Posts Tagged ‘career college’

Debunking Career College Myths and the Dismal Truths About Community Colleges

Community Colleges Graduate 20% of their students;
Career Colleges Graduate 58%

The Obama Administration is attacking career colleges at the same
time they are lauding community colleges. They propose sweeping
and arbitrary regulations against career colleges while turning a blind
eye to the deep and intractable problems among community colleges.
A look at the facts would suggest that the Administration is attacking
the wrong target and their proposed regulations would hurt the
economy, jobs — and most of all students.
The President has launched Skills for America’s Future to build a
nation-wide network to maximize workforce development strategies,
job training programs and job placement. He has only included
community colleges. By excluding career colleges, he is unnecessarily
shortchanging millions of students and a wide swath of the nation’s
future workforce. The President should include all interested colleges in
this initiative
The fact is students need more higher education choices not less —
and more information, not less. It is in the students’ best interest to
have all colleges judged by the same standards and treated the same
regardless of the school’s structure (for-profit, non-profit or public.)
Take a look at how community colleges and career colleges stack up:
Community colleges have lower, much lower, graduation
rates than career colleges.
■ Career colleges graduate 58 percent of their students. Community
colleges graduate 20 percent.*
■ Career colleges graduate 48 percent of their African-American
students. Community colleges graduate 12 percent.
■ Career colleges graduate 60 percent of their Hispanic students.
Community colleges graduate 15 percent.

■Community colleges participating in the White House
Summit on Community Colleges have graduation rates as
low as 7 percent.
■ Northern Virginia Community College, where Dr. Jill Biden teaches,
has a graduation rate of 13 percent which results in a total taxpayer
cost per graduate of approximately $74,000.
■ City Colleges of Chicago has an average graduation rate of less
than 7 percent which results in a total taxpayer cost per graduate of
approximately $137,000.
■ Ivy Tech Community College has a graduation rate of 8 percent
which results in a total taxpayer cost per graduate of approximately
$120,000.

Community colleges cost taxpayers more, much more, than
career colleges.  It costs taxpayers more than $32,000 for each community college
graduate, over four times the amount it costs taxpayers for a career
college graduate. Career colleges have similar student loan default rates as
community colleges for similar kinds of students.

It’s the type of student not the type of institution that matters most.
Career colleges have the same default rates as community colleges
when taking into account their much higher enrollments of low income
and minority students.

Community colleges have lower job placement success than
career colleges.

75% of career college graduates find employment within 6 months of
graduation.
Career colleges educate and place students in 17 of the 20
fastest growing fields, with career college graduates representing 42%
of all medical workers.

It’s time that all colleges are held to the same high
standards.  The Obama Administration is attacking career colleges while turning
a blind eye to the larger performance issues that exist at community
colleges.  Career colleges offer access and choice to millions of students
who otherwise would not have a pathway to a higher education
or career. But, these students and their schools are being targeted
through burdensome regulations that must be stopped before they
do any more harm. The President cannot achieve his goal of being the
world’s leader in graduation rates by 2020 without the innovation and
flexibility of career colleges.

To learn the facts visit: http://www.ed-success.org/facts.php

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by Kenneth J. Cooper , September 20, 2010

Some African-American and Hispanic leaders have taken a stand against proposed federal rules designed to curb student-loan defaults at for-profit colleges, arguing the strictures would reduce the educational options of minority students, who represent a large part of the enrollment at the schools.

Rev. Jesse Jackson of the Rainbow PUSH Coalition and some members of the Congressional Black and Hispanic caucuses have sent letters to the U.S. Department of Education opposing draft regulations that would cut off access to federal student aid to for-profit schools that appear to have prepared too few of their graduates for “gainful employment.”

The Career College Association, which represents the schools, states that 43 percent of their 2.8 million students and 39 percent of their graduates are minorities. It says 23 percent of African-Americans and 18 percent of Hispanics with associate degrees attended career colleges, as the trade association calls its 1,500 members.

“I am concerned that the proposed rule casts too broad and too general a brush on many institutions, some of whom are doing an excellent job at serving economically disadvantaged and minority students,” Jackson wrote in a Sept. 15 letter to Education Secretary Arne Duncan. “The department’s proposed approach will hinder the access of minority students to higher education and will make it even more difficult to realize President (Barack) Obama’s goal of leading the world in the percentage of college graduates by 2020.”

Similar criticisms are made in letters to Education Department officials signed by 12 of the 39 voting members of the Congressional Black Caucus and four of 23 voting members of the Congressional Hispanic Caucus. The signers include three of the four Black members of the House Education and Labor Committee: Reps. Donald Payne of New Jersey, Bobby Scott of Virginia and Yvette Clarke of New York, all Democrats. Among Hispanic critics are Ed Pastor, an Arizona Democrat who is the third-most senior Hispanic in the House, and Ileana Ros-Lehtinen, a Florida Republican.

A Sept. 8 congressional letter to the department predicts the proposed rules would “disproportionately impact the many low-income, first-generation students, single parents, minority and veteran students served by these institutions.” Payne, Scott and two other Black Democrats, Alcee L. Hastings of Florida and Edolphus Towns of New York, were among the 10 House members who signed the letter.

The department maintains that the proposed rules, released for public comment in July and slated to be finalized by Nov. 1, would protect students who find out too late their occupational training does not impress employers.

