The president of an online school watches the government’s unfolding campaign against schools that seek profits, and is aghast.

By Richard Bishirjian

July 30, 2010

Editor’s note: Richard Bishirjian is president of Yorktown University, an Internet-based school whose undergraduate programs are rooted in the liberal arts and whose graduate programs focus on business and government.

The Obama administration, working with congressional Democrats, has rolled out a concerted effort to change American postsecondary education.  As with health care and finance, the administration has a consistent method: Focus on a felt need, find a scapegoat, and use the full force of coercive state power to effect radical change.

Today’s scapegoats are the proprietary higher education companies. In addition to offering online education, some of those firms are starting to purchase near-bankrupt nonprofit colleges and convert them into platforms for Internet-based courses. If they are allowed to proceed in that, American higher education will become more diverse, less expensive, and more consumer-oriented.  But the Obama administration apparently believes that profits are resources better distributed by government agencies than by the marketplace.

The U.S. Department of Education has begun a multi-pronged attack on for-profit schools.  One offensive consists of proposed regulations. The “gainful employment” rule, for example, would cut off proprietary colleges from access to federal tuition assistance unless they can show that their graduates earn enough to pay off student loans. Another thrust is to prevent accrediting agencies from allowing for-profit investors to purchase traditional schools (even when those schools are failing financially). We are already seeing a response to that pressure from the Higher Learning Commission of the North Central Association of Colleges and Schools.

Yorktown University, which I head, has followed these unfolding developments with acute interest. We are accredited by the Distance Education and Training  Council (DETC), a national accreditor. We hope to obtain regional accreditation as well, so that our students can transfer the credits they earn at Yorktown to regionally accredited institutions; these schools will not accept transfer of credits from schools that have “only” national accreditation.

In April, I attended a seminar conducted by the Higher Learning Commission. This was the second such seminar I have attended in order to prepare Yorktown for applying for regional accreditation.

Until recently, the Higher Learning Commission was a trendsetter, the only regional accrediting association willing to accredit institutions that teach mostly or entirely over the Internet; until 2008, no excessive barriers to accreditation were placed on Internet-based applicants. A few months before the election of President Obama, however, Sylvia Manning became president of HLC, and the policy changed.

At the April 2010 seminar I attended, Karen L. Solinski, vice president for legal and government affairs, informed the seminar that not only must all accredited institutions be incorporated in one of the states in the region but they must have a state license in each state in which they have a “substantial presence.”

During the break I asked Ms. Solinski to specify what constitutes “presence” in a state. In good lawyer-like fashion she asked me, “Do you have representatives in any states?” I said “no.” Her raised eyebrows suggested that I did, and I thought, well, we do have instructors who reside in and instruct our students from states other than Colorado, where Yorktown University is incorporated.

She then asked, “Do you have proctors in states?” I replied, “Yes, but surely you aren’t saying that the use of a proctor triggers a state licensing requirement?”  She said that it would. Proctors supervise the exams taken by students in online courses. Solinksi seemed to be saying that merely having a student taking an exam, and thus having a proctor monitor it, whatever the state, would require the university to have a license in that state. In addition to the cost of multiple state licenses, each state has its own regulations. Some states require annual fees, others require a hefty surety bond, and Virginia even taxes authorized shares of stock companies.  Keeping track of them would be costly, time-consuming, and difficult.

During a break, I asked Solinski, “Do you mean that HLC intends to enforce state licensing regulations?” She said, “Yes.” This means that HLC, a private organization, is taking on the responsibility of enforcing regulations promulgated by the state. Not only is this inappropriate but it is probably unconstitutional.

I called to Solinski’s attention a Federal Trade Commission finding that it is a restraint of trade for states to require out-of-state optometrists to be licensed if they sell contact lenses in the state. The example seemed to be exactly parallel. To my comment, Ms. Solinski replied, “Education is a special responsibility of the states.” Okay, education has historically been responsible for education (the U.S. Constitution doesn’t mention education), but regulating private companies from other states is not a recognized state responsibility, whether the companies are in education or not.

During this seminar I was sitting at a table along with two representatives of an institution also accredited by DETC. They were shocked by this exchange.  I explained to them that the inspector general of the Department of Education had informed the Higher Learning Commission last December that its charter could be revoked. According to InsideHigherEd.com, HLC had endangered its status “because it granted accreditation to a for-profit university despite a single flaw that the inspector general deemed to be serious.”

Apparently, HLC has decided that by promoting and emphasizing state licensing, it is making clear that it will no longer accredit solely Internet-based distance-learning institutions.  That may save it from censure or revocation of its charter by the Department of Education.

But it will also harm numerous institutions, both profit-making and non-profit. There are two methods of attaining regional accreditation:  earn it or buy it. In June, the Higher Learning Commission denied the application for change of ownership to two proprietary companies that were seeking to purchase regionally accredited institutions, Dana College in Nebraska and Rochester College in Michigan.

The message is coming through loud and clear that the Department of Education simply doesn’t want for-profit institutions to exist.  On April 28, Robert Shireman, deputy undersecretary of education, gave a speech emphasizing the large amount of federal aid that is channeled to the for-profits.

And on June 30, U.S. Senator Dick Durbin (D-Il) gave a speech to the National Press Club in which he stated that purchasing colleges for their accreditation should be banned, and he outlined a comprehensive plan for reining in proprietary education companies.

Sen. Durbin referred to testimony by Wall Street arbitrager, Steve Eisman, that proprietary education companies are analogous to mortgage companies that created the subprime credit crisis. Since then, it has become known that short-sellers, a group to which Eisman belongs, have been working with Durbin—and probably others, including the Department of Education—to discredit for-profits in order to reap the rewards of declining share prices.

Durbin then outlined a broad plan to attack for-profits, by the following steps:

  • Denying access to federal grants and loans to schools that have defaults of 30 percent over three years or 40 percent in one year
  • Restricting “institutions that receive federal student aid from paying their admissions recruiters on the basis of enrollment numbers”
  • Instituting “new regulations that would require for-profit colleges to disclose job placement rates”
  • Relating student loans to “gainful employment.”  If degree programs do not lead to good jobs that enable student to repay student loans, then the institutions offering those degree programs will lose access to federal tuition assistance programs (this regulation has been proposed).
  • Lowering the 90-percent threshold that allows schools to receive up to 90 percent of their income through federal programs
  • Restricting the use of federal financial aid dollars that can be used for  “slick advertising,” such as “billboards, television commercials, and advertisements on the sides of buses”
  • Controlling how much these institutions lend to their own students
  • Stopping the practice of buying accredited institutions.

Sen. Durbin’s assault raises severe constitutional questions. Restricting normal advertising violates the First Amendment of the U.S. Constitution. Requiring state licensing of companies not domiciled in that state violates the commerce clause of the Constitution. And singling out for-profit education for using Title IV funds without including non-profit colleges violates the due process clause.

On these constitutional grounds alone, the Obama administration attack on for-profit education should be rejected.

But other consequences are equally objectionable. By deterring the purchase of accreditation, for example, the administration will challenge the ability of marginal nonprofit institutions—including institutions with large minority populations—to survive. And whether the for-profits can survive this assault is an unanswered question. My worst fear is that for profit education delivered via the Internet will experience the fate of the nuclear power industry after Three Mile Island.

The adage that “federal money brings federal control” is proving to be true. It confirms the suspicion of some that President Lyndon Johnson knew that if he could control the financing of higher education he could control the content of higher education. That control is now in federal hands.

The period for comments to the DOE has passed, but we cannot stop the dialog just yet. We still need to reach out to our members of congress, especially those who are supporting this rule against career colleges and universities. I am putting together a portfolio to hand deliver to members of congress and would like you to share your voice. It’ll only take a couple of minutes. Too, if you are an employed graduate and your employer would consider writing a letter please, please, please let me know by emailing: gainfulemploy@gmail.com ! Thank you all 🙂

Click here to have your voice heard!

