Priceonomics

This article was written by Alex Mayyasi, a Priceonomics staff writer

You’ve probably heard of the Cordon Bleu.

The Cordon Bleu is the cooking school in Paris—now expanded to over 50 schools around the world—where Julia Child learned “the art of French cooking.” Its name is synonymous with all things fancy, French, and food. It is prestige and palate-pleasing aperitifs. 

Yet in late 2014, company executives made an announcement that clashed with Le Cordon Bleu’s reputation of moneyed success: All 16 Cordon Bleu schools in America, which had unsuccessfully been put up for sale, would close. The schools are currently “teaching out” their last students. 

The schools are not closing because Julia Child’s alma mater is in financial jeopardy. In fact, the American schools have only a tenuous link to the Paris-based Le Cordon Bleu International: The North American schools are owned and operated by Career Education Corporation, an American operator of for-profit colleges. Since 2000, Career Education Corporation has paid Le Cordon Bleu more than $100 million to license its name. 

For over a decade, Career Education Corporation’s Cordon Bleu schools charged annual tuitions of tens of thousands of dollars to students who went on to work for minimum wage. Experienced chefs raised their eyebrows when they saw the Cordon Bleu name on applicants’ resumes, critics called the schools a “diploma mill,” and the federal government investigated whether the schools misled applicants in order to enroll them in programs that left tens of thousands of former students unable to pay off their loans. 

Through it all, Career Education Corporation relied on the Cordon Bleu brand and marketed its culinary schools as “Drawing upon over a 100 year heritage of culinary excellence.” 

The Cordon Bleu name was the elegant facade built over the mill. It was the hint of an elite world grafted onto a massive education company. And it was a key ingredient in a business model that successfully captured billions of dollars in federal money before the government choked off the funding. 

The Tough Economics of Culinary School

Cooking is not a lucrative trade. 

The rise of foodie culture has elevated the visibility of prosperous chefs like Gordon Ramsay and Anthony Bourdain. But they are like Yo-Yo Ma or Stephen King: rare exceptions. Career Education Corporation has 16 Cordon Bleu campuses and had (at its peak) over 10,000 culinary students; its graduates can’t all count on becoming celebrity chefs. 

Cooking can be a rewarding career, but even standout chefs caution that it is hard, poorly compensated work. The restaurant business has infamously thin profit margins and high failure rates, which translates to poor pay. 

In his book Medium Raw, Anthony Bourdain advises against attending culinary school. “You’re about to take on $40,000 to $60,000 in debt training,” he writes, “for an industry where—if you are lucky—you will, for the first few years, be making $10 to $12 dollars an hour.” Anyone over 30 is considered a grandpa, he adds, and if you can’t run up and down stairs, carrying loads in a hot kitchen, you’ll fail as a junior cook.

The rise of celebrity chefs and cooking competitions helped the Cordon Bleu schools attract applicants

Bourdain did attend culinary school—he just believes the only people who should go are young, fit people who are “fucked-up” enough to love the crazy culture of cooking. But the American Cordon Bleu schools don’t make his list of schools that are worth it (even though Cordon Bleu tuition is among the highest), and many chefs see culinary school as pointless. 

“It doesn’t give them any edge,” Kenneth Giambalvo, the executive chef of an upscale Portland restaurant has said of culinary school graduates. “I tell them, ‘I’m going to treat you like you don’t know anything.’” 

“A culinary degree is expensive and…the starting wage won't pay for the student loans,” another chef said in response to the closing of the Cordon Bleu schools. “A degree from a reputable culinary program is treated the same as experience working in a reputable restaurant kitchen…”

“The economics just don't work for the graduate."

A Cordon Bleu-Approved Scam?

It’s not necessarily a problem that the Career Education Corporation’s Cordon Bleu schools charged dearly to train people for a career that does not pay well. As long as it’s an informed choice, students can decide to accept the burden of student loans. 

Many students, however, say that the Cordon Bleu staff misled them by claiming that Cordon Bleu graduates consistently got salaries of $40,000 or more right out of school.

