The “for profit vs. non-profit” fight has gotten a little bit uglier this month.  I’ve mentioned it on the forums but I’ve decided to do a little more digging before blogging on this particular news article.  In a nutshell, Keiser University (a for profit school) finds out about a collaborative effort between Florida State College Jacksonville (a non-profit school), the Institute for College Access and Success (a connected lobby group which is anti “for profit” schools), Gilchrist Bert (founder of the Water Street Capital hedge fund and famous for short selling) and of course Steve Eisman (a hedge fund analyst also famous for short selling) conspiring to drive Keiser University out of Jacksonville.

So who are all of these actors and how does this play out?  Why would they do this?  Is this a crusade to protect the interests of students?

Florida State College Jacksonville, generally a community college in Jacksonville who allegedly believes that Keiser University would steal enrollment dollars and decrease the demand for the college’s services.  The conspirators acting on behalf of FSCJ were Steven Wallace the president of the college and Susan Lehr, the vice president of government relations.

The Institute for College Access and Success (ICAS) is a lobby group who has a primary agenda of placing restrictions on for profit schools placing them at a competitive disadvantage to non-profits.  This organization is most famous recently for producing Robert Shireman who became the Deputy Undersecretary of Education at the U.S. Department of Education.  It was Shireman who started the ball rolling in changing the U.S. Department of Education’s official stance from neutral to hostile towards for profit education as a whole.  More on himhttp://www2.ed.gov/news/staff/bios/rshireman.html

Gilchrist Bert founded the billion dollar, Jacksonville based hedge fund Water Street Capital.  Gilchrist is famous for turning massive profits short selling.

Steve Eisman is a portfolio manager for FrontPoint Financial Services, a connected hedge fund, who is also very famous for making big bucks short selling, especially in this last mortgage crisis the nation underwent.

So the next logical question is, why do these hedge fund guys care about what happens to for profit schools and how exactly do they anticipate making money by short selling?  I’ll take a shot at giving an admittedly oversimplified explanation of short selling and how these guys make money doing it.  Basically a hedge fund manager borrows a stock at a given value on interest from a brokerage and then sells them.  To settle the account eventually the hedge fund manager will then have to buy back the same number of shares and return them to the broker.  If the shares can be devalued or drop in price, the hedge fund turns a profit because they are buying them back for a smaller amount of money than they borrowed them.  They keep the difference.  I’ll give an example, say you borrow a pen worth $1,000 from a friend and agree to pay him/her 10% for every month you keep the pen out of their possession.  You then turn around and sell the pen for $1,000 and during the following weeks the manufacturer of the pen drops the price to $500.  You buy the pen, return it to the owner plus the interest you owe on it and keep the difference.  Make sense?

So why are these guys so vested in seeing the education shares fall?  Simple, because they’ve borrowed shares and would like to return them by buying them back at a reduced price.  So other than the for profit schools who stands to lose?  The brokerage firm, that’s who.  And why should we care if the brokerage firm loses?  Take a look at your 401K, guess who is managing this account for you?  That’s right, a brokerage firm.  The brokerage is betting that the stock will remain stable or otherwise grow, meaning that the hedge fund will have to pay interest and return the stock that is now more valuable than before, thus the brokerage firm (and you) will see greater returns on your initial investment than you would otherwise.  This is a win/lose game, either the brokerage and your average investor win or the hedge fund wins.

So the basically the story is, these hedge fund managers smell blood in the water.  You have an administration in power that is almost openly hostile towards free market enterprise regardless of industry.  Add to that equation a U.S. Department of Education who has no problem imposing unprecedented policy upon schools based solely upon their tax status and who is also using their position to influence the decisions of non-governmental accrediting bodies.  Lastly you have Senators and Congressmen who receive large campaign donations from not only the hedge fund managers, but law firms who may represent them, non-profit schools and other organizations that may have a stake in the game.

The losers in this are the investors (me and you), the for profit schools, students and future students regardless of whether they will or already attend for profits schools or not.  Why?  Because the supply of readily available schools will drop, making it more difficult and expensive to earn a college degree (supply vs. demand).  Secondly the alumni of for profit schools stand to lose as their degree(s) will have an unfair shadow of doubt cast upon it regardless of the reality of the quality of education they received.

