California fails to regulate for-profit colleges | Investigation | Sacramento Bee

Jana Bergevin’s dream was as elusive as it is common: a career in Hollywood. Growing up near Sacramento, she didn’t imagine herself in front of a camera or even behind one. She wanted to be an animator, able to turn her imagination into stories for screens big and small.

Admissions officers at The Art Institute of San Francisco convinced her the for-profit college could all but guarantee her a job in the industry if she graduated from its expensive program. They talked about their connections to studios such as Steven Spielberg’s DreamWorks.

She completed her bachelor of arts in 2007 but no entertainment job materialized. Admissions officers stuck to their selling points, persuading her to return for a graduate degree, she said. After seven years at the school, Bergevin said, she had $114,000 in debt and a monthly loan payment of $1,200.

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She still did not have the job she expected, nor the help getting one she said The Art Institute assured her it would provide.

Angry at what she describes as fraud by the school – including false promises, poor teaching and job placement statistics that seemed inflated – she filed a complaint in 2016 with California’s Bureau for Private Postsecondary Education, the state agency charged with licensing and regulating for-profit colleges and vocational schools. She wanted its investigators to find out if the school’s marketing materials were fair and accurate, or if she and her classmates had been duped.

“I was like, you need to really look at this school,” she said. “You need to stop what’s going on.”

Years passed with no answers – as with hundreds of other complaints filed with the BPPE.

Cases languish

An investigation by CALmatters in partnership with The Sacramento Bee found the BPPE has repeatedly failed or been slow to enforce laws meant to prevent fraud and abuse at the more than 1,000 schools it is charged with overseeing, leaving a serious gap in accountability as federal regulators back away from the job.

The backlog of complaints open at the BPPE currently is almost 1,200, and the average time the agency takes to close a case is nearly a year and a half.

About 160,000 of California’s 3 million students attend one of the state’s for-profit colleges, enough to fill five University of California campuses. Though the number represents less than 6 percent of all college students in the state, it includes some of the most vulnerable learners – veterans, low-income people and single parents. Many more attend for-profit vocational schools that don’t award degrees, looking for training that can give them a steady paycheck.

For-profit schools in California often specialize in niche subjects that appeal to students looking for specific jobs, and include mom-and-pop shops that teach trades such as cosmetology and horseshoeing as well as larger institutions such as the online education juggernaut University of Phoenix. With some exceptions, they are required to register with the Bureau for Private Postsecondary Education and follow its rules. The bureau is supposed to sanction, fine or close those that do not.

A review of online data and BPPE reports shows the bureau has skipped required inspections and allowed student complaints to languish for years, even after a scathing state audit in 2014 and the 2015 closure of for-profit Corinthian Colleges, which left tens of thousands of Californians with hefty student loan debt and dubious or nonexistent degrees.

For students attending for-profit colleges in California, state oversight is supposed to be a safeguard in an industry plagued by allegations of predatory marketing, with loan default rates up to four times those of public two-year schools. As the Trump administration pulls back from regulating the sector, consumer advocates argue, the states’ role becomes even more critical.

The BPPE’s shortcomings have caused even members of its own advisory committee to question whether it is up to the task.

“The bureau should be the first line of defense. It should be catching these frauds early on,” said Margaret Reiter, a longtime consumer attorney who serves as the advisory committee’s vice-chair. “I don’t see that that is happening.”

The bureau’s complaint backlog has grown since 2014, when the state auditor concluded that BPPE “consistently failed to meet its responsibility to protect the public’s interests.” Some cases have been pending for more than three years, with more than half of the backlog made up of complaints designated “urgent” or “high” priority.

According to staff reports, the bureau is on track to perform unannounced inspections at each of the schools it regulates about once every 11 year – less than half as often as the state law requires.

Why are you here?

Agency officials said they take their consumer protection mission seriously and are doing their best to make improvements with limited resources. But former students and advocates interviewed by CALmatters argued the industry’s woes call for more stringent oversight.

While Bergevin, The Art Institute student, eventually parlayed a temporary gig in video game development into full-time employment, she said most of her classmates failed to find jobs in their fields and were working in retail sales. After briefly corresponding with the investigator assigned to her case, Bergevin heard nothing from the bureau for more than a year. When she followed up, she found the investigator had left the agency.

