For Scandal-Plagued For-Profit Colleges, No State Is More Welcoming Than New York

As ASA College prepares to shut its doors after years of controversy, New York continues to shell out tuition subsidies to for-profit colleges — at rates higher than any other state.

Lilah Burke   ·   February 23, 2023
New York state provided ASA with more than $13.5 million in subsidies over three years, even after mounting warning signs. | Ajay Suresh

This article was published in partnership with Fast Company.

ASA College seemed like Jacaly Muranelli’s ticket to a better life — and the government was helping her pay for it.

Muranelli — 37 years old, with three kids, born into a Dominican family and living in the Bronx — enrolled in the for-profit college’s joint GED and paralegal associate degree program in September. She quit her job, thinking she could save on childcare and earn an education at the same time. A bachelor’s degree and even law school seemed within her grasp. She could finish the program in 16 months.

And it wouldn’t cost her anything upfront, since New York state and the federal government had awarded her a significant amount of aid.

But the dream didn’t last. In November, ASA College lost its accreditation after its accreditor said it had failed to provide “a quality student learning experience.” The federal education department tightened the screws on funding. Professors, no longer being paid, started canceling class. Muranelli went down to the Manhattan campus and found it shuttered.

When the administration began communicating about where students could go next, students realized that the schools mentioned didn’t offer their programs or hadn’t agreed to take their credits. For Muranelli, ASA started tacking on fees for “accident insurance” and “technology,” even though she was taking classes from home on her own computer.

She had thought ASA was a quality college. Apparently, so had New York state.

In the last three years for which data is available, New York state provided ASA with more than $13.5 million in subsidies for low-income student enrollment through the tuition assistance program, called TAP, even after years of mounting warning signs about the quality of the college’s education.

ASA would have been hard pressed to find a check that size in any other state. About half of US states subsidized tuition for students at for-profit colleges, a recent survey found. And most that do give far less. New York spends more than any other state supporting for-profit higher education. It has led the pack since 2011.

An association of for-profit colleges has fought successfully to preserve that windfall. In 2019, it bested the most powerful force in Albany: After then-Governor Andrew Cuomo proposed a set of stricter rules for the sector, lawmakers, some with for-profit colleges in their districts, rallied to kill the proposal.

“We hit a buzzsaw with the legislature,” Rich Azzopardi, the former governor’s spokesperson, told New York Focus.

The issue has nearly disappeared from the Albany agenda in the years since. When the few interested legislators do propose bills, they’re never brought to a vote.

For Muranelli, the indifference of the government was a shock.

“Once you sign that line that you are enrolled in their college, you no longer matter. What matters is the money that now they are going to deplete with your name,” Muranelli told New York Focus. “And I really truly wish I would have known that.”

Missed Warnings

There were warning signs. Despite ads claiming students were destined for “exciting careers,” media reports as early as 2013 said students graduated with nothing but debt.

The president and owner of ASA was pushed out of his role after at least 10 employees and students accused him of sexual misconduct, including rape. He then reinstalled himself as president in 2021, only to resign again after allegations went public in the press.

New York City sued ASA for subway ads that promised immigrants and tourists a legal way to stay in the country, settling with the college last year for $112,500.

ASA continued to receive state dollars throughout it all. And it’s not the only one.

Five years ago, the city sued Berkeley College, a for-profit institution with campuses in New York City and New Jersey, alleging that it tricked students into debt and collected payments it was not owed. Last March, the company settled and agreed to $20 million in debt relief for students.

Yet the college collected nearly $12 million in state subsidies from 2018 to 2020, and likely more since. Berkeley is still on the list of eligible schools.

One of the sad realities of for-profit education is the poorer the student, the more money you make.

—Johnson Tyler, South Brooklyn Legal Services

Plaza College, a for-profit institution in Forest Hills, offers another example. In 2010, a state legislator was sent to prison over a wide-ranging corruption scandal that included a bribe from an official at Plaza to nominate its president for a state position and to introduce favorable legislation. The college has collected over $27 million in state subsidies in the years since, and is still eligible for funding today.

Nationally, for-profit colleges dominate complaints from students about fraud. Of 100,000 complaints to the US Education Department about deceptive practices, nearly all of them were regarding for-profit colleges, according to public records researchfrom the Century Foundation, a progressive think tank.