By Mike Lillis – 09/11/10 01:44 PM ET
A group of top Senate Democrats urged the Obama administration this week to quickly install a new rule designed to prevent students at career colleges from defaulting on their federal loans.
“High student loan debt coupled with low repayment rates signal a questionable investment for students and taxpayers,” the Democrats wrote Thursday in a letter to Education Secretary Arne Duncan. “We encourage swift implementation of the gainful employment regulation and would be concerned with any efforts to weaken the proposal.”
The position puts the lawmakers at sharp odds with for-profit educators, who are lobbying hard to dilute the rule in the name of preserving access to education for professional-school students, many of whom are low-income minorities.
“When you look at the actual metrics, many, many good programs will lose eligibility [for federal aid], and hundreds of thousands of students — literally — would lose access,” said Randy Proto, CEO of the American Institute, a New York-based company that runs professional schools in Florida, New Jersey and Connecticut.
At issue is a Department of Education (DOE) proposal, dubbed the “gainful employment” rule, which aims to ensure that professional students graduate into fields lucrative enough to justify the debt they accrue during training. The proposal is largely a response to the rising default rate among students receiving certificates and degrees from the nation’s exploding career college industry. But it also follows a series of reports suggesting that aggressive recruiting, shady marketing practices, and even fraud aren’t uncommon tactics of the industry.
For policymakers, the issue is particularly significant because for-profit schools benefited from $24 billion in federal grants and loans last year, meaning taxpayers are on the hook when defaults occur.
For the healthcare sector, it’s consequential because an enormous number of the nation’s medical professionals are trained by for-profit institutions. Indeed, 42 percent of those receiving health degrees and certificates requiring two years of schooling or less came out of for-profit institutions, according to the latest survey from the National Center for Education Statistics.
Floated in July, the DOE proposal would require for-profit programs to demonstrate that graduates’ annual loan payments don’t exceed 8 percent of their starting salaries. Programs failing to meet that debt-to-income ratio would be at risk of losing access to federal financial aid.
Although for-profits have been required for more than four decades “to prepare students for gainful employment,” the recent proposal marks the first time the term has been quantified.
Many Democrats are cheering the changes. The gainful employment proposal, the senators wrote Thursday to Duncan, “is a significant tool to ensure students do not just have more options to get their education, but better options.”
The lawmakers — including Sens. Tom Harkin (Iowa), Richard Durbin (Ill.), Frank Lautenberg (N.J.), Bernie Sanders (Vt.), Russell Feingold (Wis.) and Al Franken (Minn.) — noted that for-profit colleges make up roughly 10 percent of college students but 44 percent of student loan defaults.
The industry is fighting back, arguing that the 8 percent threshold is an arbitrary figure that will force schools to reject applicants — many of them low-income folks — to ensure compliance. And those students, the industry adds, have few other options.
“Anytime this many taxpayer dollars are at stake, you need to make sure you’re overseeing the people who are offering the programs. But we’re not seeing nonprofits clamoring to serve our students — that’s why we’ve had the growth that we have,” said John McKernan, former governor of Maine and now chairman of the Education Management Corporation (EDMC), a Pittsburgh-based career college company.
“If we want to increase the standard of living in this country, we need to have more people with degrees and with college education,” he added. “But somebody’s got to do that for them.”
McKernan said the higher default rates among career college students come as little surprise among a lower-income student population with few resources to fall back on — particularly in an economy where unemployment is tickling 10 percent.
“It has all to do with demographics,” McKernan said.
For-profit educators have another complaint: the rules are being applied to them but not to traditional, non-profit institutions.
“Whatever metrics are being applied should apply to students at all institutions,” said Proto. “If the test really works … why wouldn’t you apply it everywhere?”

The DOE is hoping to finalize the gainful employment rule — along with 13 other less controversial guidelines — by early November.

http://phx.corporate-ir.net/External.File?item=UGFyZW50SUQ9NjI2NzZ8Q2hpbGRJRD0tMXxUeXBlPTM=&t=1

What are your thoughts?

Under attack for high student default rates, the for-profit sector is fighting back with a  report (pdf) by the Nexus Research and Policy Center that hits proposed Education Department regulations that would limit recruiting and student loan eligibility.

Jorge Klor de Alva, former president of the University of Phoenix and now president of Nexus, calls the attack on for-profits a “witch hunt” in a guest post on The College Puzzle.

For-profit colleges and universities, the fastest growing segment of American higher education, are being accused by the media, the Department of Education, Wall Street’s short sellers, and Congress of deception, greed and a failure to comply with regulations. These accusations rest on only the barest of evidence, relying primarily on anecdotes. In fact, two Government Accountability Office studies this year, one covering thousands of schools since 1998, found only 37 for-profit institutions in violation of Departmental regulations.

The “gainful employment” rule would exclude hundreds of thousands of teaching, nursing, and public safety students, Klor de Alva writes. Applied to the public and nonprofit private colleges, it would “remove so many programs from eligibility for federal financial aid that it could lead to the possible closure of 40% of community colleges, 90% of Historically Black Colleges and Universities, and 45% of campuses where Hispanic students constitute more than 25% of the students.”

Only the for-profit higher education sector “can grow sufficiently to accommodate the millions of students the nation must educate to remain globally competitive,” Klor de Alva argues. Furthermore, this comes at “no cost to taxpayers” because the for-profit educators’ taxes and the interest students pay on their federal loans exceeds the dollar value of the Pell Grants and other government subsidies received by students and institutions.

Without a robust for-profit sector, it would cost nearly a trillion dollars to reach President Obama’s goal of being the first in the world in degree attainment by 2020, the Nexus report estimates.

All institutions of higher education should measure the learning outcomes of their students and publish those results, Klor de Alva writes. “Then at last taxpayers would have the data needed to distinguish good from bad performers, making for the efficient disbursement of local, state and federal education subsidies.”

I’d love to see an objective study of subsidies going to public, nonprofit private and for-profit colleges and universities. Which sector costs taxpayers the most? What kind of return are taxpayers getting on the investment?

Objective is the key word. Nexus is funded by the University of Phoenix and the John G. Sperling Foundation, reports Washington Monthly’s College Guide. John Sperling is the executive chairman of the Apollo Group, which owns the University of Phoenix.

A lot of people will have to forfeit their right to a higher education because of this “Gainful Employment” act. The President and congressmen are stating and campaigning on how “we” as Americans need to continue our higher education, enroll in universities and colleges so that we can get high paying jobs and stimulate the economy. Well the only problem with that, is that we can’t afford to attend these colleges, nor do we have the time to attend these major universities that ultimately require you to attend school during the day. Granted some colleges have evening courses but not all of them. And beyond the financial aid you still have to come out of pocket for a lot of things that are needed to attend those universities, like books, supplies, meals, parking, lab materials, etc… The only thing that low income families can afford are (“second rate”how some senators like to label it ) career colleges.

About half of the people in this supposedly great nation are considered low income. The only thing they are accomplishing by enacting this new law/rule is taking away the last bit of hope that these (“lower income”) people (like myself) had for themselves as well as their children. For most, this is the only way to better their children’s lives, to one day be above the lower income stigma and to not have to struggle or even worry about whether or not they’ll be able to make ends meet. The only thing the government will be stimulating is the continuation of a vicious cycle that will keep the rich people rich and poor people poor.

By Ronald L. Holt, Esq., Partner

The author is an attorney practicing in the Higher Education practice at the firm of Dunn & Davison, LLC.

On July 26, 2010, the U.S. Department of Education (“DOE”) issued a notice of proposed rulemaking (the “GE NPRM”) that proposes a two-part ‘gainful employment’ test (the “GE Standards”) intended to be used to measure Title IV eligibility of the following academic programs:

(1) ALL Title IV eligible academic degree and non-degree programs offered by for profit institutions (excluding any liberal arts baccalaureate degree program); and

(2) All Title IV eligible non-degree programs offered by any nonprofit and public institutions (mostly community colleges).

Assuming the final version of the GE regulations is published by November 1, 2010, the regulation would become effective as of July 1, 2011. By its current terms, however, it will not apply to most programs until July 1, 2012 but on July 1, 2011 it will be applied to the lowest 5th percentile in performance of each kind of program (as explained in Part H below on page 11). The GE NPRM is published at 75 Federal Register 43615-43708 (July 26, 2010); it can be accessed at

http://www.ifap.ed.gov/fregisters/FR072610ProgramIntegrity.html

A separate NPRM, which was issued on June 18, 2010 and which covers a wide range of proposed new ‘integrity’ regulations, establishes new requirements for colleges to make disclosures to students and the DOE about various components of the GE Standards. For each program, the institution must annually report its CIP code (Classification of Instructional Programs), the SOC codes (standard occupational code) of occupations for which the program provides training, the graduates in the institution’s last fiscal year and the federal and private debt of those graduates. The institution also must disclose to all students: the cost of each program, the on-time graduation rate of each program, the median debt load for each program (as defined in the GE Standards), and the placement rate for each program beginning by June 30, 2013.
Click here to read entire article.
Email Ron at rholt@dunndavison.com.