Though she exchanged email messages with another investigator, she said she never spoke with anyone by phone or in person. Finally, this past August, she received a letter from the bureau saying it didn’t have jurisdiction over The Art Institute during the time she attended, and that the bureau had found no evidence of false or misleading advertising. Her case was closed.

Art Institute parent company Dream Center Education Holdings announced in July that it would shut down 18 campuses around the country by the end of this year, citing declining enrollment. The decision came just months after acquiring the school from its troubled former owner, Education Management Corporation, which had reached a $95 million settlement with the Department of Justice over accusations of illegal recruiting practices.

A spokeswoman for Dream Center declined to comment for this story, and the trustee for now-bankrupt Education Management Corporation did not respond to messages seeking comment. Some Art Institute students’ credits may not transfer to other colleges, and many have filed loan forgiveness applications with the federal government.

The bureau’s letter left Bergevin steaming.

“I warned them about this a year before it happened,” she said. “If it’s not your jurisdiction to protect California students from fraud, then why are you here?”

The training process

Bureau enforcement chief Yvette Johnson said a loophole in state law exempted some Art Institute campuses, including Bergevin’s, from bureau oversight during the years Bergevin attended, though she could not explain why determining that took two years.

She said the agency hired nine new investigators in the last year and managers are working overtime on Saturdays to clear the complaint backlog.

“With new folks coming on board, we’re still in the training process,” she said. “You’re utilizing your resources to train staff and that does have an impact on the work being done.”

Asked if her staff of 20 investigators was large enough to police all the schools the bureau oversees, Johnson said, “It’s hard to say.”

In at least one case, a delay in an investigation harmed a student’s ability to obtain forgiveness for federal loans, according to the student’s attorney. The Northern California Institute of Cosmetology agreed to shut down in 2016 after bureau investigators accused the school of hiring unqualified instructors, forging students’ signatures on official documents, refusing to turn over financial aid refunds and inflating job placement statistics.

“The school administrator would send an employee with students to cash (financial aid) checks and make sure they gave the money back to the school,” said Megumi Tsutsui, an attorney at Housing and Economic Rights Advocates who helped several of the school’s former students file complaints with the bureau.

Federal law allows students to have their loans forgiven if they withdraw from a school within 120 days before its closure. But because the investigation took longer than that, one of the cosmetology students who first raised the alarm about the school couldn’t qualify, said Tsutsui, who is also a consumer advocate on the bureau’s advisory committee.

A bureau spokesperson said the agency was simply conducting a thorough investigation. “Due to the nature of the investigative process and potential subsequent legal action, there is no one-size-fits-all timeframe, and there is a risk if students voluntarily withdraw prior to the outcome,” he wrote in a statement to CALmatters.

In another case, Rancho Cucamonga mother Darlene Medina reached out to BPPE after finding a suspicious item on her credit report. She believes the bureau mishandled her complaint.

Medina discovered that Carrington College submitted paperwork for a federal Parent Plus loan in her name on behalf her daughter Taylor, who was studying to be a veterinary technician – paperwork she says she never signed.

When Medina confronted school employees about the $10,000 loan, she said they suggested she might have just forgotten about it. Medina, who runs a medical courier business and keeps meticulous records, immediately hired a lawyer. She filed complaints with the bureau, the federal Department of Education and the San Bernardino County Sheriff’s Department, sharing documents she found in Taylor’s student file that she said are forgeries.

Medina also accused the school of making changes to the amounts and interest rates of other loans without consulting her or her daughter, failing to apply loan payments to Taylor’s account and falsifying grades. A program with a total sticker price of $34,000 ended up costing more than $57,000 for two semesters of study, she said. “She’s not going to Harvard, for Christsakes,” she recalled thinking when she saw the bills.

The school refunded some of that money after Medina complained, and servicers stopped collecting on the family’s debt. Though her police report indicates the sheriff’s department forwarded the case with no suspects or leads to Pomona police, which had jurisdiction, the officer who took her complaint wrote in the report that her signature appeared to have been forged.

One degree. Very different costs

How much does it cost to complete a veterinary technician program? A comparison of the veterinary technician program at Carrington College and programs approved by the California Veterinary Medical Association at Cosumnes River College and Cal Poly Pomona.

Source: CALmatters research

The bureau took no action against Carrington. “The school provided documentation that demonstrates that the school has very clear policies and training for financial aid representatives,” bureau investigator Leslie Feist wrote in a letter dismissing Medina’s complaint about a year after it was filed. In a separate message, Feist said the state bureau lacked jurisdiction over federal financial aid problems.

