london. just check the headlines at al jazeera.com where you will get all the breaking news and video on demand. sorry dropped my pen. greek banks running out of cash ahead of the key eu meeting and the debt crisis and all the other news at al jazeera.com. [ ♪♪ ] looking at the river of money flowing through not for profit schools, for profit businesses wanted in on the action, and they have gotten huge, offering students flexible degree programs and professional training. thousands of students that take government-backed loans end up heavily in debt with no degree and little to show for the experience. with the recent bankruptcy of

one of biggest for-profit corporations, we ask if the schools are a good deal for students. dollars and diploma, it's "inside story". welcome to "inside story". i'm ray suarez. no ivy covered walls, no decades of pedigree, no rigid structure requiring students to live nearby, taking specific classes at specific times of the day or year, and lenders willing to hem minimally qualified students afford a higher education. for-profit colleges took part in a massive run up of people that wanted more and outmanoeuvred the not for profit peer, who offered programs that did not admit the lives of working people, parents and other

aspiring students that had not met with a lot of success. as michael shure tells us, they are under scrutiny and an uncomfortable spotlight. >> turns out they have friends in high places. >> we are corinthian colleges. >> democratic senator richard durban is baulking about for-profit colleges, an industry that he and others say are rife with fraud. >> they are overcharged. students are in so much debt or they have worthless diplomas. >> reporter: the bankruptcy of corinthian colleges shows fraud and deception on the backs of students and taxpayers. >> 10% of high school graduates go to for-frost schools. -- for-profit schools. 44% of all the student loan defaults in america are students from for-profit schools.

>> this person is with the center for responsive politics. >> a lot of people think lobbying money is spent to get action. as often as not, it is spent to stop action, stop negative action against the industry. i think that's more of what you are seeing in this case. >> they have taken of the programs, instead of taking them as a way of subsidizing, they take it to make owners rich. >> the senator is backing oversight. >> the reason it's difficult to get anything done, it's financial contributions by these people to democrats and republicans at outrageously large levels. >> there's a lot of ways to make the case. $43 million can buy a lot. >> the biggest chunk has gone to minnesota republican john cline, chairman of the house committee

on education in the workforce, he has received more than $400,000 from the industry over the course of his career. >> it's a lot for one industry to give congress, in an industry industry. >> we asked representative cline how he felt about being the biggest recipient of this money, in light of controversies and failures in the industries. >> i don't try to evaluate how much money did i get from in sector or that. option? >> reporter: until now, members of congress stood behind the schools, but the senator says change may come with the reauthorization of the higher education act. >> we spent $600 million in student loans to corinne thi have been. we let them sign of students after we knew it was a failing corporation, and now the kids are stuck with the loans and

debt, and we are stuck as tax players explaining why we continue to fund money, and more than 1.3 million students are paying attention as well. we are joined by paul fine, newsered for for "inside higher ed." these people didn't invade from outer space. there must have been a plausible market-driven reason for investors and institutions to want to get into the sector. >> sure, they came up with a model to serve working adult that made sense. it met student where they were, weekend and mite. and it grew rapidly and proceed so other institutions. a lot of folks agreed that it didn't serve a nice served by traditional education.

>> what went wrong, corinthian was a huge player? >> it got up to $3.4 million. that is huge. 100,000 students in the context of a small liberal arts college is big. some would say it grew too fast, too much. you had publicly traded companies, growing rapidly with big margins. some took cuts and corners and quality release. >> is there something different in the d.n.a. the need to pay investors. is there something intrinsically difference of a land grand public university, of a private college, a not for profit school. they go by many names, capellis. strayer and university of

phoenix and others. different. >> there is. they have a different tax status. a lot are publicly traded. they receive investor money and can do some things, ramping up, investing in infrastructure and a scale of a private liberal arts college. it is a big industry as well. there's some big money there, it can move around. it's not - these are not your standard charities. depending on who you ask, yes, it is different. some say there are some benefits capital. >> the access to capital, why didn't that the create an opportunity to provide better students. >> that's a fair question.

a lot spend money on marketing, recruiting students, more than they do on construction. that said, some are served well by them. there are some institutions doing well. strayer is doing well. american public, cappella, and most folks say the students are getting good service from those institutions. we heard senator durban from illinois say a few minutes ago that the department of education knew there were problems. weren't problems well-known inside the higher ed industry. >> corinthian was a controversial for-profit. it was a large institution serving a low income, a troubling number i saw, 35% of students were from incomes of $10,000 a year or less in income. so a student population, many of which are likely to fail, for

reasons not necessarily corinthian's fault. >> poverty level college students have a higher drop out rate than other. this was the hardest to educate. >> they were educating, enrolling some of the most vulnerable. and not serving them well. however, the infrastructure that the federal government had set up was not finding a way to shut them down, they were not tripping alarms rising to the level of shutting them down. in part because the government outsourced the role to creditors, they are in good standing. that said, you know, i think the obama administration has been pretty aggressively critical of the sector and for a while i pushed measures that did have corinthian on the ropes. >> you heard the numbers. 10% of students, 20% of money, 44% of defaults.

