Interesting piece from the saints at New American Foundation’s Ed Watch blog on recent statements by Career Education Corp.’s CEO, Gary McCullough. Backstory: Mr. McCullough’s Career Education Corp (CEC) owns a number of for-profit trade schools, including Western Culinary Institute here in Portland. By way of full disclosure, I am one of the lawyers representing students pursuing a series of claims against Western Culinary and CEC over the school’s sales and enrollment practices.

Mr. McCullough provided insight into the company’s operations and financial statements in an investor briefing. It’s a let-a-smile-be-your-umbrella kind of thing. According to Mr. McCullough, CEC will emerge from its current problems in fine shape. Here’s the audio of the webcast with the CEO’s rosy predictions of better times ahead.

It gets interesting, as he explains that culinary school enrollments are down this year. But fear not: CEC is limiting admissions to “credit worthy” students, so things should turnaround.

“Credit worthy students” is a great turn of phrase. I guess what that means is that they are now agreeing that the high tuition costs of culinary schools like Western Culinary Institute are not a good lending risk. How could they be? Who would lend money–say $30,000–to students who will earn $10-12 per hour once they get out? What they fail to report is that they routinely sold students on their bright and lucrative futures, getting them to borrow tremendous sums for the “opportunity” to work in a kitchen for the kind of pay that can’t justify this level of debt.

All of this raises as many questions as it answers.  For example, I wonder how recently Mr. McCullough learned that there was a problem with credit worthiness? The smart folks at New America Foundation hypothesize that CEC has seen the light because it will now be supplying a chunk of the student loan cash to finance its students.

The other question is how a school like WCI can function in this environment. They charge eye-popping tuition that  does not provide significant net benefit to students.  How could there ever be a credit worthy student who will be upside down in the deal from the get-go?

Fun stuff, this.

David Sugerman

Tags: Career Education Corp., culinary school, oregon class action, western culinary institute