David Mahan, a 29-year-old student studying digital design, says an angry Sen. Dick Durbin noticed him wearing a T-shirt for his college — Illinois Institute of Art, Schaumburg (ILIS) — while protesting outside an education hearing Durbin was holding at the Dirksen building last Tuesday. Mahan (a veteran who served in Iraq, Kuwait and Afghanistan) tells me that after some back-and-forth, Durbin said: “I don’t give a tick s— about ILIS.”

A Durbin spokesman denied the Democratic senator made that particular remark, but Matt Reams, another ILIS student who witnessed the encounter, insists that he did.

One might wonder why a college student would take such umbrage at criticism of his school, but Mahan tells me he has invested himself so much in ILIS that he feels an attack on it is tantamount to an attack on him.

There’s more to the story, of course. Durbin has called for more oversight of for-profit colleges such as the one Mahan attends. The hearing was intended to look at complaints that such colleges entice students to take on massive debt while failing to deliver on their promise of jobs that pay enough for graduates to pay back what they owe.

A proposal by the Department of Education would require for-profit educational institutions to demonstrate that their graduates are repaying student loans (and that they do not have a high debt-to-income ratio) before qualifying for additional loans. There have also been proposals that for-profit colleges should bear a percentage of the risk if their students default. (For-profits received more than $24 billion in federal grants and loans last year.)

Studies show that students who attend for-profit schools like Strayer, Devry, and The University of Phoenix, for example, currently have a lower rate of repayment than students who attend other schools.

These proposed changes, of course, could have a major impact on for-profits. Earlier this year, as part of the health care reform bill, the Obama administration pushed most private lenders out of the student loan game (they can still manage the loans) in favor of having the government almost exclusively make direct loans to students. As such, withholding government loans is a serious stick to wield over for-profit schools.

Critics charge that when it comes to picking winners and losers in higher education, as might be expected with the Obama administration, for-profits are now at risk — even though, on average, for-profit institutions charge less than private non-profits, according to the College Board (and less that public non-profits, once taxpayer subsidies of public schools are taken into consideration).

Nevertheless, a proposed “gainful employment rule,” which ostensibly seeks to ensure that graduates of an institution are able to find work after graduation — may well end up favoring traditional non-profit schools over for-profits. This, of course, has for-profit institutions worried.

For example, ITT Technical institute ran a full-page open letter to President Obama in Sunday’s Washington Post about it.

To be sure, there are some bad actors — colleges that run TV ads promising the moon to students, but then failing to deliver — but these schools are the minority. One school that could be hurt by the changes is ILIS, which is accredited by The Higher Learning Commission.
In a June letter to the editor, ILIS campus president David W. Ray wrote, “The proposed rule, cleverly termed ‘Gainful Employment,’ will remove student choice and deny access to programs and degrees for many. The result is that entire programs now available under Title IV federal financial aid could be ineligible if they don’t meet the Education Department’s unrealistic ‘one-size-fits-all’ debt-service-to-income ratio test. Career-focused education is at particular risk.”
(According to ILIS: “Of all 2008 graduates of The Illinois Institute of Art — Schaumburg available for employment, 88.1% were working in a field related to their program of study within six months of graduation, at an average starting salary of $31,722.”)

These for-profit schools serve a lot of non-traditional students like Mahan. Many are older students who often work part time, making one wonder if government skepticism may be at least partially due to how different these students are from the people making the rules. Ken Blackwell, a conservative columnist who also taught at Xavier University, thinks the proposed rules reflect elitism, noting that, “A college or university that primarily serves working-class adults is, apparently, somehow illegitimate to these liberals.”

Such criticism, however, is not merely coming from the right. Many of the students attending these schools come from poorer families than those attending traditional colleges. As The Washington Post recently editorialized: “The government is right to fashion reasonable regulation to discourage fraud or misleading practices, but it would be wrong to impose rules that remove an option that is especially useful for poor and working students.”

http://www.careercollegecentral.com/news/Dick_Durbin_Allegedly_Insults_Student_as_For-Profit_College_Debate+Unfolds

Tell Dick what YOU think – http://durbin.senate.gov/contact.cfm

By Caralee Adams on September 2, 2010

The proposed gainful-employments rules aimed at reigning in for-profit colleges may also affect other sectors of higher education, namely community colleges.

“Unfortunately, there is a high probability that community colleges will be swept along with the for-profits into a category that will subject the institutions to greater regulation and reporting requirements,” writes George Boggs, president and chief executive officer of the American Association of Community Colleges in a Sept. 2 update to board members.

AACC has joined with other higher education groups to submit letters of concern to the Department of Education’s proposed gainful-employment rules designed to crack down on abuses in the for-profit education industry.

Boggs urges community college leaders to take the time to contact the department prior to Sept. 9 for public comment to let the regulators know how the rules will affect their institutions and students. While the proposed regulations are complex, Boggs worries that the regulations would limit a college’s ability to respond quickly to the needs of its community by requiring federal approval of programs and would add costly reporting requirements.

AACC, along with several other associations, has signed a letter sent by the American Council on Education and has joined with the Association of Community College Trustees in sending a separate letter to the Department of Education.

In a conference call last month to go over the rules with the department, community college leaders learned that 30,000 of the 50,000 programs potentially covered by the gainful-employment rules were community college programs.

Much of the drive for more oversight was linked to the concern that for-profits were increasingly supported with federal student loans that graduates have not been able to repay. Community college leaders point to the 2008 National Postsecondary Student Aid Study (NPSAS) that shows just 5 percent of students in certificate programs at public 2-year certificate programs borrowed federal loans in 2008 compared with 77 percent at for-profits. About 84 percent of private for-profit students in certificate programs borrowed at all in 2008, compared with 21 percent at public 4-year institutions, 45 percent of those at private not-for-profits, and 9 percent at public two-year colleges.

While many feel community colleges will be required to abide by the proposed rules, if they are adopted, leaders in the field are hoping others will voice their concern in public comment ending next week.

Sandra Kurtinitis, president of The Community College of Baltimore County, says she initially had not paid close attention to the gainful-employment proposal because she didn’t think it would directly affect the school. But she is following it now as it might require some additional data collection on graduates and their jobs. While accountability is a good thing, Kurtinitis says response to graduate follow-up surveys is not high, and she thinks it would be a challenge to track students. With 74,000 students in 100 associate degree programs and 200 substantial certificate programs, being required to do this additional data collection would be very significant, says Kurtinitis.

The additional regulation would likely mean adding staff in the research office, which would be difficult as the college is beginning the year with $2.6 million less than last. “We would do it, of course. But it’s an unfortunate time to ramp up the energy to approach collecting the data,” she says. Kurtinitis says she hopes ACCT and others weighing in on the issue might make a difference, but for now, community colleges will have to wait and see.

The Department of Education has proposed a new regulation called “Gainful Employment” that will limit access to Title IV financial aid for approximately 360,000 career college students per year if they do not meet an arbitrary one-size-fits-all debt-to-income ratio.

The National Black Chamber of Commerce believes this rule would limit education and economic opportunities for thousands of African American and other minority students throughout the nation.

The chamber represents 95,000 Black-owned businesses with 190 affiliated chapters operating internationally to sustain Black communities through opportunity.  We recognize that opportunity is built largely on getting a good education and obtaining the skills necessary to gain employment.  That is why we believe the Gainful Employment rule would disproportionately impact minority, low-income, non-traditional and other underserved students who rely on Title IV financial aid to pay for higher education.

We are asking the Department of Education to rethink this rule because of the negative consequences it will have on Black students across the country. Write to the Department of Education and let them know that we are against this rule! Go to Regulations.gov and click on “Submit a Comment.”

http://www.nationalbcc.org/index.php?option=com_content&view=article&id=1129:gainful-employment-will-limit-opportunities-for-black-students&catid=1:latest-news&Itemid=7

The National Hispanic Caucus of State Legislators (NHCSL), today launched its web-based center on Higher Education. NHCSL’s creation of this initiative was fueled by its desire to closely follow for the Department of Education’s proposed gainful employment rule, a rule that NHCSL believes should be re-examined for unintended consequences before implementation. The website, meant to provide a central platform for updates on current issues surrounding access to higher education, will act as a portal for information, news and other resources.