is the department of education able within its current guidelines to shut down that river of cash. >> i don't think they are able or willing to shut down the for profit sector. i think senator dick durban might feel that way. i don't think the obama has not said this wants to shut down for profits. in their more charitable moments, they said there are good performers, they said they want to shut down the bad actors, and they have. corinthian - i make the argument that the federal government, the obama administration did shut down the college. >> thanks a lot for joining us. >> thanks for having me. >> paul is the news editor for inside higher ed for-profit colleges opening opportunities for students that found it hard to complete a degree. are they taking advantage of

federal money to make big profits for not much education, dollars for diplomas, our look next on "inside story". >> because i was african american i was trying to fit in. >> misty copleland's journey wasn't easy. >> dancing gave me the opportunity to grow into the person... i don't think i could be without it. >> now, this trailblazer is opening the door for others. >> i wanna give back to ballet what it's done for me...

>> we're here to fully get into the nuances of everything that's going on not just in this country but around the world. getting the news from the people who are affected. >> people need to demand reform... >> ali velshi on target weeknights 10:30p et you're watching "inside story", i'm ray suarez. the obama administration has an trying to rein in for-profit colleges that in many cases are not doing much for their colleges, stupid.

in recent weeks the federal judge gave some help. siding with an argument that it has oversight power in this fast-growing sector. republicans in the house and senate are preparing bills to block the president's authority in this area. joining me from san francisco, trace you're den, a financial analyst for the for-profit college industry and david, a contributor to the rub like report and an author of stealing america's future. how they scam taxpayers and ruin students lives. what was the market opportunity investors saw, the unmet need in the field? >> thank you. really, the unmet need was to do with millions of americans to don't have post-vonnedry education, including a variety of groups, including folks

looking to move in vocational careers, and includes a new breed of schools that offer bachelors in masters. and they are designed to serve a number of students who started their college careers and never finished them. the completion rate in the united states hovers at around 50%. there's a lot of people in the workforce that have some college, but not a degree. so the for profits emerged to serve that market. >> was part of the attraction that there was loan money available for the students to product? >> well, without the funding, the market would be smaller, there's no question about that. i don't know that that was the impetus for it. ultimately the goal was to serve students that needed something. put the fact they had funding through the federal government was part of the equation. david, what happened?

i mean, as trace suggests, there was a lot of students, millions, who were not being served in the conventional set of educational offerings, this industry emerges, and then what? >> the problem was we didn't invest. the other sectors did not invest. so many want to be trained for a career, not to be a professor, lawyer or doctor, but to be a dietician, diesel mechanic, they are important to americans, but we didn't invest in community ledges. we left it to the private sector. that would be okay with me, but the problem is the private sector became basically a mon officer. they said there are rules constraining us, we'll hire lobbyists to get rid of the rules, the oversight. >> what we ended up with was what was described in your piece.

a couple of decades of race, fraud and abuse hurting taxpayers and destroying the lives of students. >> is that a fair description of what happened in recent years, not to say that every single institution is doing it, but there are bad actors. >> i mean, it's a regulated industry. like every regulated industry. there's a cottage industry that develops around lobbying the federal government to move the rules. david's characterisation is correct. that's a function of what's when the federal government gets involved. i - you know, i don't necessarily subscribe to the overall cork pterisation of the industry being essentially corrupt. i don't think that's the case at all. definitely there's places where, you know, abuses have occurred, and the federal government rightly identified those and tried to crack down on them. >> to give you an example, some

of the people that are the harshest critics of the industry suggest not that they provide opportunities to low income and minority tunts, but they -- students, but they target them as customers, get them hooked on the credit and courses, leaving them with loans to be serviced and no credentials, there's a difference between serving a population. >> yes, well, i have a real characterisation. you are dealing with a population - you are serving a population with open access post secondary education. everyone that plies is admitted at some level. requirements are low. this is the same population served by community colleges. when you look at the data, the completion rates in most cases for associate programs and diploma and certificate programs are worse than for for profit

schools. the difference is in the case of community colleges, it's the states and taxpayers that pick up the tab when students fail to complete. in the case of for-profit the students borrow the money themselves, when they fail to complete at a for-profit, they are worse off than if they had never begun in the first case. this is a problem with the system you deal with, students in need of this kind of training, but not necessarily very successful students, and often have chaotic lives, kilogram like the car breaking -- something like the car braking down or losing child care could be the reason they can't get to school and complete the programme. >> isn't what trace suggests, that this is one of the heaviest lifts in higher education, maybe they deserve more credit, these institutions for trying what is a daunting task. >> some do, some are on schools and some in the path were

