Nov. 16, 2015
“[It’s] one of the only things the government shouldn’t make money off,” Trump told The Hill in July, saying that students in college are “doing well but they’ve got student loans up to the neck.”
But apparently it is okay for Trump to profit off of students. From 2005 to 2010 Mr. Trump was allegedly involved in a fraudulent scheme to do just that, according to a new deep dive by Time’s Steven Brill into the lawsuits that Trump faces over his “university.”
[pullquote]The allegations of fraud and racketeering have not been proven in a court of law[/pullquote]
Read Brill’s article. It will make you angry, but it’s worth reading the whole thing. Before I begin, I’m issuing a caveat because I don’t want to get sued for libel by Trump. Trump University was not technically owned by Trump. It was owned by a limited liability company that was in turn owned by two of Trump’s limited liability companies. The class action lawsuits are ongoing and Brill’s article is based on discovery documents, as well as Brill’s own interviews with the parties involved, including Trump. The allegations of fraud and racketeering have not been proven in a court of law. Okay, here we go.
Trump University was not a university
[pullquote]The instructor advises students that during lunch they should call their credit card companies to raise their credit limits[/pullquote]
Here’s how Trump University allegedly worked: Students show up to a free session to learn the secrets of Donald Trump’s real estate investing strategy from mentors “handpicked” by Trump himself. That first session is a sales pitch to participants to spend $1,495 to attend a three-day seminar to learn Trump’s secrets. At this seminar students are instructed to disclose their financial information and assets so that the instructor can coach them on how to invest. By day two of the three-day session, the instructor pivots to telling students three days isn’t nearly enough time to learn Trump’s secrets. Using the information gleaned from the student’s financial disclosure, the instructor pitches either an “elite,” “gold,” or “silver” package, the most expensive costing $35,000. The instructor also advises students that during lunch they should call their credit card companies to raise their credit limits. For the elite packages, the instructor give one-on-one counseling, walking around to houses on the weekend, giving advice on how to flip the house.
According to one plaintiff in the class-action lawsuit, after buying the elite package he went with his mentor around Westchester County, New York, to try to make deals on houses to flip. Each real estate company told him he needed to have financing in place, which he didn’t, and the nonbank lenders that had been promised in the sessions never appeared.
The instructor most successful at upselling had no experience in real estate. Two others filed for personal bankruptcy while instructors. And none seem to have ever met Trump, even though they would say things like, “I remember one time Mr. Trump had us over for dinner.”
The instructors would get a ten percent cut of the tuition (if you can call it that) they got the students to pay. That led to high-pressure sales tactics, as evidenced by James Harris, who was a particularly successful Trump University instructor. From Brill’s article:
Near the end of the session, Harris scolded an 18-year-old who said he might not be able to make the $1,495 class starting on a Friday because he was still in high school. “Take the day off,” he told the high schooler. “This is more important … This is a billionaire, and I work for him and am going to show you how to buy and sell real estate.”What Does this tell us about Trump on higher education?
Trump University was not a university, it was just a way to prey off of people’s aspirations. “I’m rich, so trust me,” is apparently effective in both running a campaign and a “university.” So in some ways, this saga really tells us nothing about Trump’s views on higher education. Additionally, it seems possible that Trump didn’t realize his university had turned into a scam. The academic materials, for instance, were outsourced to an adult education company. Still, Trump University collected $40 million over its five-year existence, of which $5 million went directly to Trump (he says he gave it all to charity).
But Trump University does relate to two main questions in higher education policy.
First, how should the federal government determine whether a school is eligible for federal financial aid? No one attending Trump University was eligible for a Pell Grant or federal student loan because the school was not accredited. Standards for accreditation are low, but apparently not that low. However, even as Corinthian college was under investigation for fraud, had high default rates, and was financially imploding, it remained accredited. And yet conservatives are increasingly opposing the “accreditation cartel,” arguing more schools should be eligible for financial aid. Separately, the Department of Education is experimenting with accrediting more alternative providers, like coding bootcamps. In a new era of even looser standards for receiving federal money, one could easily envision Trump University reborn as a three-month intensive certificate program that gets federal financial aid. Presumably Trump would be in favor or this, though one never knows with him.
Inevitably the school would be filled with “terrific people, terrific brains,” which is the claim Trump made about Trump University in a 2008 promotional video, and also the claims he makes about his future presidential administration.
Second, should the federal government hold universities accountable? Because Trump University never received federal financial aid, they would not be subject to the Department of Education’s new(ish) accountability standards on for-profit colleges. But there are schools in the Title IV aid system that operate a slightly more dignified version of Trump University with aggressive marketing and fraudulent claims of employment and earnings outcomes, with no evidence of value once the student enrolls. Even when the schools’ claims are not fraudulent under a legal definition, many students leave with no degree and student loan debt that they fail to repay. How bad does a school’s outcomes have to be for the federal government to stop handing out loans to the students to attend school?
Brill persuasively uses Trump’s handling of Trump University as a case study in the overall Trump playbook. If Trump University is any evidence of what the Trump Department of Education would look like, there could be a lot more students “up to the neck” in student loans."