This was the case for Anna Berkowitz, a graduate of the pastry chef program who sued because, she says, admission representatives told her she could earn $75,000 “to start” and “easily pay off the loans [she was] encouraged to take out.” In 2013, an arbiter awarded her $217,000 in damages. Two years earlier, 8,500 students who called the Cordon Bleu schools a “scam” won a class action lawsuit for similar reasons.

So are these students’ complaints atypical? Or are they representative of how the Cordon Bleu schools treated students?

No one at Career Education Corporation responded to our interview request, and most Cordon Bleu staff members whom we contacted individually did not reply. 

One former admissions representative did suggest that these examples came from disgruntled students or (in the case of the staff) a few bad apples, which is the school’s standard response to these charges. He passionately told us that reps like him offered students the counseling he wishes he’d received when he attended college—and that admissions reps were monitored and promptly fired if they misled students.

We hope this is true at some of the Career Education Corporation’s campuses. But it clashes with evidence that Cordon Bleu leadership and its staff systematically misled students about their future prospects and the sustainability of their debt.

The New York Times and SF Weekly have published major articles detailing students who were told that graduates frequently earned high salaries, admissions reps who described a culture of doing whatever it took to enroll students, and graduates who earned $10 an hour.

"She said, 'When you graduate, you're probably going to make $45,000,'" one former student said of his experience talking with a recruiter. "She showed me statistics on how their students were doing. I thought, 45 to start with, that's great."In SF Weekly’s reporting, several recruiters confirmed that misleading applicants was common. 

Recruiters also falsely implied that financial aid would make tuition affordable—often by portraying loans as grants that would not need to be repaid—and avoided revealing the full price of attending. Similarly, on the Cordon Bleu website, the tuition page does not list a price but instead tells students:

With financial aid, the real cost of college could be less than you think. Le Cordon Bleu also has nearly $11 million available in scholarships and grants, which usually do not have to be repaid.**

Reddit threads and Yelp pages about the Cordon Bleu schools are full of cautionary stories from former students. More tellingly, even Cordon Bleu graduates who have become successful chefs don’t recommend the school. 

Chris Kronner, who sells his signature Kronnerburgers at his Oakland restaurant, called the school “a body factory [where] as long as you pay your $50,000, they will give you a degree.” He even considered joining his classmates in a lawsuit against the Cordon Bleu. 

"It's super tough to get into debt to get into an industry where you're going to be making minimum wage or a little higher,” an accomplished, young dropout said of the Cordon Bleu schools. “It's a rough spot to be in especially when you're being told it's going to be different."

It’s reasonable to ask whether the Paris-based Cordon Bleu International would license its name to Career Education Corporation if these accusations had merit. (The licensing deal was renewed in 2009.) From its reputation, you might imagine the head of Cordon Bleu International as a French chef who would rather die than see the Cordon Bleu name attached to an inferior product. 

But in fact the Cordon Bleu has been a profits-focused company since it was purchased in 1995 by Andre Cointreau. Cointreau belonged to a fabulously wealthy family that fought over the family business (of making Cointreau and Remy Martin cognac), and he felt he had to prove himself to have a voice. He had attended France’s best business school, and its alumni, Cointreau has said, held the attitude, “Give me a balance sheet and I'll tell you who you are." 

Cointreau transformed the Cordon Bleu from a single Parisian school into a culinary empire with over 50 campuses around the world. He also introduced licensing programs that rent the Cordon Bleu name to cookbooks, jams, mustards, cafes, cruise ship restaurants, knives, meat thermometers, and dozens of institutions’ cooking programs. 

In a terse email exchange, representatives of Le Cordon Bleu International declined to say how they vetted the quality of Career Education Corporation’s cooking schools, which used the Cordon Bleu name at a cost of roughly $15 million a year. But it’s clear that the company is willing to make deals that don’t exactly fit its stated mission of upholding the finest traditions of French cooking: The company’s latest licensing agreement, for example, is a plan to create Cordon Bleu water flavors for Sodastream.

