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Stephanie Anyaeche
Anyaeche, Stephanie
Wednesday, July 21, 2010 11 :09 AM
Arsenault, Leigh
For profrt stories
For Profit stories.doc
Intern for Financial Education and Student Aid
Office of the Secretary
U.S. Department of Education
stephanie.anyaeche@ed.gov
202.401.0425 (t)
202.205.0063 (f)
Lawsuit Accuses U. of Phoenix of Protecting Its Default Rate at Students' Expense
January 19, 2009
http://chronicle.com/article/Lawsuit-Accuses-U-of-Phoen/1450/
Former students at the University ofPhoenix are filing a lawsuit against the school for using deceptive
practices to mask the status of student-loan defaults. The University of Phoenix is being charged with
paying off loans from students who withdraw from the school soon after they enroll, and then eliciting
payments from students under more difficult terms than the original loan agreement. The students filing
the lawsuit obtained federal loans through banks and after withdrawing from the school, the University
of Phoenix sent the dollars back to the original lender, without consent from the students, and sought to
collect tuition directly from the students under more onerous conditions.
USA Today: For-profit Colleges' Increased Lending Prompts Concerns by Justin Pope
August 2009
http://www.usatoday.com/news/education/2009-08-15-profit-college-lending N.htm
Jessica Rosales was seventeen when she enrolled at Westwood, but dropped after one term. She was told
she owed $18,000, half of which was in collection and interest fees. Ms. Rosales states she was mislead
by the school about the source of her student aid and that she did not enter into a loan agreement with
the school. The interest on the loan has been forgiven; however, the bill remains on her credit report, she
receives collection calls and is having trouble securing a mortgage.
Washington Monthly: The Subprime Student Loan Racket by Stephen Burd
November/December 2009
http://www. washingtonmon thly.com/features/2 009/0911. bu rd. html
Excerpt:
Since graduating in 2008, Leveque has been unable to find a nursing job, perhaps because she never
learned how to perform basic tasks such as giving shots. Instead, she works as an occasional home
health care aid earning at the most $1,200 a month-not enough to pay her rent on the cramped
apartment she shares with her sister and son or keep gas in her car, much less pay off her student loans.
As a result her loan balance has ballooned to $40,000, and she has no idea how she will ever pay it off
"My credit is ruined," Leveque says, "I made one mistake, and I will be paying for it for the rest of my
life."
As for-profit colleges flourish, focus turns to gtads' success and debt
January 21, 2010
http://www. consumerwarningnetwork.com/2010/01/21/for-profit-colleges-under-the-microscope-as-
students-complain/
23 year old Zarina Musheyera, graduated from Westwood College with a fashion
merchandising degree in 2008. Zarina now owes more than $60,000 in debt after not being able to find a
job in her field of study. Her current job does provide enough support to enable Zarina to meet her
monthly loan payment, which is expected to reach $1000 a month. Her student loan debt has maxed out
her credit cards and has made it impossible for her to obtain a loan to buy a car. Thirty-eight year old,
William Tooley is another former student at Westwood College. William enrolled in the school's
$68,380 game software development program and had dreams of attending an engineering graduate
program after graduating from Westwood. William states he was under the impression from admissions
officers and advisors that his attendance at Westwood would allow him to apply for graduate degree
programs at other schools. Unfortunately, William was denied acceptance to engineering graduate
programs because his degree :from Westwood was not from a regionally accredited program.
McClatchy-Tribune News Service: A lesson they won't forget: For-Profit School error costs
students certification
June 22,2010
http:/ /articles.chicagotribune.com/201 0-06-22/news/ct-met-for-profit-schools-201 00622 1 for-
profit-health-careers-illinois-school
Denise Parnell, a single mother and former student at the Illinois School of Health Careers, enrolled at
ISHC under the impression that attending the school wouJd allow her to become a certified nursing
assistant. After investing more than $13,000, including $8,546 in federal loans, Ms. Parnell was
informed by the school that she would not be able to take the state certified nursing assistant's exam
because the schools program was not approved by the TI!inois Department ofPublic Health. Ms. Parnell
along with former ISHC students are filing a lawsuit against the school claiming they were given
material explicitly stating she would be qualified to take the state certified exam. The school has offered
to pay for students to attend an approved certified nursing assistant' s program in the Chicago area; in
addition to paying $1500 for additional expenses.
Chicago Tribune: Senator Slams for profit colleges
June 30, 2010
http://www.chicagotribune.com/news/ct-met-durbin-criticizes-for-profit-c20100630.0.5477564.story
Senator Dick Durbin cites how for profit colleges serve 2.6 million students, which is up from the
recorded 673,000 in 2000. Students attending for profits are reported as receiving $26.5 billion in federal
aid, and the article also cites how for-profit schools make up 10% of all students in higher education,
however, they receive 25% ofPell Grant dollars. Durbin states that bad for-profit schools should be
sanctioned and required to report graduation and job placement rated.
Filed lawsuit against American International University AID
Non-article (Filed Lawsuit Website)
http://aiulawsuit.com/
AIU is being sued for committing :fraud on a federally appointed accreditation authority, Southern
Association of Colleges and Schools (SACS) to receive accreditation and federal funds. The school is
being charged with committing fraud against students through selective enrollment, falsely stating that
an AIU education increases graduates' income and opportunities and falsifying credibility of AIU
professors
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Arsenault, Leigh
Thursday, September 09, 201 o 3:02 PM
Kvaal, James
9-9-10 The Economist.docx
FYI-Article on for-profits, gainful, in the Economist.
From: Arsenault, Leigh
Sent:
To:
Tuesday, January 26, 2010 6:45PM
Talbot, Christine
Cc: Ceja, Alejandra; Ferguson, Keith
Subject: RE: Jan. 8 2010- highered press clippings
Hi Christine, would you add Alejandra Ceja and Keith Ferguson to the daily press clips? Thanks so much!
Leigh
Office of the Under Secretary
U.S. Department of Education
leigh .a rse na u It @ed .gov
From: Talbot, Christine
Sent: Friday, January 08, 2010 8:57AM
To: Smith, Zakiya; Laitinen, Amy; Arsenault, Leigh; Plotkin, Hal; Martin, Phil; Adams, Kristen
Subject: Jan. 8 2010 - higher ed press clippings
Kalamazoo Valley Community College's Wind Academy Receives Federal Funding. The Kalamazoo News (1/8, Ciokajlo}
reports, "Kalamazoo Valley Community College's Wind Turbine Technician Academy has garnered a $550,000
appropriation" from ED. The funding will be used "purchase specialized training equipment for the academy. Based in
the college's Michigan Technical Education Center, the 26-week program graduates its first technicians in April and
welcomes its second class on May 17."
WWJ-AM Southfield, Ml (1/7) reported, ''The academy, which will graduate its first technicians on April 9, is certified by
Bildungszentrum fur Erneuerebare Energien (BZEE)." The BZEE "was created and supported by major wind-turbine
manufacturers, component makers, and enterprises that provide operation and maintenance services," and according to
the article "has become the leading trainer for wind-turbine technicians across Europe and now in Asia."
Poll Finds Uptick In Recruitment Of College Graduates. Under the headline "More Employers Plan To Increase Hiring Of
College Graduates," the Wall Street Journal (1/7, Murray) "Real Time Economics" blog reported that the National
Association of Colleges and Employers' index for college hiring is up from last month. Further, a recent poll of employers
found a rise in the percentage that planned to increase their hiring of recent college graduates. There has also been an
uptick in recruiting activity index. However, noted Marilyn Mackes, the NACE's executive director, "it's also important to
recognize that we're still not where we were two years ago, in terms of recruiting activity."
Editorial: Schools Before Prisons. Of the proposed California constitutional amendment, The Los Angeles Times (1/7,
776K) says, "The governor has his priorities in order," but he "seems to forget how we got to this point .... California
voted itself into this mess .... The Governor's goal is laudable, and we appreciate his call for an unmistakable statement
by Californians of their support for higher-education funding. But ballot-box budgeting is not the cure. It is the disease."
Educators intrigued by proposal to link college, prison spending
Contra Costa Times, San Jose, Calif.
January 7, 2010
In his State of the State address, Gov. Arnold Schwarzenegger proposed a constitutional amendment guaranteeing at
least 10 percent of the California budget for the University of California and California State University systems,
gradually scaling back prison funding to reach that number. Education leaders-- and even some critics-- called t he plan
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"bold" and "visionary." But some said the proposal would be another sign of the state's bad habit of tying its hands
when it comes to the budget.
Related Material
Read the full article ...
Funding prison college programs would cut recidivism and save state money
Detroit Free Press - Opinion Piece
January 7, 2010
Currently, state and federal efforts to educate prisoners are inadequate. Before 1994, prisoners could use f ederal Pel!
grants to pay for college classes. But Congress and the Clinton administration prohibited inmates from receiving the
grants, even though prisoners received less than 1% of them.
Related Material
Read the full article ...
Holding Colleges Accountable: Can Success Be Measured?
Time Magazine - Interview
January 7, 2010
Kevin Carey, the policy director at Washington think tank Education Sector, wrote an essay for the December issue of
Democracy that is making waves in the higher-ed world because it describes how lots of colleges are keeping
confidential a lot of student-assessment data. He spoke with TIME education correspondent Gilbert Cruz about why
parents- and public officials -should demand more accountability from colleges.
Related Material
Read the full article ...
Veteran College Official Creates Scholarship Honoring Late Wife, a Pioneering Journalist
Chronicle of Higher Education News Blog
January 8, 2010
C. Peter Magrath, president for 13 years of the organization now known as the Association of Public and Land-Grant
Universities, has established a scholarship for a woman studying journalism at the University of Texas at Austin in
memory of his wife Deborah Howell, 68, who was killed in an accident last week in New Zealand, where the two were on
vacation.
Related Material
Read the full article ...
Law Schools Get Advice on Helping Students Cope With Tight Job Market
By Katherine Mangan
New Orleans
Law schools have a responsibility to teach students how to be emotionally resilient and fiscally sensible at a time when
high-paying jobs are hard to come by and student-loan debts are mounting, several speakers asserted at the annual
meeting of the Association of American Law Schools, which began here on Thursday.
Students who have spent summers working for law firms only to have job offers from those firms rescinded or delayed
often become disillusioned or angry, said Pam Occhipinti, director of career services at Loyola University New Orleans's
College of Law.
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The full story can be accessed here.
Hawaii Faculty Union Asks Court to Block Pay Cuts and Order Arbitration
The union for faculty members at the University of Hawaii filed a motion today asking a state court to block pay cuts
recently announced by the system's president, M.R.C. Greenwood. Ms. Greenwood has agreed to personally join in a
mediation session with the union over stalled contract talks, but she has rejected a union grievance demanding that she
retract the salary cuts, which would show up in checks issued January 15. The union now wants the court to temporarily
halt the cuts and order arbitration of its demands.
Massachusetts College Amends Ban on Face Coverings, Allowing a Religious Exemption
The Massachusetts College of Pharmacy and Health Sciences has amended a controversial policy that banned face
coverings to allow for a religious exemption, The Boston Globe reported. The revision came a day after a Muslim-rights
group asked the U.S. Equal Employment Opportunity Commission to investigate whether the policy violated federal anti-
discrimination laws. The college had said the ban-- which applied to any head covering that obscured the face, including
the veils worn by some Muslim women --was intended as a campus-safety precaution.
State Tax Revenues Fall Furthest in the West
State tax revenues declined by nearly 11 percent over all in the third quarter of 2009, the third consecutive quarter of
double-digit declines, according to a report released today by the Nelson A. Rockefeller Institute of Government at the
State University of New York at Albany. But states in the Western half of the United States fell further into the red than
the rest of the country, with likely implications for higher education and other recipients of state funds. Total tax
revenues fell more than 19 percent in the Southwestern states of Arizona, New Mexico, Oklahoma, and Texas in the
quarter that ended in September. The 11 states in the Southeast had the smallest total decline in tax revenues, 7.5
percent, over that period.
Key Mississippi Legislators Oppose Governor's Plan to Merge Universities
Gov. Haley Barbour's proposal to merge the administrations of several universities in Mississippi to save money has little
chance of passing in the state's House of Representatives, said the chairman of that chamber's Universities and Colleges
Committee, according to The Commercial Appeal, a Memphis newspaper. The state's Senate, however, may still be open
to considering the proposed merger, the paper reported. The plan, which among other things would merge three
historically black universities, has drawn sharp criticism.
Debate Over Future of British Doctoral Education
With British universities facing deep budget cuts, some leading research universities are proposing that the government
support doctoral education only when students are enrolled in highly ranked departments, Times Higher Education
reported. Those advocating the change say that it will preserve the quality of the best programs, while critics are
shouting that the idea is elitist and will squelch younger programs with great potential.
Text Generation
January 8, 2010
Since some professors began suggesting that Twitter could be used not just as a recreational lark but as a potentially
revolutionary teaching tool, purists and futurists have debated whether academe should swim against the cultural
current toward limited, text-based communication, or adapt to it.
Academic libraries increasingly seem to be choosing the latter option. As students raised on text-messaging begin to
populate the halls of academe, a number of libraries have begun making their reference librarians reachable not just via
e-mail and live chat, but text messages sent from students' mobile devices.
The full story can be accessed here.
Is Google Good for History?
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January 8, 2010
SAN DIEGO-- At a discussion of "Is Google Good for History?" here Thursday, there weren't really any firm "No" answers.
Even the harshest critic here of Google's historic book digitization project confessed to using it for his research and
making valuable finds with the tool.
But that doesn't mean Google Books wasn't criticized. In a discussion at the annual meeting of the American Historical
Association, scholars questioned the way Google has organized the books project and whether it was doing enough in
quality control. At the same time, though, many comments suggested deep appreciation for the company's efforts. And
some suggested that Google has become something of an unfair target for academics who pay little attention as other
companies charge college and university libraries high fees for their materials. Over the course of the discussion, not
only did Google take a few hits, but so did librarians and professors (although the Google representative left it to the
academics to criticize themselves).
The full story can be accessed here.
Characteristics of Students at For-Profit Institutions
Mark Kantrowitz, publisher of FinAid and FastWeb, recently published a report that compares the characteristics of high
school seniors who enroll at for-profit colleges with high school seniors who enroll at public and non-profit colleges.
Kantrowitz cautions that t he results of t he analysis should be reviewed with caution because of the small sample size,
but notes that the results could provide some insights into the types of students that choose for-profit institutions.
