Posts Tagged ‘unemployment’

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.

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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



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Especially in a down economy, and with less-privileged students of the sort for-profit colleges serve, this rule would disqualify about 307,000 students, according to the Department of Education‘s own estimates. Even worse, the government would change the rules for what qualifies as a “default.” Students still current on paying off their loan interest – with Education Department encouragement for that arrangement – would be considered in default if they have not yet paid off any principal. In short, the new rule would punish students and colleges for abiding by the old rules.

The scheme would make for-profit colleges less attractive and probably would lead to many of the 307,000 affected students being dumped into state-sponsored universities and community colleges. Advocates for for-profit schools offer convincing arguments why this is bad social policy. First, they say loan defaults at these colleges aren’t all that high: about $1 billion annually out of more than $600 billion in outstanding loans. The rate of default is almost exactly the same as for students from the same socioeconomic strata at state colleges.

Second, state-sponsored colleges often can’t serve the educational needs of students who choose for-profit schools. For out-of-state students, they cost more by an average of $4,374. In-state, the taxpayer subsidies for state-sponsored colleges are about $4,500 higher per student than at for-profits, even after accounting for loan defaults. Moreover, the for-profits uniquely offer flexible class scheduling that “regular” colleges rarely match. For poor and minority students often fitting classes around full-time jobs or other hurdles, these flexible schedules can mean the difference between getting a college degree or not.

http://www.cca-now.com/2010/08/washington-times-defends-for-profit.html

From a privately held university: “One of our Medical Assisting students who is graduating this August 2010 has been working as a fulltime employee since March at the medical facility that she fulfilled both her proctored practicum and externship requirements at, which is very exciting and an ideal situation for the student.  She wrote in an email to me about her “awesome experience” with our online university and told me that she’s had many people ask about her education and that she’s personally been spreading the word about us.  Her externship site gave her a great evaluation as well (all “Excellent” performance ratings).   This student is a prime example of someone who may not have had the time, budget or resources to attend a traditional four-year university but through our college has earned a degree while gaining experience in the medical field AND came out with a full-time job before she even graduated.”

From the Washington Post

If we need more graduates why is Congress pushing for this gainful employment regulation?  Career Colleges train workers!

Washington Post Staff Writer
Monday, August 9, 2010; 3:05 PM

AUSTIN — Saying that the country’s long-term economic recovery depends on a wholesale improvement in education, President Obama on Monday pledged his administration’s best efforts toward increasing the number of college graduates.

“Lifting graduation rates. Preparing our graduates to succeed in this economy. Making college affordable. That’s how we’ll put a higher education within reach for anyone who wants it,” Obama said in prepared remarks for a speech here Monday. “That’s how we’ll reach our goal of once again leading the world in college graduation rates by the end of this decade.”

As his Democratic allies in Congress face the voters this fall, one of Obama’s chief tasks is to remind voters why they chose him for the White House back in 2008. And that involves reminding them what he’s accomplished, particularly when those accomplishments have gone largely unheralded.

The speech marks a return to the University of Texas, where Obama rallied as a candidate with more than 20,000 supporters during the campaign, to tout his administration’s higher education record.

The government in the past 20 months has revamped the student loan system, done away with the banks that used to serve as middlemen and redirected about $60 billion to increased Pell Grants for college students and other education programs. Officials have also added money to the community college system, created a new tax credit for college tuition and simplified student aid forms.

Obama, speaking in a UT gymnasium, declared education to be “the economic issue of our times.”

“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,” he said. “It’s an economic issue when nearly eight in 10 new jobs will require workforce training or a higher education by the end of this decade. It’s an economic issue when we know beyond a shadow of a doubt that countries that out-educate us today will out-compete us tomorrow.”

The president did not announce any new proposals in his speech but sought to summarize his administration’s higher education efforts.

The speech is “primarily a recap of what we’ve done,” said communications director Dan Pfeiffer, though he added that the president was attempting to place those accomplishments within the “context of dealing with the economy.”

That’s important as the Democrats seek a reaffirmation of their policies at a time when many people are struggling with unemployment in a sluggish recovery.

White House officials said the president’s speech was designed to highlight the administration’s overriding goal when it comes to higher education: making the United States No. 1 in the proportion of students who graduate from college.

“Today we have flat-lined, while other countries have passed us by,” Education Secretary Arne Duncan said. He called the president’s goal of leading the world in proportion of graduates by 2020 “the North Star for all of our educational initiatives.”

Duncan and other officials said the United States has a long way to go, with only 40 percent of Americans between the ages of 25 and 34 having earned college degrees. To lead the world, Obama wants that proportion to be 60 percent.

That would mean adding 11 million more college graduates to the ranks of that age cohort. Even assuming some additional graduates just from population growth, officials predicted the country will have to find a way to add more than 8 million new college graduates.

“This isn’t just a target for target’s sake,” said Cecilia Rouse, a member of the president’s council of economic advisers. “It’s really important that we have the workers that will compete in the 21st century.”