BLACK LETTER LAW AND THE FOR-PROFIT COLLEGE A dissertation submitted to the Kent State University College of Education, Health, and Human Services in partial fulfillment of the requirements for the degree of Doctor of Philosophy By Michael S. Hollenbaugh December 2015 © Copyright, 2015 by Michael S. Hollenbaugh All Rights Reserved ii A dissertation written by Michael S. Hollenbaugh B.A., University of Akron, 2004 M.Ed., Kent State University, 2005 Ed.S., Kent State University, 2007 Approved by _________________________, Co-director, Doctoral Dissertation Committee Stephen Thomas _________________________, Co-director, Doctoral Dissertation Committee Jarrod Tudor _________________________, Member, Doctoral Dissertation Committee Paul Gaston Accepted By _________________________, Director, School of Foundations, Leadership and Kimberly Schimmel Administration _________________________, Interim Dean, College of Education, Health, and Human Mark Kretovics Services iii HOLLENBAUGH, MICHAEL S., Ph.D., December 2015 Higher Education Administration BLACK LETTER LAW AND THE FOR-PROFIT COLLEGE (316 pp.) Co-Directors of Dissertation: Stephen B. Thomas, Ed.D. Jarrod Tudor, Ph.D. There is no single resource available to consumers of for-profit education or to owners and administrators of for-profit colleges and universities that aggregates consumer protection law. The purpose of this study is to examine the laws that regulate the operation of for-profit institutions, the marketing and advertising of for-profit institutions, the gainful employment regulations, and how the courts have interpreted laws (constitutional, statutory, and regulatory) in each of these three areas. Utilizing legal research methodology, the study revealed that for-profit institutions are treated differently in the legislation at both the state and federal level. Furthermore, by reviewing each state and federal law, its application, and its treatment by the courts, the research uncovered the weaknesses of a decentralized system of regulation and demonstrated a need for strong centralized federal oversight to protect educational businesses and their consumers. ACKNOWLEDGEMENTS There are a select few people in your life that can change the way that you think about the world. You may meet people in your life that will influence your decisions, for good or bad, but there are relatively few people who can change the course of your life and make you a better person for having done so. One of those people in my life is my friend, mentor, and colleague Dr. Stephen Thomas. Without his direct influence, I would not be the man I have become. I certainly never would have thought that I would have the academic ability to pursue, much less complete a doctorate. His steady hand, direct wisdom, and confidence have helped me to become the man I am today. I would also like to thank the members of the committee, Drs. Jarrod Tudor and Paul Gaston who have worked with me over the past three years. Their patience and willingness to provide ongoing revisions throughout the process has helped me to complete and submit a final document of which I can be proud. I would like to thank my wife, my friend, and the mother of my children, Dr. Erin Hollenbaugh. On the day of my wedding after exchanging vows, the pastor introduced my wife and I to the congregation as Mr. and Dr. Hollenbaugh. In that moment, I knew I would be completing my doctorate. Taking on a Ph.D. is not a decision to be taken lightly. It can and does affect your time spent at home and with family. Nonetheless, Erin has supported me in every step of the process. Thank you for being the love of my life, an incredible mother of our two children Jack and Sophia, a sounding board, and an excellent editor. iv Finally I would like to thank my parents, Judi and John Hollenbaugh, whose unwavering belief in me and my potential allowed me to believe in myself. I can only return the gratitude I have for them by finally giving them the ability to introduce me to their friends as my son, the doctor. Thank you both for everything. v TABLE OF CONTENTS AKNOWLEGEMENTS ................................................................................................................... iv LIST OF FIGURES ........................................................................................................................... xi CHAPTER I. INTRODUCTION ...................................................................................................................... 1 The History of For-Profit Colleges ............................................................................................ 1 Statement of the Problem ............................................................................................................ 4 Authority to Award a Degree ............................................................................................... 5 Limitations on Advertising and Recruitment ..................................................................... 7 Value of a Degree ................................................................................................................... 9 Relationship Between the Student and the University .................................................... 11 Due process .................................................................................................................... 11 Corporation .................................................................................................................... 13 In loco parentis .............................................................................................................. 14 Contract Law ......................................................................................................................... 15 Elements.......................................................................................................................... 15 Validity ............................................................................................................................. 16 Contract theory .............................................................................................................. 16 Breach of contract ......................................................................................................... 19 Termination of contract ................................................................................................ 19 Remedies ......................................................................................................................... 20 Consumer fraud statutes ............................................................................................... 20 The For-Profits ..................................................................................................................... 21 Purpose of the Study ................................................................................................................... 24 Significance ................................................................................................................................... 24 Research Questions ..................................................................................................................... 24 Glossary ........................................................................................................................................ 25 Delimitations ................................................................................................................................ 27 Limitations .................................................................................................................................... 27 Remaining Chapters .................................................................................................................... 27 II. LITERATURE REVIEW ......................................................................................................... 29 Introduction ................................................................................................................................. 29 Institutional Demographics ....................................................................................................... 29 The Number of For-Profit Institutions ............................................................................ 30 Ownership of For-Profit Institutions ................................................................................ 32 Size of For-Profit Institutions ............................................................................................ 33 Longitudinal Data Regarding Growth ............................................................................... 34 The Future of For-Profit Higher Education .................................................................... 35 Summary of the Problem .................................................................................................... 36 Literature Following the Student Path: Prior to Enrollment ................................................ 36 vi Fraudulent Degrees .............................................................................................................. 38 Marketing and Admission Practices ................................................................................... 40 Government Intervention ................................................................................................... 43 Review of Consumer Fraud State Statutes .......................................................................