“The Department of Education’s gainful employment rule and its impact on our student’s ability to continue to pursue higher education is concerning. Out of this concern, we have created an online center, where concerned individuals can learn more about the proposed rule and its potential impacts,” Illinois State Senator Iris Y. Martinez said. “It is our hope that the Department of Education will re-examine the rule and the impact it may have on the Hispanic community.”

NHCSL’s Initiative on Higher Education website explains the importance of access for Hispanic students and weighs in on various higher education issues that affect the Hispanic community. Additionally, the website asks visitors to “speak out” and tell the Department of Education how they feel about the proposed gainful employment rule by filing a comment in the public docket.

“We are not alone in our concern about the proposed rule. Many groups and individuals have already made their voices heard and we encourage more to do the same. NHCSL believes that the Department of Education’s rule may be overbroad, a one-size-fits-all solution to the student debt issue that may harm already vulnerable students,” Senator Martinez said. “We hope that our comments will encourage the Department of Education to take another look and further study the rule for unintended consequences.”

To learn more about NHCSL’s Higher Education Initiative, visit http://higheredu.nhcsl.org/.

About NHCSL

The NHCSL is the premier national association of Hispanic state legislators working to design and implement policies and procedures that will improve the quality of life for Hispanics throughout the country. NHCSL was founded in 1989 as a nonpartisan, nonprofit 501(c)3 with the mission to be the most effective voice for the more than 300 Hispanic legislators. For more information visit http://www.nhcsl.org.

Source: National Hispanic Caucus of State Legislators


// FOR IMMEDIATE RELEASE
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PRLog (Press Release)Sep 02, 2010 – Representative Rob Bishop (R) encouraged faculty and supporters of Stevens-Henager College to continue to fight against the Department of Education’s proposed “gainful employment” rule. While visiting the campus, the Congressman, who taught high school for 20 years and sits on the Committee of Education and Labor, pointed to free enterprise as a sufficient regulator of so called bad actors in higher education.

As one of the oldest colleges in Utah, Stevens-Henager has helped generations of students achieve their dreams of a better career through degree programs in Healthcare, Computer Programs, Business and Graphic Arts. Congressman Bishop visited the Logan campus yesterday to meet with faculty, students, campus advisory board members and local business partners.

He encouraged all the event attendees to voice their concern through letter writing campaigns against imposing the “gainful employment rule,” which would regulate for-profit colleges based on student graduation and loan default rates. The Congressman said the closing of unsatisfactory colleges would happen organically because of loss of business and should not be the result of federal regulation.

“Congressman Bishop has long been a friend to education and to our college,” said Vicky Dewsnup, Stevens-Henager Regional Director. “The misconduct of a few individuals has fueled scrutiny of career colleges. We are glad to know Congressman Bishop recognizes that the whole barrel of apples is not rotten and is an advocate for the vital role Stevens-Henager serves in the community.”

This was the Congressman’s first trip to the Logan campus, having visited the Ogden campus several times. During his visit, the Congressman toured the campus, attended a few campus events and met with key campus personnel. At the end of his visit, Congressman Bishop was presented an official Stevens-Henager stadium blanket on behalf of the college.

About Stevens-Henager College®
Established in 1891, Stevens-Henager College has built up a reputation in training generations of successful graduates over the years as well for being one of the oldest colleges in Utah. It is located over seven convenient campuses in Utah and Idaho. Stevens-Henager College is accredited by the Accrediting Commission of Career Schools and Colleges (ACCSC), which is recognized by the U.S. Department of Education as a national accrediting agency.

Contact:
Audrey Strong
astrong@csg-pr.com
303.433.7020

I just skimmed the report, “For-Profit Colleges and Universities: America’s Least Cost and Most Efficient System of Higher Education,” from Nexus Research. I see significant praise for the University of Phoenix and other for-profit colleges. There is a great deal of data presented to respond to the current initiatives in Congress. I know that UOP sponsored this research group in or around 2008. This report should have listed the people that served on the “independent, nonpartisan research institute” so that the general public wouldn’t assume the research was biased by UOP.

The full report is available here: http://nexusresearch.org/1/NexusStudy8-31-10.pdf.

I’m going to make a plug for my employer, The College of St. Scholastica. The leadership here does an outstanding job of managing the operations associated with education. We actually had significant surplus of revenues last year when most public universities were struggling financially. We are efficient! This goes against the examples being used in the Nexus Report.

What did you think after reading the report?
Kurt

http://blog.kurtlinbergblog.com/

http://edocket.access.gpo.gov/2010/pdf/2010-17845.pdf

WASHINGTON, Sept. 1 /PRNewswire-USNewswire/ — The National Hispanic Caucus of State Legislators (NHCSL), today launched its web-based center on Higher Education. NHCSL’s creation of this initiative was fueled by its desire to closely follow for the Department of Education’s proposed gainful employment rule, a rule that NHCSL believes should be re-examined for unintended consequences before implementation. The website, meant to provide a central platform for updates on current issues surrounding access to higher education, will act as a portal for information, news and other resources.

“The Department of Education’s gainful employment rule and its impact on our student’s ability to continue to pursue higher education is concerning. Out of this concern, we have created an online center, where concerned individuals can learn more about the proposed rule and its potential impacts,” Illinois State Senator Iris Y. Martinez said. “It is our hope that the Department of Education will re-examine the rule and the impact it may have on the Hispanic community.”

NHCSL’s Initiative on Higher Education website explains the importance of access for Hispanic students and weighs in on various higher education issues that affect the Hispanic community.  Additionally, the website asks visitors to “speak out” and tell the Department of Education how they feel about the proposed gainful employment rule by filing a comment in the public docket.

“We are not alone in our concern about the proposed rule. Many groups and individuals have already made their voices heard and we encourage more to do the same. NHCSL believes that the Department of Education’s rule may be overbroad, a one-size-fits-all solution to the student debt issue that may harm already vulnerable students,” Senator Martinez said. “We hope that our comments will encourage the Department of Education to take another look and further study the rule for unintended consequences.”

To learn more about NHCSL’s Higher Education Initiative, visit http://higheredu.nhcsl.org/.

About NHCSL

The NHCSL is the premier national association of Hispanic state legislators working to design and implement policies and procedures that will improve the quality of life for Hispanics throughout the country. NHCSL was founded in 1989 as a nonpartisan, nonprofit 501(c)3 with the mission to be the most effective voice for the more than 300 Hispanic legislators. For more information visit www.nhcsl.org.

SOURCE National Hispanic Caucus of State Legislators

IRVINE, Calif., Sept. 1 /PRNewswire-USNewswire/ — In an open letter to congress, Fardad Fateri, President and CEO of International Education Corporation (IEC), opposed the proposed federal regulation on Gainful Employment. Fateri asserts that U.S. Senate’s Help Committee chair Senator Tom Harkin is supporting a federal regulation called Gainful Employment that will prevent millions of low-income and ethnically diverse students from pursuing a college education. For the full copy of the Open Letter to Congress, go to: An Important Message from IEC’s President & CEO or visit the Newsroom section of the IEC website at http://www.iecglobal.com

According to Fateri’s Open Letter to Congress:

The proposed regulation sets formulas that will mostly hurt historically underserved and under-represented students. This proposed regulation targets the career education sector of which IEC is a member and is comprised of for-profit education companies serving hundreds of thousands of students and employing thousands of individuals all over the United States. The U.S. Senate’s Help Committee’s support of this regulation is in line with their zeal to destroy the sector which will in essence eliminate access to students who need postsecondary education the most in addition to eliminating thousands of jobs all over the country. Students have been flocking to private for-profit institutions because of the sector’s ability to provide timely and relevant programs and offer true access to postsecondary education. Ethnic and racial diversity in traditional public and private non-profit universities is rare; in fact, the University of Iowa’s own website touts a student population comprised of only 2.4% African American/Black and a 2.8% Hispanic/Latino. Senator Tom Harkin of Iowa has been fighting vigorously against the career education sector just because of the for-profit tax status of the companies in the sector.

The entire proprietary postsecondary sector exists because of an incredible need for career education. All the pundits on the U.S. Senate HELP Committee must understand that the growth of this sector is not due to ingenious marketing methodology or unconventional recruitment tactics. The for-profit career education sector prepares students for the workforce with tuition rates that are of tremendous value considering that this sector does not have access to additional funding only accessible by public and non-profit colleges and universities. In addition, when referring to recruitment tactics of the for-profit career education sector, let’s remember the approaches of traditional public and non-profit colleges and universities who manage to convince students and their sophisticated parents to pay approximately $400,000.00 for an undergraduate degree that will seldom lead to an academically related career. There are anecdotes on all sides; the most prudent approach would be to focus on thoughtful as well as meaningful decision-making grounded in evidence.

