Posts Tagged ‘for profit’

The U.S. Department of Education is trying to create a clear financial picture for students with a recently developed, not yet implemented regulation called “Gainful Employment.” The Gainful Employment regulation along with many other new regulations are set to be put into action sometime in 2011. These new regulations have been conceived in response to the growing pressure over for-profit education’s questionable recruitment practices.

What the U.S.D.E. hopes to accomplish with these new policies is to make students more informed about the financials of their degree programs. Simply defined, the regulation will “apply a formula to programs in career-oriented majors, like healthcare, business and education 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 U.S.D.E. has defined “gainful employment” as employment that provides students with the income they need to successfully re-pay their education debts.

Randy Proto, CEO of the American Institutes school group which operates healthcare-based career schools in a number of states, says that the disclosure agreement found in the “gainful employment” regulation is an “excellent idea.” But, for the regulation to be effective, Proto suggests that the formulas established to decipher the “gainful employment” statistics must “account for differences in: student populations served, programmatic goals, national economic conditions and many other factors.”

As it is envisioned now, the “gainful employment” regulations would only apply to for-profit education institutions and a minute percentage of students in non-degree programs at ground schools. So, Proto asks, what about the “7.5 million additional students enrolled in career-oriented degree majors at public and private universities? Why leave any students and programs out of its reach? If the proposed regulation is a good idea and provides the anticipated benefits and protections, it should be broadly applied.”

Proto, clearly a proponent of for-profit education, supports the “gainful employment” measure, but would also like to see regulations emplaced across the board to ensure equality, not just at for-profit online schools or career training institutions.

Proto seems to be on the right track. “Gainful employment” regulations are a good idea but shouldn’t be enforced only at for-profit schools. All students should be able to benefit from the information “gainful employment” statistics will provide. Says Proto, “this is a real opportunity for higher education. But only if it is ‘Gainful Employment’ for all students.”


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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.

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.

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

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

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?

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.

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.

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

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?


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.

The Department’s proposed rules for “gainful employment” underestimate the number of borrowers who are repaying their student loans, according to a recent policy analysis by Mark Kantrowitz, publisher of and

If the Department overestimates the number of students who are not in repayment, some programs could be unfairly penalized for not meeting the proposed gainful employment requirements. In his analysis, The Impact of ‘Persistence of Interest’ on Loan Repayment Rates, Kantrowitz contends that the Department’s proposal “fails to give credit for all borrowers who are making full payments on their loans.”

The Department’s proposal would include an annual loan repayment rate test that would measure the percentage of borrowers who are successfully reducing the principal of their FFEL and Direct Loans. The Department would measure whether borrowers are actually repaying their loans by comparing snapshots of a borrower’s principal balance at the start and end of the most recent federal fiscal year. But, since loan payments are applied to accrued interest before principal, borrowers could be making full loan payments on their loans without actually paying down their loan debt, according to Kantrowitz.
Read the rest –

To view the full analysis click here –

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 –

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.