“Our proposal is to protect students from taking on debt they can’t afford in exchange for a certificate they can’t use,” said Justin Hamilton, Duncan’s press secretary. “This is no way affects a student’s ability to access federal student aid at programs that would be helpful to them. Our proposal would cut off federal student aid to ineffective programs.”

If for-profit schools fail two tests, the schools would lose their eligibility to accept federal student loans and grants. At least 35 percent of former students — both graduates and dropouts — have to be paying down their federal loans, and those loans have to amount to less than 12 percent of their total income.

In 2007-2008, the department says 55 percent of student borrowers from for-profit schools were paying on their loan balances, compared with 80 percent at public colleges and 88 percent at private, nonprofit ones.

The aid cutoff could apply only to certain training programs that fail both tests, rather than entire schools. The department estimates about 5 percent of such programs would become ineligible to receive federal student aid.

Critics have also argued that the proposed rules unfairly single out for-profit schools while, as the congressional letter suggests, “ignoring legitimate questions that have been raised about some elements of traditional higher education” with similar demographics and student loan default rates.

Under existing federal regulations, traditional colleges can lose federal aid if default rates exceed 25 percent for three consecutive years. The department says the 98 historically Black institutions eligible for federal student aid meet that standard.

Since the 1970s, federal law has imposed a different standard on for-profit schools, allowing only those that prepare students for “gainful employment” to be eligible for federal aid, Hamilton said. This is the first time, he added, federal regulations have attempted to define what that provision means.

Besides Jackson and the members of Congress, a few Black and Hispanic organizations have opposed the new rules, including the National Black Chamber of Commerce, National Congress of Black Women and Hispanic Leadership Fund. But larger organizations, such as the NAACP, National Urban League, League of United Latin American Citizens and National Council of La Raza, do not appear to have taken a similar stance.


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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

Sent to you on behalf of The Art Institute of Fort Lauderdale President Chuck Nagele:

As you know, The Art Institute of Fort Lauderdale has been a longtime supporter of your organization and the good work you do.  As an education provider, we not only feel the responsibility to help shape the lives of our students, but also to shape the community we call home.  The Art Institute of Fort Lauderdale takes tremendous pride in providing our students the education and skills they need to make an impact in the workplace, and in tandem with you, we also work to provide them opportunities to have an impact on the lives of those around us.   Simply put, we value our association with your organization, as well as the opportunities it affords our students.

At present, our schools are fighting an important policy issue that has the potential to greatly limit opportunities for our students and, thus, limit our ability to give back to our community.  The Department of Education has proposed a rule, deceptively named “Gainful Employment,” that could potentially restrict access to Title IV student loans necessary for most low/moderate-income students.  Under the proposed rule, a program’s eligibility for financial assistance is determined under a series of arbitrary and loosely researched metrics.  Students’ access to financial assistance would be restricted, preventing the student from attending the career program and thereby eliminating future opportunities to partner with your organization.  In fact, one study, conducted by a University of Chicago economist Jonathan Guryan, estimated that 360,000 students would be impacted by the proposed rule.

We respectfully request your assistance.  Please log on to: http://www.aiactioncenter.com
and follow the prompts. You can simply choose the paragraph you would like, add a comment, if you wish, and then hit sent. They will automatically send your letter to the legislators.

Thank you, again, for the work your organization does, and for the strong relationship you have with our school.  We value this partnership, and appreciate your willingness to assist us at this important time.  Should you have any questions about the “Gainful Employment” rule or our letter request, please do not hesitate to contact me directly.

Sincerely,

Chuck Nagele
President, The Art Institute of Fort Lauderdale 

Can the value of a college diploma be quantified? Should it be quantified? Many would argue no on both counts. The benefits of better critical thinking skills, a rich network of relationships with professors and alumni, or an enhanced sense of your own bright future and capacity to achieve are very difficult to reckon. Researchers report many multidimensional advantages associated with more years of education: better health, more stability in relationships, increased political and civic engagement, and more peace and happiness, even into old age.

It’s hard to put a price on any of these goods. And yet, high and continuously rising tuition is increasingly forcing would-be students and their families to perform some cost-benefit analysis. A college degree, on average, awards you 60 percent higher earnings (PDF), which more than offsets the average $23,000 in student loans that graduates stack up.

But the relative advantage of the degree has been growing for a generation not because college graduates are earning more and more, but because high school graduatess are earning less and less—20 percent less for young men compared to the 1970s. In fact, it might make more sense to speak of a non-college penalty than a college reward.

Then there’s the question of what happens to the 43 percent of college students who, for one reason or another, don’t finish their degree within six years of their freshman year. They may have student loans but no degree to show for it.

Or what about those who graduate into a recession, like the one going on right now, with very high loan burdens? Graduating into a poor job market can reduce your lifetime earnings by 10 or 15 percent—and it’s a disadvantage that never really goes away.

It’s clear that with such sums of money, not to mention people’s futures, at stake, it’s time to have more hard-nosed discussions about the costs and benefits of college. Late last month, the Department of Education under Obama took an important step in precisely that direction. For the first time they’re putting teeth into an existing rule that in order to qualify for federal financial aid, colleges must prepare students for “gainful employment.”

The measure they’re using is how the college’s graduates handle their student loans. If too many of your students leave school with an unreasonable ratio of debt to income (defined as more than 8 percent of total earnings), or if they don’t pay back their loans at all, then presumably they didn’t get enough bang for their buck.