The students attending for-profit colleges are smart, ambitious, and they care deeply about their future. So, the claim that these students are naive and are easily abused is offensive and disrespectful. An individual’s household income and ethnicity should not be grounds for unfounded assumptions about their aptitude, judgment and ability. Without the for-profit education sector, millions of students will not have access to post-secondary education because public colleges and non-profit colleges have historically ignored and avoided these students.

When assessing a college, quality demonstrated through student retention, graduation and employment rates must be considered, not repayment rate of student loans. Consider the strain on federal entitlement programs when students remain on welfare as opposed to securing employment. And as taxpayers, many companies on the for-profit education side frequently question the lack of accountability for quality in education and lack of fiscal responsibility illustrated through atrocious expenditures of public and non-profit colleges that are tax-exempt.

For the full copy of the Open Letter to Congress, go to: An Important Message from IEC’s President & CEO or visit the Newsroom section of the IEC website at http://www.iecglobal.com

About International Education Corporation

Headquartered in Irvine, California, International Education Corporation is one of the largest private providers of postsecondary career education in the United States, offering quality programs in high-demand verticals such as healthcare, business, technology, transportation, and criminal justice. International Education Corporation is the parent company of UEI College and United Education Institute.

For more information about International Education Corporation, please visit http://www.iecglobal.com

Contact:
Hanan Awad
International Education Corporation
(949) 272-7200 begin_of_the_skype_highlighting              (949) 272-7200      end_of_the_skype_highlighting
(714) 368-0885 Fax
mordaah@iecglobal.com
http://www.iecglobal.com



It has been over two weeks since the gavel came down at the U.S. Senate hearing examining for-profits and deceptive recruitment/financial aid tactics. The highlight was the release of videos of congressional investigators catching the largest for-profit schools “in the act.” While the hearing was little more than a forum for politicians to pontificate, it had a devastating impact. The secret-shopper scenes could not be defended and ever since, the media has been full of highly critical articles of how for-profit schools are taking gross advantage of students and taxpayers.

Over the past week, much of the chatter has turned to the implementation of so-called Gainful Employment regulations that would in effect establish price controls and eliminate certain occupational programs. These career programs are some of the most popular and profitable offerings for companies such as Kaplan, EDMC, and Corinthian Colleges. While the proposed regulations would apply to all institutions, the impact would mostly be felt by for-profit entities. Ironically, many of the schools that were highlighted by the secret-shopper videos are schools that would be most impacted by Gainful Employment.

Many of the larger for-profit education corporations have warned investors that regulatory changes and most specifically Gainful Employment could have a materially adverse impact on their businesses. These warnings coupled with all the negative press out there are not only hammering stock prices but also leaving many of the for-profits with questions on what to do next and what may happen next. Conversely, many non-profit institutions are trying to determine how they might be able to benefit from all of this.

STRATEGIES FOR FOR-PROFITS

Let’s start with ideas for the for-profits. The largest obstacles for having students obtain “gainful employment” so that they are in a position to benefit from their education and repay their student loans are a) making sure students actually persist until completion and b) securing appropriate employment opportunities for students. For-profits that have found ways to address these two issues (and there are ones that have) have a significant advantage.

For-profits should consider implementing proactive retention strategies as well as career placement solutions. This starts with providing each and every student with a caring, dedicated Retention or Reenrollment Counselor. The focus of this counselor should be to get to know each and every student as well as their unique needs. Furthermore, this counselor should make consistent contact with the student to check-in, motivate, and mentor. Whether it is providing a bridge to student services, social services, academic advisors, or financial aid; this counselor should be trained and empowered to help remove any and all obstacles that might prevent a student from completing a specific program. In essence, a counselor should act as a student’s advocate and be just as passionate about seeing a student graduate as an Enrollment Counselor might be to matriculate a prospective student.

Retention Counseling should be supplemented by professional Career & Education Advisors who not only help students write a resume or show them how to login to Monster.com but can prepare students for interviews, build confidence, and work as each student’s partner in securing employment. These advisors should be available to students not only before graduation but long afterward.

Another key strategy is administering a simple online personality assessment to all new students that measures student strengths and weaknesses in 15 key areas. The assessment provides counselors, career advisors, and faculty with a proactive glimpse of how each individual needs to be motivated, mentored, or coached.

These solutions seem costly and complex. The reality is they are, however, the ROI is substantial. Clients of ours that utilize these solutions see on average a 26% improvement in graduation rates and a 39% improvement in career placement even in today’s challenging economy. Not only do these solutions allow schools to better serve their students while providing better outcomes but they also help schools with their bottom line. Finally, schools that promote the existence of these services will recruit more students – especially in the current press climate!

For-profits also need to ensure their programs are at the cutting edge of employment demand – ensuring that students have a better chance to secure employment and maximize earning potential. The cumulative effect of all these strategies is to enhance enrollment revenue and profitability, possibly enabling schools to lower prices without reducing their margins which is so important to Wall Street.

HOW CAN NON-PROFITS BENEFIT

There is no way to sugar coat it. With each passing day, the for-profits are gaining a worse reputation than BP and the common cold combined! This provides non-profits with a unique opportunity to benefit at least in the short-term. While I prefer strategies that allow for long-term gains, a short-term advantage can help many non-profits generate more momentum that can produce long-term results. So what are the 3 key steps that every tuition dependent non-profit that loses student enrollments to for-profit schools should consider taking?

First, an applicable institution (schools that are not highly selective and cater to non-traditional students) must come to the realization that even though they may not compare themselves to a for-profit school, they may be losing students and relevance at the hands of for-profits. Stakeholders must decide to change and act with time of the essence so that they may effectively compete. Part of this decision involves taking risks and thinking outside of the box. There are many resources out there to help schools do just this. Further, institutions do not need to sacrifice their values or educational quality but they should realize that whether they like it or not for-profits will and (in the long-term) probably continue to be a growing competitive force that will draw students.

Next, schools must reevaluate their offerings. If non-traditional students are being served, fully online options should be available. Online programs should be of the highest quality, interactive, accelerated, and applicable to today’s most relevant career opportunities. In some cases, this may mean that institutions may need to look to offer new programs. In other cases, existing programs may need to be modified or reinvented. By way of example, an MBA with a concentration in Accounting that was popular 5 years ago may need to be retooled into a Masters of Accounting program that has much greater career relevancy today.

Finally, non-profits should not only focus on their strengths such as history, having traditional campuses, reputation, full-time faculty, and distinct missions but also on areas that have been traditional benefits offered by the for-profits – acceleration, career-focused programs, flexibility, and in many cases technology. Providing special support services including the type of proactive retention and career counseling mentioned earlier is also key – as it is a competitive advantage compared to most for-profits and non-profits alike.

Do you have other ideas? We would like to hear them!

John Hall
Greenwood & Hall
jhall@greenwoodhall.com

http://greenwoodhall.com/blog/2010/08/gainful-employment-into-gainful-advantage-how-non-profits-for-profits-can-turn-the-tables/

WASHINGTON — A long recession and a wavering job market have brought for-profit higher education institutions into the public eye as never before. Big advertising budgets have given them name recognition. Dramatic enrollment growth (fueled by increasing amounts of federal financial aid) and assurances to students that a degree or certificate is the path to a comfortable job in a specific field have brought them scrutiny.

Many newspapers, websites and TV networks have told the tale of programs at for-profit institutions that don’t prepare students for the jobs they’ve been all but promised — and plunge them into debt in the process. While the anecdotes are often true, they’re only part of the story; some for-profit colleges (the institutions themselves prefer the term “private sector” or “market funded”) do prepare students for good jobs and don’t sink them in an overwhelming pool of post-graduation debt.

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Title IV of the Higher Education Act of 1965 requires all for-profit offerings other than those clearly designated as “liberal arts,” and non-degree vocational programs at nonprofit institutions, to show that they prepare students for “gainful employment in a recognized occupation.” If they don’t, they’re not supposed to be eligible for federal financial aid dollars.

No one, the U.S. Department of Education has contended, seems to have a satisfactory way of determining which programs meet that standard. “It’s illuminating for us that when we ask institutions how they’re complying with this current law, we have not received adequate answers,” says Bob Shireman, deputy undersecretary of education. “And this is the law.”

