‘Fail State’ Delves into the Shadowy World of For-Profit Colleges

The film details how the for-profit college industry began, its rise to power and why legislative attempts to rein it in have had only limited success.


You’ve seen the ads: smiling, fresh-faced young graduates praising schools like DeVry University and Corinthian Colleges for changing their lives. In a 2008 TV spot typical of the genre, brothers Wilfredo and Manuel Siliezar pose in front of shiny cars, talking about how studying computer technology at ITT Tech led them to great new careers. “We were the first two to have a degree out of our entire family,” Wilfredo says, before enjoying a picnic at the beach with his wife and daughter. A slick 2017 University of Phoenix ad consists of a cinematic montage of a woman’s immigration journey — surviving World War II, arriving at Ellis Island, working at a factory — paired with words of encouragement for her offspring: “I’d succeed so you could wake up one day with the choice to be anything you wanted.” Finally we see her adult great-granddaughter, wearing a power suit and striding triumphantly into a corner office. The production values vary, but the message is the same: For-profit colleges are peddling not just a college degree, but the American dream.

Unfortunately, the dream is a scam. For-profit colleges recruit vulnerable and first-generation students, encourage them to take on huge loans to pay exorbitant tuition, offer subpar instruction and then leave their alumni to struggle with crippling debt. For-profit alumni account for 47 percent of all defaults on federal student loans, and 57 percent of them owe at least $30,000, according to a 2012 Senate committee report. This has been going on more or less unchecked since the 1970s, thanks to a powerful industry lobby that keeps Congress in its thrall through campaign donations.

It’s also the subject of Fail State, a briskly paced and emotional new documentary premiering at the Austin Film Festival on Saturday. Written and directed by Alexander Shebanow, a young filmmaker in his feature debut, and executive-produced by Dan Rather, the film details how the for-profit college industry began, what allowed it to rise to power and why legislative attempts to rein it in have had only limited success.

From 2009 to 2015, $10 billion in G.I. Bill benefits went to for-profits.

Fail State begins with a bright spot in U.S. history: the rapid expansion of public colleges and universities in the 1960s and ’70s. We see President Lyndon B. Johnson signing the Higher Education Act of 1965 and proclaiming, “It is not enough just to open the gates of opportunity. All our citizens must have the ability to walk through those gates.” That law increased federal funding to universities, created low-interest student loans and encouraged states to do the same. School was affordable and sometimes even free, as in the case of Houston’s Rice University. In-state tuition at the University of Texas at Austin was a mere $136 for the 1960-61 academic year. More Americans went to college than ever before. What could go wrong?

Quite a bit, actually. The film shows how the seeds of the for-profit industry were planted in 1972, when Congress changed how financial aid was allocated. For the first time, aid went directly to students, who could use Pell Grants and loans at any college. A bipartisan coalition of lawmakers believed that this voucher model would give students more choice and increase access — rhetoric echoed today in the “school choice” debate. Instead, for-profits quickly figured out how to market to the most vulnerable students, especially veterans. From 2009 to 2015, $10 billion in G.I. Bill benefits went to for-profits. One of the most upsetting stories in the film is that of Murray Hastie, an Iraq War veteran with post-traumatic stress disorder whose Google search led him to GIBill.com, a for-profit website designed to look like an official government page. A DeVry recruiter soon contacted Hastie, assured him his service member benefits would cover everything, and signed him up. Murray ended up with more than $50,000 in loans and was unable to afford community college once he learned his DeVry credits were useless. “I felt like a failure,” he says.

We meet several former students like Hastie in the film, and the most painful part of their stories is how they all blame only themselves. But with high-pressure sales techniques, including the “pain funnel,” a method that encourages recruiters to spend hours listening to and empathizing with their targets until they gain their trust, even sophisticated students can easily be fooled. The blame lies with lawmakers on both sides of the aisle who trade PAC money from for-profit lobbyists for lax regulations. President George W. Bush put Sally Stroup, formerly the University of Phoenix’s chief lobbyist, in charge of higher education policy, which went about how you’d expect. The Obama administration cracked down by cutting off loans at schools where a high percentage of graduates couldn’t get jobs, but Betsy DeVos wasted no time in rolling that back. Today, with Trump University’s swindler-in-chief in charge, the outlook is bleak.

Jennifer Wilson and her diploma.  courtesy/Fail State

Fail State focuses more on policy than on individual stories. It’s a risky choice: You’ll either geek out over the follow-the-money flowcharts and legislative history, or your eyes will glaze over. Still, this approach largely works, mostly due to the film’s judicious editing and selection of talking heads who are both articulate and brief. I wanted to spend more time with people like Hastie and Jennifer Wilson — who enrolled in Everest College to study criminal justice after her daughter was murdered — and to learn how they’re rebuilding their lives. On the other hand, the scenes we do get with former students are all the more powerful for their brevity. Staring longingly at a photo of herself in cap and gown, holding her summa cum laude diploma, Wilson says, “This is the final picture of me while I was still happy. … That was the beginning of the end.” It’s a sad story, but one you won’t soon forget.

Texas Observer publisher Mike Kanin will moderate a panel discussion after Fail State premieres at the Austin Film Festival on Saturday, October 28, at 12:30 p.m.