Presumptive Republican nominee Donald Trump’s foray into for-profit education with Trump University, which currently faces two class-action lawsuits in California brought by former students, and one fraud lawsuit in New York, is by now well documented. In marketing materials, Trump compared Trump University to his alma mater, the prestigious Wharton School at the University of Pennsylvania; in a deposition in January, he favorably compared its refund policy to the Home Shopping Network’s. Then, when called on the carpet for failing to deliver results for students, Trump said in his own defense that no one should have believed his “marketing BS.”
Ostensibly an educational endeavor, Trump’s chief financial officer, Allen Weisselberg, said in a deposition that Trump University was “just one more investment” for Trump—the goal was to “maximize profits.” Trump, who owned 92 percent of the company, had nothing to do with picking instructors and everything to do with marketing, which he starred in, corrected, and signed off on. The instructors, meanwhile, were chosen by his partner, Michael Sexton.
“Given his complete lack of experience and training in real estate and education, the ‘instructors’ [Sexton] hired for TU were primarily high-pressure salesmen,” one court filing reads. “Instead of protecting the people who believed in him, Trump threw them to the wolves.” The whole debacle has been ludicrous, and the Clinton campaign has been lightly critical of Trump for it. But Trump and the Clintons have more in common than either is likely to admit—namely, a shared comfort with profiting from poor people’s attempts to claw their way into the middle class through for-profit educational networks.
Last spring, just as Hillary Clinton began her presidential campaign, Bill Clinton resigned from his post as honorary chancellor of Laureate International Universities, the world’s largest chain of for-profit colleges and universities . He’d held the position for five years, visited 19 of the system’s global campuses, and been paid a $16.5 million for his services. Just weeks before he announced his resignation, Hillary Clinton, on her first swing through Iowa, warned students about the dangers of for-profit schools that “take all this money and put all these young people and their families into debt.” An aide to the former president told the New York Times that his resignation had nothing to do with his wife’s campaign.
Laureate International Universities is owned by Laureate Education, founded in 1989 as Sylvan Learning Systems. Sylvan began as a K-12 tutoring service, went public in 1993, acquired its first college, Universidad Europea de Madrid, in 1999, and changed its name to Laureate Education in 2004. After being bought out by a group of investors led by private equity firm KKR & Co. in 2007, Laureate filed for an initial public offering last fall.
The great majority of the company’s revenue comes from universities abroad, mostly in Latin America, but also in China, Australia, Portugal, Saudi Arabia, and Morocco. It also owns five colleges in the United States, of which Walden University has the most name recognition. Although nearly one million students are enrolled at Laureate universities around the world, according to the Baltimore Sun, it has lost money every year since 2010, and carries $4.7 billion in debt.
While, according to the Times, Laureate is “not considered among the worst offenders in the for-profit college industry,” it has nevertheless been subject to domestic and international complaints. Critics allege that, in expanding its operations overseas, Laureate has unfairly profited by skirting regulations imposed by the Obama administration aimed at targeting recruiting abuses. According to a 2012 report, issued by the U.S. Senate Committee on Heath, Education, Labor, and Pensions, for-profit colleges “devote tremendous amounts of resources to non-education related spending.” As a whole, the committee found, the sector spent far more on publicity and profit-sharing than actual education and instruction. This overemphasis on marketing led to the the for-profit college and university (FPCU) bubble of the late aughts which drew the Obama administration’s subsequent regulatory ire. As a presidential candidate, Hillary Clinton’s rhetoric on FPCUs has echoed the Obama administration’s policies
Through March of this year, Laureate International Universities has given the Clinton Foundation between $1 million and $5 million, according to the foundation’s donor disclosures. The Clinton Global Initiative, in turn, has partnered with Laureate “on a number of initiatives since 2008.” Despite the network’s failings, in an August 2009 email, Secretary Clinton asked that Laureate, “the fastest growing college network in the world...started by Doug Becker who Bill likes a lot,” be included in a higher-education policy dinner. “It’s a for-profit model that should be represented,” she wrote. A senior vice president from Laureate was added to the guest list, along with faculty from UC-Davis, Yale, Bryn Mawr, NYU, and Cornell. Internal State Department emails show that about a year later, Bill Clinton began negotiating a consulting contract with Laureate. In fiscal year 2012—two years into Bill Clinton’s tenure as honorary chancellor at Laureate—budgetary records show that the International Youth Foundation, a well-regarded charity, received $1.2 million in grants from the Hillary Clinton’s Department of State. Doug Becker, “who Bill likes a lot,” was (and is) IYF’s chairman of the board.
That the Clintons should embrace FPCUs is hardly surprising, given their longstanding support for corporate education reform. “It is now clearer than ever that the Clintons’ relationship is a partnership built on the foundation of a unified ideology that serves as moral code for both Bill and Hillary. It is impossible to talk about the political strategy—or, to use today’s individualist parlance, the ‘vision’ and ‘achievements’—of one Clinton without talking about the other,” Jacobin’s Megan Erickson argues in “Waging War on Teachers,” her essay for False Choices: The Faux Feminism of Hillary Rodham Clinton. “This is particularly true when it comes to matters they care deeply about—and education is unlucky enough to be one of those.”
“If there’s one thing these institutions lack, it’s credibility,” Dr. A.J. Angulo, author of Diploma Mills: How For-Profit Colleges Stiffed Students, Taxpayers, and the American Dream, told Gawker. Retaining someone like, say, a former president as honorary chancellor goes a long way towards lending credibility, if not necessarily accreditation. “There is a hunger to come off as established, because they don’t have a history of serving the public very well,” Angulo continued. “To fill that void, they can have stellar programs—but that would take too long. And so they end up serving the shareholders rather than the students.”