Through a process of negotiated rule making that began last year after passage of the Higher Education Opportunity Act in 2008, the department has sought to develop a formulaic solution to the dilemma, in the form of regulations that define “gainful employment” using data on incomes and debt loads, as well as completion, job placement and loan repayment rates.

In essence, this is a crude mechanism to assess the quality and value of vocational programs. The “good” programs that help students get jobs without saddling them with debt could continue to exist and deliver Pell Grants and subsidized loans to their students. The “bad” programs — the ones found to lead graduates to jobs they could’ve gotten without the educational experience or that don’t pay well enough for borrowers to repay their loans — would be identified and put under closer scrutiny.

Representatives of the for-profit sector have aggressively fought such an approach, but most analyses so far suggest that the proposed regulations are unlikely to be a sector killer. The department has acknowledged the need for nonprofit and for-profit vocational programs, and has estimated that just 6 to 8 percent of programs that qualify for Title IV under gainful employment would potentially need to change under the proposed rules.

In research that’s been circulated but not yet publicly released, the Career College Association, the trade group that represents for-profit colleges and universities, has less-conservatively estimated that close to 20 percent of career college programs and a third of the colleges’ students would be affected. In what the department would consider a positive outcome, some of the “bad” programs would shut down, while others would lower prices or work to improve their completion and job placement rates.

Though some observers have suggested that rewriting federal financial aid policy would be a better way to address these problems, the Obama administration’s Education Department is seizing on the opportunity it has now, with Democratic majorities in both houses of Congress, to effect change. The revision of the gainful employment rules could be a once-in-an-administration (if not once-in-a-career) chance for Shireman — who has advocated for reform and increased protections for borrowers since serving in the Clinton White House — and his staff to tackle what they consider to be a major source of student debt.

Shireman himself does not put it that way. “We have to do everything we can in the regulatory process, as well as in the legislative process, to protect taxpayers and students,” he says. “We have these regulatory opportunities so we have to take them.”

He does acknowledge that he is unwilling to wait for the next renewal of the Higher Education Act, in 2013, when lawmakers would be most likely to make major changes in the law. “We’re not going to wait for a reauthorization to ensure that federal funds are being used appropriately.”

The department sent a version of the regulations to the White House Office of Management and Budget this month, and, though it’s still being revised, a final draft will be published by mid-June. Over the summer, there will be one last chance for public input and, by Nov. 1, the regulations will be printed in the Federal Register, to go into effect on July 1, 2011.

Defining Gainful Employment

The Education Department was slow to formulate a proposed definition of gainful employment. In November and December, during the first two week-long rule making sessions, the discussion among negotiators focused on whether the department had the statutory authority to establish a formulaic definition of gainful employment.

Many negotiators saw the department’s suggestions — particularly one that sought to determine the value a credential would add to a recent graduate’s earning power, and to use that to determine an acceptable maximum tuition — as price controls. The most vocal opponent was the lone negotiator representing for-profit institutions, Elaine Neely, senior vice president of regulatory affairs at Kaplan Higher Education. In December, Neely said she was “flabbergasted that [the department] would impose price controls when clearly Congress itself has not been able to come to the decision to do that on higher education.” By warning of a “slippery slope” toward price controls throughout higher education, Neely was able to get many representatives of nonprofit institutions on board in opposition to the proposal.

An idea that took up much less of the panel’s time was the department’s proposal to determine whether the starting salary in the field for which a program prepared students was sufficient to pay the average annual debt obligation of the program’s graduates. If the average debt load for a program’s graduates was $9,000 on a 10-year loan with a 6.5 percent interest rate, students would have loan obligations of $1,250. With a debt-service-to-income ratio of 5 percent, the starting income in that field would have to be at least $25,000 to be considered “gainful employment.”

By mid-January, as the department and negotiators prepared for the third and final round of rule making, this debt-service ratio had become the department’s preferred regulatory path. Based on a partial reading of a 2006 paper by Sandy Baum, of the College Board, and Saul Schwartz, of Ontario’s Carleton University, the department’s ratio became 8 percent. (While Baum and Schwartz’s paper discusses 8 percent as a generally accepted standard, most likely derived from mortgage underwriting standards, the authors suggest that a ratio as high as 18 percent could be appropriate for single people earning $150,000 annually.)

Under the proposal made in January, which remains the only complete definition made public by the department, vocational programs would be eligible for Title IV funds if their graduates’ median annual payments on a 10-year loan were no more than 8 percent of the Bureau of Labor Statistics’ 25th percentile of annual earnings for people in occupations for which a given program prepared students.

Programs that exceed 8 percent could still be eligible for Title IV funds by producing what the department considers good outcomes: by showing that its graduates’ annual earnings are higher than the BLS’s 25th percentile and keep the debt-income ratio below 8 percent; by documenting that students have at least a 75 percent repayment rate on federal loans; or by demonstrating a program completion rate of at least 70 percent and an in-field employment rate of at least 70 percent.

In the third round of negotiations, debate was contentious and without resolution. Terry W. Hartle, senior vice president for government and public affairs at the American Council on Education, said he worried about cost, privacy and the potential for “unintended consequences.” A former Bush administration Education Department official, Todd Jones, president and general counsel of the Association of Independent Colleges and Universities of Ohio, said he saw the proposal as ripe for lawsuits.

Department officials were unwilling to reconsider the approach entirely, though they were open to constructive feedback. “We put things on the table partly because we think they’re a good idea and partly to get input,” Shireman says.

The department started with its most extreme — but politically viable idea — and was ready to negotiate, but many negotiators seemed too intent on persuading officials to obliterate the proposals to make good, constructive suggestions.

And, since the third round of negotiations ended in late January, the department has continued to discuss the proposals with stakeholders and to get feedback. “We recognize that some people felt – even we felt – that there was not enough discussion at negotiated rule making for whatever reasons,” Shireman says. “So we continue to hear from associations and institutions, getting input from them that continues to be helpful, to continue to hear what suggestions they have about what the term gainful employment should mean.”

Who Would Be Hit

In broad terms, the Department of Education’s goal is to determine which programs really are preparing students for gainful employment and not sinking graduates into chasms of debt.

“There’s a tremendous number of students graduating with incredibly high levels of debt,” says Rich Williams, higher education associate at the U.S. Public Interest Research Group, who represented students on the negotiated rule making panel. “And in some cases they’re unable to enter the fields they studied at the levels they thought they’d be qualified for.”

Pauline Abernathy, vice president of the Institute for College Access and Success, anticipates the regulations “will lead to programs that are currently leaving students in terrible debt either having to change the quality of their programs or their cost structure.” Before Shireman joined the Obama administration, he was TICAS’s president.

But it’s unclear whether the department’s proposed rules would really weed out those programs and would do so in a way that kept all good programs up and running. “I don’t think you can draw a line that separates the wheat from the chaff perfectly,” says Mark Kantrowitz, publisher of Finaid.org. “The choices are tough — you either throw out the baby with the bathwater or, because you want to keep the baby no matter what, you’re going to get some bathwater too. I think that’s a reality that everyone needs to come to terms with.”

When applied to the existing landscape of vocational programs, the department’s approach would seem to favor programs at public institutions over private ones (either for-profit or nonprofit), those that required fewer credits earned over more credits, and those in higher-paid fields like nursing and information technology over lower-paid careers in the arts.

Because the rules would apply only to certificate programs at community colleges, state universities and private, nonprofit institutions, they’re less likely to force any real change at nonprofits. Tuition on these programs at public institutions is so low that it’s relatively rare for students to take out loans. If they do, they’re likely to be small. Even at private nonprofits, where tuition is likely to be of a similar magnitude as at for-profit colleges, the fact that the rules apply only to non-degree programs will keep many programs out of regulatory reach.

Shireman and other department officials have insisted in many instances that the department is not “out to get” for-profit colleges and that it is not the department’s intention to regulate the sector out of existence. “We have made it quite clear that we are interested in improvement and outcomes all across the spectrum, all across the sectors,” he says.

Nonetheless, it seems clear that the gainful employment regulations will force the most change on for-profit institutions, which will have to choose between lowering tuition, improving student outcomes or shutting down programs that don’t align with the rules. In the short run, at least, all of these options would hurt the institutions’ bottom lines.

Even if some programs end, says Abernathy, of TICAS, “there will be plenty of other for-profit programs that will be very eager and capable of being able to meet that need, but that do so in a way where students and taxpayers are better off.”

