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Let’s Talk Payback

So, while many prospective students would agree that these programs are expensive, the key point is that you can pay back the education with the increased salary that you will get after the training.

this logic is solid, but needs to be confirmed or mapped out.  in the long run, almost any increase will pay off because anyone under 30 will likely see over 30-35 years in any projection of an increase.  in fact, if the increase was only $1.00 per hour for someone at 25 years old and planning to retire at 65, the benefit would be over $80,000 paying for just about any education costs.

however, one of the key selling points to prospects from the for-profit market and American Career College is the speed.  they say, “in just 8 months you will learn medical assisting and you will immediately start this new career with increased pay”.  so the real question is how long will it take for you be able to break even on the expense and actually get to spend the extra money that you are earning?  the answer is not very exciting for those who have to take out loans to pay for this decision.

so let’s take a look at medical assisting and look at the sources.  on the American Career College website, they reference the bureau of labor statistics – an excellent government source about employment.  on that page they show the following table about wages:

the school would love to tell you that you will make the median wage.  but this figure is the median for ALL medical assistants and at the time of graduation, you will have zero experience.  more realistic salary will be somewhere around the 10%-25%.  what is true, is that california pays more and this chart is for all of US.  so, because this information is not available, we will assume the top end (25%) for any student coming out of the American Career College MA program.

also, we will compare the change from minimum wage job and from a job at $10/hr.  additionally we will compare at various levels of grants versus loans.

bottom line, unless you are getting at least 50% of the program covered in grants (money that does not have to be paid back), you will need at least one full year of living in the same conditions you were before you go to school to use the extra money to pay off your school loans.  If you were making $10/hour and pay for the entire program with loans, it will take almost 5 years.  we are absolutely sure, given the stories we have heard about American Career College and other for-profit schools, that this is not being shared with prospective students.

lets compare it to community college.  using cerritos college information from the web site, a comparable program would be 30.5 credits at $20 a credit for a total of $610.  there are a number of other fees like parking and the like so we have used $1,000 for the analysis.  also, we are going to assume that all of it is loaned versus having any grants – see below:

yes, you are reading that correctly.  the community college comparison requires either 2 months or 4 months to pay back the debt.  and while we acknowledge that the community college system is more difficult to navigate and may take a little longer, think about waiting 5 years after you are done with school to actually feel the benefits of the new job.

*Analysis assumes 40 work weeks, 52 weeks a year.

Categories: Student Advice Tags: ,

The Anatomy of the For-Profit Postsecondary Certificate Scam

over the holiday weekend, we received a couple feedback items – one being a tweet from an account apparently set up only to let us know that we need to “relax”.  from this “one tweet, one follow” mobile account, we got a link to an article that uses the infamous Steven Slater JetBlue emergency-slide-with-a-beer as a basis to suggest how you should leave a business “with class”.

after talking about it, the group felt is was a fairly transparent attempt by members at american career college or west coast university to try to get us to stop our efforts.  but we did not want to be too dismissive and, more importantly, we wanted to use it as an opportunity to show how equating our effort to the actions of a frustrated flight attendant veteran could not be farther from the truth.  our team is trying to bring attention to predatory practices by exposing or highlighting the actions of a specific organization engaged in the behavior.

the group also concluded that there might be a knowledge gap out there.  while our team thinks it is obvious how an organization can take advantage of the student loan/grant program, we realized that many of you do not work in the industry and you do not have the experience we do.  we realized that we need to spend a little time explaining how it works and decided to dedicate today’s post to this explanation.

the setup

starting a for-profit school simple in concept, but difficult to execute and the accreditation process at the beginning is appropriately rigorous.  there are on-site visits and standards that must be cleared to get started and each program has a number of reviews and associations that manage each program.

