Beauty Schools Use Ugly Practices to Boost Profits
Cosmetology schools have been called the “biggest scam in higher education” because of the way they make money.a Cosmetology students essentially pay for the privilege of working for their schools. Here is how it works: Students pay the schools tuition—as this study shows, often going deep into debt to do so—and customers pay the schools for services they receive from students working for free in the schools’ salons. And this double-dipping is only the most obvious way that cosmetology schools arguably take advantage of students.
Cosmetology schools around the country stand accused of using shady practices to make even more money off their students. Take La’ James International College, a chain of cosmetology schools in Iowa, for example. In 2014, the state attorney general filed a consumer fraud lawsuit against the chain, alleging it engaged in deceptive, omissive and unfair practices.b
Among other things, the state’s lawsuit alleged La’ James “failed to disclose important information to prospective students,” such as the fact that they would get credit only for practicing skills on paying customers of the schools’ salons, not mannequin heads or even fellow students when customers were lacking; that students themselves would have to recruit those customers and pay for the services themselves if customers could not or would not pay; and that they would have to sell products and be penalized for not doing so.c
The upshot of these practices, the lawsuit alleged, was that many students became frustrated and stopped attending school regularly. This, together with alleged understaffing and other problems at the chain’s schools, meant students had difficulty completing school by the agreed-upon—yet entirely arbitrary—completion deadline. And for every hour they attended past the deadline, the chain required students to pay additional tuition. The chain refused to waive these “overage fees” even for students with reasonable excuses, such as illness, pregnancy and other circumstances beyond their control. La’ James also allegedly imposed higher overage fees than advertised to students and kept poor records that resulted in students being overcharged.d
Arbitrary completion deadlines paired with overage fees are common with cosmetology schools. The specific policies and amounts vary widely, but overage fees can add thousands of dollars to the cost of cosmetology education. Indeed, in less than three and a half years, La’ James levied over $631,000 in overage fees on the 254 graduates who did not graduate on time—over 25% of the chain’s students during the period—a per-student average of nearly $2,500.e
Cosmetology schools around the country stand accused of using shady practices to make even more money off their students.
Without admitting any wrongdoing, La’ James entered a consent judgment with Iowa in 2016. Among other things, the judgment required the chain to provide students with a one-page disclosure form clearly laying out all costs and other key information and to stop forcing students to recruit customers or pay the school for services provided to nonpaying customers. The judgment also required that La’ James forgive $2.16 million in debt from former students and pay to clear the students’ credit reports of those debts.f
The consent decree is good news for current and former students of La’ James and should serve as a warning to other cosmetology schools that might engage in such practices.
However, the judgment did nothing to address the fact that students in Iowa—and across the country—still essentially pay their schools for the privilege of working for free. Nor did it address the steep licensing requirements that force students to spend far longer in cosmetology school than can be justified by the demands of public health and safety. Indeed, even if La’ James’ alleged practices were an extreme example, the basic structure they exploited are core to cosmetology licensing laws nationwide.