The Department of Education is proposing a new sanction, namely that if the for-profit programs are not producing “gainful employment” opportunities for these students, those institutions will lose their student aid eligibility — a major source of income for these education companies. As usual, the issue has raised partisan rancor in several congressional hearings (the latest on Sept. 30) held by Iowa Democratic Sen. Tom Harkin, chairman of the Health, Education, Labor, and Pensions Committee.

As a not-for-profit, four-year and graduate residential university, my institution is not directly affected by these federal rules. But they do bring a critical issue to light for all of higher education, for-profit and not-for-profit alike: What are we doing to prepare and enable our students to secure jobs and succeed in an increasingly competitive and dynamic workforce, especially for those in the highest-need brackets? Are we doing enough? Are new models needed?

According to the Bureau of Labor Statistics, the youth unemployment rate reached 19.1 percent in July, and the United States is experiencing some of the worst youth joblessness of the post- World War Two era. These statistics should sound an alarm across the nation. While penalizing for-profit universities for programs that produce little results and high debt for their students might be an effective short-term solution to protect students and our student loan system, we need a broader national vision from Washington, from corporate America, and from higher education about how to ensure that our young people have a future in our nation’s workforce. Punitive measures from the government and “business as usual” from our nation’s colleges and universities just won’t cut it. Students need a new deal — a promise of access that can actually lead to job opportunity when they complete their degrees.

With the state of our economy, the question is even more urgent for students and their families: What will a degree get me after I graduate? In the salad days of job opportunity, we university administrators could afford to wax a bit more vague about this. For many traditional academicians, this question might even seem out of place. After all, college is about imparting knowledge, the collective inheritance of humanity — not about something as mundane as a job.

Of course that is the case, but our students also want and need to work. I see this mindset in the kind of students we attract to Stevenson University. Almost one-third are first-generation college students. Their parents did not attend college, but they nurtured that dream for their children. These students expect that attending college will lead to a good job, and they consciously chose an education with programs and experiences structured to help make their dreams a reality.

Several years ago, representatives of Maryland’s public and independent colleges and universities joined forces with the Governor’s Workforce Investment Board on a listening tour, dialoging with business leaders around the state about the kinds of programs and initiatives that prepare students to work successfully in their companies and economic sectors. This tour was extremely productive and helped to build the kind of collaboration that higher education, business and government need.

But this process needs to be national, continual and at the top of the president’s and Congress’ agendas.

President Barack Obama’s “Skills for America” initiative, announced Oct. 4, is a step in the right direction. By encouraging partnerships between community colleges and industry, students will be able to connect their educations to careers, many in new and emerging industries. This initiative should also move beyond community colleges to four-year institutions, public and private, that are serving many of the nation’s highest-need students.

What else can higher education do? Diverse employment internships should be a near mandate across college curricula; federal and state employer advisory boards for higher education can update academia on the changing and emerging workforce skills for industry; and we should promote career development standards and requirements that challenge our students and grow their skills as much as their academic coursework expands their knowledge.

Instead of punitive measures that might ultimately limit access and discourage students and working adults from achieving a degree, we need creative measures from leaders in education and the top policymakers that ensure degrees — and the college experiences that support them — remain relevant in an increasingly dynamic and global workforce. Career education should not be sidelined; it needs to be front and center in our strategic institutional plans and national economic policy.

Kevin J. Manning is the president of Stevenson University with campuses in Stevenson and Owings Mills. His e-mail is kmanning@stevenson.edu.
From: http://www.baltimoresun.com/news/opinion/oped/bs-ed-colleges-jobs-20101013,0,2442120.story

Report from Mark Kantrowitz

Dear Dr. Biden:

Congratulations on convening the first Community College Summit.  Your deep commitment to higher education is clear, and your leadership gives those of us who work in higher education confidence that our future workforce is in caring hands.  From business leaders, to lawmakers, to community college administrators and students, your Summit will bring together a diverse and impressive array of stakeholders – all of whom are committed to improving and enhancing higher education.

But one group is missing: the 3.2 million students and the more than 250,000 employees who populate private sector universities and colleges.  We are sorry about this missed opportunity, but we stand ready to support you, President Obama and Vice President Biden and to help attain the goal of the highest percentage of college graduates in the world by 2020.

