National American University gets rich from federal loans

Meanwhile 15.7 percent of graduates default

Diane Leef worked for 20 years at a dry cleaners in Robbinsdale before a back injury took her off the floor. In her early 40s, she realized she'd never be able to do physical work again. If she was going to support herself, she was going to need more than her high school degree.

Leef started looking into places where she could get her bachelor's degree. She ended up settling on National American University, which has a campus in Brooklyn Center, an easy bus ride from her home. Like every Minnesotan with a television, Leef was already familiar with National American from its ubiquitous commercials: "Get your degree/Set yourself free/National American University!"

It was an attractive promise to Leef, not least because the financial aid officer she spoke to at the university promised to sign her up for a host of student loans that would make it possible to afford her college education.

National American University's campuses at Bloomington (top) and Roseville. The company made $10 million last year, while many of its students can't even repay their loans.
City Pages
National American University's campuses at Bloomington (top) and Roseville. The company made $10 million last year, while many of its students can't even repay their loans.
City Pages

But it wasn't long before Leef's experience with National American started to go south.

For one thing, although Leef's loans entitled her to a living stipend, the financial aid office wouldn't pass that money along to Leef.

"I'm disabled, I wasn't working, and they weren't giving me any money to live on," Leef says. "I was looking at being homeless."

Leef took the issue up with the financial aid office, but found that the workers seemed more interested in bringing in new enrollment than helping her.

"I'd go in there to try to sort this out, and they would be in the middle of a contest to see who could sign up the most new students," Leef says. "It was like a boiler room."

When she finally worked her way up to talking with the regional district manager, Leef says, she was treated rudely.

"She told me to go out and get a job if I was so unhappy with the school," Leef says. "I couldn't believe it."

Leef eventually got her stipend, but in subsequent semesters found that the university often hung onto money longer than it ought to, collecting interest on it. Talking to other students, she learned that many of them had similar experiences. Many discovered they were paying more for their education than they'd originally been led to believe. Some were dropping out without degrees, already thousands of dollars in debt.

"It seemed like once they had you enrolled and signed up for the loans, they didn't really care about whether you succeeded or failed," Leef said. "We're just dollars to them."

In Minnesota and across the country, for-profit universities like National American University are booming. Unlike public schools such as the University of Minnesota, National American University and other "proprietary institutions" exist to make money. Many, like National American, are publicly traded companies, answerable to shareholders and a board of directors.

In recent years, for-profits have seen business surge, financed largely by state and federal student loans. There are more than 2,000 for-profit universities across the country receiving federal loans totaling $24 billion.

For-profit schools are cheaper on average than private colleges, which can cost up to $50,000 a year. But they're far more expensive than the public education at state universities and community colleges. According to a report by the Department of Education, the average tuition last year at a four-year for-profit school was $15,661, more than twice the in-state tuition at the University of Minnesota.

The for-profit schools serve non-traditional students. As National American's "One day, one night, Saturday's all right" jingle promises, the schools offer flexible scheduling for working adults, as well as programs online, letting students get a degree without ever setting foot on a campus.

But there's been little government oversight of the for-profits. With so much money to be made from student loans—the schools get paid even if students default—critics say it's a system ripe for abuse.

"This is an industry that has gotten fat on public money while largely escaping any kind of public oversight," says Barmak Nassirian, associate director at the American Association of Collegiate Registrars and Admissions Officers. "There's a rush to seize excessive profits that is hurting the students who need help the most."

National American University had its origins in South Dakota in 1941, as a small two-year business school called the National School of Business. Over the next 30 years, the school slowly grew to become a four-year college. It wasn't until 1974 that the school—by then called National College—began setting up satellite campuses in Sioux Falls, Minneapolis, and St. Paul, as well as out west in Denver and Colorado Springs.Today, National American University has 18 locations across seven states, from South Dakota to Texas. In the Twin Cities area, the University has branches in Brooklyn Center, Roseville, Minnetonka, and even the Mall of America.

National American's growth has gone into overdrive in the last few years, increasing the number of its students by 35 percent, from about 6,500 students in 2009 to nearly 9,000 students this year. The school merged with another company last year, forming a new corporation registered in tax-friendly Delaware.

Last year, National American University cleared $10 million in profits. And how it got there is telling: The company pulled in $82 million in academic revenue—most of it in the form of state and federal student loans. On its Minnesota campuses alone, National American's students received $9.2 million in public loans last year.

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