“I am disappointed with the results (of the investigation) as it is based on lies and coverups by Carrington College,” Medina responded by email. “I am just another victim … and won’t be the last.”

Reiter, the advisory committee vice-chair, said she had not seen the details of the case but disputed the idea that the bureau can do nothing about federal financial aid issues. She said it has “broad jurisdiction to look at misrepresentation and fraud.”

“They can’t do anything about the lender, but can do something to the school if they’re the one making the loan available to the student,” she said.

A spokeswoman for Carrington declined to comment on Medina’s case, citing federal privacy laws. In a letter to the U.S. Department of Education regarding her complaint, Carrington’s parent company, Adtalem Global Education, said an internal investigation found no evidence of forgery. The company acknowledged that it changed Taylor’s grades and attendance records but said the errors were accidental, adding that it found “no malicious intent.”

Taylor left school and is working in her mother’s business. “She is completely discouraged from ever wanting to be a veterinarian,” said Medina, who plans to file a civil suit against Carrington.

Secret investigations

The full extent of the BPPE’s enforcement failings is difficult to decipher. The bureau keeps complaint files secret – even from the members of its own advisory committee – making it nearly impossible for outsiders to gain a clear picture of its actions.

When CALmatters and The Sacramento Bee requested records of complaints filed over a four-year period, the bureau declined to release any documents for either closed or open cases, citing an exemption in California’s public records law for investigative files. Bureau staff members said they were withholding the records to protect the privacy of those filing complaints and avoid compromising investigations. They did not explain why they couldn’t redact personal information from complaint forms, or provide records of closed cases – as other state agencies have done. They directed reporters to the bureau’s website – but that lists only cases in which the bureau took disciplinary action, and doesn’t include the original complaint filed by the student. Prospective students trying to use the website to decide if a school is reputable would be similarly stymied. Disciplinary records are housed on a separate page from the bureau’s list of approved schools, and inspection results are in still another area. There’s no single database a potential student could search to find any red flags.

The lack of information contrasts sharply with California’s reputation as a leader in consumer protection. The state’s Attorney General has aggressively pursued debt relief for those defrauded by for-profit schools, reaching a $67 million settlement with one student loan servicer, and suing U.S. Education Secretary Betsy DeVos for delaying Obama-era rules protecting students.

But the Attorney General’s office focuses on a small number of high-impact cases, leaving day-to-day monitoring of the industry to the bureau.

“It takes a team effort because these cases are hard to develop,” said Attorney General Xavier Becerra. “It is tough for students to want to come forward. It is tough to prove that they were defrauded.”

One recent study by the Children’s Advocacy Institute at the University of San Diego Law School found California had stricter laws governing for-profit colleges than any other state. It’s the only state that insists that out-of-state schools operating in its borders comply with state regulations, instead of recognizing a multi-state reciprocity agreement with weaker standards. Schools have to disclose their graduation and job placement rates to students when they enroll, and can’t receive state financial aid if more than 15.5 percent of graduates default on their loans.

Laws only work if they are enforced, however. Take inspections: At an August meeting of the bureau’s advisory committee, compliance chief Beth Scott told committee members she didn’t know when her department would start complying with the law requiring them to conduct one announced and one unannounced inspection of each school every five years. Schools are required by law to provide prospective students with “fact sheets” showing job placement and graduation rates for the program in which they are enrolling. When asked whether it is currently verifying this data as required, bureau staff said that would normally be done as part of the inspections.

Among schools missed by inspectors: The Art Institute, which hasn’t had any of its six campuses visited since 2012, according to bureau records, and the Carrington College Pomona campus Taylor Medina attended.

When the bureau does physically inspect schools, it often finds problems. More than 40 percent of inspections conducted in the first seven months of this year led to referrals to the bureau’s enforcement division.

“Unless the bureau inspects these schools, we don’t know if there are violations happening, or if these schools are doing what they say they’re doing in reports to accreditors,” said Tsutsui. California lawmakers took the first major steps to regulate private colleges in the late 1980s, after lax oversight gave the state a reputation – in the words of the Legislative Analyst’s Office – as the “diploma mill capital of the world.”

But the state has struggled to find an effective method. In 2007, then-governor Arnold Schwarzenegger vetoed legislation reauthorizing a previous version of the bureau. The decision led to a Wild West era in which unlicensed schools flourished.