Our institutions provide paths forward for students who, in many cases, have no other options.  Most students at our schools do not conform to the profile of a traditional student.  For example, 76% are financially independent of their parents; 47% have dependent children; 28% work full time; and 63% are age 24 or older.  Before the discussion turns overly abstract, we should remember the faces and stories of aspiring students.  There are countless examples of people, unable to find success within the traditional educational system, who have turned to private sector colleges and universities — and flourished as a

As you know, our schools work closely with the employer community to ensure that their faculty, curricula and facilities are preparing students for meaningful careers.  Last year, 54% of all new allied health workers and 10% of nurses received their degrees, diplomas, or certificates from private sector colleges and universities.  Though in 2008 our sector represented only 8% of higher education students (we have now climbed to 12%), 15% of all degrees and certificates were awarded by our institutions.  This positive outcome is because our schools focus so intently on outcomes for their students—getting the degree and getting the job.

On September 29, 2010, over 2,000 students rallied on Capitol Hill with lawmakers from both parties to tell their inspiring stories of their time at private sector colleges and universities.  Progressive Democrats and Conservative Republicans—at a time of election-year partisanship—joined hands and stood with these students.  We must follow these students’ lead and together find a way forward.

The millions of students in private sector schools deserve the same attention and encouragement as those students in other postsecondary institutions.  Please don’t forget to include our students in future White House discussions of how best to prepare our future workforce for the 21^st Century.  Only by joining forces will we help our country regain its global leadership in higher education and allow many more Americans to achieve their dreams.

APSCU contact: Bob Cohen.

From: http://www.career.org/iMISPublic/AM/Template.cfm?Section=Newsletters1&CONTENTID=21401&TEMPLATE=/CM/ContentDisplay.cfm

With an enrollment of 85,000, our college has plenty of students.

What is true is that Keiser University is retaliating against our efforts to raise awareness about excessive student loan debt.

In collaboration with the U.S. Department of Education, Florida State College at Jacksonville has been significantly involved in efforts to improve student loan consumer protection.

In our view, strong measures are urgently needed at state and federal levels to ensure consumer protection against the abusive practices of some for-profit colleges that can saddle vulnerable students and their families with a lifelong burden of debt without any realistic prospect for repayment.

Such excessive debt often precludes further education and may severely impair the student’s ability to secure future employment and housing. Ultimately, American taxpayers pay for loan defaults, which currently total an estimated $47.4 billion.

Federal studies and investigations have found the for-profit college industry to be at the center of this student debt crisis and have raised serious concerns about some of their business practices.

The leaders of Florida State College at Jacksonville are concerned primarily about the exploitation of students in Northeast Florida by profit-focused colleges as these (typically young) citizens pursue their dream of a higher education.

As one of the largest and most comprehensive public colleges in America, Florida State College at Jacksonville offers nearly every program of interest at tuition rates among the lowest in the nation.

The college’s commitment to student loan minimization led to the establishment of the Star Opportunity Fund – one of the largest local need-based financial aid programs in the country.

The number of scholarships awarded by the fund to low-income students has increased by 176 percent over the past two years, and the college’s foundation has launched a massive campaign to make far more resources available to students.

Florida State College at Jacksonville officials will continue to combat excessive student debt while working hard to protect the interests of our local college students.

We will not let this lawsuit deter us from our mission of providing high-quality, affordable education to our community, nor will it deter us from sounding the alarm about some of the business practices of the for-profit college industry.

STEVEN R. WALLACE,

president,

Florida State College at Jacksonville

From: http://jacksonville.com/opinion/letters-readers/2010-10-08/story/non-profit-collegesconsumers-need-protection?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+JacksonvillecomOpinion+%28Jacksonville.com%3A+Opinion%29

For-profit colleges are beginning to launch an all-out war to fight what they see as unfair attacks from such critics as community colleges and the federal government.

Fort Lauderdale-based Keiser University sued a Jacksonville community college on Monday, claiming administrators there maligned its school. At the same time, a group representing 19 other for-profit schools released a study slamming recruiting practices and student achievement at community colleges, which compete for many of the same students and government dollars.

And last week, more than 2,000 career college students and supporters attended a rally in Washington, D.C., to protest proposed regulations that could strip the for-profit colleges of much of their federal aid.

“The misinformation is just extraordinary, and we have been absolutely miserable at defending ourselves,” said Keiser chancellor Arthur Keiser, who also leads the Association of Private Sector Colleges and Universities, the industry lobbying group. “Finally, I think that’s beginning to change.”