For now, the “gainful employment” standard is being applied only to trade schools, which are usually for-profit. But it’s not a bad question to ask no matter what the status of the college. One would think that this guideline could strike fear into the hearts of the philosophy department at, say, Middlebury College (price tag, $208,600; starting salary, about $35,000) or, for that matter, the film school at USC (price tag, $100,000+; starting salary, $0 to $100,000).

Anya Kamenetz is a staff writer for Fast Company and author of “Generation Debt.” Her latest book is DIY U: Edupunks, Edupreneurs, and the Coming Transformation of Higher Education.”

Read the full article here – http://www.good.is/post/gainful-employment-no-pain-no-gain/

As an employee of Anthem College in St. Louis, Missouri I am writing to oppose the Department of Education`s proposed `gainful employment` definition. At Anthem College, we witness on a daily basis the drive and determination of our students to meet their career goals. We work very hard to provide them with the education and training necessary to obtain high demand jobs and compete in today`s competitive workforce. We have an enrollment of 277 students, primarily female, African American, with the average age between 23-25 years old. Our students are economically disadvantaged and pursue education to improve their lives and the future of their families. Many of my students are single moms that sacrifice their everyday life by continuing their education, an education that is not only for them but for their children. Moreover, these are students who will most likely be a first generation graduate of college something that will show their children that when they graduate they will be second generation graduates which will be in line with President Obama’s vision and quest to be the most educated country in the world by the year 2020. These are also students that have not been well-served by traditional colleges, which are in any event filled to capacity. We accept only students who have a reasonable chance of success in our programs, and I am proud that they graduate, find employment in their fields of study at the rate of 70%. This is much higher than the success rate of community colleges in our city because we work hard to provide academic and other support for our students. Large health care providers such as St. Louis University Hospital apart of the Tenet Healthsystem St. Louis, Inc, Barnes Jewish Hospital apart of the Barnes Jewish Christian Health Care Systems, St. John’s Mercy Health Systems, SSM Health Care St. Louis which includes over 10 hospitals and 250 medical offices, just to name a few, seek out our graduates because they are well-prepared.

Read the full commentary here – http://www.congress.org/congressorg/bio/userletter/?letter_id=5701278706

a noted Wall Street short-seller, Steve Eisman, gave a speech criticizing certain public companies that are for-profit colleges and universities. Eisman is known for “shorting” stocks in public companies in the sub-prime industry before the collapse — meaning he made tons of money when these companies’ share values went down or virtually collapsed.

For the uninitiated, at the risk of oversimplifying, you make money “shorting” stock by borrowing someone’s stock at a certain share value and then, if the share values go down, repaying the loan at a lower amount, pocketing the difference.

Eisman, in his May 26 speech before the Ira Sohn Research Conference in New York City, criticized some for-profit colleges and universities that are public companies (such as the Apollo Group, which owns the University of Phoenix, Corinthian College and Kaplan University (owned by The Washington Post). He suggested they were on financially shaky ground due to high student default rates from Department of Education Title IV loans and excessive debt-to-income ratios, to name just a few of his criticisms.

Stories appeared shortly after the speech that the share values of the companies that Eisman had criticized dropped immediately and considerably — and that Eisman had “shorted” these stocks, and thus profited handsomely. Whether the share values fell as a result of Eisman’s criticisms is up to a logical reader — or inquiring member of Congress — to determine.

Eisman also penned an extensive op-ed in the New York Post. But he made no disclosures in that piece as to how much he had shorted in the companies he was criticizing and how much he had profited if and when the share values dropped.

Similarly, on Thursday morning, in front of the Senate Health, Education, Labor and Pensions (HELP) Committee, chaired by Sen. Tom Harkin (D-Iowa), Eisman is repeating similar charges. Yet he doesn’t make any specific disclosures that I can discern, at least from the written testimony I have read, as to what stocks he has shorted in the companies he has criticized in the past, and what his current short positions are and how much.

I’ve known Harkin for many years. He is one of the best senators ever. But he has always stood for transparency. I suspect he will demand such full disclosure and transparency this morning from Eisman.

Private-sector colleges are part of the mix of higher-education options available to lower-income kids, representing 2.7 million (about 7 percent) of the current students in higher education. Many of the students would qualify as non-traditional — working adults, low-income students and minorities — and can fairly be described as “higher risk” compared to students at traditional universities.

One report, using U.S. Department of Education data and issued by the Parthenon Group, said that students at two-year private-sector colleges graduate at rates approximately 50 percent higher than public schools. In addition, the graduation rate for four-year private-sector schools is virtually no different from traditional four-year schools — 43 percent compared to 45 percent, according to the Integrated Postsecondary Education Data System (IPEDS).

In a 2009 report, the National Governors Association (NGA) said this: “Private two-year colleges have much higher graduation rates than public two-year colleges, even though they enroll similar students.” The U.S. Department of Education’s National Center for Education Statistics (NCES) data corroborated the NGA’s study: “Four-year career colleges that are predominantly minority-serving exhibit a higher graduation rate than public and private institutions that also serve minority students (47 percent versus 33 percent and 40 percent, respectively).”

And what happens when private-sector colleges graduate their students? A review of the data shows that these students get a job and pay their debts. Default rates of for-profit students are basically the same as students from community colleges (11 percent versus 10 percent, respectively). While it’s true that for-profit students have higher default rates than public and nonprofit colleges, the GAO reported in 2009 that “the characteristics of the students who attend the schools” account for the differences in the loan defaults, not the kinds of institutions these students chose to attend. In other words, lower-income students have higher default rates than wealthier students, whether or not they attend for-profit or non-profit schools.