Location seems to be a strong factor in these students' decision. The report finds that students who enroll at for-profits,
attend schools close to home and are more likely to live at home and commute to school.
The full story can be accessed here.
Apollo Repaid Education Aid Late, Lax in Counseling Students (Bloomberg)
"Apollo Group Inc., owner of the largest for-profit university in the U.S., was late repaying federal financial aid money
and should better inform students about the costs, requirements and details of its programs, according to a government
report cited by the company," Bloomberg reports. "The findings by the Department of Education will cost Apollo about
$1.5 million, the Phoenix-based company said yesterday in a statement .... The Education Department report also
'expressed a concern that some students enroll and begin attending classes before completely understanding the
implications of enrollment, including their eligibility for student financial aid,' Apollo said in a filing yesterday with the
Securities and Exchange Commission."
You can read the complete Jan. 8, 2010 Bloomberg article on-line.
New Jersey: Immigrant-Tuition Bill Stalls in N.J. Senate (Philadelphia Inquirer)
"A plan that would let children of illegal immigrants pay in-state tuition at New Jersey colleges stalled in the state Senate
yesterday, raising questions about its prospects," the Philadelphia Inquirer reports. "The bill, for which advocates have
fought for eight years, is short on votes to pass but close enough that it may be considered again Monday, Senate
President Richard J. Codey (D., Essex) said. The Assembly may also take up the bill Monday, the last day of the legislative
session."
You can read the complete Jan. 8, 2010 Philadelphia Inquirer article on-line.
Oregon: State Boards Smooth Paths for College Transfers (The Oregonian)
"Oregon college students will be able to transfer more smoothly among the state's community colleges and universities
as the result of common criteria for general education courses adopted by two state education boards today, " The
Oregonian reports. "The course guidelines define what students should learn in a given subject, such as writing, and
what the course should include. In a joint meeting at Portland State University, the Oregon Board of Education and State
5
Board of Higher Education also approved common course standards for an Associate of Arts Oregon Transfer degree
that will allow students to move more freely among the state's 17 community colleges and transfer smoothly into any of
the seven public universities for their final two years of studies."
You can read the complete Jan. 7, 2010 Oregonian article on-line.
Florida: Waiting in the Wings (Inside Higher Ed)
"The third-largest university in the country could get a lot larger, thanks in part to an increasingly popular guaranteed
transfer initiative it sponsors with four community colleges in Orlando," Inside Higher Ed reports. "The University of
Central Florida, which enrolled a record 53,537 students this fall, introduced DirectConnect in 2006. The program offers
guaranteed entrance and accelerated admission to the university for all students and alumni of Brevard Community
College, Lake Sumter Community College, Seminole State College of Florida and Valencia Community College who
complete an associate degree. High school students applying to these four community colleges can also signal their
desire to attend UCF on their application and are similarly guaranteed admission once they earn a two-year degree.
Though such guaranteed transfer programs are not new, the sheer number of students making use of the option to enter
UCF is attracting the attention of university officials and presidents of the participating community colleges."
You can read the complete Jan. 8, 2010 Inside Higher Ed article on-line.
Opinion: Citigroup Sacks Taxpayers in Title Game (Houston Chronicle)
"[S]ponsoring college bowl games isn't typical advertising. It's another example of finance companies worming their way
into the lucrative college market, associating their names with institutions of higher learning," writes Loren Steffy in the
Houston Chronicle. "Campuses have been fertile ground for banks and finance companies, especially those that issue
credit and debit cards and underwrite private student loans. For example, when my son started college in the fall, a
major bank handled the school's meal card program and quickly suggested he open an account with them as well. The
account, of course, came with massive 'overdraft protection' fees that, rather than simply refusing a transaction if he
miscalculated his balance by a few dollars, instead turned a $2 soft drink into a $37 one."
You can read the complete Jan. 5, 2010 Houston Chronicle article on-line.
Opinion: Should Citigroup, Capital One Draw Criticism for Bowl Sponsorships (American Banking News)
"At issue is the sponsorship of college football bowl games, and whether or not it is appropriate for banks to maintain
those sponsorships, particularly as it aligns with colleges-- which have long been fertile ground for banks and finance
companies to reach new customers with credit cards and private student loans," according to an article in American
Banking News. "All in all, attacking the bowl sponsorships seems to be an obvious target that avoids dealing with the
much trickier issues. Do the banks take advantage of college students? What role do the colleges play? How much
disclosure is enough? What role do parents play in helping students understand their financing options, if they in fact
understand them?"
You can read the complete Jan. 7, 2010 American Banking News article on-line.
How Non profits Won Special Treatment in Student lending Bill (The Huffington Post)
"When President Obama unveiled a plan in February to overhaul the student loan industry, nonprofit lenders in dozens
of states feared their business was doomed. But now those nonprofits - including some accused of previous misconduct
by state and federal authorities -- are on the verge of winning a protected position in the higher-education business,"
The Huffington Post reports. "Interviews and a review of documents and e-mails for the Huffington Post Investigative
Fund show how nonprofit lenders persuaded the U.S. House to award them the equivalent of no-bid contracts
potentially worth millions of dollars each."
You can read the complete Jan. 7, 2010 Huffington Post article on-line.
Some Nonprofit Student lenders Accused Of Misconduct (The Huffington Post)
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"As the cost of college continues to skyrocket, students are increasingly seeking loans from nonprofits--state-based
organizations often viewed as an attractive alternative to for-profit lenders synonymous with Wall Street excess. But
some nonprofit student lenders have been dogged, like their for-profit competitors, by allegations of misconduct," The
Huffington Post reports. "Nonprofit lenders in at least 10 states ran afoul of state and federal rules between 1993 and
2008, records show. Government investigators have exposed illegal payments to an alumni association, questionable
executive compensation and perks, deceptive advertising and tens of millions of dollars in unwarranted federal
subsidies."
You can read the complete Jan. 7, 2010 Huffington Post article on-line.
Christy Talbot
U.S. Department of Education
400 Maryland Ave. SW
Washington, DC 20202
202-453-7271 I christine.talbot@ed.gov
7
The
Economist
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For-profit higher education
Schools of hard knocks
Facing heavy-handed government regulation, America's for-profit colleges are reforming
themselves
"EGREGIOUS, outrageous, violated everything we stand for": Don Graham's denunciation of recent
activities by some employees of his own firm is stark. On August 4th a report by the Government
Accountability Office (GAO) found evidence of deceptive recruitment tactics by 15 of America's leading
for-profit colleges, including one operated by Kaplan, which accounts for the bulk of the profits of Mr
Graham's Washington Post Company. Some of the colleges, which also included the giant University of
Phoenix, insisted that the incidents-which ranged from misleading potential students about tuition costs
and likely post-graduation salaries to encouraging them to file fraudulent loan applications- were
isolated. But the mood is turning against them.
For-profit colleges, which range from beauty schools to institutions that resemble traditional universities,
were already under attack. In June Steve Eisman, a hedge-fund manager who made a lot of money
during the financial crisis by shorting bank shares, told Congress that the for-profit education business
was as destructive as the subprime mortgage industry. Congress already seems eager to add to
regulations that the government plans to introduce in November.
The markets sense weakness in the industry. Shares in Apollo Group, which owns the University of
Phoenix, are worth half what they were at the start of 2009. The Washington Post Company has lost
nearly one-third of its value since April. Shares in Corinthian Colleges have fallen 70% in the same spell.
Yet for-profit higher education is one of the greatest success stories in American business. Since 1976,
when it was founded by John Sperling, a history teacher at San Jose State University who was frustrated
in his efforts to provide courses for students with full-time jobs, the University of Phoenix has grown into
an institution with over 450,000 students. Many of them study online, although the university also has
more than 200 campuses across America. It is now America' s second-largest university system. Kaplan,
best known for its test-preparation courses, is a 75-campus organisation with 112,000 students learning
everything from law to nursing.
In the academic year 2008-09 America's for-profit colleges enrolled 3.2m students, 23% more than the
year before and 59% more than in 2004-05. Cuts at public and non-profit colleges boosted the for-profit
sector's share of students to 12%. Total revenues of the 3,000 or so for-profit colleges have soared to
over $29 billion from under $10 billion a decade ago, calculates Jeffrey Silber of BMO Capital Markets.
According to critics such as Mr Eisman, this is a bubble like the subprime mortgage crisis, with a "churn
'em and burn 'em", commission-driven approach to student recruitment and a ready supply of
government-provided debt. On this last point, at least, he is right.
Packing them in
The American government has an unusual model of financing higher education, in which it lends to
students who decide at which educational institution they spend the money. In most other countries, the
government subsidises educational institutions directly. "In the United States, for-profit colleges are
competing for students directly with public and non-profit colleges; everywhere else, they are filling niches
ignored by the traditional colleges," points out Doug Becker, the boss of Laureate, a global for-profit outfit.
The recent GAO report offers anecdotal support for Mr Eisman's view that much of the recruitment of
students is predatory. Also troubling was another report that found for-profit college students defaulted on
their loans at a far higher rate than students at public or non-profit colleges. This the government took as
evidence that many students found their courses less useful than they had expected, so dropped out or
stopped paying. Among the new rules expected on November 1st is a "gainful employment" requirement
that would make a course eligible for government loans only if enough current or past students are
repaying their loans.
The gainful-employment rule has been the focus of sustained attack by the for-profit colleges. According
to data in a recent government report, even courses offered by many of the leading colleges would fail the
gainful-employment test as currently proposed. Default rates of more than 50% are not uncommon- on
the face of it, a shocking number. But the government definition of default is wrong, argue the for-profit
colleges, not least because it counts as defaulters students who have joined a temporary interest-only
payment scheme offered by the government to help ease the transition from student to worker. Mr
Graham says the vast majority of Kaplan's students are meeting their loan obligations.
Servi ng the t oughest customers
US education institutions.
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Default rates at for-profit colleges are higher, they point out, because they educate a large proportion of
students from poor backgrounds, whose parents did not go to university (see chart). "If you are going to
take a chance on a part of the population that is poorer and has no tradition of going to school, your
dropout and default rates are going to be higher," says Greg Cappelli, Apollo Group's chairman. Compare
a for-profit college with a public or non-profit institution with similar student backgrounds, and the default
rates are similar. The danger is that the gainful-employment rule will simply reduce access to higher
education for poorer people.
Mr Cappelli insists he is not against more regulation of this already heavily regulated industry, as long as
it is done right. That means focusing on the needs of students, not the tax status of the college at which
they enrol. The recruitment tactics condemned in the GAO report can probably be found at public and
non-profit institutions, too, he says. Likewise courses that offer poor value for money and students with
too much debt. New rules should apply equally to higher education institutions of every kind, he says.
A belated house-cleaning
Meanwhile for-profit colleges have started hiring "mystery shoppers" to test their sales practices. The
University of Phoenix is working to disconnect recruiters' pay from the number of students recruited. It is
also encouraging students to take on less debt. To reduce the number of dropouts, it is offering students
a three-week "orientation" during which they can quit without charge. Kaplan plans to go further,
regulators permitting, by offering students a full refund if they drop out during their first term. Mr Graham
would like such a refund to be made mandatory, to drive the "bad actors" out of the industry.
The leading for-profit colleges hope to survive by putting their own houses in order and by calling for new
regulations that apply to higher education as a whole. And they make another, broader, claim. When the
full cost of loans and subsidies is added up they are significantly cheaper for the taxpayer, per graduate,
than public and non-profit institutions. Given the Obama administration's ambitious plans to expand
higher education, a rush to impose more burdensome regulations may not be such a good idea.
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Babyak, Stephanie
Wednesday, May 05, 2010 4:05PM
Shireman, Bob; Hamilton, Justin
Glickman, Jane
Bloomberg story May 5
For- Profit N.J. College Halts Recruit ing of Homeless (Updatel )
By Daniel Golden and John Hechinger
May 5 (Bloomberg) -- Drake College of Business, a for- profit higher education company
based in New Jersey, suspended its recruiting of students from homeless shelters while
accreditors scrutinize the practice.
Closely held Drake, which trains medical and dental assistants, relied on taxpayers for 87
percent of revenue in 2007 through federal financial aid programs. Almost 5 percent of the
student body at its Newark, New Jersey, branch is homeless, said Jean Aoun, director of
admissions and student services. In 2008, Drake began offering a $350 biweekly stipend to
students who showed up for 80 percent of classes and received "Cs" for their work, Bloomberg
Businessweek reported last week.
President Barack Obama's administration is proposing tougher regulation of for-profit colleges
because of concern that recruiters are signing up unqualified students and leaving them with
taxpayer-funded student loans they may be unable to repay. Drake, which defended its policy
of recruiting the homeless as reachi ng out to the disadvantaged, raised tuition to $15,700 this
year from $4,000 in 2007-2008. Shelter workers told Bloomberg they feared the school was
preying on the homeless to get access to financial aid money, leaving them to default on
student loans.
Adverse Publ icity
"We do not believe that recruiting at shelters is either illegal, unethical or immoral so long as
the recruitment of students from shelters is above board, which it has been," Ziad Fadel,
Drake's president, said in an e-mail today. The school is halting the practice "for the time
being" because of "adverse publ icity" and a regulatory i nquiry, he said.
"Notwithstanding, we would accept a qualified appl icant who lives at a homeless shelter who is
referred to Drake," he said.
After Bloomberg called the Washington-based Accrediting Council for Independent Colleges &
Schools to inquire about the stipends, the organization opened an investigation into Drake's
recruiting practices. The inqui ry could lead to the revocation of Drake's accreditation, leaving
it ineligible for federal aid.
Drake hasn't notified the counci l of any change in its practices, Anthony Bieda, the counci l 's
di rector of external affairs, said in an interview. The formal i nquiry is exami ning whether the
stipends amount to i mproper inducements for students who wouldn't otherwise enroll , he said.
"We expect our members to enrol l students with integrity and to be above board and honest,"
he said. "There should be nothing controversial about the way our members enroll students."
Financial Assistance
Drake, with 1,200 students and locations in Elizabeth and Newark, said it provides a valuable
service in a low-income community and that both the homeless and welfare recipients benefit
from further education by improving their job prospects.
The college plans to change the way it handles its $350 biweekly checks for newly enrolled
students, Fadel said in an interview today. About three-quarters of students receive the
payments, which the school calls "financial assistance."
Rather than outright payments, the money will instead be awarded in the form of a no-
interest loan from the college that will be forgiven if students graduate on time or maintain a
B average, he said. Otherwise, starting one year after graduation, students would repay the
loans over 20 years, with those receiving the maximum amount owing about $23 a month, he
said. The loans will encourage students to stay in school, increasing the chance they will repay
taxpayer-funded loans, Fadel said.