New York statute says a college can be cut off from tuition subsidies if there is evidence of fraud. The agency responsible for administering TAP did not respond to a request about the aforementioned colleges.

The industry’s primary lobbying group in New York — called the Association of Proprietary Colleges until it changed its name to the Association of Private Colleges late last month — noted that neither Berkeley nor Plaza was formally charged with or admitted any wrongdoing.

ASA did not respond to a request for comment. Berkeley and Plaza each provided statements about their missions, but didn’t respond to queries about their respective scandals.

Critics of the industry say instances of fraud like these are just the most prominent ways for-profit colleges can take advantage of students.

In New York, the 59,540 students who attended for-profit colleges in 2017 made up only 6 percent of the state’s undergraduates. Yet a study by the Center for an Urban Future found that for-profit students accounted for 41 percent of the student loan borrowers who defaulted after five years. Students at for-profit colleges were twice as likely to default as students at public New York institutions, though not all those institutions receive subsidies.

“We’ve seen numerous cases where students are really left worse off than if they had never attended the schools at all,” said Carolyn Fast, a researcher at the Century Foundation who formerly worked on for-profit college enforcement at the New York Attorney General’s Office.

A majority of ASA students make less than $25,000 — about the national average for someone with only a high school diploma — 10 years after entry. According to federal education data, at least four other for-profit degree-granting colleges in New York that receive TAP can say the same, compared to one nonprofit and zero public colleges.

For-profit colleges generally say that they provide opportunities for students who are often not well served by traditional higher education, such as older, rural, and low-income students. In New York, students at for-profit colleges are more likely to be Black and Hispanic than students in other sectors.

The industry nationally has leaned on this fact to explain poor graduation, earnings, and default outcomes. Students who are already marginalized face greater barriers to labor market success and paying off their loans.

New York City has instead called the relationship between these colleges and marginalized students “predatory inclusion” — the expansion of educational access with low-quality, high-cost programs.

Average outcomes don’t capture all for-profit colleges, the industry’s defenders point out.

Donna Stelling-Gurnett, president and CEO of the Association of Private Colleges, said outcomes at the group’s 11 member colleges — which do not include ASA are strong. The APC boasts that its members’ associate programs have better on-time graduation rates than those at New York’s public colleges. (Their borrower default rates, however, are higher.)

For example, LIM College, an APC member and for-profit college in Manhattan, has similar graduation rates and median expected earnings for graduates as City College, part of CUNY. The School of Visual Arts’s graduation rates are approaching those of the Fashion Institute of Technology, part of SUNY. Tuition and fees at LIM and SVA, however, are several times higher than at City College and FIT.

‘Parts of the Power Structure’

A small coterie of advocates have long been beating the drum about New York’s willingness to subsidize enrollment at poorly performing for-profit colleges.

Jessica Ranucci, an attorney with New York Legal Assistance Group, says she has spoken to nearly 100 ASA students in her work. “Schools like ASA are just allowed to take federal and state money, pay their salaries, and there’s not a lot of oversight over what they do with that money,” she said. “Students are left holding the bag. I don’t see any reason these schools should be subsidized.”

Chuck Bell, programs director of advocacy at Consumer Reports, said the subsidies appear to students as a seal of approval from the state about programs that don’t deserve it. “The state should be using the power of the public purse to promote good educational outcomes for every student,” he said. “From the taxpayer point of view, we’re funding a lot of misery for our students who attend these institutions.”

Johnson Tyler, staff attorney with South Brooklyn Legal Services, describes the industry as deliberately seeking out marginalized students. “One of the sad realities of for-profit education is the poorer the student, the more money you make,” he said.

A handful of state lawmakers have taken up the cause as well.

Senator James Skoufis has sponsored a bill to eliminate the subsidies since 2019, most recently introduced last month. “I’m interested in putting for-profit schools out of business,” he said. “I think the TAP prohibition is a step towards that ultimate goal.”

Assemblymember Harvey Epstein sponsored similar legislation, as well as other bills that would create more requirements for for-profit colleges in the past two legislative sessions. “Even if you think there are good institutions providing good education … the level of default should be alarming,” he said.

But as a whole, the legislature has moved in the opposite direction.

