Education Only a Con Man (or Congressman) Could Love

But if Bridgeport and Warburg Pincus are billing top dollar, they're unrepentant misers when it comes to educating students. In 2009, Bridgepoint spent less than $700 per student on actual instruction. By comparison, the nearby University of Iowa spends 17 times that figure.

What Bridgeport doesn't short is its marketing, spending $2,714 per student to keep the turnstiles spinning. Overall, the 15 largest for-profit colleges spend nearly $13 billion a year on recruiting and marketing.

Courtesy of Rick Kriseman

Rick Kriseman, a Florida state Representative, represented Mary in her suit against Argosy University: "When the school did not have those [internship] slots, they found reasons to either dismiss the students or to make it so uncomfortable for them that they left on their own accord."

Courtesy of Chris Pantzke

Iraq war veteran Chris Pantzke ran up $26,000 in debt and burned through an additional $65,000 of his G.I. Bill benefits with almost nothing to show for it at the Art Institute of Pittsburgh.

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More About

• Barmak Nassirian
• Kathleen Bittel
• Todd Nelson
• For-Profit Education
• Distance and Online Education

It's a terrific business if you don't have to worry about educating students. Nearly 80 percent of them won't complete their programs within six years — almost double the failure rate at traditional colleges.

The tactics have become so brazen that even accreditors are taking notice. Last month, Ashford conceded that the Western Association of Schools & Colleges had denied its accreditation renewal, noting that the school had just 50 full-time faculty members to teach 90,000 online students. Within a week, Bridgepoint's stock price plunged 50 percent.

"It's basically consumer fraud rendered to a business model," says Nassirian. "Over-advertise, oversell, overcharge, and under-deliver. They found a system where the pitch goes to one guy and the bill to someone else."

Mary had been a good student all her life, earning a master's in psychology from William & Mary University in Virginia. When the military transferred her husband to Tampa, she chose Argosy University, the only area school offering a psychology doctorate geared toward clinicians rather than researchers.

Mary, who doesn't want her real name disclosed, figured it was legit. Argosy was accredited by the American Psychological Association.

She aced her studies with a 3.7 grade-point average. All she needed was an internship to graduate. That's where her problems began.

Argosy University, with 19 campuses (including one in metro Phoenix), is owned by Education Management Corporation, whose investors include Goldman Sachs and Providence Equity Partners, a Rhode Island private-equity firm. To wring out more profit, Argosy began taking on more students than it could handle, says Mary's lawyer, Florida state Representative Rick Kriseman.

But Argosy didn't have the professional connections to supply enough internships. So, like air-traffic controllers, it decided to place students into holding patterns.

Mary was asked to accept a practicum instead. It's like a lesser form of internship that wouldn't bring her any closer to her doctorate.

She was upset but went along, spending the next eight months volunteering at a mental-health facility. But by the time she was finished, Argosy still didn't have enough internships. Her instructors ordered her to take a second practicum.

She didn't have much choice. Mary already had invested four years and more than $100,000. She spent another five months volunteering. By then, her instructors had begun to question her intellectual rigor.

They not only flunked her out of the program but refused to let her defend her work before a board of teachers and peers Then they denied her a chance to address administrators before rejecting her appeal. (EDMC refused repeated requests for comment.)

Mary was shocked. "I was an A student," she says. "It was baffling to me how this could happen at the last minute. You have to understand the shame of going to school and being an A student and becoming a flunked-out person. It's so foreign and confusing."

Yet Kriseman would discover a pattern at play, finding three more students who'd suffered a fate similar to Mary's. "When the school did not have those [internship] slots, they found reasons to either dismiss the students or to make it so uncomfortable for them that they left on their own accord," he says.

Argosy's problems seemed to be nationwide. Across the country, in the psychology program at Argosy-Seattle, the school had assured its doctoral candidates that accreditation was moments away — since without certification, their degrees would be all but worthless. It wouldn't be until later that administrators confessed that their application had failed — and they were closing the entire program.

For-profit colleges like to place their alarming failure rates in charitable terms. They claim to disproportionately serve low-income students who struggle in school.

But if they're serving people of lesser means, why are they charging so much money?

On average, a four-year degree from a for-profit runs twice what in-state tuition costs at a public institution. When it comes to two-year programs, the disparity widens: For-profits charge three to four times the rates of their public counterparts. Yet they've still managed to lull the political class into believing their competition is driving down tuition.

During the Republican primary, Mitt Romney praised a major donor and co-chairman of his Florida fund-raising team — Bill Heavener, owner of Full Sail University — for helping to "hold down the cost of education." What Romney failed to mention is that a 21-month degree in video game art at Full Sail costs over $80,000. And that's not unusual.

A four-year bachelor's degree in business from Indiana-based ITT Tech costs almost $89,000. That's more than twice the in-state tuition at Indiana University.

Worse, subprime degrees from places like ITT and Full Sail are typically held in such low regard that it's difficult for grads to find jobs that pay enough to cover their loans. Nearly one in four for-profit students default on their loans within three years of leaving school, more than double the rate of public-school students.