Federal aid to for-profit colleges has jumped to $26.5 billion in 2009 from $4.6 billion in 2000,
according to the Education Department. The Star-Ledger of Newark, New Jersey today
reported that Drake would suspend recruiting in homeless shelters.
Apollo Group Inc.'s University of Phoenix, the largest U.S. for-profit college by enrollment, and
Chancellor University, which counts former General Electric Co. Chief Executive Officer Jack
Welch as an investor, have also recruited the homeless. Chancellor has said it had stopped
doing so, and Phoenix has said the efforts were unauthorized.
To contact the reporters on this story: Daniel Golden in Boston at dlgolden@bloomberg.net ;
L t U dat d M 5 2010 15 14 EDT

Ne'es tools ~ ~
2
From:
Sent:
To:
Cc:
Subject:
Babyak, Stephanie
Friday, April30, 2010 9:56AM
Shireman, Bob; Arsenault, Leigh
Glickman, Jane
Articles on your speech, fyi
Education Stocks Drop On Comments By DOE Official (AP)
By Erin Conroy
Associated Press, April30, 2010
Shares of for-profit schools fell Thursday following a report that a Department of Education official criticized oversight of the
industry in a speech Wednesday to state regulators.
Deputy Undersecretary of Education Robert Shireman compared the institutions to the Wall Street firms whose behavior led to
the financial meltdown, according to Inside Higher Ed, a trade publication.
The growing for-profit education sector is drawing heavy sums of federal student aid money, and several for-profit schools saw
their share of Pell Grant money rise by more than a third this year, Shireman reportedly said.
The publication relied on the reports of people in the audience to produce its coverage of Shireman's speech.
The sector has been criticized as leaving students with overwhelming debt for questionable training. Federal grants cover only
a small portion of any student's tuition and other expenses.
Shares of DeVry Inc. dropped $4.09, or 6.1 to $62.61 on Thursday. And stock in Apollo Group Inc. - which runs the
University of Phoenix chain, the nation's largest for-profit school- slid $3.56, or 5.8 to $57.94.
Shares of Corinthian Colleges Inc. fell 87 cents, or 5.1 percent, to $16.04; Career Education Corp. sank 3.36 cents, or 10.1
to $30.05 and Strayer Education Inc. lost $3.04, or 1.2 to $243.71. ITT Educational Services Inc. shed $7.09, or 6.4
to $103.61.
Signal Hill analyst Trace Urdan called the drops "overdone."
"The challenge in this case would be to show that the academic rigor was inferior to that of comparable institutions which, in
our opinion, would be extremely difficult," Urdan wrote in a note to investors.
He was responding to Shireman's reported comment that there is a conflict of interest inherent in the way higher education is
regulated.
Noting that accrediting agencies depend on financial contributions from the programs they rate, Shireman questioned whether
the tradition of joint oversight by the federal state governments and accrediting groups can guarantee school quality,
the publication said.
Urdan was among the readers who posted comments about the event and the report on Inside Higher Education's website
Thursday.
Several commenters said Shireman's comments included positive statements about for-profit schools -- including that they
performed the important function of meeting fast-rising demand for higher education.
DeVry, Career Education Drop On Federal Official's Criticism (BLM)
Bloomberg News, April30, 2010
(Bloomberg) - Apollo Group Inc., the biggest U.S. for-profit education provider; Career Education Corp.; Grand Canyon
Education Inc., and DeVry Inc. fell in stock trading after a trade journal report that U.S. Education Deputy Undersecretary Robert
Shireman criticized the companies.
Career Education, based in Hoffman Estates, dropped $3.41, or 10 percent, to $30. DeVry, based in Oakbrook Terrace, fell
$4.51, or6.8 to $62.19.
Apollo Group Inc., based in Phoenix, fell $3.50, or 5.7 to $58 at 12:26 p.m. in New York Stock Exchange composite
trading. Grand Canyon, also based in Phoenix, declined 76 cents, or 3 percent, to $24.20.
The Education Department has proposed rules that might make it more difficult for for-profit colleges to recruit students and
qualify for federal financial aid programs. In a speech yesterday, Shireman criticized for-profit educators for their growing use of
federal student aid, the trade journal Inside Higher Ed reported today on its Web site. Crain's Briefing
"Allegedly, rvt. Shireman mentioned the for-profit education companies by name in reference to the increasing amount of
federal student aid being used by students to attend their schools," said Jeffrey Silber, an analyst with BMO Capital Markets in New
York, in a note to clients. "He then compared the relationship between for -profit education companies and national accrediting
agencies to the relationship between Wall St firms and ratings agencies, citing an inherent conflict of interest."
ITI, Bridgepoint Shares
ITT Educational Services Inc., based in Carmel, Indiana, fell $6.05, or 5.5 percent, to $104.65. San Diego-based Bridgepoint
Education Inc., fell61 cents, or 2.4 p e r c e n ~ to $25.04.
Federal aid to for-profit colleges increased to $26.5 billion in 2009 from $4.6 billion in 2000, according to the department.
The severity of the remarks was a departure for the Education Department official, who had been "congenial" to for-profit
educators, Silber said in the note.
Shireman's remarks weren't prepared as a speech, and the Education Department wasn't able to provide a copy of them, said
Justin Hamitton, a spokesman.
"For-profit colleges play a critically important role in helping to ensure so many American's have access to education and
training that can improve their job prospects and their lives," he said in an e-mail. "We've had constructive discussions in recent
months, and look forward to continued thoughtful dialogue with the career education community."
Shireman noted that higher-education accrediting agencies are constituted by, and financially supported by, their member
colleges, according to Inside Higher Ed.
"Federal and state governments cannot rely on accreditors to assure that consumers and taxpayers are protected to full extent
that they need to be," Shireman said, according to the report.
Education Dept Criticism Pressures For-Profit Ed Shares (OJ)
By Kerry Grace Benn
Dow Jones Newswire, April30, 2010
NEW YORK (Dow Jones)--For-profit education companies were under pressure Thursday after a U.S. Department of
Education official did an about-face and bashed the companies and the accreditation process in a speech late Wednesday, allegedly
comparing the sector with Wall Street firms whose actions brought about the financial turmoil of the last few years.
In a speech to state regulators who oversee for-profit colleges, Robert Shireman, the man behind the Education Department's
strategy, called out the colleges one by one for the increasing amounts of federal student aid money they're getting, according to an
article in industry publication Inside Higher Ed.
BMO Capital Markets analyst Jeffrey Silber said in a note to clients he doesn't think the author of Inside Higher Ed's article was
present to hear the speech, and that it's based on accounts from people who "presumably did attend."
Silber said his thesis hasn't changed on the stocks--that there will likely be some constraints because of the regulation
process, but he is cautiously optimistic the changes proposed earlier this year, like the gainful-employment proposition, will be
diluted somewhat
"However, the 'fear factor' has certainly risen this morning," he wrote.
There were no prepared remarks for Shireman's speech, a Department of Education spokesman said, and Shireman wasn't
immediately available for comment.
"For-profit colleges play a critically important role in helping to ensure so many Americans have access to education and
training that can improve their job prospects and their lives," the spokesman said. "We've had constructive discussions in recent
months and look forward to continued thoughtful dialog with the career education community."
Shares of Career Education Corp. (CECO) fell 10% to $30.07, while Corinthian Colleges Inc. (COCO) dropped 7.2% to
$15.70. ITT Educational Services Inc. (ESI) declined 5.4% to $104.73, Apollo Group Inc. (APOL) slid 6% to $57.83 and Grand
Canyon Education Inc. (LOPE) declined 2.4% to $24.37.
Strayer Education Inc. (STRA), which beat analysts' expectations with its first-quarter earnings earlier Thursday, pared some
declines, falling 1.1% to $244.03.
Signal Hill Group analyst Trace Urdan thinks Shireman's speech shows the Education Department is "taking a very hard line"
in promoting its gainful employment regulations.
The most hotly debated measure to come out of the negotiated rulemaking discussions was a government proposal to hold
colleges accountable for graduating students with high debt loads and low income levels, or literally not preparing students for
"gainful employment" Though the exact criteria have been debated, the Department of Education has pegged a fair level of debt at
about 8% of income and originally said it would scrutinize schools that don't graduate at least 70% of their students or place 70% of
graduates in jobs related to their fields of study.
Shireman's comments seem to signal the department intends to go after accrediting agencies, Urdan said.
Shireman said accreditors lack the "firepower" to regulate the sector, and states and the federal government don't have all the
tools they need to do it, either, Inside Higher Ed said, citing the notes of several people in the audience.
2
Urdan said it looks likely the department will pressure the accrediting agencies, but it's a tricky situation for them, because
other than kicking one of the agencies out of the club, the department is limited as to what it can do. There's a panel made up of six
Senate members, six House members and six White House staffers that has the job of looking over accreditation agencies, he said,
so though the market is worried Thursday, the process of making changes is going to be much slower and will probably have to
involve Congress.
Shireman's comments were a switch from his stance of late. Earlier this week, Shireman told Dow Jones Newswires in an
interview that there was a misimpression that the Education Department was out to get or was biased against for-profit education
companies. The companies "play a very important role" in the higher-education system, he said at the time.
Urdan said he thinks the market is going to see Shireman in the press a lot this summer drumming up positive sentiment for
the gainful-employment rules, which have so far generated only negative comments from the industry.
He added Career Education's shares were down more than the others since the company had been trying to switch its
accreditation to the North Central division, which had already been called to task by the Education Department for being too lax in
allowing other schools to make that switch.
-By Kerry Grace Benn, Dow Jones Newswires; 212-416-2353; kerry.benn@dowjones.com
Deborah Gist (TIME)
3
From:
Sent:
To:
Cc:
Subject:
Babyak, Stephanie
Friday, April30, 2010 9:56AM
Shireman, Bob; Arsenault, Leigh
Glickman, Jane
Articles on your speech, fyi
Education Stocks Drop On Comments By DOE Official (AP)
By Erin Conroy
Associated Press, April30, 2010
Shares of for-profit schools fell Thursday following a report that a Department of Education official criticized oversight of the
industry in a speech Wednesday to state regulators.
Deputy Undersecretary of Education Robert Shireman compared the institutions to the Wall Street firms whose behavior led to
the financial meltdown, according to Inside Higher Ed, a trade publication.
The growing for-profit education sector is drawing heavy sums of federal student aid money, and several for-profit schools saw
their share of Pell Grant money rise by more than a third this year, Shireman reportedly said.
The publication relied on the reports of people in the audience to produce its coverage of Shireman's speech.
The sector has been criticized as leaving students with overwhelming debt for questionable training. Federal grants cover only
a small portion of any student's tuition and other expenses.
Shares of DeVry Inc. dropped $4.09, or 6.1 to $62.61 on Thursday. And stock in Apollo Group Inc. - which runs the
University of Phoenix chain, the nation's largest for-profit school- slid $3.56, or 5.8 to $57.94.
Shares of Corinthian Colleges Inc. fell 87 cents, or 5.1 percent, to $16.04; Career Education Corp. sank 3.36 cents, or 10.1
to $30.05 and Strayer Education Inc. lost $3.04, or 1.2 to $243.71. ITT Educational Services Inc. shed $7.09, or 6.4
to $103.61.
Signal Hill analyst Trace Urdan called the drops "overdone."
"The challenge in this case would be to show that the academic rigor was inferior to that of comparable institutions which, in
our opinion, would be extremely difficult," Urdan wrote in a note to investors.
He was responding to Shireman's reported comment that there is a conflict of interest inherent in the way higher education is
regulated.
Noting that accrediting agencies depend on financial contributions from the programs they rate, Shireman questioned whether
the tradition of joint oversight by the federal state governments and accrediting groups can guarantee school quality,
the publication said.
Urdan was among the readers who posted comments about the event and the report on Inside Higher Education's website
Thursday.
Several commenters said Shireman's comments included positive statements about for-profit schools -- including that they
performed the important function of meeting fast-rising demand for higher education.
DeVry, Career Education Drop On Federal Official's Criticism (BLM)
Bloomberg News, April30, 2010
(Bloomberg) - Apollo Group Inc., the biggest U.S. for-profit education provider; Career Education Corp.; Grand Canyon
Education Inc., and DeVry Inc. fell in stock trading after a trade journal report that U.S. Education Deputy Undersecretary Robert
Shireman criticized the companies.
Career Education, based in Hoffman Estates, dropped $3.41, or 10 percent, to $30. DeVry, based in Oakbrook Terrace, fell
$4.51, or6.8 to $62.19.
Apollo Group Inc., based in Phoenix, fell $3.50, or 5.7 to $58 at 12:26 p.m. in New York Stock Exchange composite
trading. Grand Canyon, also based in Phoenix, declined 76 cents, or 3 percent, to $24.20.
The Education Department has proposed rules that might make it more difficult for for-profit colleges to recruit students and
qualify for federal financial aid programs. In a speech yesterday, Shireman criticized for-profit educators for their growing use of
federal student aid, the trade journal Inside Higher Ed reported today on its Web site. Crain's Briefing
"Allegedly, rvt. Shireman mentioned the for-profit education companies by name in reference to the increasing amount of
federal student aid being used by students to attend their schools," said Jeffrey Silber, an analyst with BMO Capital Markets in New
4
York, in a note to clients. "He then compared the relationship between for -profit education companies and national accrediting
agencies to the relationship between Wall St firms and ratings agencies, citing an inherent conflict of interest."
ITI, Bridgepoint Shares
ITT Educational Services Inc., based in Carmel, Indiana, fell $6.05, or 5.5 percent, to $104.65. San Diego-based Bridgepoint
Education Inc., fell61 cents, or 2.4 p e r c e n ~ to $25.04.
Federal aid to for-profit colleges increased to $26.5 billion in 2009 from $4.6 billion in 2000, according to the department.
The severity of the remarks was a departure for the Education Department official, who had been "congenial" to for-profit
educators, Silber said in the note.
Shireman's remarks weren't prepared as a speech, and the Education Department wasn't able to provide a copy of them, said
Justin Hamitton, a spokesman.
"For-profit colleges play a critically important role in helping to ensure so many American's have access to education and
training that can improve their job prospects and their lives," he said in an e-mail. "We've had constructive discussions in recent
months, and look forward to continued thoughtful dialogue with the career education community."
Shireman noted that higher-education accrediting agencies are constituted by, and financially supported by, their member
colleges, according to Inside Higher Ed.