Above all, these accounts of the Cordon Bleu misleading students into debt are especially compelling because its parent company, Career Education Corporation, has faced class action lawsuits from students, criticism from faculty, and government investigations at the state and national level since 2005 on similar grounds. 

And all these tactics are in line with the business model that made companies that ran for-profit colleges wildly successful—at least on their balance sheets—for the past two decades.

Why a Poor Product was Profitable

From the mid 1990s until around 2013, the for-profit higher education industry exploded in size and scale. 

In 2001, 766,000 students attended American for-profits, and by 2010, that figure had increased to 2.4 million students. In 2005, 60 Minutes called the industry the “darling of Wall Street.” Despite only being founded in 2005, Career Education Corporation was earning annual profits of $234 million on revenues of $1.8 billion.

The results for students were dismal. A two-year Senate investigation noted that students at for-profits, on average, paid more in tuition, graduated with more debt, and, although only 10% of college students attended for-profits, accounted for 47% of all students who failed to pay back their loans.

In most industries, a company offering such a poor product or service would go out of business. If a student loan was like a business loan, Cordon Bleu students would have to convince a skeptical bank employee that they would make enough money as a chef to pay back a 6-figure loan. 

Student loans work differently, though, because the government wants to make it easier and more affordable to attend college. That’s why the government gives out over $30 billion worth of grants each year to low-income students and makes or guarantees much of the trillion dollar student loan market.

In lieu of skeptical bank employees, the Department of Education requires that colleges that receive federal money meet several standards. 

The first is that a nonprofit evaluator accredit each college—a step that is ineffective for familiar reasons: For-profits can buy accredited nonprofit colleges; the regulating agencies rely on fees from the colleges they evaluate; and executives and major shareholders of for-profit colleges sit on the board of regulating agencies. 

Another standard is the rule that no more than 30% of a college’s graduates can default on their loans. But there’s a loophole, which a Senate investigation has cited as widely used: This default rate measures how many students fail to meet loan payments within 3 years, so colleges can game their default rates by signing up students for programs that defer their loan payments until after that 3-year period. 

The result is that colleges and vocational schools like Cordon Bleu can profit from a dependable stream of federal grants, GI benefits (which pay veterans’ tuition), and federally-guaranteed loans even if they fail their students. As is typical for the industry, Career Education Corporation receives nearly 90% of its revenues—the maximum legal amount allowed—from these Title IV (federal education) programs.

For this reason, the key to for-profits’ success has always been to get as many students as possible to enroll and sign up for loans. And the tactics and playbook that most of the industry used are the same sales-centric and misleading ones that critics say the Cordon Bleu used. 

The process starts with commercials like the ads run by the lead generator e-Learners, which promise that you can make “$25,000 more per year” by earning an online degree “right from your home, in your pajamas.” The target demographic is young, low-income individuals.

For-profits intentionally hide the cost of tuition. The for-profit Alta College Inc, for example, has listed tuition prices by semester without noting that its programs had 5 terms per year rather than the normal 2 or 3. 

Each college or school’s admissions representatives then contact the leads—students have complained about receiving dozens of calls from multiple for-profits within days of entering their contact information—and use traditional sales tactics. Some of these strategies are fairly innocent: Career Education Corporation’s sales manuals, for example, instructed its representatives to seem busy by only offering applicants two potential appointment times. 

Other strategies used to enroll students at for-profits are shocking and fraudulent. In Congressional testimony, a former admissions rep for Alta College has described how salespeople hit their quotas by lying about the great salaries most graduates enjoyed and by falsely implying that their financial aid would be mostly grants rather than loans. “To my knowledge, none of these lies were ever discouraged,” he testified. “And at times, they were even encouraged.”

Many for-profit colleges trained its admission reps to get applicants talking about their problems. In sales, this technique is common. The idea is that people will reveal their “pain points” (our photocopier always breaks, which frustrates me, delays me, and forces me to miss dinner with my family!) so your solution sells itself (Lucky you, I’m selling a top-of-the-line photocopier!). 