In 2019, Cuomo proposed the For-Profit Accountability Act in his executive budget. The bill would have required for-profit colleges to spend a certain amount on instruction and receive a portion of their revenue from private sources, among other requirements. But it went nowhere.

“The legislature did not want anything to do with it,” recalled Azzopardi, the Cuomo spokesperson.

Stelling-Gurnett, president of APC, testified to lawmakers that Cuomo’s plan would “decimate” the entire for-profit sector. And although she expressed openness to other accountability measures for poorly performing colleges, none have passed the legislature since. Even bills only requiring public financial disclosures have gone nowhere.

“These colleges definitely become parts of the local communities, parts of the power structure,” Azzopardi continued. “When you have these institutional players that have these sorts of connections, sometimes well thought-out, good legislation dies.”

Skoufis echoed that point, attributing the legislature’s attitude to local ties.

“Part of it is parochial,” he said. “Some of my colleagues who identify as progressive have a for-profit school or multiple in their districts. And for them that supersedes any ideological position they might otherwise have on this issue.”

Legislative support for for-profit institutions has been nearly unanimous. In 2017, the legislature passed a bill that would make for-profit colleges eligible for subsidies beyond TAP. No lawmakers in the Assembly voted against it, and only one — Republican Robert Ortt — did in the Senate.

Cuomo vetoed that legislation; lawmakers pushed it through the budget process the next year.

New York Focus reached out to lawmakers who voted for the legislation and whose districts at the time included some of the largest for-profit colleges in the state, including Senators Andrea Stewart-Cousins, Brad Hoylman-Sigal, Gustavo Rivera, Liz Krueger, and Neil Breslin.

Only one responded. Hoylman-Sigal said that with the benefit of hindsight, he may not have supported the bill to expand subsidies — and that while some for-profit colleges have good track records and he doesn’t want to see the sector put out of business, it is “an area that New York needs to re-examine.”

“Recent scandals have shed new light on for-profit institutions,” he said. “We have to question why taxpayers are subsidizing these private institutions. You could call it another form of corporate welfare. … Why do we do this when most states [do] not?”

The industry has been well connected to New York lawmakers. In 2009, then-Mayor Michael Bloomberg spoke at ASA’s commencement, and attended graduation along with two state assemblymembers.

Some of my colleagues who identify as progressive have a for-profit school or multiple in their districts. And for them that supersedes any ideological position they might otherwise have.

—Senator James Skoufis

Carl Heastie, speaker of the Assembly, taught as an adjunct professor at the for-profit Monroe College from 2007 to 2014, and resumed in 2017, after he was elected speaker. His office did not respond to a request for comment.

Among the industry’s most visible champions in the legislature is Toby Ann Stavisky, the chair of the Senate’s higher education committee. In 2014, Stavisky attended a ribbon-cutting at Plaza College alongside Charles Callahan, the administrator recently embroiled in the legislative bribery scandal — and since elevated to college president. Three years later, she co-sponsored the legislation that would have made students at for-profit colleges eligible for even more subsidies.

Stavisky did not agree to an interview for this story, but a spokesperson sent a statement over email. “Public, private and proprietary institutions each play a unique role within the higher education system,” they said. “When we see a proprietary college lose accreditation, it actually shows our system of protecting the students is functioning.”

The Association of Private Colleges said in a statement that it would support more conditions on where students can use tuition subsidies as long as measures applied to all colleges, not just for-profit ones.

The association spent nearly $936,000 on lobbying between January 2019 and December 2022. Other figures in the for-profit industry have donated substantial sums to state elections, such as Marc Jerome, the president of Monroe College in the Bronx, who donated $19,000 last year to PACs supporting political candidates, including Stavisky and Governor Kathy Hochul.

Stelling-Gurnett, president of APC, said their advocacy focuses on expanding eligibility and award amounts for TAP. An APC spokesperson said their lobbying is “in line with what other higher ed associations do.”

Back at ASA College, all campuses are set to close by the end of February. The New York Legal Assistance Group operates a hotline for ASA students and is hoping to get relief and clarity from state and federal regulators.

Muranelli said she wants to continue her education, but her next steps are unclear. Public colleges in the city don’t offer the type of joint GED and associate degree she’s looking for and don’t offer many programs online, which she needs to watch her son. But after her experience, she doesn’t want to attend another for-profit college.

“The way I see it,” she said, “it’s a scam.”

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