"Federal and state governments cannot rely on accreditors to assure that consumers and taxpayers are protected to full extent
that they need to be," Shireman said, according to the report.
Education Dept Criticism Pressures For-Profit Ed Shares (OJ)
By Kerry Grace Benn
Dow Jones Newswire, April30, 2010
NEW YORK (Dow Jones)--For-profit education companies were under pressure Thursday after a U.S. Department of
Education official did an about-face and bashed the companies and the accreditation process in a speech late Wednesday, allegedly
comparing the sector with Wall Street firms whose actions brought about the financial turmoil of the last few years.
In a speech to state regulators who oversee for-profit colleges, Robert Shireman, the man behind the Education Department's
strategy, called out the colleges one by one for the increasing amounts of federal student aid money they're getting, according to an
article in industry publication Inside Higher Ed.
BMO Capital Markets analyst Jeffrey Silber said in a note to clients he doesn't think the author of Inside Higher Ed's article was
present to hear the speech, and that it's based on accounts from people who "presumably did attend."
Silber said his thesis hasn't changed on the stocks--that there will likely be some constraints because of the regulation
process, but he is cautiously optimistic the changes proposed earlier this year, like the gainful-employment proposition, will be
diluted somewhat
"However, the 'fear factor' has certainly risen this morning," he wrote.
There were no prepared remarks for Shireman's speech, a Department of Education spokesman said, and Shireman wasn't
immediately available for comment.
"For-profit colleges play a critically important role in helping to ensure so many Americans have access to education and
training that can improve their job prospects and their lives," the spokesman said. "We've had constructive discussions in recent
months and look forward to continued thoughtful dialog with the career education community."
Shares of Career Education Corp. (CECO) fell 10% to $30.07, while Corinthian Colleges Inc. (COCO) dropped 7.2% to
$15.70. ITT Educational Services Inc. (ESI) declined 5.4% to $104.73, Apollo Group Inc. (APOL) slid 6% to $57.83 and Grand
Canyon Education Inc. (LOPE) declined 2.4% to $24.37.
Strayer Education Inc. (STRA), which beat analysts' expectations with its first-quarter earnings earlier Thursday, pared some
declines, falling 1.1% to $244.03.
Signal Hill Group analyst Trace Urdan thinks Shireman's speech shows the Education Department is "taking a very hard line"
in promoting its gainful employment regulations.
The most hotly debated measure to come out of the negotiated rulemaking discussions was a government proposal to hold
colleges accountable for graduating students with high debt loads and low income levels, or literally not preparing students for
"gainful employment" Though the exact criteria have been debated, the Department of Education has pegged a fair level of debt at
about 8% of income and originally said it would scrutinize schools that don't graduate at least 70% of their students or place 70% of
graduates in jobs related to their fields of study.
Shireman's comments seem to signal the department intends to go after accrediting agencies, Urdan said.
Shireman said accreditors lack the "firepower" to regulate the sector, and states and the federal government don't have all the
tools they need to do it, either, Inside Higher Ed said, citing the notes of several people in the audience.
5
Urdan said it looks likely the department will pressure the accrediting agencies, but it's a tricky situation for them, because
other than kicking one of the agencies out of the club, the department is limited as to what it can do. There's a panel made up of six
Senate members, six House members and six White House staffers that has the job of looking over accreditation agencies, he said,
so though the market is worried Thursday, the process of making changes is going to be much slower and will probably have to
involve Congress.
Shireman's comments were a switch from his stance of late. Earlier this week, Shireman told Dow Jones Newswires in an
interview that there was a misimpression that the Education Department was out to get or was biased against for-profit education
companies. The companies "play a very important role" in the higher-education system, he said at the time.
Urdan said he thinks the market is going to see Shireman in the press a lot this summer drumming up positive sentiment for
the gainful-employment rules, which have so far generated only negative comments from the industry.
He added Career Education's shares were down more than the others since the company had been trying to switch its
accreditation to the North Central division, which had already been called to task by the Education Department for being too lax in
allowing other schools to make that switch.
-By Kerry Grace Benn, Dow Jones Newswires; 212-416-2353; kerry.benn@dowjones.com
Deborah Gist (TIME)
6
From:
Sent:
To:
Cc:
Babyak, Stephanie
Wednesday, Apri l 14, 201 o9:05AM
Hamilton, Justin; Shireman, Bob; Madzelan, Dan; Bergeron, David
McCull ough, Carney; Sellers, Fred; Glickman, Jane; Hammond, Cynthia; Arsenault, Leigh;
Manheimer, Ann
Subject: St. Lending Analytics Slog/Gainful employment
Importance: High
Exemptions Proposed to Gainful Employment Rules; For-Profit Ed Stocks Rise
Sharply
Post ed: 13 Apr 2010 06:41PM PDT
From Investor's Business Daily:
"ITT Educational Services (ESI), DeVry (DV) and otherfor-profit educators jumped after Credit Swsse hiked ITT and
DeVry to outperform, s a ) ~ n g they may benefit from new gov't programs. The Education Dept. has proposed exemptions to
its so-called "gainful employment rule" that aims to limit student loans so they don't greatly exceed projected salaries. The
exemption would apply t o programs \vith a graduation rate of more than so% and a placement rat e over 70%. That could
boost student funding for ITT and DeVry. ITT rose 9.6% to 119.20, DeVry surged 10% to 71.73 and Grand Canyon
EducationLOPE) rose 4% to 27.35."
From the Wall Street Journal:
"A ne-vv draft of the Department of Education's proposed regulation on higher education and the widening of an exemption
for instit utions had t he for-profit education sector rising sharply higher Tuesday, with ITT Educational Servi ces Inc. (ESI)
and DeVry Inc. (DV) leading the climb.
The DOE, in negotiations that started late last year, wants to i mpose regulations on t he for-profits to t emper the
argument that the insti tutions charge t oo much twtion without producing quality educations and by forcing t hem
to have certain levels of students in "gainful employment" positions.
The draft, apparently sent from the DOE t o the Office of Management and Budget for review, isn't a public
document but analysts at Credit Suisse and Signal Hill reported it included an exemption for institutions wit h a
so% completion rate and, of those who finished, 70% job-placement rate. That would reintroduce an exemption
that had appeared in earHer drafts before being cut, the analysts said, and lower the completion rate from the
previous 70% threshold.
That would mean it would open the door for some of the perceived \veaker for-profit institutions to avoid the
regulation on "gainful employment ."
7
8
From: Babyak, Stephanie
Sent: Monday, November 16, 2009 9:24 AM
To:
Cc:
'DAN GOLDEN, BLOOMBERG/ NEWSROOM:'; Glickman, Jane
Hamilton, Justin
Subject: RE: (BN) Apollo Weakness for Phoenix Revenues Spurring Short
Sure. I' l l get back to you asap.
-----Origi nal Message-----
From: DAN GOLDENJ BLOOMBERG/ NEWSROOM: [mail to:dlgolden@bloomberg.net]
Sent: MondayJ November 16J 2009 9:05AM
To: GlickmanJ Jane
Cc: BabyakJ Stephanie
Subject: RE: (BN) Apollo Wea kness for Phoenix Revenues Spurring Short
Hi JaneJ StephanieJ
I have to do a quick stor y on the Department of Education recertifying the University of
Phoenix for financial aid. It had been on month by month provisional participation. Can you
get me a quick statement or somebody on the phone to say why the Ed Department did this?
YoursJ
Dan
Original Message -----
From: Jane Glickman <Jane.Glickman@ed.gov>
To: DAN GOLDEN (BLOOMBERG/ NEWSROOM:) J Stephanie.Babyak@ed.gov
At: 10/30 11:49:28
You were a pleasure to work with -- I've started it but keep getting interrupted and haven't
had a chance to finish reading yet. Let's see what the article does to Apollo's stockJ over
and above what the SEC filing did.
Take care-- (and may Philly win the World Series!)
-----Original Message-----
From: DAN GOLDENJ BLOOMBERG/ NEWSROOM: [mailto:dlgolden@bloomberg.net]
Sent: FridayJ October 30J 2009 9:59AM
To: GlickmanJ Jane; BabyakJ Stephanie
Subject: (BN) Apollo Weakness for Phoenix Revenues Spurring Short
Thanks to you both for the wonderful help.
+------------------------------------------------------------------------------+
Apollo Weakness for Phoenix Revenues Spurring Short Sellers 2009-10- 30 04:00:01.2 GMT
By Daniel Golden
Oct. 30 (Bloomberg) -- The University of PhoenixJ the largest for-profit college in the
u.s.J may have set off on a collision course wit h the federal government and investors in
2001. ThatJs when its founderJ John SperlingJ urged executives at his 80th birthday party to
boost enrollment fivefold to half a million studentsJ a goal it has almost accomplished.
9
Now, Phoenix,s parent, Apollo Group Inc., is facing challenges to its growth. The
Securities and Exchange Commission is investigating how Apollo books revenue, the company
said Oct.
27. Apollo recorded a charge of $80.5 million to cover costs it expects to pay to settle a
lawsuit alleging that it violated federal student recruitment rules. Profit in the quarter
ended Aug . 31 fell 60 percent largely because of that charge.
Apollo shares, which had more than doubled since 2006, may have difficulty rebounding
from an 18 percent decline the day after the SEC probe was disclosed. Phoenix may also face
scrutiny as the U.S. Education Department examines for -profit universities that rely heavily
on taxpayer-supported financial aid. In fiscal 2009, Phoenix derived 86 percent of its $3. 77
billion in revenue from federal grants and loans, up from 48 percent in 2001, and approaching
a federal limit of 90 percent.
"The outlook for Apollo next year has definitely become a lot tougher, said Robert
Wetenhall, an analyst for RBC Capital Markets in New York, who lowered his rating on Apollo
shares on Oct. 28 to "underperform.
Axia,s Growth
Phoenix,s enrollment has almost doubled to 443,000 from 227,800 in fiscal 2004. About 90
percent of that growth has come from a two-year online college called Axia, created in 2004.
While Phoenix originally focused on bachelor,s degree and graduate degree programs for
managers whose employers paid their tuition, Axia attracts students with lower income and
less academic preparation, the majority of whom depend on federal financial aid.
Apollo,s revenue was $1.1 billion during the three months ended Aug. 31, five times the
amount during the same period in 2001. Net income rose almost threefold to $91.5 million.
The company,s shares fell $1.91, or 3.2 percent, to $58.15 on Oct. 29 in New York Stock
Exchange composite trading. Before the close on Oct. 27, the stock had fallen 4.8 percent
this year, compared with an 18 percent rise in the Standard & Poor,s 500 Index.
Investors have bet against Apollo, with 10 percent of its shares sold short as of Oct.
15, compared with 3.5 percent for the New York Stock Exchange as a whole. Apollo,s short
interest has risen to 13. 4 million shares from 6.6 million a year ago.
Obama Administration
Phoenix now has to deal with the Obama administration, which is tightening review of
for - profits and has close ties to community colleges that compete with Axia. Driven in part
by the shift to Axia, Phoenix,s growing reliance on taxpayer funds is drawing government
attention. The average annual tuition is $10,350, $500 less than what federal aid will pay
for a low- income freshman under age 24. By comparison, annual tuition at publ ic community
colleges this year averages $2,544, according to the College Board, the New York- based
nonprofit organization that owns the SAT college admissions test.
"It makes sense to examine institutions that rely heavily on federal aid, Robert
Shireman, Deputy Undersecretary of Education, said in an interview without singling out any
university. "Certainly, one of the data points we look at for triggering possible program
reviews is a large growth in the use of federal financial aid.
Uncover Problems
Such a program review would be designed to uncover problems with financial management or
signing up students who are unqualified or aren,t fully aware they,re taking out loans, and
may result in fines, suspensions or terminations from eligibility for financial aid, Shireman
said.
Students are reliant on aid because of the recession and rising college costs, said Sara
Jones, an Apollo spokeswoman.
Phoenix expanded into online two-year degrees to continue its shift from a niche institution
for degree completion into a comprehensive university, not to obtain more financial aid
dollars, she said. The 90 percent limit on federal revenue, enacted in 1992, penalizes
10
schools for having low-income studentsJ said Gregory CappelliJ Apollo Co-Chief Executive
Officer.
we want to help peopleJ" Cappelli said in a Sept. 9 interview at the companyJs Phoenix
headquarters. They need to be able to read and write and compete at the college level. Know
what? We donJt want your money otherwise."
The company believes the revenue recognition policies being investigated by the SEC are
appropriateJ Brian SchwartzJ ApolloJs chief financial officer and treasurerJ said in an Oct.
27 conference call.
Few Graduate
While Phoenix has succeeded in drawing studentsJ most donJt graduateJ leaving them
without degrees and often burdened by loans. Only 8.9 percent of Phoenix students without
prior college experience complete a degree in six yearsJ including 5 percent of those who
attend classes onlineJ according to the National Center for Education StatisticsJ in
Washington. The national graduation rate is 56.1 percent for four-year schools and 30.9
percent for two-year schools.
Besides leaving school prematurelyJ many students arenJt able to pay their billsJ with
U.S. taxpayers picking up the balance. Of Phoenix students who should have begun repaying
loans in 2007J 9.3 percent have defaultedJ up from a 7.2 percent rate a year earlier and more
than the national average of 6.7 percentJ according to the Education Department.
The university works closely with lenders and delinquent students to stave off defaultsJ
said Robert CollinsJ ApolloJs vice president for financial aid.
<Replacement CurveJ
PhoenixJs dropout rate means the school needs to recruit 250J000 new students a year --
equivalent to six University of Michigans -- to maintain current enrollmentsJ said former
Apollo manager Mark DeFuscoJ now an education investment banker at BerkeryJ Noyes & Co. in
New York.
The replacement curve is astronomicalJ" DeFusco said.
<<vou have to feed the beast."
PhoenixJs growth is hardly uncontrolledJ said JonesJ the Apollo spokeswoman. The
university has more than 200 campuses and learning centers" which means it can add 1J00e
students a day by enrolling five at each oneJ she said. Phoenix gained 102Jeee new students
in the quarter ended Aug. 31J according to Charles B. EdelsteinJ Apollo Co-CEO.
The question of whether recruiters sign up unqualified students is the focus of the
lawsuit that Phoenix said it expects to settle for $80.5 million. The 2003 suit brought by
two former employees in federal court in California alleges that Phoenix violated a 1992 ban
on paying recruiters on the basis of enrollment numbers. The company has denied wrongdoing.
