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9486 in the collection
New Owners Fail To Improve Chain Of Career Schools
Read all the way through and you discover that students are taking out loans to pay over $20,000 tuition to these career schools--in hopes of learning a skill that will enable them to change their lives. It would be interesting to know who's approving the loans to such disreputable institutions.
By Xiyun Yang
Three years ago, a private-equity fund and other investors took over the Chubb Institute, a troubled chain of career schools, with high hopes that they could put the business on the right footing.
Three years later, the chain has lost its accreditation in Chicago. Former students are suing in New Jersey and Pennsylvania. And financial problems have forced a school to close in Arlington.
Not all private-equity deals work out for the best.
Great Hill Partners, a fund based in Boston, took over the Chubb schools in 2004 at a time when many in private equity flocked to the fast-growing for-profit education industry.
"We are serving a much-needed demographic," said Bill Hillard, the newly appointed chief executive of High-Tech Institute, Chubb's Phoenix-based parent company. The previous company's chief executive and part-owner recently stepped down. "Like any organization, issues always arise from time to time," Hillard said.
The school pledged to help students affected by the problems complete their studies and reach graduation. Great Hill Partners declined to comment.
Private-equity funds took interest in the for-profit career education industry at the beginning of the decade, when the dot-com bubble burst and investors began looking elsewhere for opportunities. Some gravitated to the sector figuring that as the U.S. economy shifts its focus from manufacturing to service-related enterprises, demand would grow in fields such as computing and nursing.
About 60 funds have invested in the sector over the past 10 years, said J. Mark Jopling, head of Jopling Inc., an investment banking firm that specializes in private post-secondary education.
The Chubb schools got their start in 1970 when the Chubb Corp., an insurance company, set up a program to train its computer staff. Over time, the school branched out to offer medically related programs.
But by 2004, the schools had run into regulatory troubles and were sued by former students, who claimed the schools promised more than they could deliver. Its expenses exceeded revenue by more $9 million by the end of fiscal 2005, according to records at the State Council of Higher Education in Virginia.
The Chubb Corp. struggled to find a buyer and eventually sold the schools for $1 to Great Hill Partners and High-Tech Institute, according to Virginia filings.
"This was a business on the decline and they tried to fix it," said Neil Lefkowitz, a lawyer who specializes in advising funds interested in post-secondary education companies. Lefkowitz represented a private-equity fund that had considered buying Chubb at the time. "It's difficult to turn around in this field. If your reputation is damaged, it's very, very tough."
Since its purchase, the new owners have invested millions of dollars in the schools, said Hillard of High-Tech Institute. They also changed the names of the two least worst-performing branches in Chicago and Arlington, to Banner Institute and Banner College, in an attempt to disassociate the schools from their past problems.
But troubles continued.
The Chicago campus lost its accreditation. The Accrediting Council For Continuing Education and Training faulted the school for its high staff turnover, its dismal completion and placement rates, and for not having written proof of the staff's ongoing education.
The Chicago school enrolled students who did not have "required prerequisite courses," ACCET said in a letter revoking the school's accreditation. Instructors routinely "adjusted [test] scoring by deleting those questions relating to material not covered. Most of the students in the class had an 'A,' " ACCET said.
Meanwhile, in New Jersey, Michael Corsner, a former student at the school's Parsippany branch, filed suit with two other students claiming the school misrepresented job-placement figures.
It has settled at least three similar class-action lawsuits in New Jersey and Pennsylvania, with an additional pending lawsuit.
"The materials and teaching was inadequate," Corsner said. "It was impossible to get an education there."
The company denies the claims.
Arlington's Banner College, which currently has 220 students, will close its doors next year because of financial troubles.
In a large metropolitan areas like Washington, it's difficult to compete with the larger, more established career schools such as Strayer University, Lefkowitz said. "It's very easy to be successful in this sector, but there are challenges, like tremendous competition."
Banner College in Arlington graduated less than 49 percent of its students, according to the Department of Education. The company said the school placed 46 percent of its students in jobs.
Banner College's accreditation is being deferred because the school has not provided adequate information to ACCET, said Charlie Matterson, associate director for the agency.
At the Arlington branch, students complained of mismanagement, a lack of fundamental teaching supplies, and an unresponsive administration.
"When we first got there, things were fine," said Joelle Paige, a student in the surgical technicians program at the Arlington branch. "But then everything started going downhill. In late March, we didn't have the correct instruments or gowns. Nothing."
Although the school has assured students that it will not close its doors before all the students graduate, some are skeptical.
Franklin Caulker, a manager at a Wendy's restaurant, took out $16,000 in student loans to help pay his $21,500 tuition. He hoped the surgical technician's program would lead to a new career.
"I wanted to work in the OR," or operating room, he said. "I thought I'd do something with my life."
— Xiyun Yang
Washington Post
2007-08-13
INDEX OF OUTRAGES
Pages: 380
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