Duh.

Let’s concede that, in the for-profit college industry, there are bad apples. Congressional oversight and U.S. Department of Education rules give ample ability to focus on fraud, root it out and end it.

But the notion of pervasive, systemic abuse and fraud as suggested by Eisman, more with innuendo than hard facts, may not stand up to scrutiny.

We need oversight and regulation for sure. We also need full disclosure and transparency by short-seller critics — for sure too.

——————————-

This piece appears today, June 23, 2010, in Mr. Davis’s regular weekly column in The Hill, “Purple Nation” and The Daily Caller, an online political website.

Mr. Davis, with his own Washington firm, Lanny J. Davis & Associates PLLC, served as special counsel to President Bill Clinton from 1996-98 and was a member of President George W. Bush’s Privacy and Civil Liberties Oversight Board in 2006-07. He is the author of Scandal: How “Gotcha” Politics Is Destroying America (Palgrave MacMillan 2006).

From the Huffington Post – http://www.huffingtonpost.com/lanny-davis/transparency-by-shorts-on_b_622999.html



I am a graduate of Herzing University – New Orleans Campus. I graduated with my Associates Degree in Business Administration. I am currently working on my Bachelor’s Degree in Human Resources. Herzing University is a wonderful school that taught me the skills that I needed to obtain a great job with pay. I am currently making a great salary as a Business Office Manager in Kenner, Louisiana. Now I have a great career versus working at a fast food job that I did for a long time. Herzing provided excellent instructors that lectured and also brought in real world experience plus hands on training. I was a high school drop out at the age of 16. Becoming a college graduate was a dream for a long time that I never thought would materialize. Herzing gave me the confidence that I needed to become a professional business person. As a citizen I have a right to decide where I want to obtain my education from. I chose Herzing because they have small class sizes and working students like me that I could relate to. I didn’t choose a traditional college for this very reason. I needed to get in and out quickly with a schedule that worked around my job. Herzing provided all of these things for me.

Shelley K, Career College Graduate



THE OBAMA administration is considering rules that could sharply limit the availability of for-profit colleges to American students. 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.

Readers should know that we have a conflict of interest regarding this subject. The Washington Post Co., which owns the Post newspaper and washingtonpost.com, also owns Kaplan University and other for-profit schools of higher education that, according to company officials, could be harmed by the proposed regulations.

But our feelings about career colleges, as the for-profits are often called, are consistent with our editorial policy on education more broadly: that is, the more options available to parents and students, the better. Particularly among some Democrats, that’s not always the prevailing view. But for the most part it has been the philosophy of the Obama administration, which is why an effort to narrow choice in this area would be inconsistent as well as misguided.

In a speech on higher education in Texas this month, President Obama noted that getting more Americans into — and successfully out of — college is an economic imperative. “It’s an economic issue when the unemployment rate for folks who’ve never gone to college is almost double what it is for those who have gone to college,” Mr. Obama said. “Education is an economic issue when nearly eight in 10 new jobs will require workforce training or a higher education by the end of this decade.” But the president noted that in college completion the United States has been “slipping. In a single generation, we’ve fallen from first place to 12th place in college graduation rates for young adults.” He vowed to reverse that trend.

Read the rest of the article at – http://www.washingtonpost.com/wp-dyn/content/article/2010/08/21/AR2010082102468.html

From “The Hill” – http://thehill.com/opinion/letters/115621-limiting-access-to-proprietary-colleges-will-hurt-prospective-students

Harry C. Alford
President/CEO of National Black Chamber of Commerce

In an opinion piece (“Don’t discriminate against proprietary colleges” 8/19), John R. McKernan, Jr., former U.S. Congressman and former Governor (R-Maine), makes a very important point about the Department of Education’s proposed regulation on career colleges: Limiting access to these schools will drastically hurt minority and low-income students. While President Obama is setting goals of increasing graduation rates, the department is creating massive hurdles for students to get there, especially at-risk students who need help the most.

Currently, black unemployment rates are well above the national number and are hovering around 15 percent. It’s a critical time to educate and train students to be prepared for a career upon graduating college.

Unfortunately, if programs at career colleges are shut down because of the proposed rule, we are going to close the door on opportunity and limit higher-education access for thousands of students. I agree with the former governor and hope the department will see the value in giving all students of all backgrounds a chance to succeed.
Washington

Larry Edward Penley, Ph.D.,
former president of Colorado State University and professor emeritus at Arizona State University

Critics of private sector education have been working overtime over the past few months. And despite some bad behavior from a few for-profit providers, there is a substantial misunderstanding of this part of the higher education industry and the real consequences of the Department of Education’s proposed actions.

The Department of Education’s proposed gainful employment rule endeavors to curb rampant student debt; actually it will limit educational opportunities for thousands of students across the country. In his opinion piece “Don’t discriminate against proprietary colleges”, Governor McKernan notes that the purpose of federal student aid is to provide access by helping disadvantaged students reach their potential. Unfortunately, the gainful employment rule will achieve just the opposite – limiting access.

Whereas private sector schools provide low-income and non-traditional students with educational access and opportunity, the gainful employment rule moves to strip that opportunity from some of the most vulnerable students.