Laureate’s IPO filing reflects this anxiety, noting particular concern over how students discuss the Laureate brand on social media and how allegations against FCPUs more generally reflect upon Laureate in particular. (Hello!) “Adverse media coverage regarding other for-profit or private educational institutions or regarding us directly could damage our reputation, reduce student demand for our programs, materially adversely affect our revenues and operating profit or result in increased regulatory scrutiny,” the filing notes. A Laureate spokesperson could not say how many of the network’s institutions were accredited before being acquired.
In a recent blog post, legal scholar Jonathan Turley drew the parallel between Trump University and the Clintons’ involvement with Laureate, specifically noting recent litigation against Walden University. “I am not suggesting that Laureate as a whole is fraudulent. It clearly is a large for-profit educational company that has far more to show for its work than Trump University,” Turley wrote.
However, the money given to the Clintons, the involvement of the State Department, and the claims of fraud make this an obviously significant story in my view. The ridiculous amount of money given to Clinton alone raises legitimate questions. This is a company that was expanding exponentially in foreign countries. The association with Clinton was obviously greatly desired by the company. The question is whether the association with the Clintons resulted in any favorable treatment for the company or its affiliates.
“Walden University is a part of the Laureate International University Network,” Walden president Jonathan Kaplan wrote in reply to Turley. “We are proud of our association with President Clinton and his role as honorary chancellor at Laureate from 2010 to 2015. It is unfortunate that this association has now drawn us into a political debate.”
As it happens, Walden—an online-only university mostly for graduate students, acquired by Laureate Education in 2002—was one of the FPCUs examined by the Senate committee in 2012. Despite spending less than all but one of the 30 for-profit colleges investigated on instruction per student, the committee deemed it “perhaps the best of any company examined.”
In his book, Angulo argues that FPCUs have embraced the 2011 U.S. Supreme Court ruling in favor of draconian arbitration clauses, which allows them to silence whistleblowers and block class-action lawsuits. In January, a class-action lawsuit filed against Walden, in Maryland, was resolved out of court, and the students are back in class. A Laureate spokesperson told Gawker that none of its U.S. institutions require students to enter into arbitration agreements. (Lawyers for the students did not respond to a request for comment. Walden settled another class-action suit, in Texas, in April.)
The Maryland filing alleges that Walden did not adequately shepherd its graduate students through the dissertation process. “Once the faculty members agree to serve in the roles of dissertation or thesis supervisory committee chair and member, they frequently quit, are fired, or stop responding to the student. Retention of committee chairs and committee members is a systemic, institutional issue that is not regulated whatsoever by Walden University,” the complaint reads. When that happens, the student “essentially starts over from scratch.”
In 2009, the Maryland filing states, Walden spent just $1,574 per student on instruction, compared to $2,230 per student on marketing. According to Angulo, at most non-profit colleges and universities those numbers are nearly inverted, spending approximately 70-80 percent of their budgets on personnel and instruction. “Every dollar that goes towards advertising is a dollar that’s absent in the classroom. This is something nonprofits spend comparatively little on,” Angulo wrote in a follow-up email. “And, given historical spending patterns, this puts for-profits at a tremendous competitive disadvantage when it comes to quality instruction.”
“If balance sheets are any guide,” he said, “Walden is a marketing and profit-making machine, rather than an educational institution.” Revenues are bolstered too by federal funding: nearly three-quarters of Walden’s revenues in the fiscal year ending in December 2014 were derived from federal financial aid funds. If any of Walden’s US institutions were to lose access to such Title IV programs, the IPO filing admits, it would crater. (Meanwhile, Laureate Education as a whole had accumulated a deficit of “$1,512.7 million” at the end of March.)
The $35 billion FPCU industry has its share of defenders. “My gut feeling on diploma mills is the whole idea of having to regulate this is the denial of intelligence of consumer and marketplace,” David Salisbury, director of the libertarian Cato Institute’s Center for Education Freedom, said following Senate hearings in 2004. “If people want to waste their money in buying a diploma from a diploma mill, let them do so.” This might be a more persuasive argument if the industry didn’t spend so much money on marketing and publicity.
In any case, the financial establishment appeared to agree with Salisbury: Several major investors joined $95 billion equity firm Kohlberg Kravis Roberts and Company in the $3.8 billion buyout of Laureate in 2007, including Citigroup Private Equity, billionaire liberal philanthropist George Soros, hedge-fund billionaire Steve Cohen (formerly of SAC Capital), and Microsoft co-founder Paul Allen. A few months after Secretary Clinton left office, she conducted an hour-long Q&A with KKR founder Henry Kravis, for which she was compensated $225,000. (Also, in 2012, KKR hired the woman who was Clinton’s press secretary when she was a senator.)
And while the amount of capital involved was remarkable, this kind of buyout had by 2007 become an established business strategy. As the American economy became increasingly dependent on “risky financial instruments” towards the end of the last century, Angulo argues in Diploma Mills, the relationship between the financial sector and for-profit education flourished creating institutions “driven by the same aggressive, predatory practices scholars now identify with systemic financial risk.”
“Trump University was the Comic Sans version of all this,” Angulo told Gawker. “The link is in how much money all for-profits spend on marketing, advertising, and publicity, rather than on instruction.”
It is perhaps unsurprising that both a real estate developer and a retired politician would come to be involved in an industry obsessed with cultivating a perception of authenticity that might better enable its predation and fraud: The difference between Trump slapping his name across a comically fake university, targeting people who don’t understand that reality television isn’t real, and a consortium of hedge-fund billionaires trotting President Bill Clinton out at campuses across the world to deliver liberal platitudes is, at bottom, one of degree, not kind.