<Dumb as DoornailJ
In a deposition in the lawsuitJ Jennifer KahnJ a recruiter who left Phoenix in 2006J
said she complained to her boss about a prospect who couldnJt handle college.
r had a studentJ letJs refer to him as dumb as a doornailJ" Kahn said. And my manager
told meJ <Enroll him.
ItJs not our call to say who has a right to an education.J As a consequenceJ he startedJ he
went to the first nightJ he knew he was in deep doo-dooJ and dropped. He never should have
been there."
Tom CorbettJ a former director of online enrollment at Phoenix who provided an affidavit
in the lawsuitJ said in an interview that the schoolJs recruiters were like brokers peddling
subprime mortgages.
The University of PhoenixJs management culture is fueled by greedJ the same as the
housing scenarioJ" Corbett said.
There was no emphasis on the studentJs actual valuesJ goalsJ backgroundJ experiences."
11
Compensation Methods
Timothy an outside counsel for Phoenix and a partner in the Los Angeles office of
Dunn & said the school enrolled the student mentioned by Kahn because he
had completed an degree at another for-profit college.
compensation methods are legal because teamwork and student retention figure
into its salary adjustments along with enrollment he said. The criticisms by
Corbett and other former employees reflect the views of Phoenix recruiters and managers
in he said.
The Education Department may tighten 2002 rules that let colleges pay recruiters partly
on the basis of according to the deputy undersecretary.
The department announced on Sept. 9 that it may prohibit misrepresentations of
information provided to students and prospective students. The move was prompted partly by
reports the department received about Axia according to a federal official
familiar with the matter.
Prospective Students
In tape - recorded telephone calls heard by Bloomberg Axia recruiters told Wall
Street researchers posing as potential applicants that its credits could be transferred to
Harvard University and Columbia University. Those schools grant transfer credit for
online undergraduate the spokesmen said in e-mails.
Cappelli said he aware of the alleged misrepresentations.
not a mandate or a directive from anyone in the management team to fool or hurt
he said. "Traditional colleges make too.
Phoenix has a pilot program to improve student readiness for Cappelli said
during a conference call with analysts on Oct. 27. Lower retention rates and extra remedial
instruction and other support services for Axia students have damped Apollo he said
in September.

"We are making a concerted effort to get back our focus on and
said a former Credit Suisse research analyst who joined Apollo in 2007.
"The return to the student is better if they stay in school and complete their
degree. The return to us is too. Not all of our growth is coming from Axia anymore.
The company supports a proposal in Congress that would allow colleges to exceed the 90
percent ceiling on the portion of revenues from financial aid until and not to count
increases in student loan limits as federal revenue.
The which passed the House last month as part of a broader education
included in a Senate said Mark publisher of the FinAid.org and
FastWeb.com financial-aid Web sites based in Cranberry Pennsylvania.
Phoenix officials said the 8.9 percent graduation rate measured by the government counts
only first-time students.
Including transfer 27 percent of Axia students according to the
2008 Academic Annual Report. Of those pursuing Phoenix said
38 percent graduate.
No Placement
Phoenix help graduates land nor does it track where they find
the Apollo said.
She said most Phoenix students already have jobs.
Simon a Hawaii transferred to online program as a
junior in 2006 and graduated last year with a 3.9 average out of 4.0 in computer science. He
said he has applied for 25 entry-level information technology jobs without receiving a single
12
interview. Almost half of the openings he sought were at Apollo itself, Saffery said. He is
unemployed, owes $45,000 in student loans and may declare bankruptcy, Saffery said.
Jones declined to comment on individual students, citing privacy considerations.
According to a 2008 survey by Phoenix, graduates of its associate and bachelor's degree
programs earned average increases in personal income of 19 percent and 28 percent,
respectively.
Founder's Dream
Sperling, who has an economic history Ph.D. from Cambridge University in England,
founded Phoenix in 1976. His mission was to give working professionals a convenient way to
get back to school and boost their academic credentials without having to quit their jobs,
according to his 2000 autobiography, ((Rebel With a Cause.'' Students, who learned in teams
and took five - week courses in business, nursing and other fields, tended to be managers in
their mid- 30s whose employers reimbursed them for tuition.
Richard Chait, a professor of higher education at Harvard in Cambridge, Massachusetts,
who has studied Sperling's university, said the school ((saves money everywhere by hiring
part-time faculty, leasing real estate, and centralizing administration.
((The genius of the University of Phoenix is that it spends
$1 million to develop one course that it gives a thousand times, Chait said in an interview
in his office. ((Community colleges spend almost nothing developing a thousand courses that
they will use once.
Expanding Eastward
In the 1990s, Phoenix expanded eastward, opening facilities in Michigan, Maryland and
Pennsylvania. Today, according to its Web site, the university has campuses in 39 states, the
District of Columbia, Puerto Rico, and two Canadian provinces. From 1995 to 2000, Apollo's
stock rose more than 10-fold, making it one of the 30 top-performing stocks in the Russell
3000 Index.
When enrollment was about 20,000, Sperling told executives Phoenix would have 100,000
students by 2000, Bob Barker, a former Phoenix executive vice president, said in an
interview.
At his 80th birthday party in 2001, Sperling raised his sights to 500,000, DeFusco said.
Apollo never formally adopted Sperling's vision, said Jones, the spokeswoman. She said
Sperling was unavailable for interviews.
As fast as Phoenix was growing, it was drawing from a limited customer base of mid-
career managers, former Apollo president Brian Mueller, CEO of for-profit Grand Canyon
Education Inc. in Phoenix, said in an interview. Students had to be at least 23 years old and
have two years of work experience and as many as 60 credits from other colleges.
Rapid Growth
By 2004, the university had eliminated its credit and age requirements, Jones said.
DeFusco, who worked at Apollo from 1994 to 2003 in academic affairs and then opening
campuses for Phoenix, said Axia's tuition was set just under the federal limit for financial
aid so government grants and loans could cover most, if not all, of the cost.
The college's tuition-pricing "was a financial -aid play, DeFusco said.
Apollo spokeswoman Jones said that was not the case.
Unlike students who came to Phoenix to complete degrees, the company said that three out
of five Axia attendees haven't gone to college before.
((It's no longer the mid-career manager, it's somebody working a minimum-wage job
somewhere and looking to get out of that dead end, said Laura Palmer Noone, a former Phoenix
president who is now CEO of Piccolo International University, an online school based in
Scottsdale, Arizona.
Career Aspirations
13
Sabrina BoganJ 39J a criminal - justice majorJ said in an interview that Axia has improved
her writing. The RichmondJ VirginiaJ mother of threeJ who has a high school equivalency
degree and used to work as an assistant manager at a convenience storeJ said she has written
essays on the death penalty and energy conservation.
"The person that I was before I started taking those classes could not have done thatJn
Bogan said. She said she hopes to land a job in a lawyerJs office after she finishes her
associateJs degree next year.
Not all Axia students benefit. Laura HolderJ 29J has a diploma from Prairie Grove High
School in Prairie GroveJ ArkansasJ where she took special-education classesJ she said.
According to her motherJ Beatrice McCormackJ Holder has an IQ of
65 to 70J within a range the Washington- based American Association on Intellectual and
Developmental Disabilities defines as intellectually disabled.
Axia Recruiter
HolderJ who lives in an apartment with her husbandJ said she learned about Phoenix on the
Internet and contacted the school in hopes that a college degree would help her find work as
a preschool teacher. The Axia recruiter) she saidJ asked if she had graduated from high
schoolJ not whether she was in special education.
"They said once I go through the classesJ I would get a job in teachingJ Holder said.
Holder enrolled at Axia in October 2006 and realized the classes were too hard for herJ
she said. She left school amid a payment dispute without completing a course. A collection
agency dunned her for a tuition balance of $1J710.
JonesJ the Phoenix spokeswoman) said the school is aware of a handful of instances in
which intellectually disabled students enrolled and soon demonstrated that they didnJt have
the ability to succeed. In those casesJ she saidJ Phoenix worked to help the students
withdraw without financial obligation.
Community Colleges
Axia may soon face more competition for students. The Obama administration has proposed
allocating $12 billion to publicly run community collegesJ which also give two -year degrees.
While Sally StroupJ a former Apollo lobbyistJ oversaw post-secondary education in the George
W. Bush administration) former community- college leader Martha Kanter plays a similar role
now.
"Some in the administration) if they were advising students who had a choice of going to
a community college or a for-profit collegeJ would sayJ ~ P i c k the community collegeJJn said
Scott FlemingJ a Washington lobbyist who represents Apollo.
The Education Department isnJt out to "shut down or maim
for-profitsJ Cappelli said.
"If Obama means what he saysJ that he wants everyone to have one year of collegeJ how do
you accomplish that without for - profit higher ed?n he said.
For Related News and Information:
Stories about education: NI EDU <GO>
U.S. colleges and universities: USUV <GO> Education or ganizations: EDOR <GO> Stories about
technology: {NI TEC}
--With assistance from Robin D Schatz and Jeffrey Tannenbaum in New York. Editors: Jim AleyJ
Jonathan Kaufman
To contact the reporter on this story:
Dan Golden in Boston at +1-617-21-4610 or dlgolden@bloomberg.net.
To contact the editor responsible for this story:
Jonathan Kaufman at +1-617-210-4638 or
14
jkaufman17@bloomberg.net
15
From:
Sent:
To:
Cc:
Subject:
Second story
From: Babyak, Stephanie
Babyak, Stephanie
Friday, October 30, 2009 9:22AM
Greene, Chris; Young, Tara; lsett, Christine A.
Glickman, Jane
FW: Bloomberg story on U of P and Apollo
Sent: Friday, October 30, 2009 9:15AM
To: Shireman, Bob; Smith, Zakiya; Hamilton, Justin
Cc: Glickman, Jane; Abrevaya, Sandra
Subject: Bloomberg story on U of P and Apollo
Apollo Weakness for Phoenix Revenues Spurring Short Sellers
Share Business ExchangeTwitterfacebookl Email I Print I A A A
By Daniel Golden
Oct. 30 (Bloomberg)-- The University of Phoenix, the largest for-profit college in the U.S., may have set off on a
collision course with the federal government and investors in 2001. That's when its founder, John Sperling, urged
executives at his 80th birthday party to boost enrollment fivefold to half a million students, a goal it has almost
accomplished .
Now, Phoenix's parent, Apollo Group Inc., is facing challenges to its growth. The Securities and Exchange
Commission is investigating how Apollo books revenue, the company said Oct. 27. Apollo recorded a charge of $80.5
million to cover costs it expects to pay to settle a lawsuit alleging that it violated federal student recruitment rules.
Profit in the quarter ended Aug. 31 fell 60 percent largely because of that charge.
Apollo shares, which had more than doubled since 2006, may have difficulty rebounding from an 18 percent decline
the day after the SEC probe was disclosed. Phoenix may also face scrutiny as the U.S. Education Department
examines for-profit universities that rely heavily on taxpayer-supported financial aid. In fiscal 2009, Phoenix derived
86 percent of its $3.77 billion in revenue from federal grants and loans, up from 48 percent in 2001, and approaching
a federal limit of 90 percent.
"The outlook for Apollo next year has definitely become a lot tougher," said Robert Wetenhall, an analyst for RBC
Capital Markets in New York, who lowered his rating on Apollo shares on Oct. 28 to " underperform."
16
Axia's Growth
Phoenix's enrollment has almost doubled to 443,000 from 227,800 in fiscal 2004. About 90 percent of that growth has
come from a two-year online college called Axia, created in 2004. While Phoenix originally focused on bachelor's
degree and graduate degree programs for managers whose employers paid their tuition, Axia attracts students with
lower income and less academic preparation, the majority of whom depend on federal financial aid.
Apollo's revenue was $1.1 billion during the three months ended Aug. 31, five times the amount during the same
period in 2001. Net income rose almost threefold to $91.5 million.
The company's shares fell $1.91, or 3.2 percent, to $58.15 on Oct. 29 in New York Stock Exchange composite trading.
Before the close on Oct. 27, the stock had fallen 4.8 percent this year, compared with an 18 percent rise in the
Standard & Poor's 500 Index.
Investors have bet against Apollo, with 10 percent of its shares sold short as of Oct. 15, compared with 3.5 percent
for the New York Stock Exchange as a whole. Apollo's short interest has risen to 13.4 million shares from 6.6 million a
year ago.
Obama Administration
Phoenix now has to deal with the Obama administration, which is tightening review of for-profits and has close ties to
community colleges that compete with Axia. Driven in part by the shift to Axia, Phoenix's growing reliance on taxpayer
funds is drawing government attention. The average annual tuition is $10,350, $500 less than what federal aid will
pay for a low- income freshman under age 24. By comparison, annual tuition at public community colleges this year
averages $2,544, according to the College Board, the New York-based nonprofit organization that owns the SAT
college admissions test.
"It makes sense to examine institutions that rely heavily on federal aid," Robert Shireman, Deputy Undersecretary
of Education, said in an interview without singling out any university. "Certainly, one of the data points we look at for
triggering possible program reviews is a large growth in the use of federal financial aid."
Uncover Problems
Such a program review would be designed to uncover problems with financial management or signing up students
who are unqualified or aren't fully aware they're taking out loans, and may result in fines, suspensions or terminations
from eligibility for financial aid, Shireman said.
Students are reliant on aid because of the recession and rising college costs, said Sara Jones, an Apollo
spokeswoman. Phoenix expanded into online two-year degrees to continue its shift from a niche institution for degree
completion into a comprehensive university, not to obtain more financial aid dollars, she said. The 90 percent limit on
federal revenue, enacted in 1992, penalizes schools for having low-income students, said Gregory Cappelli, Apollo
Co-Chief Executive Officer.
"We want to help people," Cappelli said in a Sept. 9 interview at the company's Phoenix headquarters. "They need to
be able to read and write and compete at the college level. Know what? We don't want your money otherwise."
The company believes the revenue recognition policies being investigated by the SEC are appropriate, Brian Schwartz,
Apollo's chief financial officer and treasurer, said in an Oct. 27 conference call.
Few Graduate
17
While Phoenix has succeeded in drawing students, most don't graduate, leaving them without degrees and often
burdened by loans. Only 8.9 percent of Phoenix students without prior college experience complete a degree in six
years, including 5 percent of those who attend classes online, according to the National Center for Education
Statistics, in Washington. The national graduation rate is 56. 1 percent for four-year schools and 30.9 percent for
two-year schools.