the weak link is in the maintenance of those that have been established for a while.  programs that were setup and accredited 10-20 years ago are not scrutinized nearly as much as new programs.  as with many things, the process of keeping a program is much simpler than trying to start a new one.  Additionally, over a 10-20 year period, the schools and agencies establish a relationship. this is not illegal by any means, but schools fund the accrediting agencies and it creates very difficult situation for review teams if they know that harsh discipline might cause a school to leave for another accrediting agency and reduce the fees they collect (same complaint made about the MMS in the oil/gas regulation).  this creates a system that tends to acquiesce more than it should.

while this part of the system has holes, the dishonest behavior really does not rest here.  all interactions with accrediting organizations have for the most part been forthright, honest and true to its responsibilities.  it is the fact that the group is routinely undermanned and spread thin leaving much more responsibility to run a respectable education institution to those that are leading the for-profit organization.

the for-profit certificate product

the selection of the program that a school will run is critical and, in the past, led to success or failure.  now, because of the enormous growth of the industry, the programs that will generate the best profits and the least scrutiny have been identified and are top on the list for any certification.  these programs include:

medical assisting
medical billing
pharmacy tech
massage therapy

the programs are popular with for-profit schools because they are short in length, require limited classroom size and labs, and have aspirational components to them (a paralegal is like a lawyer, a medical assistant is like a nurse, etc.).  additionally, there are good job prospects and the community college system either does not have the resources to accommodate the demand or substitution programs are not available.

to this point, there is nothing wrong and the for-profit education component is working as it should – fulfilling demand that the public system cannot support.  it would be appropriate that the business take a profit for delivering education that the some patrons might find to be superior and pay a premium (where the profit comes from) for this.  at this point, all is pretty good and it really speaks to why this system exists in the first place.

getting what you paid for?

it is irrefutable (at least in southern california).  the costs of taking one of these programs at a for-profit school is somewhere around 15x-20x taking it at a community college (see tuition page – $600-$1,000 vs. $15,000).  this is a fact.  to put it in context – this is the same as buying an ipad for $7,500-$12,000 or $48.75 for a Big Mac.  why would ANYONE do this?

access – there are admissions standards at community college and a process, by necessity, to limit enrollment.  so while there is plenty of demand, there will be people left behind and the community college wants to focus its resources on those with a track record of performing well in the classroom.  this leaves a group of people underserved and this group might pay 15x more to simply get the opportunity to theoretically atone for not doing as well in past classrooms.

speed – another reason someone might buy the $47 hamburger is because of speed.  the sooner the student is done, the sooner she will be earning the higher wage.  for-profits push this argument to its farthest point using averages and generalized education statistics to move this point as far as possible.

better outcomes – lastly, prospects might pay a 1500% premium for better outcomes.  if attending a particular institution could ensure a better chance of success (i.e. getting a better paying job in the new field), it would make sense for her to pay more to attend that school.

admittedly, there are a few more arenas that might have someone pay more, but we find it hard to believe that any of these would effectively motivate someone to pay such a high price.

double-edged sword

unfortunately for the for-profit school, these advantages that can create better pricing opportunities create their own problems.  while providing access to less accomplished students is laudable on many levels, it will increase cost and efforts as the organization develops ways to help students play catch up academically.  Simultaneously, this is challenged by the second point – speed – and pretty much makes it impossible to take every less educated student and teach them MORE in a shorter time period than the traditional process.  the result is that outcomes are challenged to exceed its traditional counterparts because it requires for better comprehension and better preparation in a shorter amount of time from a group that excludes all those that were accepted from the community college system.  it is impossible to believe that for-profit outcomes could exceed its counterparts – let alone exceed it by 15x to justify the price differential.

against the grain of market rules

while solutions like lowering price to be more in line with community college or taking more time to improve the quality of the education are available, this would challenge the margins and the profit of the business significantly.  so, by most free market standards, there is no reason for the proposal from a for-profit school like american career college or west coast university should thrive and grow.  how does it survive?

the key centers around government support – but not the one you usually hear about from the for-profit organizations.  while it is undeniable that the government provides money to the public school system (incl. community colleges), the government program that is bastardizing the system is the one that is given directly to the student – student grants (which do not have to be paid back) and loans (that do have to be paid back).