The gainful employment rule has the potential to hurt the very students it was written to help, as Governor McKernan notes. Instead of helping, it undermines the true congressional intention of Title IV grants and loans. As a vehicle to enable opportunity in education, Title IV’s purpose is undermined as the gainful employment rule strips away access and becomes fundamentally altered if implemented as currently written.

Instead of imposing a one-size-fits-all solution to combat student debt, the Department of Education and Congress should strive to hear from those most affected by the proposed rule. I fear that the most vulnerable student will be the real losers.
Chandler, Ariz.

Commentary found here – http://caps.fool.com/Blogs/gainful-employment-rules/437132

One of the biggest risks facing publicly traded for-profit educational institutions is the Department of Education’s (DoE) proposed “gainful employment” rule. Under the proposed rule, schools where less than 35% of students are repaying the principal on federal education loans would essentially become ineligible. Schools with 35-45% would face restrictions on their ability to receive these loans. There are some additional income stipulations, where if debt is 8% or less of income, then the above restrictions can be waived.

Notably, the rule is set to only apply to for-profit institutions, not publicly funded 2 or 4-year schools.

The rationale for these rules is noble. The government wants to insure their investment in education is resulting in employment where the student is making enough incremental salary to show the value of the education received.

Private Sector Education Repayment Rates

Shortly after announcing the proposed rules, the DoE released a report that detailed the repayment rates at over 8,400 institutions, both for-profit and not (download it here). This release caused the share prices of many for-profit companies to tank, as several of them fell well below the 35% threshold. The consolidated repayment rates and weighted average federal debt per student at some of the larger companies were:

Corinthian Colleges (COCO) 24% ($6,794)
Strayer (STRA) 25% ($14,908)
Washington Post’s Kaplan Division (WPO) 28% ($7,458)
ITT Education (ESI) 32% ($10,608)
DeVry (DV) 35% ($13,373)
Career Education (CECO) 36% ($10,775)
Apollo Group (APOL) 44% ($13,324)

Those are unquestionably some poor numbers, leading to an explosion of reactionary journalism and “analysis” that immediately concluded that the bear case on for-profit educators, of being “churn and burn” marketing institutions, must be true. In fact, a New York Times article had a quote from Debbie Frankle Cochrane, program director at the Institute for College Access and Success, that read “I think it’s notable that the for-profits are the only type of school where the majority of students are unable to repay their loans”.

With several of these companies a part of Magic Formula Investing, the issue is important to followers of the strategy (as well as investors at large). Is it really true that for-profit institutions are wholly unconcerned with educating their students? Is the problem just that the insatiable greed of capitalism is to blame for low repayment rates at private sector schools?

All Students Are Not The Same

For the purposes of this article, I’ll put aside the objections raised by firms like Strayer that argue that consolidation loans, which are often structured as interest-only or graduated income repayment, are not considered in the repayment rates. That is fine, but if the methodology was the same for all schools, the net effect should be similar and bring down repayment rates for all schools.

More of interest to me was raised on Corinthian’s conference call last Friday. Corinthian raised a very salient point: these companies, particularly the 2-year focused ones like COCO, ITT, DV, and CECO, service a generally low income, minimally educated demographic. In fact, up until this year a quarter of Corinthian’s enrollment was “Ability To Benefit” students, a program set up by the government to allow students with no high school diploma or equivalent to attend higher education. It is of little surprise that ATB students graduated at low rates, defaulted on loans frequently, and were hard to place in jobs (Corinthian is dropping them for 2011). Most programs at these 2-year schools are vocational, and targeted at either older students or younger students that do not possess the desire, SAT test scores, or GPA to be accepted into public universities.

Could it be that the relatively low repayment rates at many of these institutions were due more to the demographic they served as opposed to the supposedly poor quality of education they delivered? I wanted to test the hypothesis.

Is There A Demographic Pattern?

One way to test the demographic theory on the DoE’s data is to look at some 4-year public schools (the ones not ruined by capitalism). Data about average student incomes at public schools is obviously difficult to come by, but reputation is a good place to start. MagicDiligence operates from Baltimore, and I started there with a few inner-city and rural colleges that, by reputation, service low income demographics:

Coppin State University 23% ($11,958)
Morgan State University 23% ($14,765)
University of Maryland, Eastern Shore 31% ($12,433)

Hmmm… all 3 schools have similarly low debt repayment rates. We’re off to a good start, but this is clearly not enough data. Let’s stretch the example out some. Athletic conferences are built around schools with similar demographic populations, so let’s look at the rest of the Mid-Eastern Athletic Conference (MEAC):

Bethune-Cookman 15% ($12,890)
South Carolina State 17% ($15,583)
Savannah State 20% ($12,511)
Delaware State 21% ($15,316)
North Carolina Central 22% ($20,367)
Norfolk State 24% ($13,325)
North Carolina A&T 27% ($12,036)
Howard 32% ($31,789)
Florida A&M 32% ($18,804)
Hampton 42% ($17,377)

Well, this is interesting! The entire conference of schools have repayment rates below 45%, and only Hampton even clears the DoE’s 35% restricted threshold. 7 schools have lower repayment rates than Corinthian, the worst of the for-profits (1 is the same). And all are sticking the federal government with more than double the debt of the 2-year schools (challenging another myth that for-profits are way more expensive than public schools).