In the hands of admissions reps, however, this tactic was used nefariously. A sales manual from the for-profit Kaplan, for example, encouraged its staff:

KEEP DIGGING UNTIL YOU UNCOVER THEIR PAIN, FEARS, AND DREAMS. . . . IF YOU GET THE PROSPECT TO THINK ABOUT HOW TOUGH THEIR SITUATION IS RIGHT NOW AND IF THEY DISCUSS THE LIFE THEY CAN’T GIVE THEIR FAMILY BECAUSE THEY DON’T HAVE A DEGREE, YOU WILL DRAMATICALLY INCREASE YOUR CHANCES OF GAINING A COMMITMENT FROM THE STUDENT! IF YOU CAN STIR UP THEIR EMOTIONS, YOU WILL CREATE URGENCY! 

At ITT Tech, a training manual that used this same approach of getting applicants to talk about their money problems referred to the strategy as “the pain funnel.” 

Since the federal government provided the money, schools and colleges have no monetary incentive to make sure that applicants could handle the work or benefit from the program. Former admissions representatives of Cordon Bleu have told SF Weekly that recruiters signed up applicants who had mental health problems and learning disabilities. 

Another explained, "We were advised to tell the students that because it's such a prestigious school, Cordon Bleu recognized, yadda yadda, you have to tell me why you should be accepted… [But really] it's like, 'Yeah, uh-huh, can you sign up for a loan? Then you're going to school.'"

Adieu, Cordon Bleu

In 2014, the president of Career Education Corporation—citing the impact of new government regulation—announced that the Cordon Bleu schools would close. 

For-profit schools have impressive lobbying powers, but reforms passed over the last several years seem to have some bite. The new regulations cut off federal funding to institutions where the average graduate pays more than 20% of his or her income in loan payments. The annual reports of Career Education Corporation make clear that meeting this standard is a struggle. The culinary schools had become unprofitable, and the leadership decided to focus on the more promising and lucrative area of online education. 

That doesn’t mean we won’t see another Cordon Bleu school—whether branded or opened by the actual Paris-based company—in the United States in the future. In our email exchange with the company, a representative referred to North America as an important market and showed no indication that they viewed their partnership with Career Education Corporation as unfortunate or unsuccessful. 

Still, the new regulation and government scrutiny has all led to a sense in the for-profit, higher education industry that the boom days of the early naughts are over. 

That’s probably for the best. Far too many for-profits redistributed money from taxpayers and low-income students to executives and shareholders without helping students. 

But it has hardly solved the problem. The students who flocked to for-profit colleges over the past 15 years are still struggling and looking for a path to financial stability. And while there are nonprofit colleges that help students climb the economic ladder, many others offer just as dismal results as the maligned for-profits: A Priceonomics analysis, for example, found that 5 of the 10 worst colleges for low-income students are nonprofit colleges. 

Even among Ivy League schools and flagship universities like the University of Texas at Austin, there is a growing awareness that college is not a magic bullet. Among the most pressing questions for college administrators and education researchers is the trend that—as the New York Timesputs it—”whether a student graduates or not seems to depend today almost entirely on just one factor — how much money his or her parents make. To put it in blunt terms: Rich kids graduate; poor and working-class kids don’t.”

Given this reality, the advice and rhetoric that financial aid can make college affordable and that tuition is a valuable investment can feel just as misleading to students at nonprofit and public colleges as it did to Cordon Bleu students. 

***

For Career Education Corporation, using the name Cordon Bleu was a coup. It gave a rarified air to a school that students described as feeling like a “factory” and a “cash machine.” 

But really the same could be said of another word—one that no one has to pay to use, but which is used successfully by for-profits and nonprofits alike. A word that brings to mind success and “the best years of your life” and self-esteem. A word that inspires people to move across the world and take on crazy amounts of debt:

“College.”

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Published Mar 17, 2016


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