honoured schools. the giants do not deserve credit because they cynically design a business model to sign up students. students were invested as starts, pieces of" and ass in classes. they did not care if the students could graduate. they did not care if the student graduated and they could get a job. they lied to students. they said come to our law enforcement. 3%. communicates were able to get jobs as law enforcement. corinthian college signed up a student for law enforcement. it was reading on a second grade level. he was not going to be a police officer, corinne thi have been knew it, but were happy to take his money. >> gentlemen, stay with us. the u.s. government is proposing new measurements to engage way schools are provided good service and value.

is there something to say school a is doing better than school b. dollars and diplomas. tonight's "inside story", stay with us.

welcome back to "inside story". i'm ray suarez. dollars and diplomas, this time on the programme. we are looking at the fast-growing for-profit sector in higher education. the schools are nimble, flexible, willing to take on the non-traditional students, but have come under scrutiny for numbers that do not look good enough and the terrible stories that accompany the rise of college as a business. david, author of "stealing

america's future", did with me, and trace, a financial analyst for the for-profit college industry. before the break we spoke about some of the people that have been abused by the system. if you start a bad restaurant, customers will eventually abandon that and the market will take care of it, and you'll go out of business, a school is a little proposition, sometimes you are waiting for years of your life, not just one bad evening. can we rely on market rationality to take care of the bad actors. >> the changes that you are dealing with a population that society said this, we would like to go and receive more education, this is the answer for people at the bottom end of the socioeconomic ladder.

the marketing that has been done is actually serving a useful purpose, and it does leave open the possibility that david described to folks that are not going to be in a position to benefit. drawing the line is diff. no one is looking at the students and are not in a position to fail. they are no worse off than if they hadn't started in the first place. it's a challenging issue, what if we take schools by completion rates, successful completion of a credential. if we comparison shot. not by numbers, but know more kids finish college a than b. more are employed after finishing a college c, at least you know roughly buying. >> this will be a topic for a different show.

the president tried to institute a ratings system plying across the college, and what we discovered was that the not for profit was more powerful than of the for had profit. they have a number of measures. this was used in gainful employment. that does not exist for community colleges and not for profit schools, schools are not provided to provide it. >> i agree with trace, that the other colleges are powerful lobby in washington. i do want to say the market is starting to work. it didn't work for years, because students that signed up for the for profit were the first in their family to go to college, were immigrants, low income people and it was a mismatch the the school is designed to lie, it is a school that if you don't sign up today, you lose your place.

finally information is reaching students that some of the schools are not a good deal. you have 37 of attorney-general working together on law enforcement looking at corruption and fraud in the industry, and a lot of federal law enforcement too. students are getting the message, make you can get better value and opportunity at a nonprofit or public school. non-profits are starting to move into that space aren't they, online earning and learn as you go. kind of using the model they other. >> i -- phoenixes and others >> i hope they don't use too much. a part that says we'll sign up everyone, and that says we'll scrimp on education and spend most of the money on marketing. there's a risk. i think people that run the

schools have students at heart. they'll never look at bad as the schools. >> it's almost time to go, are the not for profits starting to eat the lunch of for profits, now that they are learning what they know? >> well, in a certain part of the market they are. in that part of the market i described of ba completion, helping adults that start in college and need to finish it. that has been attacked with a vengeance by a lot of not for profit players, schools like southern new hampshire, they have built large businesses serving the non-traditional students. in that part of the market it's the case that the for profits have a new set of pretty robust competitors to contend with. >> trace is a financial analyst for the for-profit college industry. david is author of "stealing america's future", how for profit colleges scam taxpayers

and ruin students lives. thank you for joining us. i'll be back in a minute with a word on college, cost and credibility. stay with us. it's "inside story".

we played a terrible trick on a generation of americans. the answer to the question how much education do i need is always more. get more and you'll be better off. you'll get a better job, own a better house and give your kids a better shot at a comfortable future. in a country of slowing mobility, there's a clash wean

the real and the ideal. optimism shown by people that work all day and go to college in front of a screen at night is inspiring and when all that tuition money leads nowhere, heart-breaking. the wealthiest families in the country do not recommend online schools or for-profit universities for their own kids, they are recommending them for other people's kids, and for a while collected the dividends as the companies became hugely profitable. fuelled by loans and waves of customers, driven by those telling them they understood more education. the era of easy money may be over, customers and those lending money may have tougher standards. i'm ray suarez, that's tonight's "inside story".

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