So, the MEAC should be shut down by the DoE and shorted by Steve Einsman. But is this an anomaly? What if we look at another conference of low income demographic public universities? Let’s take the Southwest Athletic Conference (SWAC):

Mississippi Valley State 8% ($19,143)
Grambling State 12% ($17,111)
Jackson State University 12% ($20,433)
Alabama State 14% ($15,102)
Arkansas Pine Bluff 14% ($13,559)
Alcorn State 15% ($15,398)
Southern 18% ($19,621)
Prairie View A&M 20% ($20,833)
Alabama A&M 21% ($18,186)
Texas Southern 23% ($17,931)

That’s even worse than the MEAC! The entire conference, 10 publicly funded schools, with repayment rates well below Corinthian’s (drastically below ITT and DeVry), and with more than double the repayment obligations.

Clearly, Debbie Frankle Cochrane is dead wrong when she asserts that only for-profit schools have students that cannot repay their debt. But do we really believe that all of these schools are “churn and burn” institutions, uninterested in the outcomes for students? I think it is unlikely that is the case.

Summation

While I realize that this is by no means an exhaustive analysis, I think it is more then enough to show that demographics matter to repayment rates – and they matter a lot. The “best and brightest”, with well-to-do families that pay a significant portion of their bills, should not be the standard for which a student who went to work out of high school to support their family is.

Furthermore, the “gainful employment” rule seems to do a very poor job at weeding out the bad apples in for-profit education – the ones that are not truly providing valuable instruction. In fact, for these low income students, the trade-based for-profit schools are a much better value than the 4-year publicly subsidized schools. They are providing jobs that allow higher repayment rates and leave students with much lower debt burdens, according to the DoE’s own data!

A better plan would be to simply do what has been done – limit federal aid based on cohort default rates. This system has been fairly successful, penalizing a school when cohort defaults exceed 25% for three consecutive years (or 40% for one year). Even lowering these rates by a few percentage points would help the bad apples to shape up. If the DoE is really serious about pushing “gainful employment”, for which no positive outcome studies exist, a better idea is to include consolidation loans that are current. It is unfair to penalize any school (private or public) for loans that are current, regardless of the repayment schedule.

I fear that, if passed, all this rule will succeed in is limiting educational opportunities for low income students looking to better their position in life. We need a better way to weed out what schools are providing value vs. those that are not.
Disclosure: Steve owns APOL, COCO, ESI

To view the full analysis click here – http://www.faireducation.org/assets/taxpayer-analysis.pdf

1. The proposed regulation will limit access to higher education for hundreds of thousands of non-traditional students (primarily working adults and lower income students) at a time when job creation, often requiring skills training or retraining, is a paramount national public policy goal.

  • Student demand for professional and career education is at historically high levels partly because of the transformation of the U.S. economy from a production-based to a skilled services-based economy and partly because of the high unemployment rate.
  • At this time, only proprietary (i.e., for-profit) colleges and universities have the resources to increase capacity to meet the demand. Alternative educational paths for students seeking such training do not exist because those institutions, e.g., community colleges, are facing substantial funding shortfalls.President Obama has set a goal of regaining the nation’s number one rank internationally for the highest proportion of college graduates by 2020. Even critics concede that we cannot reach this goal without a robust proprietary sector of higher education. The Gainful Employment metric is directly at odds with this national policy goal.

2. The regulation will eliminate high quality programs that offer graduates a lifetime of improved earnings because the initial post-graduation earnings in those careers are low.

  • According to data released by the Department of Education (“ED”), if the same metric were applied to traditional medical schools, most would fail. An analysis of the data provided show that institutions in the private not-for-profit and public sector that serve populations similar to those attending private sector colleges and universities (i.e. non-traditional, minority, and lower socioeconomic populations) have similar repayment rates. Yet, ED is targeting just one sector.

3. The regulation falls most harshly on low income and minority students.

  • Schools in our sector serve proportionately more low income and minority students who are under-represented in postsecondary education than the traditional sector. This regulation implicitly discriminates against African American and Hispanic students by eliminating program choice and access.

4. The proposed rule, which pegs the calculation of the debt-to-income ratio on earnings in the first three years post graduation, is heavily biased against longer term (baccalaureate and above) and costlier (e.g., health care) programs, because students in those programs have to borrow more in the aggregate but their earnings differential from those with lesser degrees do not emerge until after the first three years after graduation.

  • Economists have shown that it takes seven years or more after graduation, not three years, for those with higher degrees to begin to experience the real financial advantage of additional education in the marketplace.
  • The explanation given by ED for using the first three years of earnings is that the gap in earnings in the first three years is about the same as the gap in later years. This measure of the gap in earnings does not measure the gap in earnings between those with a high school degree and those with some postsecondary education, but rather only the level of earnings. In ED’s explanation it is admitted that the level of earnings increases significantly even over the first ten years after school. Whether the gap, measured this way, stays the same is not relevant to the proposed rule.

5. Although the proposed regulation is lengthy and complex, it is still basically the same concept ED previously proposed that created such strong opposition when it surfaced in January 2010—programs must show a debt to income ratio of 8% or less to continue. In this version of the regulation, ED simply recognized the need for adding a more nuanced measure of income, namely discretionary income.

  • Most independent research by authorities such as Dr. Sandy Baum and Mr. Mark Kantrowitz has shown that an 8% metric, borrowed from other types of consumer debt metrics, is wrong for higher education.
  • While the addition of the discretionary income to the debt-to-income metric results in fewer programs being impacted, the vast majority that do not meet the flawed 8% metric would still fail and a majority of programs that do not meet the 8-12% metric would remain in the restricted category.