Besides leaving school prematurely, many students aren't able to pay their bills, with U.S. taxpayers picking up the
balance. Of Phoenix students who should have begun repaying loans in 2007, 9.3 percent have defaulted, up from a
7. 2 percent rate a year earlier and more than the national average of 6. 7 percent, according to the Education
Department.
The university works closely with lenders and delinquent students to stave off defaults, said Robert Collins, Apollo's
vice president for financial aid.
'Replacement Curve'
Phoenix's dropout rate means the school needs to recruit 250,000 new students a year-- equivalent to six University
of Michigans -- to maintain current enrollments, said former Apollo manager Mark Defusco, now an education
investment banker at Berkery, Noyes & Co. in New York.
"The replacement curve is astronomical," Defusco said. "You have to feed the beast."
Phoenix's growth is hardly uncontrolled, said Jones, the Apollo spokeswoman. The university has " more than 200
campuses and learning centers" which means it can add 1,000 students a day by enrolling five at each one, she said.
Phoenix gained 102,000 new students in the quarter ended Aug. 31, according to Charles B. Edelstein, Apollo Co-
CEO.
The question of whether recruiters sign up unqualified students is the focus of the lawsuit that Phoenix said it expects
to settle for $80.5 million. The 2003 suit brought by two former employees in federal court in California alleges that
Phoenix violated a 1992 ban on paying recruiters on the basis of enrollment numbers. The company has denied
wrongdoing.
' Dumb as Doornail '
In a deposition in the lawsuit, Jennifer Kahn, a recruiter who left Phoenix in 2006, said she complained to her boss
about a prospect who couldn't handle college.
"I had a student, let's refer to him as dumb as a doornail, " Kahn said. "And my manager told me, 'Enroll him. It's not
our call to say who has a right to an education .' As a consequence, he started, he went to the first night, he knew he
was in deep doo-doo, and dropped. He never should have been there."
Tom Corbett, a former director of online enrollment at Phoenix who provided an affidavit in the lawsuit, said in an
interview that the school's recruiters were like brokers peddling subprime mortgages.
"The University of Phoenix's management culture is fueled by greed, the same as the housing scenario," Corbett said.
"There was no emphasis on the student's actual values, goals, background, experiences. "
Compensation Methods
18
Timothy Hatch, an outside counsel for Phoenix and a partner in the Los Angeles office of Gibson, Dunn & Crutcher,
said the school enrolled the student mentioned by Kahn because he had completed an associate's degree at another
for-profit college.
Phoenix's compensation methods are legal because teamwork and student retention figure into its salary adjustments
along with enrollment expectations, he said. The criticisms by Corbett and other former employees don't reflect the
views of Phoenix recruiters and managers in general, he said.
The Education Department may tighten 2002 rules that let colleges pay recruiters partly on the basis of enrollment,
according to Shireman, the deputy undersecretary.
The department announced on Sept. 9 that it may prohibit misrepresentations of information provided to students and
prospective students. The move was prompted partly by reports the department received about Axia recruiters,
according to a federal official familiar with the matter.
Prospective Students
In tape-recorded telephone calls heard by Bloomberg News, Axia recruiters told Wall Street researchers posing as
potential applicants that its credits could be t ransferred to Harvard University and Columbia University. Those schools
don't grant transfer credit for online undergraduate courses, the universities' spokesmen said in e-mails.
Cappelli said he isn't aware of the alleged misrepresentations.
"There's not a mandate or a directive from anyone in the management team to fool or hurt people/' he said.
"Traditional colleges make errors, too."
Phoenix has a pilot program to improve student readiness for college, Cappelli said during a conference call with
analysts on Oct. 27. Lower retention rates and extra remedial instruction and other support services for Axia students
have damped Apollo profits, he said in September.
'Concerted Effort'
"We are making a concerted effort to get back our focus on bachelor's and master's degrees/' said Cappelli, a former
Credit Suisse research analyst who joined Apollo in 2007. "The return to the student is better if they stay in school
and complete their bachelor's degree. The return to us is better, too. Not all of our growth is coming from Axia
anymore."
The company supports a proposal in Congress that would allow colleges to exceed the 90 percent ceiling on the
portion of revenues from financial aid until 2012, and not to count increases in student loan limits as federal revenue.
The proposal, which passed the House last month as part of a broader education bill, isn' t included in a Senate
version, said Mark Kantrowitz, publisher of the FinAid.org and FastWeb.com financial-aid Web sites based in
Cranberry Township, Pennsylvania.
Phoenix officials said the 8. 9 percent graduation rate measured by the government counts only first-t ime students.
Including transfer students, 27 percent of Axia students graduate, according to the university's 2008 Academic
Annual Report. Of those pursuing bachelor's degrees, Phoenix said 38 percent graduate.
No Placement
19
Phoenix doesn't help graduates land jobs, nor does it track where they find employment, Jones, the Apollo
spokeswoman, said. She said most Phoenix students already have jobs.
Simon Saffery, 30, a Hawaii resident, transferred to Phoenix's online program as a junior in 2006 and graduated last
year with a 3.9 average out of 4.0 in computer science. He said he has applied for 25 entry- level information
technology jobs without receiving a single interview. Almost half of the openings he sought were at Apollo itself,
Saffery said. He is unemployed, owes $45,000 in student loans and may declare bankruptcy, Saffery said.
Jones declined to comment on individual students, citing privacy considerations. According to a 2008 survey by
Phoenix, graduates of its associate and bachelor's degree programs earned average increases in personal income of
19 percent and 28 percent, respectively.
Founder's Dream
Sperling, who has an economic history Ph.D. from Cambridge University in England, founded Phoenix in 1976. His
mission was to give working professionals a convenient way to get back to school and boost their academic credentials
without having to quit their jobs, according to his 2000 autobiography, "Rebel With a Cause." Students, who
learned in teams and took five- week courses in business, nursing and other fields, tended to be managers in their
mid-30s whose employers reimbursed them for tuition.
Richard Chait, a professor of higher education at Harvard in Cambridge, Massachusetts, who has studied Sperling's
university, said the school "saves money everywhere" by hiring part-time faculty, leasing real estate, and centralizing
administration.
"The genius of the University of Phoenix is that it spends $1 million to develop one course that it gives a thousand
times," Chait said in an interview in his office. "Community colleges spend almost nothing developing a thousand
courses that they will use once."
Expanding Eastward
In the 1990s, Phoenix expanded eastward, opening facilities in Michigan, Maryland and Pennsylvania. Today,
according to its Web site, the university has campuses in 39 states, the District of Columbia, Puerto Rico, and two
Canadian provinces. From 1995 to 2000, Apollo's stock rose more than 10-fold, making it one of the 30 top-
performing stocks in the Russell 3000 Index.
When enrollment was about 20,000, Sperling told executives Phoenix would have 100,000 students by 2000, Bob
Barker, a former Phoenix executive vice president, said in an interview. At his 80th birthday party in 2001, Sperling
raised his sights to 500,000, DeFusco said.
Apollo never formally adopted Sperling's visi on, said Jones, the spokeswoman. She said Sperling was unavailable for
interviews.
As fast as Phoenix was growing, it was drawing from a limited customer base of mid-career managers, former Apollo
president Brian Mueller, CEO of for- profit Grand Canyon Education Inc. in Phoenix, said in an interview. Students
had to be at least 23 years old and have two years of work experience and as many as 60 credits from other colleges.
Rapid Growth
By 2004, the university had eliminated its credit and age requirements, Jones said.
20
DeFusco, who worked at Apollo from 1994 to 2003 in academic affairs and then opening campuses for Phoenix, said
Axia's tuition was set just under the federal limit for financial aid so government grants and loans could cover most, if
not all, of the cost.
The college's tuition- pricing "was a financial -aid play," DeFusco said.
Apollo spokeswoman Jones said that was not the case.
Unlike students who came to Phoenix to complete degrees, the company said that three out of five Axia attendees
haven't gone to college before.
"It's no longer the mid-career manager, it's somebody working a minimum-wage job somewhere and looking to get
out of that dead end," said Laura Palmer Noone, a former Phoenix president who is now CEO of Piccolo
International University, an online school based in Scottsdale, Arizona.
Career Aspirations
Sabrina Bogan, 39, a criminal-justice major, said in an interview that Axia has improved her writing. The Richmond,
Virginia, mother of three, who has a high school equivalency degree and used to work as an assistant manager at a
convenience store, said she has written essays on the death penalty and energy conservation.
"The person that I was before I started taking those classes could not have done that," Bogan said. She said she
hopes to land a job in a lawyer's office after she finishes her associate's degree next year.
Not all Axia students benefit. Laura Holder, 29, has a diploma from Prairie Grove High School in Prairie Grove,
Arkansas, where she took special-education classes, she said. According to her mother, Beatrice McCormack, Holder
has an IQ of 65 to 70, within a range the Washington-based American Association on Intellectual and
Developmental Disabilities defines as intellectually disabled.
Axia Recruiter
Holder, who lives in an apartment with her husband, said she learned about Phoenix on the Internet and contacted
the school in hopes that a college degree would help her find work as a preschool teacher. The Axia recruiter, she
said, asked if she had graduated from high school, not whether she was in special education.
"They said once I go through the classes, I would get a job in teaching," Holder said.
Holder enrolled atAxia in October 2006 and realized the classes were too hard for her, she said. She left school amid
a payment dispute without completing a course. A collection agency dunned her for a tuition balance of $1,710.
Jones, the Phoenix spokeswoman, said the school is aware of a handful of instances in which intellectually disabled
students enrolled and soon demonstrated that they didn't have the ability to succeed. In those cases, she said,
Phoenix worked to help the students withdraw without financial obligation.
Community Colleges
Axia may soon face more competition for students. The Obama administration has proposed allocating $12 billion to
publicly run community colleges, which also give two-year degrees . While Sally Stroup, a former Apollo lobbyist,
oversaw post-secondary education in the George W. Bush administration, former community-college leader Martha
Kanter plays a similar role now.
21
"Some in the administration, if they were advising students who had a choice of going to a community college or a
for-profit college, would say, 'Pick the community college,"' said Scott Fleming, a Washington lobbyist who represents
Apollo.
The Education Department isn't out to "shut down or maim" for-profits, Cappell i said.
"If Obama means what he says, that he wants everyone to have one year of college, how do you accomplish that
without for-profit higher ed?" he said.
To contact the reporter on this story: Dan Golden in Boston at dlgolden@bloomberg.net .
Business Exchange
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Please copy my job-share partner .Jane Glickman (jane.glickman@ed.gov) on all emails.
Thank you.
22
From:
Sent:
To:
Cc:
Subject:
Babyak, Stephanie
Friday, October 30, 2009 9:17AM
Babyak, Stephanie; Shireman, Bob; Smith, Zakiya; Hamilton, Justin
Glickman, Jane; Abrevaya, Sandra
RE: Bloomberg story on U of P and Apollo2
Apollo Weakness for Phoenix Revenues Spurring Short Sellers
Share Business ExchangeTwitterfacebookl Email I Print I A A A
By Daniel Golden
Oct. 30 (Bloomberg) --The University of Phoenix, the largest for-profit college in the U.S., may have set off on a
collision course with the federal government and investors in 2001. That's when its founder, John Sperling, urged
executives at his 80th birthday party to boost enrollment fivefold to half a million students, a goal it has almost
accompl ished .
Now, Phoenix's parent, Apollo Group Inc., is facing challenges to its growth. The Securities and Exchange
Commission is investigating how Apollo books revenue, the company said Oct. 27. Apollo recorded a charge of $80.5
million to cover costs it expects to pay to settle a lawsuit alleging that it violated federal student recruitment rules.
Profit in the quarter ended Aug. 31 fell 60 percent largely because of that charge.
Apollo shares, which had more than doubled since 2006, may have difficulty rebounding from an 18 percent decline
the day after the SEC probe was disclosed. Phoenix may also face scrutiny as the U.S. Education Department
examines for-profit universities that rely heavily on taxpayer-supported financial aid. In fiscal 2009, Phoenix derived
86 percent of its $3.77 billion in revenue from federal grants and loans, up from 48 percent in 2001, and approaching
a federal limit of 90 percent.
"The outlook for Apollo next year has definitely become a lot tougher," said Robert Wetenhall, an analyst for RBC
Capital Markets in New York, who lowered his rating on Apollo shares on Oct. 28 to "underperform."
Axia's Growth
Phoenix's enrollment has almost doubled to 443,000 from 227,800 in fiscal 2004. About 90 percent of that growth has
come from a two-year online college called Axia, created in 2004. While Phoenix originally focused on bachelor's
degree and graduate degree programs for managers whose employers paid their tuition, Axia attracts students with
lower income and less academic preparation, the majority of whom depend on federal financial aid.
23
Apollo's revenue was $1.1 billion during the three months ended Aug. 31, five times the amount during the same
period in 2001. Net income rose almost threefold to $91.5 million.
The company's shares fell $1.91, or 3.2 percent, to $58.15 on Oct. 29 in New York Stock Exchange composite trading.
Before the close on Oct. 27, the stock had fall en 4.8 percent this year, compared with an 18 percent rise in the
Standard & Poor's 500 Index.
Investors have bet against Apollo, with 10 percent of its shares sold short as of Oct. 15, compared with 3.5 percent
for the New York Stock Exchange as a whole. Apollo's short interest has risen to 13.4 million shares from 6.6 million a
year ago.
Obama Administration
Phoenix now has to deal with the Obama administration, which is tightening review of for-profits and has close ties to
community colleges that compete with Axia. Driven in part by the shift to Axia, Phoenix's growing reliance on taxpayer
funds is drawing government attention. The average annual tuition is $10,350, $500 less than what federal aid will
pay for a low- income freshman under age 24. By comparison, annual tuition at public community colleges this year
averages $2,544, according to the College Board, the New York-based nonprofit organization that owns the SAT
college admissions test.
"It makes sense to examine institutions that rely heavily on federal aid," Robert Shireman, Deputy Undersecretary
of Education, said in an interview without singling out any university. "Certainly, one of the data points we look at for
triggering possible program reviews is a large growth in the use of federal financial aid."
Uncover Problems
Such a program review would be designed to uncover problems with financial management or signing up students
who are unqualified or aren't fully aware they're taking out loans, and may result in fines, suspensions or terminations
from eligibility for financial aid, Shireman said.
Students are reliant on aid because of the recession and rising college costs, said Sara Jones, an Apollo
spokeswoman. Phoenix expanded into online two-year degrees to continue its shift from a niche institution for degree
completion into a comprehensive university, not to obtain more financial aid dollars, she said. The 90 percent limit on
federal revenue, enacted in 1992, penalizes schools for having low- income students, said Gregory Cappelli, Apollo
Co-Chief Executive Officer.