For a field in which a for-profit institution offers multiple certificate and degree options, the ones that cost the least — and often require the fewest credits — are the ones least likely to be regulated out of existence. If an institution offered certificates, associate degrees and bachelor’s degrees in, for example, culinary arts, that all led to the same Labor Department-classified jobs and the same Bureau of Labor Statistics-reported 25th percentile of income, it’s logical that the 8 percent rule would make the preferred outcome a certificate and not a bachelor’s degree.

Kantrowitz, of Finaid.org, says that though the department’s existing proposals “really didn’t consider the impact on bachelor’s and graduate degrees,” he thinks the next draft of regulations will because the department hasn’t shown any indication of wanting to discourage students from pursuing longer programs. “Take an associate’s degree versus a bachelor’s degree. Students are in school twice as long, paying twice the tuition, but they don’t have twice the income.”

Though programs would have the option of collecting their own salary data rather than relying on the BLS numbers, institutions often find it difficult to collect this information. As of now, observers say, few institutions have a comprehensive view of their graduates’ incomes.

Kantrowitz and others have suggested that the department use different labor data — in his own calculations, Kantrowitz used federal Census data, which details age group and educational attainment but not field of employment — but the ideal data set does not exist.

Apollo Group, which owns the University of Phoenix and other institutions, said in a March 30 earnings call that it has begun the process of analyzing its programs. But, “given the number and range of disciplines offered by our universities as well as the uncertainty regarding the implementation process of the draft proposal, our analysis is both extensive and complex.”

In mid-March, analysts at Morgan Stanley said they thought that Education Management Corp. (which runs the Art Institutes and Argosy University, among others) and ITT Educational Services would need to undergo the most widespread change to meet the regulations because of high tuition rates and, at Education Management, an enrollment that leans heavily toward low-paying arts fields.

Two companies that would have very few endangered programs, according to Morgan Stanley: American Public Education, Inc., which focuses on serving members of the military and public servants, who are less likely to take out student loans; and Capella Education Company, whose programs have very low loan default rates and would be able to qualify for Title IV funds under one of the alternative definitions of gainful employment.

Gregory W. Thom, Capella’s vice president of government affairs and general counsel, agrees that his company would probably have to make few changes to abide by the gainful employment regulation. “Capella is viewed by folks within the department as a high quality institution,” he says. “We have a degree of comfort that however this plays out, Capella would be fine and Capella would be in good shape.”

And yet, until the final regulations go into place and the institution can collect and calculate all the appropriate data, Capella can’t be sure that it’s out of the woods. “There are so many moving parts,” Thom says. “It’s premature to engage in speculation on how this is going to play out … at Capella on a program-by-program basis.”

A leader at another for-profit institution with low cohort default rates said he also thought his programs would meet at least one of the gainful employment rules, but still worried that they might not. Insufficient data and a still-unclear sense of the precise regulations the department will decide upon has left him feeling a bit uneasy about the outcomes.

The Feedback

At every hint that the Department of Education is backing down from proposed regulations that would force some programs offered at for-profit colleges to lower their prices, improve their outcomes or shut down, Wall Street analysts and the for-profit institutions breathe a sigh of relief.

When Secretary of Education Arne Duncan testified before the House of Representatives’ Education and Labor Committee on March 3, and was questioned on the gainful employment regulations, his comments that the department was “by no means wedded to any one direction” and “[didn’t] want to be overly heavy-handed” were perceived by for-profit boosters as signs that the department was open to scaling back the regulations.

Before and since, the Career College Association and lobbyists for for-profit institutions have pounded the halls of Congress trying to get members to put pressure on the department. Some members of the Congressional Black Caucus sent a letter to Duncan charging that the rules are discriminatory because for-profit institutions disproportionately serve minority students. A bipartisan group of 18 House members wrote to Duncan asking that he pull the plug on the department’s approach altogether.

Last week, when a report from Credit Suisse cited someone “close” to the Office of Management and Budget as saying that the department had seemingly decided to soften one of the alternative methods of qualifying for Title IV, higher education stocks soared as the rumor spread. The source told the bank that the option to demonstrate a program completion rate of at least 70 percent and an in-field employment rate of at least 70 percent had become a 50 percent completion rate and a 70 percent employment rate.

Though it is one of the possibilities the department is considering, the switch to a 50 percent completion rate is not final. Officials submitted a draft to the OMB to begin the process leading to the publication of rules and the public comment process, but are said to be continuing to analyze data and listen to feedback.

The for-profit institutions tout these small bits of news and others as indications that the department may be backing away from its tough-line approach, but it is unclear whether any perceived motion on the department’s part will actually materialize as dramatic changes to the next draft of regulations.

Teddy Downey, of Washington Research Group, says he doubts the department would take any steps that would dramatically lessen the reach of the regulations. In an e-mail message last week after the Credit Suisse rumor circulated, he said he anticipates “a very low chance that this change will amount to a truly significant loophole.”

In an interview, he went further. “I don’t think the department would do anything it doesn’t think will have the desired effect. I think they have the data to support whatever they choose to do.”

Kantrowitz, of Finaid.org, is skeptical of whether the department has the data, but he agrees that the department isn’t backing down on gainful employment. “They’re not going to do anything that doesn’t have teeth in it,” he says. “It may just be some kind of educated guess, but it’s going to have teeth.”



By Kelly Field

Washington

Warning that a proposed limit on student borrowing would force thousands of programs serving low-income students to close, the Career College Association on Thursday released an alternative that would require for-profit programs to provide prospective students with more information about their graduates’ debt levels and salaries.

The move comes as the Education Department is finalizing a rule that would withhold federal aid from for-profit programs whose graduates are likely to carry high debt-to-income loads. An early version of the “gainful employment” rule, released during a negotiated rule-making session that ended in January, put the cap on loan payments at 8 percent of graduates’ expected earnings, based on a 10-year repayment plan and Bureau of Labor Statistics. Programs could escape penalty by showing that their graduates’ true earnings were higher than the government averages or that 90 percent of all graduates repaid their loans. (Existing law requires for-profit colleges to show that they are preparing their graduates for “gainful employment,” but the Department of Education says the term hasn’t been well defined.)

The association, which represents for-profit colleges, says the department’s proposal lacks an empirical basis and appears to be driven by stories of students who took on large debt loads to finance worthless degrees. The department recently rejected the association’s Freedom of Information Act request seeking the data behind the 8-percent limit.

“The department is basing this on anecdotes, not systematic research,” said Harris N. Miller, president of the for-profit college association.

To bolster the case for its alternative, the association released a study of more than 10,000 for-profit college programs estimating that a fifth of those programs would exceed the 8-percent cap and be eliminated. The study, which was conducted by a professor at the University of Chicago, also predicted that more than 300,000 students would be displaced by the proposed rule. However, the study did not consider how many programs would be exempt from the rule because their graduates earned more than average or repaid their loans.

Rule Due Out Soon

The department is expected to release its rule by mid-June. Last week, analysts at Credit Suisse reported that the department is weighing another exemption to the rule, for institutions with a completion rate of at least 50 percent and a job-placement rate of at least 70 percent. The first draft of the rules had set both rates at 70 percent, but the exemption was removed from later drafts.

In addition to expanding disclosures to prospective students, the association’s plan would require programs to prove that they prepare students for employment by vetting them with employers in the field and making sure they pass licensure and certification exams.

Asked about the association’s study and alternative proposal, the department issued a statement saying it was “pleased that many participants in the program community have expressed views and presented information in this important area.

“We look forward to considering their comments as they react to what we will propose in our notice of proposed rule making,” it continued.

Congress weighed in on the controversy in March, sending a letter to the Education Department that raised “serious concerns” about the department’s plan and urged its officials to consider “other means to address overborrowing that would not create additional barriers to service for at-risk students.” The letter, which asked the department “why your goals for this proposal cannot be met simply through expanding disclosures,” was signed by 15 Democratic and Republican lawmakers.



By mschnittman

In Senator Harkin’s opening remarks during the recent congressional hearings on higher education, he stated, “We have a responsibility to ensure that taxpayer dollars are being spent wisely, and that for-profit colleges are serving students, not just shareholders.” As the CEO of TopSchool and previously serving as the president of eCollege, I understand the need to serve shareholders. However, I couldn’t agree more that the ultimate goal of those of us in education is to serve the student.

For-profit colleges have a huge opportunity to move education forward, and at a great value to taxpayers. They have already made great strides in driving access, innovation and a trained workforce.

ACCESS:
For-profit colleges make education possibilities a reality for the underserved, non-traditional student population. The Department of Education states that the Student Aid Objective is “to ensure that low and middle income students have the same access as high income students do.”