6. The regulation creates a complex taxpayer funded regulatory regime within ED without a sufficient basis of research to assess its national impact.

  • ED does not have the current infrastructure to monitor and enforce this complex regulation and significant resources will have to be expended to implement this new regime.
  • ED selectively cites research findings and interprets experts on financial aid issues to support and promote its flawed proposal.

7. ED’s Gainful Employment metric exceeds statutory authority by going well beyond the definition of the term “gainful employment.”

  • It provides new authority for ED to pre-approve all new programs.
  • It uses a narrowly defined repayment rate to measure acceptable levels of debt for the first time rather than the congressionally sanctioned and well-tested cohort default rate.
  • It does not permit students using congressionally supported debt management programs such as deferments or forbearances, or who choose lower-wage jobs in social service fields and rely on the Income Based Repayment Plan, to be counted in the repayment calculation, although those are fully legitimate means of repayment for any graduate.

8. Although ED offers the repayment rate test as an alternative qualification test for programs that fail the debt to income ratio metric, by ED’s own analysis that alternative test will benefit only a tiny fraction of programs and arbitrarily hurt smaller programs and small schools.
9. The repayment rate test may often be the only test available to smaller programs and, as a result, small programs, often at smaller schools, would suffer random and severe consequences.

  • Small programs are more likely to be unable to meet the debt ratio metric due to small student numbers, and will have to rely on the repayment test according to ED.
  • As a result, repayment problems by just a few students could eliminate the entire program. The repayment test results for small programs would be random and impacted by economic volatility at much higher rates than larger programs, for no quality reason.

10. The proposed regulation does not balance risks and interests in pursuit of a common policy goal, but instead appears to advance an agenda unrelated to student debt.

  • Institutions bear all the risks of repayment without taking into account student populations served.
  • Institutions will know whether a program fails only after it fails because only ED will have access to the repayment information and income data (using social security reported earnings) used to calculate the metric.
  • The retroactive application of the regulation violates a basic principle of legal fairness and points to the agenda of ED to eliminate, not reform, programs.
  • Institutions will have no way to monitor compliance and make adjustments until after a program has failed the metrics.
  • If a single program is out of compliance with the metric, the entire institution can be placed on provisional certification, limiting the institution’s ability to add new programs and increase enrollments. The Department has stated that when reviewing an institution’s application for recertification of its program participation agreement – the school’s agreement with ED for participating in the title IV Federal student aid programs – they will take into consideration the fact that an institution is provisionally certified due to being out of compliance with one of the gainful employment measures for one program. Thus, the institution’s participation in the title IV programs can be terminated due to one program not meeting the gainful employment provision.
  • By excluding students utilizing deferments, forbearances, and in some cases IBR from the repayment calculation, institutions will have to choose between assisting students in selecting the best method of managing their student loan repayments or risking running afoul of the metric.
  • Institutions will lose their right to due process because without access to the income data (out of privacy concerns for the students) they will not be able to defend themselves against action by ED.
  • The requirement that institutions on restricted status obtain testimonials from an employer unaffiliated with an institution that the program aligns with expected job skills is weighted against institutions. While many private sector institutions have well-established relationships with employers, they may not be permitted to speak on behalf of the school and the students they have hired. An unaffiliated employer has no reason to take the time and effort needed to support a program.

11. The proposal is social engineering at its worst.

  • ED is telling lower income students who rely on title IV Federal aid to assist them in achieving their postsecondary dreams where they can go to school, what they can study, and what careers they can enter. A student who can afford to pay out of pocket can make his/her own choices.
  • ED states institutions could comply with the metric by lowering their tuition. Not only is this a back-door way to control tuition pricing, it is a false premise. Students will still be able to take out the same amount of federal loans even if a school lowers tuition because institutions are not permitted to limit loan eligibility even when that eligibility far exceeds institutional charges. Also, institutions would run afoul of the 90-10 rule if they lowered their tuition to the degree ED infers in the proposed regulation.
  • By placing an entire institution on provisional certification if a single program is out of compliance with the proposed gainful employment metric, the regulation stunts one of the great advantages of private sector education for our economy: the rapid development of new programs closely tied to changing workforce needs.

12. CCA supports substantially increased, and yet easy to understand, consumer disclosures to prospective students that gives detailed information on the costs of the educational program, the likely occupations in which the student may work after graduation, the overall loan burden the student is likely to have at graduation (including the predicted monthly repayments), and the range of earnings in those occupations, as determined by the U.S. Department of Labor.

  • Increased consumer information, not a complex and convoluted set of metrics, is the direction ED should take to address concerns that prospective students do not fully appreciate the risks and rewards of entering an educational program.

The first time I remember a person in my life telling my I was “worthless, stupid, and wouldn’t add up to anything” is when I was 8 years old. I put on a nursing outfit and walked down the stairs to show everyone that this is what I wanted to be when I grew up. I got down the last stairs and was told to go upstairs and take it off because I would never be a nurse because I was worthless and stupid. I have an 8 year old son now and I think of those damaging words everyday while looking at him and wondering how can an adult say something like that to a child.