"We want to help people," Cappelli said in a Sept. 9 interview at the company's Phoenix headquarters. "They need to
be able to read and write and compete at the college level. Know what? We don't want your money otherwise."
The company believes the revenue recognition policies being investigated by the SEC are appropriate, Brian Schwartz,
Apollo's chief financial officer and treasurer, said in an Oct. 27 conference call.
Few Graduate
While Phoenix has succeeded in drawing students, most don't graduate, leaving them without degrees and often
burdened by loans. Only 8.9 percent of Phoenix students without prior college experience complete a degree in six
years, including 5 percent of those who attend classes online, according to the National Center for Education
Statistics, in Washington. The national graduation rate is 56.1 percent for four-year schools and 30.9 percent for
two-year schools.
24
Besides leaving school prematurely, many students aren't able to pay their bills, with U.S. taxpayers picking up the
balance. Of Phoenix students who should have begun repaying loans in 2007, 9.3 percent have defaulted, up from a
7.2 percent rate a year earlier and more than the national average of 6.7 percent, according to the Education
Department.
The university works closely with lenders and delinquent students to stave off defaults, said Robert Collins, Apollo's
vice president for financial aid.
' Replacement Curve'
Phoenix's dropout rate means the school needs to recruit 250,000 new students a year -- equivalent to six University
of Michigans - - to maintain current enrollments, said former Apollo manager Mark Defusco, now an education
investment banker at Berkery, Noyes & Co. in New York.
"The replacement curve is astronomical, " DeFusco said. "You have to feed the beast. "
Phoenix's growth is hardly uncontrolled, said Jones, the Apollo spokeswoman. The university has "more than 200
campuses and learning centers" which means it can add 1,000 students a day by enrolling five at each one, she said .
Phoenix gained 102,000 new students in the quarter ended Aug. 31, according to Charles B. Edelstein, Apollo Co-
CEO.
The question of whether recruiters sign up unqualified students is the focus of the lawsuit that Phoenix said it expects
to settle for $80.5 million. The 2003 suit brought by two former employees in federal court in California alleges that
Phoenix violated a 1992 ban on paying recruiters on the basis of enrollment numbers. The company has denied
wrongdoing .
'Dumb as Doornail'
In a deposition in the lawsuit, Jennifer Kahn, a recruiter who left Phoenix in 2006, said she complained to her boss
about a prospect who couldn't handle college.
"I had a student, let's refer to him as dumb as a doornail/' Kahn said. "And my manager told me, 'Enroll him. It's not
our call to say who has a right to an education.' As a consequence, he started, he went to the first night, he knew he
was in deep doo-doo, and dropped. He never should have been there."
Tom Corbett, a former director of online enrollment at Phoenix who provided an affidavit in the lawsuit, said in an
interview that the school's recruiters were like brokers peddling subprime mortgages.
"The University of Phoenix's management culture is fueled by greed, the same as the housing scenario/' Corbett said.
"There was no emphasis on the student's actual values, goals, background, experiences."
Compensation Methods
Timothy Hatch, an outside counsel for Phoenix and a partner in the Los Angeles office of Gibson, Dunn & Crutcher,
said the school enrolled the student mentioned by Kahn because he had completed an associate's degree at another
for-profit college.
Phoenix's compensation methods are legal because teamwork and student retention figure into its salary adjustments
along with enrollment expectations, he said. The criticisms by Corbett and other former employees don't reflect the
views of Phoenix recruiters and managers in general, he said.
25
The Education Department may t ighten 2002 rules that let colleges pay recruiters partly on the basis of enrollment,
according to Shireman, the deputy undersecretary.
The department announced on Sept. 9 that it may prohibit misrepresentations of information provided to students and
prospective students. The move was prompted partly by reports the department received about Axia recruiters,
according to a federal official familiar with the matter.
Prospective Students
In tape-recorded telephone call s heard by Bloomberg News, Axia recruiters told Wall Street researchers posing as
potential applicants that its credits could be transferred to Harvard University and Columbia University. Those schools
don't grant transfer credit for online undergraduate courses, the universities' spokesmen said in e-mails.
Cappelli said he isn't aware of the all eged misrepresentations.
"There's not a mandate or a directive from anyone in the management team to fool or hurt people," he said.
"Traditional colleges make errors, too."
Phoenix has a pi lot program to improve student readiness for coll ege, Cappelli said during a conference call with
analysts on Oct. 27. Lower retention rates and extra remedial instruction and other support services for Axia students
have damped Apoll o profits, he said in September.
'Concerted Effort'
"We are making a concerted effort to get back our focus on bachelor's and master's degrees," said Cappelli, a former
Credit Suisse research analyst who joined Apol lo in 2007. "The return to the student is better if they stay in school
and complete their bachelor's degree. The return to us is better, too. Not all of our growth is coming from Axia
anymore."
The company supports a proposal in Congress that would allow coll eges to exceed the 90 percent cei l ing on the
portion of revenues from financial aid until 2012, and not to count increases in student loan limits as federal revenue.
The proposal, which passed the House last month as part of a broader education bill, isn't included in a Senate
version, said Mark Kantrow itz, publisher of the FinAid.org and FastWeb.com financial-aid Web sites based in
Cranberry Township, Pennsylvania.
Phoenix officials said the 8. 9 percent graduation rate measured by the government counts only first-time students.
Including transfer students, 27 percent of Axia students graduate, according to the university's 2008 Academi c
Annual Report. Of those pursuing bachelor's degrees, Phoenix said 38 percent graduate.
No Placement
Phoenix doesn't help graduates land jobs, nor does it track where they find employment, Jones, the Apollo
spokeswoman, said. She said most Phoenix students already have jobs.
Simon Saffery, 30, a Hawaii resident, transferred to Phoenix's onl ine program as a junior in 2006 and graduated last
year with a 3.9 average out of 4.0 in computer science. He said he has applied f or 25 entry-level information
technology jobs without receiving a single interview. Almost half of the openings he sought were at Apollo itself,
Saffery said. He is unemployed, owes $45,000 in student loans and may declare bankruptcy, Saffery said.
26
Jones declined to comment on individual students, citing privacy considerations. According to a 2008 survey by
Phoenix, graduates of its associate and bachelor's degree programs earned average increases in personal income of
19 percent and 28 percent, respectively.
Founder's Dream
Sperling, who has an economic history Ph.D. from Cambridge University in England, founded Phoenix in 1976. His
mission was to give working professionals a convenient way to get back to school and boost their academic credentials
without having to quit their jobs, according to his 2000 autobiography, "Rebel With a Cause." Students, who
learned in teams and took five- week courses in business, nursing and other fields, tended to be managers in their
mid-30s whose employers reimbursed them for tuition.
Richard Chait, a professor of higher education at Harvard in Cambridge, Massachusetts, who has studied Sperling's
university, said the school "saves money everywhere" by hiring part-time faculty, leasing real estate, and centralizing
administration.
" The genius of the University of Phoenix is that it spends $1 million to develop one course that it gives a thousand
times," Chait said in an interview in his office. "Community colleges spend almost nothing developing a thousand
courses that they will use once."
Expanding Eastward
In the 1990s, Phoenix expanded eastward, opening facilities in Michigan, Maryland and Pennsylvania. Today,
according to its Web site, the university has campuses in 39 states, the District of Columbia, Puerto Rico, and two
Canadian provinces. From 1995 to 2000, Apollo's stock rose more than 10-fold, making it one of the 30 top-
performing stocks in the Russell 3000 Index.
When enrollment was about 20,000, Sperling told executives Phoenix would have 100,000 students by 2000, Bob
Barker, a f ormer Phoenix executive vice president, said in an interview. At his 80th birthday party in 2001, Sperling
raised his sights to 500,000, DeFusco said.
Apollo never formally adopted Sperling's vision, said Jones, the spokeswoman. She said Sperling was unavailable for
interviews.
As fast as Phoenix was growing, it was drawing from a limited customer base of mid-career managers, f ormer Apollo
president Brian Mueller, CEO of for-profit Grand Canyon Education Inc. in Phoenix, said in an interview. Students
had to be at least 23 years old and have two years of work experience and as many as 60 credits from other colleges.
Rapid Growth
By 2004, the university had eliminated its credit and age requirements, Jones said.
DeFusco, who worked at Apollo from 1994 to 2003 in academic affairs and then opening campuses for Phoenix, said
Axia's tuition was set just under the federal limit for financial aid so government grants and loans could cover most, if
not all, of the cost.
The college's tuition-pricing "was a financial-aid play," DeFusco said.
Apollo spokeswoman Jones said that was not the case.
27
Unlike students who came to Phoenix to complete degrees, the company said that three out of five Axia attendees
haven't gone to college before.
"It's no longer the mid-career manager, it's somebody working a minimum-wage job somewhere and looking to get
out of that dead end, " said Laura Palmer Noone, a former Phoenix president who is now CEO of Piccolo
International University, an onl ine school based in Scottsdale, Arizona.
Career Aspirations
Sabrina Bogan, 39, a criminal -justice major, said in an interview that Axia has improved her writing. The Richmond,
Virginia, mother of three, who has a high school equivalency degree and used to work as an assistant manager at a
convenience store, said she has written essays on the death penalty and energy conservation .
"The person that I was before I started taking those classes could not have done that," Bogan said. She said she
hopes to land a job in a lawyer's office after she finishes her associate's degree next year.
Not all Axia students benefit. Laura Holder, 29, has a diploma from Prairie Grove High School in Prairie Grove,
Arkansas, where she took special -education classes, she said. According to her mother, Beatrice McCormack, Holder
has an IQ of 65 to 70, within a range the Washington-based American Association on Intellectual and
Developmental Disabilities defines as intellectually disabled .
Axia Recruiter
Holder, who lives in an apartment with her husband, said she learned about Phoenix on the Internet and contacted
the school in hopes that a college degree would help her find work as a preschool teacher. The Axia recruiter, she
said, asked if she had graduated from high school, not whether she was in special education.
"They said once I go through the classes, I would get a job in teaching, " Holder said.
Holder enrolled atAxia in October 2006 and realized the classes were too hard for her, she said. She left school amid
a payment dispute without completing a course. A collection agency dunned her for a tuition balance of $1,710.
Jones, the Phoenix spokeswoman, said the school is aware of a handful of instances in which intellectually disabled
students enrolled and soon demonstrated that they didn't have the ability to succeed. In those cases, she said,
Phoenix worked to help the students withdraw without financial obligation.
Community Colleges
Axia may soon face more competition for students. The Obama administration has proposed allocating $12 billion to
publicly run community colleges, which also give two-year degrees. While Sally Stroup, a former Apollo lobbyist,
oversaw post-secondary education in the George W. Bush administration, former community-college leader Martha
Kanter plays a similar role now.
"Some in the administration, if they were advising students who had a choice of going to a community college or a
for-profit college, would say, ' Pick the community college,"' said Scott Fleming, a Washington lobbyist who represents
Apollo.
The Education Department isn't out to "shut down or maim" for-profits, Cappelli said.
"If Obama means what he says, that he wants everyone to have one year of college, how do you accomplish that
without for-profit higher ed?" he said.
28
To contact the reporter on t hi s story: Dan Golden in Boston at dlgol den@bloomber g.net.
Last Updated: October 30, 2009 00:00 EDT
Please copy my job-share partner .Jane Glickman (jane.glickman@ed.gov) on all emails.
Thank you.
29
From:
Sent:
To:
Cc:
Subject:
Babyak, Stephanie
Friday, October 30, 2009 9:15AM
Shireman, Bob; Smith, Zakiya; Hamilton, Justin
Glickman, Jane; Abrevaya, Sandra
Bloomberg story on U of P and Apollo
Apollo Weakness for Phoenix Revenues Spurring Short Sellers
Share Business ExchangeTwitterfacebookl Email I Print I A A A
By Daniel Golden
Oct. 30 (Bloomberg) --The University of Phoenix, the largest for-profit college in the U.S., may have set off on a
collision course with the federal government and investors in 2001. That's when its founder, John Sperling, urged
executives at his 80th birthday party to boost enrollment fivefold to half a million students, a goal it has almost
accompl ished .
Now, Phoenix's parent, Apollo Group Inc., is facing challenges to its growth. The Securities and Exchange
Commission is investigating how Apollo books revenue, the company said Oct. 27. Apollo recorded a charge of $80.5
million to cover costs it expects to pay to settle a lawsuit alleging that it violated federal student recruitment rules.
Profit in the quarter ended Aug. 31 fell 60 percent largely because of that charge.
Apollo shares, which had more than doubled since 2006, may have difficulty rebounding from an 18 percent decline
the day after the SEC probe was disclosed. Phoenix may also face scrutiny as the U.S. Education Department
examines for-profit universities that rely heavily on taxpayer-supported financial aid. In fiscal 2009, Phoenix derived
86 percent of its $3.77 billion in revenue from federal grants and loans, up from 48 percent in 2001, and approaching
a federal limit of 90 percent.
"The outlook for Apollo next year has definitely become a lot tougher," said Robert Wetenhall, an analyst for RBC
Capital Markets in New York, who lowered his rating on Apollo shares on Oct. 28 to "underperform."
Axia's Growth
Phoenix's enrollment has almost doubled to 443,000 from 227,800 in fiscal 2004. About 90 percent of that growth has
come from a two-year online college called Axia, created in 2004. While Phoenix originally focused on bachelor's
degree and graduate degree programs for managers whose employers paid their tuition, Axia attracts students with
lower income and less academic preparation, the majority of whom depend on federal financial aid.
30
Apollo's revenue was $1.1 billion during the three months ended Aug. 31, five times the amount during the same
period in 2001. Net income rose almost threefold to $91.5 million.
The company's shares fell $1.91, or 3.2 percent, to $58.15 on Oct. 29 in New York Stock Exchange composite trading.
Before the close on Oct. 27, the stock had fall en 4.8 percent this year, compared with an 18 percent rise in the
Standard & Poor's 500 Index.
Investors have bet against Apollo, with 10 percent of its shares sold short as of Oct. 15, compared with 3.5 percent
for the New York Stock Exchange as a whole. Apollo's short interest has risen to 13.4 million shares from 6.6 million a
year ago.
