Mr. Conway accused the college's owners and operators of enrolling unqualified students, misleading students about the transferability of their credits, and preventing students from purchasing textbooks from cheaper sources than the college store. According to the Lexington Herald-Reader, "roughly 5,000 students were allegedly forced to buy new textbooks from Daymar College's bookstores, usually at marked up prices and using their financial aid, rather than being able to purchase used books or look for better deals on the open market."

The complaint also alleges that some programs at Daymar College do not meet its accrediting agency's standards regarding faculty and facilities. At the core of the complaint is the allegation that Daymar "enrolls students who don't meet its own admissions standards. This alone is a shock, since the minimum Wonderlic score for admission to Daymar is a 10 out of a possible 50, which, as one of my previous commenters explained, translates to an I.Q. of 80. The thought that they're admitting students who don't even meet that standard is horrifying.

The complaint also alleges that most Kentucky colleges won't accept Daymar course credits, making it impossible for Daymar students to transfer, and thus imprisoning them in an institution from which they have little or no hope of attaining a well-paying job.

And, of course, there are the usual (in this case worse than usual) student-loan default rates. I've noted before that for-profit institutions enroll 12 percent of the college population but borrow 37 percent of federally guaranteed loan money. And mounting evidence shows that they can't pay those loans back. Overall, students at Daymar's eleven Kentucky campuses have a default rate of 37 percent, which means taxpayers pick up the tab for what the students can't repay. At the Paducah, Ky. campus of Daymar, "one in three students defaults on loans within three years of the first payment coming due," according to the Herald-Leader.

Sadly, there's nothing new here. What's encouraging is the independence and the scope of the investigation and lawsuit. In a news conference shortly after announcing the lawsuit, Conway announced that he is actually not coordinating his effort with Iowa Senator Tom Harkin's inquiry into the shady practices of the for-profit industry. Conway is, however, one of 19 state attorneys general who is investigating those practices. In my view, Conway's a terrific role model. He's done this before--achieving a very favorable settlement with another proprietary school in Kentucky, Decker College, which abruptly closed its doors in 2008, leaving its students in debt and in the lurch. Now he's pursuing the same course of action against Daymar.

Maybe this is ultimately a job best suited for state attorneys general rather than the U.S. Senate or the GAO. The attorneys general can take direct action against the problem. And it's a big problem. Daymar has branches not only in Kentucky, but in Ohio, Indiana, and Tennessee as well. It may well have duped thousands of unqualified students, and shows no signs of changing its standards or policies.

I'm sure I'll take a lot of flak for what some will characterize as the dismissive tone of this piece, but I think it's interesting that the owners of Daymar Colleges Group, brothers Mark and Damien Gabis, have remained totally silent since Conway's lawsuit was filed. They've only retorted with platitudes from one of their spokesmen. Maybe instead of responding to me, my commenters should ask the Gabis brothers some pointed questions.

— Frank Donoghue
Chronicle of Higher Education





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