when a student contacts a school like american career college to find out about the admissions process, the school will, as it should, tout its clear benefits – access and speed.  this is used to get students more interested which by any account is not controversial on any level.  but once the price tag comes out, it is a very tough sales endeavor to get anyone to fork up the $47 for that Big Mac – no matter how many I can get or how soon you can get it to me.

and this is the moment of truth.  faced with this, the business could accept the signs provided by the marketplace and lower the price to something that equates the profits to  the value of access, speed and outcome, ignoring the way that the student pays for it and accepting its place in the market.  or it can choose to enter the government subsidy into the equation and price to maximize it.  most schools to the latter and while it is clear that this slope is slippery, no one has really gone over the edge yet.  it is when you start to target prospects based on her grant and/or loan availability,  you start to get into the predatory practices.  This is because of the student’s mindset to grants versus loans versus personal funds as well as the hierarcial distribution of these funds.

as many know, student aid is based on need.  the more need, the more favorable the terms of your funds.  explicitly, the child of a middle income family would likely get a range of loan options with no grant money; conversely, a member of a poverty level family will likely see mostly grants before they would even need to consider loans.

while loans delay the payment, most students understand that at some point they will need to pay it back and so it makes the investment easier but there is still something to consider.  It is treated as layaway or a payment plan.  grants, on the other hand, simply lower the price and are considered a “coupon”, if you will.  it is this situation that fuels the decision making of the executive teams and creates the inappropriate actions.

how did the price of for-profit schools get to be 15x that of community college?

imagine to start, that the price was the same – lets say $1,000 for an medical assistant program both at a community college and a for-profit school. price would not be an issue and the student would pick a school for independent reasons.  Also, because of the government public education subsidies, the community college would have more money in the end and the for-profit school would likely be taking a loss.

so now the for profit school has to charge 50% more to make up for the public education subsidy and to equal the financial outcome making the price $1,500 for the same MA program.  If this happened, then the school would have a very difficult time justifying the extra 50% without creating benefits that make a student spend more.  This might be access, speed or outcomes.

But what if there is a way that I can get my extra $500 without making these improvements?  Here is where grants come in.  In essence, finding a student who comes to the door with $500 in grant money just lowered your price by the same amount.  so this student uses the $500 does not care about the potential benefits of access, speed or outcomes.  this simultaneously makes the cost of potential projects to build these advantages unnecessary and the school simply pockets the $500 as profit.

What if that person comes to the door with $8,000 of grant money?  while the substitute product only cost $1,000, you can charge $9,000 and the financial decision returns to neutral.  and if my costs are $1,000 (as stated before – without a need for projects), I get to clear $8,000 for myself.

this works also as you slide up the need continuum and include loans.  what if a student comes with $8,000 in grants and $2,000 in loans?  can we charge $11,000?  sure! the cost to the student is now $1,000 today (same as community college) and $2,000 to me over the next 10 years when I will conceivably will have more income.  the loan gets discounted in the mind of the prospect (thanks to some pressure by the admissions rep) and the $1,000 today is the perceived price.

now you can see how there is every incentive to pursue the students with the most need so my company can continue to raise the price.

this has got to create problems….its too easy.

well, as stated before, we know that student loans/grants are based on need so lets just find the most in need.  however, these are also the least educated and least prepared to make these decisions (there are plenty of studies out there supporting education and income correlations).  it generates a litany of questions.

how can we realistically give the less educated a comparable education in less time?

are we sure that these prospects understand what they are signing up for?

we need to exceed in outcomes – how do we do that when we have time constraints?

unfortunately, these questions often get replaced by the following questions from admissions or the business office.

so how does my business find more of these people with the $8,000 free money versus those with none or only $500?