The sector has come under fire in the past year, as Senate hearings and federal government reports have raised questions about recruiting practices, student debt and the large amounts of federal dollars the schools receive. For-profits say they are being unfairly singled out.

Keiser claims in its lawsuit that the president and another administrator at Florida State College at Jacksonville launched a smear campaign against Keiser and the entire for-profit sector. The university based many of its claims on documents obtained through a public records request to the community college.

According to the suit, college president Steven Wallace sullied the reputation of Keiser and other for-profit schools in an April 2009 e-mail to a short seller, who would profit if the price of publicly-traded education stocks declined in value, the suit alleges. The community college was launching a new technical school at the time and saw Keiser as competition, according to the suit.

“The new technical college we will launch … is designed, in part, to drive the sleazebags out of our region,” according to Wallace’s e-mail.

The suit also alleges that school officials fed the media stories that for-profit schools “ripped off” their students and provided them with “worthless degrees.” Keiser’s business suffered, with lower than expected enrollments and restricted access to recruit at area high schools.

“They were out to harm our business, and it got to a point where this was intolerable,” said James Waldman, Keiser’s general counsel.

Wallace called the suit “absurd,” adding, “we are not concerned in the slightest because we have done nothing improper.”

Florida State College officials say they suspect Keiser is upset because community colleges have supported tighter controls of the for-profit industry. The U.S. Department of Education has proposed new rules that would limit colleges’ access to student aid if too many students default on their loans or fail to find “gainful employment.”

For-profit colleges received $4 billion in federal Pell Grants and $20 billion in federal loans in 2009, making up the bulk of their revenues, federal data show. And while only 12 percent of college students attend for-profit schools, they account for 43 percent of student loan defaults. Most students in community colleges don’t take out student loans, since tuition is state-subsidized and considerably cheaper.

“We are simply trying to protect our local college students from excessive debt,” Wallace said. “We will continue to do so on behalf of our community and will defend the college vigorously in court. “

Keiser’s fight is not limited to Florida State College. Last week, it sent 28 students and supporters to Washington, D.C., to join a national rally against proposed federal regulations. Keiser nursing program graduate Greg Shaw, 44, of Tallahassee, was one of them.

“I worked very hard for a program where we lost 60 percent of the students who didn’t make the grade,” he said. “Now I’m hearing people sneering, saying, ‘I understand the government is cracking down on programs like yours.’ It has the effect of devaluing the degree I worked hard for, and it’s offensive.”

Career colleges and their supporters say the industry is being unfairly attacked. For example, a recent Government Accountability Report did an undercover investigation of recruiting practices at 15 for-profit colleges, but didn’t look at other education sectors. Problems were found in all the campuses, with potentially fraudulent behavior at four schools. Keiser was not among those visited.

Several for-profits, including Kaplan Higher Education and the University of Phoenix, have issued a long list of changes to address the problems, including restructuring their pay system so advisers aren’t working on commission, thus discouraging the use of high-pressure sales tactics.

Immediately after the government report, Kaplan suspended enrollment at Kaplan College locations in Pembroke Pines and Riverside, Calif., and that’s still in effect. A company statement said Kaplan is conducting a thorough investigation to make sure students and applicants “are treated in the most responsible and ethical manner possible,” and that employees are following all laws and company policies.

But industry officials say community colleges are also guilty of questionable practices. The Coalition for Education Success, made up of such schools as the Art Institutes and Argosy University, commissioned an undercover operation of practices at community colleges. The report states admission officials wouldn’t release graduation data and gave misleading or evasive data about job placement rates and earnings potential of graduates.

The survey also quotes federal data that shows community colleges have graduation rates of 21 percent, compared to 58 percent for career colleges.

“At a time when community colleges are being touted as the answer for educational achievement and job placement in this country, we found troubling evidence to the contrary,” said Jean Norris, lead researcher on the study.

If all the findings are true, it still doesn’t negate the need for reforms in the for-profit industry, said critic David Hawkins, director of public policy for the National Association for College Admission Counseling.

“The stakes must be extraordinarily high for the for-profits to be responding with such aggressive tactics,” he said. “The regulations proposed would fundamentally alter their business model, which is something they’re not interested in doing right now.”

