For-Profit Brought Down by Lawsuits, Calls for Regulation Get Louder

The price tag of picking the wrong school is high for anyone. But for older students, especially those with children, who seek out mid-career vocational training, being on the hook for a worthless education can be an insurmountable burden. This is the dilemma now facing former students of Florida’s ATI Career Training Center who were left high and dry when the school shut down, brought under by two whistle-blower lawsuits.

This is not only a story of ATI. This is a story of similar schools all over the country that take advantage of federal student funding to turn themselves into multi-million dollar enterprises briefly before exploding in a flurry of lawsuits and broken promises and leaving their students holding the bag.

In the big-money world of for-profit colleges, ATI was something of a bit player. Former CEO Arthur Benjamin, of Delray Beach, says his compensation topped out at about $500,000 or so, and the school’s enrollment was about 18,000 when he stepped down in 2010. That’s tiny compared to the nation’s largest for-profit, the University of Phoenix, which enrolls hundreds of thousands of students, and pays its chief executive more than $25 million — higher than what the head of Coca-Cola or Starbucks makes.

But when fueled by a steady pipeline of federal dollars, even a small school like ATI can be lucrative. The school boasted more than $100 million or so in annual revenues.

According to Michael Vasquez of the Miami Herald, even though ATI eventually settled the two lawsuits for nearly $55 million, none of that money will go to the school’s former students. And ATI’s eventual fate was unusually grim. Typically, schools like that simply face fines that force them to return literally pennies for every dollar they scammed out of the federal and state government education finance programs, including Pell Grants and Stafford loans.

As the number of stories like ATI’s grow, so do the calls for stricter regulations on for-profit schools.

Barmak Nassirian of the American Association of State Colleges and Universities has spent decades calling for tighter regulation of for-profit schools. He said the millions fined to a school like ATI might seem like a significant punishment, until you consider the much-larger amount of federal aid dollars these schools rake in every year.

“If you are interested in committing wrongdoing, for-profit education is the place to be, because the consequences are minimal,” Nassirian said. “So you get caught, and guess what? You give a little bit of the money back. And the rest of it you enjoy on your yacht, or in your Lamborghini.”