Hunting down those schools, many of which are still operating, is “very, very hard,” said Johnson, the enforcement chief. She said bureau staff use web searches, listen to radio advertisements and respond to tips from competitors. The federal government’s Integrated Postsecondary Education Data System lists 335 for-profit colleges in California that are eligible for federal financial aid, but many more for-profits are operating in the state, with or without bureau approval.

Established in 2010, the current bureau is part of the state’s Department of Consumer Affairs, which also licenses and regulates businesses from acupuncturists to landscape architects. The bureau’s 12-member advisory committee, made up of consumer advocates, industry representatives former students and members of the public, meets publicly but has little decision-making power. It’s chaired by a lawyer from a firm that represented Corinthian Colleges during its much-publicized meltdown.

State law gives authority over bureau operations to its chief, Michael Marion Jr., the former executive director of Drexel University’s not-for-profit, and now-defunct, Sacramento campus.

Marion said the bureau has struggled to keep up with complaints since 2010, when the new staff inherited 800 cases that piled up during its hiatus. Staff turnover made it hard to stay current with inspections, he said. Complicating the picture is a loophole in state law that exempted some schools with regional accreditation from state oversight until 2016; a number of uninspected schools fall into this category, including some campuses of The Art Institute, Carrington, DeVry University and the Fashion Institute of Design and Merchandising – all for-profit chains that together enroll thousands of Californians.

Marion said he understands advocates’ frustration, but “as much as we would love to start from ground zero, the reality is we don’t have the luxury to do that.”

Since coming on board a year ago, Marion said, he has filled key vacancies including two managers overseeing investigations. Currently scattered in different offices, the bureau’s staff is scheduled to move into a consolidated space within six months, which he said would improve coordination between departments. Its antiquated computer system, which lacks the ability to track complaints’ status, is slated to be replaced, too – though not until 2021.

“The bureau is going through a transition,” he said. “There’s going to be a lot of changes that will be beneficial to consumers and you’ll start to see a different BPPE over the next year or so.”

Critics said the bureau, which like other state Consumer Affairs bureaus derives its entire budget from fees paid by those it regulates, has focused on licensing new schools to the detriment of policing existing ones. In recent years, it has moved quickly to clear a backlog of pending license applications while hundreds of complaints remain unsolved.

“The initial staff were lifelong licensing experts and not necessarily lifelong consumer protection advocates,” said Angela Perry, a policy analyst at the Institute for College Access & Success, a national nonprofit that advocates reducing student debt.

Perry said some recent hires have been “more student-focused.” A new Office of Student Assistance and Relief conducts workshops with potential students to educate them on college options, including community college vocational programs that might be more affordable. It’s also tasked with supporting students when schools shut down, and faces its first big test with the Art Institute closures.

Outreach workers from that office met with about 40 students at The Art Institute of Orange County and sister school Argosy University in Alameda this month, three months after the closures were announced. Meanwhile, social media sites have been buzzing with Art Institute students wondering how to obtain copies of their transcripts, or whether their credits will transfer.

As DeVos scales back federal investigations of for-profit schools and seeks to weaken safeguards put in place by the Obama administration, having a state office that can help students answer those questions is crucial, said state Assemblyman Marc Berman, D-Palo Alto.

“The problem is we’ve lost our (federal) partners so we now need to expand the scope of what we do,” said Berman.

He has authored legislation to bar for-profit colleges with bad job placement track records from enrolling California students. That bill passed the state Assembly in 2017, but died in the Senate amid industry opposition. Berman hopes to have a new proposal on the issue next year.

The bureau’s backlog of student complaints, he said, “is concerning and something we should get figured out quickly.”

Until then, responding to students’ concerns about fraud often falls to a small cadre of non-profit lawyers who specialize in student debt cases. One of them, the National Consumer Law Center’s Robyn Smith, recently represented a group of military veterans whose video production school suddenly shut down. Despite failing to deliver the industry-valued credentials he’d promised, the school’s owner is suing students to collect on private loans, she said.

“I didn’t go to the bureau,” she said, “because I didn’t know if the bureau would do anything.”

This the first in an occasional series on California for-profit college oversight produced by CALmatters and The Sacramento Bee. Do you have a for-profit college experience to share? Email felicia@calmatters.org or achabria@sacbee.com.

This story was originally published October 24, 2018 3:00 AM.