this is where an organization starts to get into trouble.  by answering the first set of questions with “lets get the money first and then we will deal with that”, the organization has left the education harbor and drifted into the sea of profits, from which it is very difficult to return.  so when you read stories about recruiting in homeless shelters and the like, you can now see how valuable the high financial need prospects are.  they are so valuable that an organization would do this in the open with little attempt to conceal.

why aren’t there more lawsuits/complaints/outrage about this?

there are many reasons why this has stayed under the radar.  first is that the government has implemented rules to target these practices.  specifically there is a 90%/10% rule which requires at least 10% of students’ tuition to come from outside the student loan program. this however is toothless as most will solve by using private loans which really does not help the student any.  additionally for every $1 in a private loan, the organization gets $9 of guaranteed funds from federal student aid.  with this kind of trade off, any accountant would be happy to take on risk on the private loan front.

additionally, there are rules around admissions team compensation plans that are meant to curb aggressive practices.  what the government has yet to recognize is that these rules have all been effectively gamed by the industry and most of the institutions have found fixes around these.

another reason is that the victims of these crimes are either members of the underprivileged community or the faceless taxpayer, both of whom have a difficult time mounting a meaningful defense.  because the victims cannot mobilize, it goes somewhat unreported.

lastly, it is very difficult to communicate or determine “intent”.  when a group is recruiting in a homeless shelter, are they trying to provide better opportunities or trying to steal government grant money?  it is tough to parse and due to the general positive public sentiment of educators, many have received a pass on this.

what are we to do?

going back to the start of this post, you now might understand better why we just cannot see a connection between what we are trying to do with our collection of former employees and Steve Slater of JetBlue fame.  while Mr. slater was upset and frustrated over years of abuse from clients, he would acknowledge that it was all within the realm of the job he selected and he at no time was asked to bend laws, bankrupt students, or put undue pressure on prospects to do his job effectively.

our group understands the inner workings of an organization that is knowingly using underprivileged communities to get access to government funds without delivering anything close to the performance that justifies charging 15x the price.  No one bemoans those that uncovered that the Department of Defense was paying $640 per toilet seat – we believe that we are providing the same public information campaign.  taking the advice of Frankie and “relax” is just not the appropriate response to an industry stealing billions of our dollars and giving to a select few wolves in sheep’s clothing.  in our opinion, telling the story to the public shows more class than letting it go forward unchecked.

if, after reading this, you agree that this is as large of a problem as we think, please help us promote the site.  you can reach us at or follow us on twitter (@frndofstudents) or facebook (friendofthestudent page).

American Career College Review – 11/26

found on,+CA&cid=3548040288534719298

I am student in this college now, LVN-WE. Please DO NOT put yourself here. all the educator here are lazy and rude, they don’t know much about nursing, I’ve experience clinical in sub-acute at Knott Ave Care center, My Instructor Mrs. M was rude and not professional, she always look for student mistakes and yelled at you in front of nurses and patients until the patient told us “your teacher is a terrible person.” And she always favorite some students because they talk same language. 
The Principal of LVN program is rude too, she always talk nice in front of class by saying come to me if you have problem, but when she has some student complaint about something, she always refuse and always say I DON’T HAVE TIME FOR YOUR PROBLEM!! What kind of educator is that? We are here for study and learn about nursing, but they just want your money and will make you failed, if they see your grade not satisfied them. 
Please..please.. please consider this school once again, I paid $700 a month for 18 months and with student loan for $20,000. I wish I can quit from here and get a better school, who have good educator and facility. Thank you for your time to read this.