The for-profit education industry delivers an attractive alternative to students who are lower income, minority, older and/or more financially independent. Roughly 76% of for-profit college students are financially independent compared to 50% at public schools, and 45% of for-profit college dependent students come from families in the lowest income quartile compared to 24% at public and 22% at private non-profits.1 These for-profit college students are not choosing between paying their own way or getting federal financial aid – rather they are choosing between not getting educated and federal financial aid.

In fact, according to the U.S. Department of Education, the average Estimated Family Contribution for a student attending a four-year, non-profit school is almost $17,000, which is 123% greater than the $7,500 average for a student attending a four-year, for-profit school. Ironically, this is almost exactly the same ratio of the federal aid required by a student attending a for-profit school compared to a non-profit school.

INNOVATION:
For-profit colleges sit on the forefront of innovation when it comes to flexible delivery and schedules, giving more students the chance to succeed.

When you consider that 60% of for-profit college enrollments occur on a rolling basis, 2 meaning frequent intervals during the year, flexibility is key. For-profit colleges invest significantly in meeting the complex needs of their non-traditional students through online education, night and weekend offerings, and smaller suburban/satellite campuses. This consistent drive to satisfy their students has resulted in 65% of for-profit college students attaining a degree within six years after enrollment, slightly higher than students attending four-year, non-profit schools.3

SKILLED WORKFORCE:
For-profit colleges also focus on aligning their programs with the fields and jobs that are most in demand. According to Imagine America Foundation, for-profit colleges currently enroll more students (44%) in high demand fields than do public (18%) and private, not-for-profit (13%) institutions.2 In fact, 17 of the 20 fastest-growing occupations are in the key focus areas of for-profit schools, including the healthcare and computer/data processing industries, with an estimated 1.8 million jobs being created in these fields through 2016.2 These are positions that graduates of for-profit colleges can fill.

Not only are for-profit colleges training students, but they are getting them placed in the workforce. Consider the percentage of students who are employed within six months of graduation – in 2009, DeVry University reported a 90% placement rate for these students, while larger universities such as UCLA and Johns Hopkins reported only a 45% rate.4 And overall, 76% of for-profit college students who completed an award in 2005 were employed directly following graduation.2

WHAT DOES THIS MEAN FOR TAXPAYERS?
Before we jump into the numbers, I think it important to point out that both for-profit and non-profit models work effectively. For-profit institutions are similar to state systems of higher education in that graduates of both models step out into a demanding job market after earning such degrees as an Associate’s in Accounting, a Bachelor’s in Finance or Computer Engineering Technology, a Master’s in Business Administration or Education – and the list goes on and on.

That said, what do taxpayers invest in students at for-profit schools? And to round out the equation, what is the taxpayer investment to support students at non-profit schools as well?

For-profits
Let’s start on the for-profit side. I analyzed four large, publicly traded for-profit institutions – DeVry, ITT, Strayer and Corinthian Colleges. Using the data available in their most recent annual reports, I wanted to determine the taxpayer investment required to educate one student for one year. I calculated a “net taxpayer investment” by taking the annual Title IV revenue received for all four schools, in this case $3.5 billion, and subtracting the annual taxes provisioned by the institutions, in this case $377 million. As noted in the table below, this number, divided by the student population served, which was around 313,000, resulted in the net cost to taxpayers of roughly $10,000 to educate a student for one year at one of these for-profit schools.

Non-Profits
Keeping that equation in mind, let’s take a look at the non-profit side. In addition to federal financial aid, students enrolled in public, non-profit institutions reap the benefits of state funding for education. You’ll notice that no federal taxes are provisioned for these non-profits as they don’t pay them.

Since I reside in Colorado, I’ve used publicly available information about our own higher education system. According to the Colorado Department of Higher Education, in the Fall Term 2009, the state enrolled just over 240,000 students in its 28 two-year and four-year institutions. During that same year, the Department was allocated almost $2.8 billion in state funds and received over $1.2 billion in federal student financial aid. The table below shows that the net cost to taxpayers to educate a student in the Colorado Department of Higher Education in 2009 was almost $17,000, which is 66% greater than at the for-profit institutions.

Federal Loans
Of course, if we are looking at a net investment to taxpayers, we need to remember that much of the federal subsidies for higher education come in the form of loans. For a variety of reasons, students default on their loans. According to an analysis by the Chronicle of Higher Education, the 15 year loan default rate for for-profit students enrolled in four-year programs is 30%, as compared to 15.1% for non-profit students.5

Using the example from the Colorado Department of Higher Education, when you account for the percentage of education subsidies that are loans (compared to grants or state appropriations) and the difference in default rates, the adjusted taxpayer investment per student at a for-profit school is roughly $4,100, compared to $13,200 at a non-profit school, driving the State of Colorado non-profit education to a 224% premium over for-profits.

THE VALUE TO STUDENTS AND TAXPAYERS ALIKE:
Both for-profit and non-profit institutions play valuable roles in our country’s need to educate the masses. All aspects of our society benefit the more educated we become. The fact is that we need both choices to effectively serve our country’s diverse population.

We can’t deny that the high growth, for-profit college industry should be held accountable for its recent issues, including the misguided information given to students by admissions representatives, higher default rates and so on. However, we also can’t ignore the tremendous value these schools provide to students. I believe the overall value to taxpayers is well worth the growing pains.

The critical factor in both the for-profit and non-profit models should always be the students. Students need accurate and credible information to make an educated choice in determining their path. At the same time, schools need to use data to better understand the type of student who is a good fit for their program and the ways in which they can ensure the success of that student.

In my career in the education market, I’ve learned the importance of data in providing a quality educational experience, both in the way education is delivered and the way it is managed. This principle guides everything we do at TopSchool, as we have built a next generation student information system – and that is exactly what the leaders of both for-profit and non-profit schools like about our model.  The majority of the data and information that Senator Harkin and others want to provide to prospective students can be accessed through a system like ours. We believe the key is making it accessible and available to the right audiences.  In addition to the many uses for prospective students, access to data can also guide college and university leaders to better understand their students and drive stronger learning outcomes, student satisfaction and retention.

Regardless if the school fits the for-profit or non-profit model, those schools that rely on data to make decisions that benefit their students will deliver a tremendous value not only to their students, but also a high return to us as taxpayers, to our workforce, and to the future of our country.

TAXPAYER INVESTMENT IN HIGHER EDUCATION:

Taxpayer Investment in Higher Education

Last week, I spent a few days in Pennsylvania and have returned to Denver energized for things to come. Along the way, I was stuck behind a number of major traffic accidents and was re-routed extensively. It gave me an opportunity to see much of the PA country side and was worth the detour.

A colleague and I had a great meeting with a business college in the region. They have significant growth plans and are looking to utilize a student management system to increase operational efficiencies. We all look forward to further discussions with them.

I was honored to be invited to speak at the Pennsylvania Association of Private School Administrators Annual Conference.  I welcomed the opportunity to discuss the power of Software as a Service (SaaS) solutions to the attendees. SaaS solutions are flexible, low maintenance and can help schools focus on recruitment, retention and placement, rather than IT. It was great to see schools embrace the concept of SaaS.

In addition, I was excited about Mike Artim’s presentation, and he didn’t disappoint. Mike is the Executive Director of Cambria-Rowe Business College. Cambria-Rowe has been talking with employers in the region to better understand the skills and competencies they are looking for to fill positions. The school is evolving its program curriculum to adapt to the changing needs of the employers. Mike also discussed how Cambria- Rowe is leveraging technology in the classroom through the use of digital content, iPads and other vehicles.

Thanks to the efforts of the group at PAPSA for an enlightening career college conference, I look forward to participating next year.

I’m always looking for feedback, how is your school leveraging technology to create efficiencies?

Sources:

1U.S. Department of Education, National Center for Education Statistics, “National Postsecondary Student Aid Study 2003-2004 (NPSAS: 2004).”
2Imagine America Foundation, “Economic Impact of America’s Career Colleges (2007).”
3U.S. Department of Education, National Center for Education Statistics, “1995-96 Beginning Postsecondary Students Longitudinal Study, Second Follow-up (BPS: 96/01).”
4Daniel Hamburger, DeVry University, “The Vital Role of the Private Sector Higher Education,” 2010, (data originally pulled from institutional websites, May 2009).
5 The Chronicle of Higher Education, “Government Vastly Undercounts Defaults” July 11, 2010.