Misleading Students: Chelsea For-profit School Sued by Ag for Deceiving Students and Facilitating Unfair Loans

The attorney general for the state has entered a lawsuit against the company that operates the for-profit training school, Everest Institute, in Chelsea.

Everest has operated in Chelsea for several years and is located in the office park on Everett Avenue. Hundreds of students from Chelsea and the surrounding areas attend the school, which also has a location in Brighton. It is believed that many students from the Chelsea campus – though not named in the suit – did participate in the AG’s investigation and are quoted in the complaint against Everest.

AG Martha Coakley alleges that the school misrepresented its training programs and job placement rates in order to increase profits, and pushed students into high-interest subprime loans, leaving many students without employment and unable to repay their debt.

The complaint, filed two weeks ago in Suffolk Superior Court, alleges that since 2009, Corinthian Colleges, Inc. and Corinthian Schools, Inc., which operate Everest Institute, have misled Massachusetts students in order to increase profits for shareholders at the expense of students and taxpayers.

“We allege that this for-profit school aggressively recruited and misled students by falsely promising high quality, successful training programs, and instead left them with exorbitant student loan debt and without proper training or a well-paying career,” AG Coakley said. “Our office will continue to investigate the for-profit school industry as we continue to see students and taxpayers suffer the consequences of high default rates, inadequate training, and mounting debt.”

The complaint alleges that Corinthian, which Coakley said subsists largely on taxpayer-backed loans to students, focused intently on recruiting new students regardless of their qualifications or whether the students were likely to complete or benefit from Corinthian’s programs. She said that included using deceptive marketing and high pressure enrollment tactics, steering some students to additional private subprime loans, as well as providing poor instruction.

According to the complaint, in some classes students received little instruction of any kind. As one student noted, “My instructor did not teach us. This was basically a hangout place for people.” Another student stated, “A typical day consisted of discussing a lecture assignment:  we would answer among ourselves… the instructor just sitting there in her chair doing nothing.” Although Corinthian advertised its programs as providing “high quality private education” with “professional level standards for conduct and behavior,” students reported that classes were reportedly subject to constant disruptions and teachers and administrators made no effort or failed to maintain control of the environment.

Corinthian allegedly told prospective students that a very high percentage of its Massachusetts students obtain well-paying employment in their fields of study, but the complaint alleges few students in fact obtain jobs in their fields of study.

The school allegedly told prospective students that its programs had placement rates ranging from 70 to 99 percent, when actual placement rates in certain programs were between 20 and 30 percent. Additionally, Corinthian allegedly hid that it had failed its accreditor’s standards for placement from 2008 to 2011, and allegedly counted temporary jobs lasting longer than one day as a placement, including students who assisted at a two-day health fair. One student even reported that in order to receive her diploma, she was forced to falsely fill out a form stating that she had obtained a job.

According to the complaint, Corinthian deceived students by falsely promising prospective students they were “guaranteed” jobs after graduating. Corinthian, on its Everest website, has long represented “we help our graduates find jobs after graduation.” In fact, the complaint alleges that Everest provides little or no help to students looking for jobs. One student noted “my problem was with the job placement department. Every time I called I would leave a message never to have it returned.”

Corinthian also allegedly misled students about the salaries they could expect after attending the school. One student in the medical assistant program was reportedly told the salaries of graduates start at $17 or $18 per hour, while a second “was told [that the] pay rate was $21-$22.”  The actual average wage for entry-level medical assistants in Massachusetts is significantly less (approximately $14 per hour).

There were also allegations by Coakley that Corinthian engaged in harassing and deceptive enrollment tactics, which included having recruiting agents make hundreds of calls per week to prospective students, often numerous times per day. Corinthian’s recruiters allegedly made a litany of promises in order to get consumers through the door. As one student noted “[the recruiter] called me every day at any time during the day or night to tell me that car[eer] will change my life. Guess what? It didn’t! I’m working at my city grocery store.”

Another issue in the complaint was about debt incurred by students and the structure of certain subprime loans to help finance the cost of a Corinthian diploma.

Although most of the debt that students incurred attending Corinthian’s schools comprised federal loans, Corinthian also created, guaranteed, and steered students into a private subprime loan program with interest rates as high as 18 percent. According to the complaint, by January 2013, 70 percent of students who obtained these private loans in 2008 and 2009 had defaulted. The complaint alleges that Corinthian knew or should have known generally that Massachusetts students were unable to repay these loans in accordance with their terms, and that such loans were structurally unfair. The complaint alleges that Corinthian created this subprime loan program in order to satisfy the federal requirements that 10 percent of student funding come from private sources.

The complaint addresses diploma programs in dental assistant, medical administrative assistant, medical assistant, medical insurance billing and coding, and massage therapy, offered at Corinthian’s Everest Institute locations in Brighton and Chelsea. As of March 2013, Corinthian operated 97 campuses in the United States and 16 in Canada, with a total enrollment of 87,776 students.

The complaint against Corinthian seeks restitution to affected students, civil penalties and fees, along with injunctive relief to prohibit future deceptive practices.

Coakley has filed similar suits against other for-profit training centers, such as American Career Institute (ACI) and Sullivan & Cogliano Training Centers, Inc. of Brockton.

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