American Career College Review – 11/24

Julie on 03/21/2010 –

I graduated from American Career College in September of 2009. I have not been able to find a job as a Medical Assistant. The school had not trained me in any medical software. This causes a big problem trying to find a job.
When I signed up, I was told they would help us find a job. They printed out my resume for me. That was the extent of their help. They called me after my internship in September, to ask if I found a job. I stated I had not. They informed me they would start helping me look. I did not hear from them again until December of 2009., Again they asked me if I had found a job. I told them I have not. They assured me they would help me look. I have not heard from them since. It is now March.
While in school, we changed instructors 4 times. Which made it hard to learn the new instructors teaching methods, along with the materials. I didn’t feel I was learning very much. Some days, no instructor would show up. and we would be in the classroom waiting. We would go to the front desk, they never knew what was going on.
My tuition was 12,500. They actually charged me more than that. I just happened to notice. I was making $90.00 Payments. I noticed none of that money was being applied. I had finally had it squared away, after much complaining. My loans start this month. I am trying to defer them a year, because I have no way of paying them.
I have not received any support in finding a job. Finding one fresh out of school is hard enough. Now with time lapsing farther and farther, from when I graduated, I fear nobody will every hire me.
I have found since graduating, other schools offer the computer software classes that go with medical assisting. I feel I was cheated in this area. Along with having an instructor who was there with us the entire course.

American Career College Review – 11/23

by hazelunicorn on 05/05/2010 –

I just came back from ACC. At first they weren’t so pushy, but they do ask if you’re ready to start right away, or not. I got there at the Los Angeles location around 11am, and got out at 3pm. They had me take a small reading, language, and math test that was about 1-hr long. Then they ask you how you’re paying for your tuition, I can’t, so they rushed me to financial aid. Had to fill out 2 fasa forms back two years (why?), I’m unemployed so I had to write a judgement letter, bring 2 yrs of back taxes, HS diploma, I.D, IU stats, and SSN. They told me I can start tomorrow, for the medical assistant program, how can this be? My credit is in the toilet to get student loads, and if I get a co-borrower why would I get more in trouble with $15,286, to pay back if I don’t have a job right away. They’re crazy. And now I hear all this lack of teachers, no thanks.

American Career College Review – 11/22

Reviewed by: Alumni A, Diploma in Medical Claims Examiner on October 18th, 2010




Instructors Caught in the Crossfire

November 19, 2010 3 comments

while the government, activists (including this blog), and media continue to question the unethical and greedy practices of the for-profit education sector, instructors and/or the quality of education often gets thrown into the mix.  however, from all of our conversations, it has been clear to us that this allegation is more complex than simple guilt by association.  while the business end of the for-profit machine is mercilessly pummeling the government and underprivileged students, it is not fair to say that the education end of the school is 100% in cahoots.

in our contributors’ comments, it was communicated that the instructors were given a complex situation to manage with little or no recourse.  Because of the “take anyone who can get financial aid” admissions process, the teacher is stuck with a classroom ranging from the reluctant/nothing-invested student to the highly-motivated/self-funded.  By all accounts, this would be difficult to manage especially when the room needs to graduate a particular percentage in order to keep its license.  So in most cases, the class gets bogged down.

As if this wasn’t enough, the admissions team sticks education again by taking 15%-30% of the revenues for to keep themselves happy while they pursue unethical and aggressive recruiting practices.  In privately held for-profits, the business is routinely looking for 40%+ profit margins meaning that there is only 30%-45% of revenues left for the entire rest of the business – including fixed costs, salaries, etc.  Bottom line, is that education routinely is told that there are little resources for what they want to do to enhance the teaching process.

Lastly, they lack any organizational power to influence change.  When you have a VP of admissions bragging to the entire executive team that he brings in 100% of the revenue (thus, profit) and needs something to improve it, the business will trip over itself to feed the monster.  that is how the budgets for admissions gets so bloated.  for example, at american career college, the meals and entertainment budget (the day-to-day account, meetings/events had a different budget) could easily afford lunch for every admissions rep every day the school was open with room to spare.

so, the instructors do the best they can with what they have.  now, it is true, they have chosen working for this type of organization so they are part of the machine.  usually this is complicated by aggressive salaries to keep them where they are, something very compelling for a person trying to survive the current recession.

bottom line, while an admissions staff, especially the VP of admissions, have no excuses for the practices they have implemented, the culpability of the instructors is not clear.  we should be sure that we do not paint everyone with same paintbrush we use for admissions/administration.