Lack of Standard Definition for Job Placement Rates Fuels Abuses

Last Thursday California Attorney General Kamala D. Harris filed a lawsuit against Corinthian Colleges accusing the company of deliberately deceiving prospective students and investors about the company’s record in placing graduates into jobs. The California AG’s action comes just two months after New York Attorney General Eric T. Schneiderman reached a $10.25 million settlement with Career Education Corporation over similar charges.

The two cases together underscore the need for policymakers to develop a single, national standard that for-profit colleges would be required to use when calculating their job placement rates and to establish a strict regulatory regime to make sure that the rates are not rigged. U.S. Department of Education officials have the opportunity to establish such standards when they rewrite the Gainful Employment regulations.

Currently, the federal government leaves it up to accreditation agencies and states to set the standards that for-profit schools must use to calculate the rates and to monitor them. The only exception is for extremely short-term job training programs, which must have employment rates of at least 70 percent to remain eligible to participate in the federal student loan program.

As a result, the methodologies that for-profit colleges use to calculate these rates vary state by state and accreditor by accreditor, making them impossible to compare. And without a single standard in place, the schools can easily game the system.

Take Career Education Corporation, for example. According to the NY AG’s findings, officials at the company’s health education schools counted graduates as being employed if they worked for a single day at community health fairs. In some cases, school officials allegedly arranged for these fairs to be held so that they could pump up their institutions’ job placement rates.

These practices were not devised and carried out by “rogue” employees. The investigation found that “high-level Career Services managers” at the company’s headquarters “not only knew about the practice of counting employment at single one-day health fairs as ‘placements,’ but explicitly condoned and even encouraged the practice of recording such employment as ‘placements.’”

Meanwhile, the California AG found that in large part the placement rates that Corinthian Colleges (CCI) has disclosed cannot be substantiated. “The data in the disclosures published on or about July 1, 2012 for all campuses in California and online campuses does not match or agree with the data in CCI’s own database system and/or in student files,” the lawsuit states. “In numerous cases, the placement rate data in CCI’s files shows that the placement rate is lower than the advertised rate.”

For example, Corinthian “advertised job placement rates as high as 100% for specific programs when, in some cases, there is no evidence that a single student obtained a job during the specified time frame,” the AG’s office wrote in a press release announcing the lawsuit.

Some of Corinthian’s Everest College campuses went as far as paying temp agencies to place graduates in short-term jobs to help the schools meet the minimum job placement rates required by their accreditors, the lawsuit states. Others appear to have fabricated the data. In many cases, the documentation needed to verify placements was just plain missing.

The AG’s complaint includes excerpts from internal company e-mails showing that top Corinthian executives were fully aware of the problems with the data but did little about them. “Corinthian Colleges, Inc.’s CEO and/or senior management were, at all relevant times, aware of the falsity, inaccuracy, and unreliability of job placement data and the statements they made concerning the data yet they did not disclose that fact to consumers or investors, or take any action to make consumer disclosures and statements to investors accurate,” the lawsuit says.

The Education Department needs to create a single national job placement rate standard that makes clear exactly what types of practices are allowed and which are not. And it needs to develop a strict regulatory regime that will hold for-profit colleges accountable for these types of abuses.

Students rely heavily on job placement rates when deciding which career college program to attend. The least we can do is make sure that schools are not cooking the books on the rates they disclose."