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Trump University and Its Fellow Scams

Republican frontrunner Donald Trump has gotten into even more hot water for the scandals surrounding his now-defunct Trump University. Two businessmen, Michael Sexton and Jonathan Spitalny, created the University in 2004 under the Trump brand. Trump supported this initiative, and formally launched it on May 23, 2005. And what was Trump’s goal? He wanted to teach people the business acumen he had accumulated, especially in real estate investing. Unlike a traditional college with face-to-face interaction with professors and students, Trump University was a series of online workshops. The University sold mentorships and seminars priced anywhere from $1,500 to $35,000, in which it was promised that real estate experts would turn any student into a successful real estate investor. Rather, the teachers were independent contractors who not only had little prior experience in real estate, but also were paid commissions for selling the products. As a lawsuit against Trump for defrauding over 5,000 students looms, his “university” brings into the light the economic damage for-profit colleges inflict upon innocent students.

For-profit universities have existed since the Colonial Era. Through the 18th century, there were not enough universities to meet the demand for higher education. Hence, entrepreneurs charged students in order to teach them formal education, such as reading and writing skills. However, the for-profit industry began to grow rapidly starting from the 1980s. As state governments, burdened by increasing costs of healthcare, prisons, and K-12 education, began cutting funds from public universities, people began to grow disillusioned with their state colleges. Since 2011, however, despite the millions of dollars the industry has brought in from students and large investment firms, for-profit colleges have been declining and with good reason. Most of the data points toward for-profit schools burdening, rather than empowering, their students. For example at for-profit institutions, the median student loan debt per person is $32,700, while the average graduate from public schools accumulates $20,000 in student loan debt.

Hence, it is not surprising that even though for-profit schools account for only 12% of total college enrollment nationwide, their share of defaults is 44%. This data indicates for-profit schools are not only financially risky ventures, but also do not help students’ employability. Even though for-profit schools do report their graduates’ employment statistics, they are often inflated or outright false. For example, the Education Management Corporation’s Art Institute in Minnesota reported 89% of students who graduated in 2013 secured work. However, this employment figure includes jobs that require no college degree, such as working as a barista or folding clothes at GAP.

However, there is good news on the horizon. Some of America’s largest for-profit institutions, such as the University of Phoenix and Corinthian Colleges, are declining or have gone bankrupt. For example the former group lost more than 200,000 students over just five years, meaning they lost half of their total enrollment. Corinthian Colleges, buffeted by a string of lawsuits from California’s Attorney General and the U.S Department of Education, has gone bankrupt. Overall, from 2014 to 2015, over 100 for-profit colleges have shut its doors. If this trend continues, predatory education may become a minor part of society.

- Daniel Hyun

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