I grew up in foster care, my mother died when I was three and my father turned to alcohol to drown his grief. I just wanted to let you guys know that the hateful words did not come from my family, but from two teachers that were raising me. Because of that faithful day I really didn’t have a passion in school and had no one with patients to teach me what I needed to learn to be able to go to further my education, and daily I heard though hateful words. I moved to Florida when I was 21 years old, and began my many jobs, and by many I mean in 17 years I had 17 jobs. Working retail, optical labs, moving companies, telephone operator, etc. I wanted to be one of though happy people that I saw driving to work everyday in their expensive cars, they just seemed to have a life that I wanted.

I had my son in 2002, and was in a very violent relationship. I had left my son’s father 7 times in 16 months, and then the faithful day happened, he took his rage out on our 16 month old son. I left and moved back to Pennsylvania and stayed in a domestic violence shelter, not my first, and that is where I knew that I needed to go back to school and do something that I could support both my son and myself.

My current college was not my first college, I’m not going to name the school, but it was a very awful experience for me, and after 6 months I decided that college wasn’t for me and that everyone was right, I was stupid and worthless. Well one day looking online I saw an ad for Medical Billing and Coding, I started thinking about it and I answered the ad, well after answering the ad it took only about 5 minutes and I got my first phone call. It was Trace, I start to laugh because of the 5 minutes it took him to call me. Well during our first conversation I learned so much, and I can tell you he wasn’t just selling the school to me, he was talking to me about what I wanted to do and earning my trust. After an hour of talking with Trace I hung up the phone and I felt like I just got one of the biggest pep talks and I finally felt good about myself.

Well Trace and I had many phone calls after that and worked very patiently with me about getting me signed up. I started my first classes in March and I have never looked back, and never will, my eyes are set for 2012 when I graduate with my Associated Degree in Medical Billing and Coding, and I have also decided to keep going and earn my Bachelor Degree in Medical Health Management and then looking forward to getting my Masters. Everyone deserves an education, and at my school your not just a number, YOUR FAMILY!!! 🙂 I also wanted to let everyone know that they were wrong about me, that I’m not stupid and worthless, as of this semester, which is my third I have gotten all A’s in my classes.

Ann Q.

Millions of college students are getting ready to go back to school. Millions more adult students attending year-round institutions are about to enter their next term. Among the common questions: Will this all be worth it? Having a clearer picture would sure be nice.

The U.S. Department of Education is trying to give students that clearer picture and protection from making what it deems could be wrong choices. How? With its new regulation called “Gainful Employment.”

It would apply a formula to programs in career-oriented majors, like healthcare, business and education to name a few, to decide which ones lead to ‘Gainful Employment.’ Those that do not would be eliminated. Students would also get concrete information about graduation rates, employment rates, potential salaries in their chosen field, loan debt info and the like before they choose their school. This information should help students analyze their risk/reward scenario.

The disclosure requirement is an excellent idea; it helps students compare their options. It
should be implemented at all schools. As for setting standards to see if programs yield Gainful Employment? It could be a good idea, if the regulation’s measurements and mechanisms are derived correctly. But that’s not easy.

For example, one key factor in recent draft regulations – a specially calculated federal student-loan repayment rate – shows many fine and varied institutions from Alabama State University to Harvard University Medical School dramatically failing that metric. This points to the proposed approach being somehow flawed.

By Randy Pronto, read the rest here – http://www.huffingtonpost.com/randy-proto/gainful-employment_b_683521.html

By Mike Lillis – 08/12/10 09:00 AM ET

As Congress and the White House eye ways to rein in the exploding for-profit education business, some industry leaders are warning policymakers: Don’t overstep.

Recently proposed Department of Education (DOE) rules could hobble for-profit medical colleges at a time when those schools are feeding more and more of the nation’s ever-rising demand for health professionals, cautioned Randy Proto, CEO of the American Institute, a New York-based company that runs schools in Florida, New Jersey and Connecticut.

The rules would slow the growth of career colleges, Proto said in a recent phone interview, and “thwart our ability to meet that need.”

Broadly, Proto wondered why the administration has singled out for-profit schools, while largely excluding traditional nonprofit institutions. That discrepancy, he warned, puts the for-profits at a distinct disadvantage — something that could harm the lower-income students who tend to enroll disproportionately in career schools.

The administration “is trying to define thresholds for certain types of programs and not others,” he said. “The rules are being applied unequally.”

The comments are timely. Career colleges have been under fire after a series of reports suggested that aggressive recruiting, shady marketing practices — even fraud — are common within the industry.

Just last week, for instance, the Government Accountability Office (GAO) issued a report that outlined cases where for-profit recruiters obscured the true costs to attend institutions; exaggerated post-graduation salaries and employability in the fields students were entering; and encouraged applicants to lie on submission forms to tap federal loans for which they weren’t eligible.

Read the rest of the story here.

Gainful Employment Exec Summary

By Mike Lillis – 08/19/10 03:20 PM ET

The U.S. Chamber of Commerce this week is slamming a new White House proposal designed to ensure that career college students are trained for jobs lucrative enough to pay back their federal loans — an issue for the healthcare industry, because a huge percentage of medical professionals are trained at for-profit institutions.

“This ill-conceived regulation will work against job creation, only resulting in jobs lost and fewer Americans getting the post-secondary education and training they need to secure work in today’s economy,” Thomas Donohue, the Chamber’s president and CEO, wrote in a letter to the Department of Education (DOE) Wednesday.

Read the rest of the article here:

http://thehill.com/blogs/healthwatch/corporate-news/115065-business-lobby-blasts-new-gainful-employment-proposal-for-career-colleges

Here is the letter:

2010_08_18_Gainful_Employment_fromUSCC