From: http://www.exploringgrants.com/keiser-university-sues-jacksonville-college/

From: http://www.sddt.com/Commentary/article.cfm?Commentary_ID=141&SourceCode=20101006tza

When Navy Lt. Cmdr. David Chigos retired, he tried to enroll at San Diego State University. Since he was working full-time during the day, he sought night classes.

Silly him … thinking that publically-employed academics might teach at night to accommodate working adults.

It is hard enough to get them to teach during the day.

Mr. Chigos must have been fuming as they laughed him out of the registrar’s office.

The experience helped Dave Chigos recognize that the public schools were failing to serve employed adults who worked all day and could only go to school at night.

The result of his frustration and then foresight and energy is the now widely recognized “National University” an institution that he started “out of the trunk of my car.”

Chigos and his team identified several impediments to reasonably-priced degrees.

Public university students are inured to the inveterate unresponsiveness of tenured, unionized and prickly faculties that require certain classes be taken while at the same time not providing enough of such classes to allow a perspicacious student to graduate timely.

Gone is the notion of a four-year degree because the faculty is just too durned busy to be bothered teaching the necessary hours to allow the enrollees to acquire 15 units a semester.

Chigos and his National University team instead arranged to have student registrations drive faculty decisions, not the other way around. When enough students needed a class in freshman English, an instructor was hired and the class provided.

To keep costs down and maintain maximum flexibility, there were no tenured faculty members. Instructors, who were working adults themselves, were hired based on the fact that they were qualified to teach the class.

Since they had other jobs, they did not need expensive benefits.

Quality control was maintained by having the students evaluate the instructors at the end of each teaching period. Lousy teachers were simply not hired back.

National University was decades ahead in applying computers to their administration further reducing overhead and pioneering “distance learning” throughout the world.

The N.U. template became a nearly overnight success spawning dozens of copy cats like Phoenix University, but meanwhile sending shock waves through the traditional schools.

About the same time, a group of investors realized that the existing law schools suffered from the same insular laziness as the big public universities.

So they started the Western States College of Law to serve working adults, such as myself, at night.

They kept costs affordable by hiring actual lawyers to teach instead of full-time faculty. Western States quickly became the largest law school in California.

Were these two innovative institutions lauded for democratizing education and cutting costs? Nope.

Instead, National University was set upon by the educational establishment led by USD President Author Hughes.

The henchman for the educational establishment is the Western Association of Schools and Colleges (WASC) and their hatchet of choice is to withhold accreditation and thereby cut off student access to federal school loans.

In the case of Western States School of Law, the apex man was the American Bar Association.

How dare the school use lawyers to teach law? How dare they rely on the public law library and the internet for access to legal resources?

To gain accreditation, WSU had to hire a full-time faculty of mostly liberals and establish a large, expensive library thus raising costs while making them less competitive, the real agenda for the accrediting agencies.

Done and done. Student costs rose substantially: a cost initially borne by the taxpayers via student loans and later by the students being burdened with larger debts.

However, the harassment of National University and WSU did not stop the creation of the manifestly superior private post-secondary educational market.

Students and parents came to recognize that public universities specialized in providing little more at the end of six year’s education than young, liberal unemployable social workers, oh, and a huge debt hangover.

As a result students flocked to the private-schools knowing that upon graduation they would likely be employable.

From 2000 to 2008, enrollment in private post-secondary schools ballooned to 1.8 million.

So many students have abandoned the public higher education system that a full panic has overtaken the traditional schools.

So they have called on the federal government to simply crush the competition with a proposed “gainful-employment” rule, a rule which no public higher education institution, especially SDSU, could ever meet. (See: www.mycareercounts.org for more information).

If the graduates of the private schools don’t pay back their loans within a stipulated period of time (something the school itself has no control over), the school whence they graduated will be cut off from federal loan eligibility.

The Secretary of Education claims that private students, obtaining employable skills are “less versatile” and the success of the schools may result in an “oversupply” of certain classifications of employees such as nurses.

I happen to know that the Department of Labor does not keep track of vacant jobs of which there are many millions in this nation. I also find it ludicrous that the Secretary of Education would attack the schools for their success and claim “oversupply.”

The “gainful employment” rule is nothing more than the public entities trying to suppress successful competition.

Dr. Chigos and the WSU founders would understand.