Obama Administration
Phoenix now has to deal with the Obama administration, which is tightening review of for-profits and has close ties to
community colleges that compete with Axia. Driven in part by the shift to Axia, Phoenix's growing reliance on taxpayer
funds is drawing government attention. The average annual tuition is $10,350, $500 less than what federal aid will
pay for a low- income freshman under age 24. By comparison, annual tuition at public community colleges this year
averages $2,544, according to the College Board, the New York-based nonprofit organization that owns the SAT
college admissions test.
"It makes sense to examine institutions that rely heavily on federal aid," Robert Shireman, Deputy Undersecretary
of Education, said in an interview without singling out any university. "Certainly, one of the data points we look at for
triggering possible program reviews is a large growth in the use of federal financial aid."
Uncover Problems
Such a program review would be designed to uncover problems with financial management or signing up students
who are unqualified or aren't fully aware they're taking out loans, and may result in fines, suspensions or terminations
from eligibility for financial aid, Shireman said.
Students are reliant on aid because of the recession and rising college costs, said Sara Jones, an Apollo
spokeswoman. Phoenix expanded into online two-year degrees to continue its shift from a niche institution for degree
completion into a comprehensive university, not to obtain more financial aid dollars, she said. The 90 percent limit on
federal revenue, enacted in 1992, penalizes schools for having low- income students, said Gregory Cappelli, Apollo
Co-Chief Executive Officer.
"We want to help people," Cappelli said in a Sept. 9 interview at the company's Phoenix headquarters. "They need to
be able to read and write and compete at the college level. Know what? We don't want your money otherwise."
The company believes the revenue recognition policies being investigated by the SEC are appropriate, Brian Schwartz,
Apollo's chief financial officer and treasurer, said in an Oct. 27 conference call.
Few Graduate
While Phoenix has succeeded in drawing students, most don't graduate, leaving them without degrees and often
burdened by loans. Only 8.9 percent of Phoenix students without prior college experience complete a degree in six
years, including 5 percent of those who attend classes online, according to the National Center for Education
Statistics, in Washington. The national graduation rate is 56.1 percent for four-year schools and 30.9 percent for
two-year schools.
31
Besides leaving school prematurely, many students aren't able to pay their bills, with U.S. taxpayers picking up the
balance. Of Phoenix students who should have begun repaying loans in 2007, 9.3 percent have defaulted, up from a
7.2 percent rate a year earlier and more than the national average of 6.7 percent, according to the Education
Department.
The university works closely with lenders and delinquent students to stave off defaults, said Robert Collins, Apollo's
vice president for financial aid.
' Replacement Curve'
Phoenix's dropout rate means the school needs to recruit 250,000 new students a year -- equivalent to six University
of Michigans - - to maintain current enrollments, said former Apollo manager Mark Defusco, now an education
investment banker at Berkery, Noyes & Co. in New York.
"The replacement curve is astronomical, " DeFusco said. "You have to feed the beast. "
Phoenix's growth is hardly uncontrolled, said Jones, the Apollo spokeswoman. The university has "more than 200
campuses and learning centers" which means it can add 1,000 students a day by enrolling five at each one, she said .
Phoenix gained 102,000 new students in the quarter ended Aug. 31, according to Charles B. Edelstein, Apollo Co-
CEO.
The question of whether recruiters sign up unqualified students is the focus of the lawsuit that Phoenix said it expects
to settle for $80.5 million. The 2003 suit brought by two former employees in federal court in California alleges that
Phoenix violated a 1992 ban on paying recruiters on the basis of enrollment numbers. The company has denied
wrongdoing .
'Dumb as Doornail'
In a deposition in the lawsuit, Jennifer Kahn, a recruiter who left Phoenix in 2006, said she complained to her boss
about a prospect who couldn't handle college.
"I had a student, let's refer to him as dumb as a doornail/' Kahn said. "And my manager told me, 'Enroll him. It's not
our call to say who has a right to an education.' As a consequence, he started, he went to the first night, he knew he
was in deep doo-doo, and dropped. He never should have been there."
Tom Corbett, a former director of online enrollment at Phoenix who provided an affidavit in the lawsuit, said in an
interview that the school's recruiters were like brokers peddling subprime mortgages.
"The University of Phoenix's management culture is fueled by greed, the same as the housing scenario/' Corbett said.
"There was no emphasis on the student's actual values, goals, background, experiences."
Compensation Methods
Timothy Hatch, an outside counsel for Phoenix and a partner in the Los Angeles office of Gibson, Dunn & Crutcher,
said the school enrolled the student mentioned by Kahn because he had completed an associate's degree at another
for-profit college.
Phoenix's compensation methods are legal because teamwork and student retention figure into its salary adjustments
along with enrollment expectations, he said. The criticisms by Corbett and other former employees don't reflect the
views of Phoenix recruiters and managers in general, he said.
32
The Education Department may t ighten 2002 rules that let colleges pay recruiters partly on the basis of enrollment,
according to Shireman, the deputy undersecretary.
The department announced on Sept. 9 that it may prohibit misrepresentations of information provided to students and
prospective students. The move was prompted partly by reports the department received about Axia recruiters,
according to a federal official familiar with the matter.
Prospective Students
In tape-recorded telephone call s heard by Bloomberg News, Axia recruiters told Wall Street researchers posing as
potential applicants that its credits could be transferred to Harvard University and Columbia University. Those schools
don't grant transfer credit for online undergraduate courses, the universities' spokesmen said in e-mails.
Cappelli said he isn't aware of the all eged misrepresentations.
"There's not a mandate or a directive from anyone in the management team to fool or hurt people," he said.
"Traditional colleges make errors, too."
Phoenix has a pi lot program to improve student readiness for coll ege, Cappelli said during a conference call with
analysts on Oct. 27. Lower retention rates and extra remedial instruction and other support services for Axia students
have damped Apoll o profits, he said in September.
'Concerted Effort'
"We are making a concerted effort to get back our focus on bachelor's and master's degrees," said Cappelli, a former
Credit Suisse research analyst who joined Apol lo in 2007. "The return to the student is better if they stay in school
and complete their bachelor's degree. The return to us is better, too. Not all of our growth is coming from Axia
anymore."
The company supports a proposal in Congress that would allow coll eges to exceed the 90 percent cei l ing on the
portion of revenues from financial aid until 2012, and not to count increases in student loan limits as federal revenue.
The proposal, which passed the House last month as part of a broader education bill, isn't included in a Senate
version, said Mark Kantrow itz, publisher of the FinAid.org and FastWeb.com financial-aid Web sites based in
Cranberry Township, Pennsylvania.
Phoenix officials said the 8. 9 percent graduation rate measured by the government counts only first-time students.
Including transfer students, 27 percent of Axia students graduate, according to the university's 2008 Academi c
Annual Report. Of those pursuing bachelor's degrees, Phoenix said 38 percent graduate.
No Placement
Phoenix doesn't help graduates land jobs, nor does it track where they find employment, Jones, the Apollo
spokeswoman, said. She said most Phoenix students already have jobs.
Simon Saffery, 30, a Hawaii resident, transferred to Phoenix's onl ine program as a junior in 2006 and graduated last
year with a 3.9 average out of 4.0 in computer science. He said he has applied f or 25 entry-level information
technology jobs without receiving a single interview. Almost half of the openings he sought were at Apollo itself,
Saffery said. He is unemployed, owes $45,000 in student loans and may declare bankruptcy, Saffery said.
33
Jones declined to comment on individual students, citing privacy considerations. According to a 2008 survey by
Phoenix, graduates of its associate and bachelor's degree programs earned average increases in personal income of
19 percent and 28 percent, respectively.
Founder's Dream
Sperling, who has an economic history Ph.D. from Cambridge University in England, founded Phoenix in 1976. His
mission was to give working professionals a convenient way to get back to school and boost their academic credentials
without having to quit their jobs, according to his 2000 autobiography, "Rebel With a Cause." Students, who
learned in teams and took five- week courses in business, nursing and other fields, tended to be managers in their
mid-30s whose employers reimbursed them for tuition.
Richard Chait, a professor of higher education at Harvard in Cambridge, Massachusetts, who has studied Sperling's
university, said the school "saves money everywhere" by hiring part-time faculty, leasing real estate, and centralizing
administration.
" The genius of the University of Phoenix is that it spends $1 million to develop one course that it gives a thousand
times," Chait said in an interview in his office. "Community colleges spend almost nothing developing a thousand
courses that they will use once."
Expanding Eastward
In the 1990s, Phoenix expanded eastward, opening facilities in Michigan, Maryland and Pennsylvania. Today,
according to its Web site, the university has campuses in 39 states, the District of Columbia, Puerto Rico, and two
Canadian provinces. From 1995 to 2000, Apollo's stock rose more than 10-fold, making it one of the 30 top-
performing stocks in the Russell 3000 Index.
When enrollment was about 20,000, Sperling told executives Phoenix would have 100,000 students by 2000, Bob
Barker, a f ormer Phoenix executive vice president, said in an interview. At his 80th birthday party in 2001, Sperling
raised his sights to 500,000, DeFusco said.
Apollo never formally adopted Sperling's vision, said Jones, the spokeswoman. She said Sperling was unavailable for
interviews.
As fast as Phoenix was growing, it was drawing from a limited customer base of mid-career managers, f ormer Apollo
president Brian Mueller, CEO of for-profit Grand Canyon Education Inc. in Phoenix, said in an interview. Students
had to be at least 23 years old and have two years of work experience and as many as 60 credits from other colleges.
Rapid Growth
By 2004, the university had eliminated its credit and age requirements, Jones said.
DeFusco, who worked at Apollo from 1994 to 2003 in academic affairs and then opening campuses for Phoenix, said
Axia's tuition was set just under the federal limit for financial aid so government grants and loans could cover most, if
not all, of the cost.
The college's tuition-pricing "was a financial-aid play," DeFusco said.
Apollo spokeswoman Jones said that was not the case.
34
Unlike students who came to Phoenix to complete degrees, the company said that three out of five Axia attendees
haven't gone to college before.
"It's no longer the mid-career manager, it's somebody working a minimum-wage job somewhere and looking to get
out of that dead end, " said Laura Palmer Noone, a former Phoenix president who is now CEO of Piccolo
International University, an onl ine school based in Scottsdale, Arizona.
Career Aspirations
Sabrina Bogan, 39, a criminal -justice major, said in an interview that Axia has improved her writing. The Richmond,
Virginia, mother of three, who has a high school equivalency degree and used to work as an assistant manager at a
convenience store, said she has written essays on the death penalty and energy conservation .
"The person that I was before I started taking those classes could not have done that," Bogan said. She said she
hopes to land a job in a lawyer's office after she finishes her associate's degree next year.
Not all Axia students benefit. Laura Holder, 29, has a diploma from Prairie Grove High School in Prairie Grove,
Arkansas, where she took special -education classes, she said. According to her mother, Beatrice McCormack, Holder
has an IQ of 65 to 70, within a range the Washington-based American Association on Intellectual and
Developmental Disabilities defines as intellectually disabled .
Axia Recruiter
Holder, who lives in an apartment with her husband, said she learned about Phoenix on the Internet and contacted
the school in hopes that a college degree would help her find work as a preschool teacher. The Axia recruiter, she
said, asked if she had graduated from high school, not whether she was in special education.
"They said once I go through the classes, I would get a job in teaching, " Holder said.
Holder enrolled atAxia in October 2006 and realized the classes were too hard for her, she said. She left school amid
a payment dispute without completing a course. A collection agency dunned her for a tuition balance of $1,710.
Jones, the Phoenix spokeswoman, said the school is aware of a handful of instances in which intellectually disabled
students enrolled and soon demonstrated that they didn't have the ability to succeed. In those cases, she said,
Phoenix worked to help the students withdraw without financial obligation.
Community Colleges
Axia may soon face more competition for students. The Obama administration has proposed allocating $12 billion to
publicly run community colleges, which also give two-year degrees. While Sally Stroup, a former Apollo lobbyist,
oversaw post-secondary education in the George W. Bush administration, former community-college leader Martha
Kanter plays a similar role now.
"Some in the administration, if they were advising students who had a choice of going to a community college or a
for-profit college, would say, ' Pick the community college,"' said Scott Fleming, a Washington lobbyist who represents
Apollo.
The Education Department isn't out to "shut down or maim" for-profits, Cappelli said.
"If Obama means what he says, that he wants everyone to have one year of college, how do you accomplish that
without for-profit higher ed?" he said.
35
To contact the reporter on t hi s story: Dan Golden in Boston at dlgolden@bloomberg.net.
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Thank you.
36
From:
Sent:
To:
Subject:
Attachments:
From: Jones, Andrew
Bennett, Ron
Thursday, March 04, 2010 12:50 PM
Bowman, Randall ; Byrne, Lynn; Hardy, Eric; Way, Jonathan; Dolan, Oliver; Parker, Larry;
Perkins, Shenel; Seidel, Brenda; Sherrer, Valerie; Simmons, Sandra; Sutton, Willie; Wade,
Renee; Ware, Brenda; Washington, Carolyn
FW: News clips for March 4th, 2010
image001.jpg; image002.gif
Sent: Thursday, March 04, 2010 11:06 AM
To: Newsclips
Subject: News cl ips for March 4th, 2010
News Clips for March 4, 201 0
Today there are fifteen articles for your review
Duncan Outlines Benefits Of Proposed Higher Ed Lending Reforms. Secretary of Education
Arne Duncan wrote in an op-ed for the Buffalo News (3/3) that ED "currently subsidizes student loans
to the tune of $9 billion every year .... President Obama is ready to put an end to that deal. " According
to Duncan, "Based on the president's proposal, the House of Representatives has passed the
Student Aid and Fiscal Responsibility Act," and the Senate "is still working on its version of the
legislation .... These changes are an essential part of our plans to expand college access and relieve
student borrowers of an impossible burden of debt."
Letter: Sallie Mae Back's Duncan's Higher Ed Lending Reform Push. John Remondi, vice
chairman and chief financial officer of Sall ie Mae, writes in a letter to the Washington Post (3/4),
"Contrary to Education Secretary Arne Duncan's assertions [" Investing in students, not the banks,"
Washington Forum, Feb. 26], Sall ie Mae is not lobbying to preserve today's student-loan program. In
fact, our efforts have been focused on supporting the foundation of the president's proposal with a
few enhancements that would preserve jobs and deliver a better program for students, schools and
taxpayers." According to Remondi, "We stand ready to work with Mr. Duncan to seize this 'once in a
generation' opportunity."
USA Today Backs Obama's Proposed Higher Ed Lending Reforms. The USA Today (3/4)
editorializes, "Under a federal program run by banks, Washington buys or guarantees student loans"
and from the "banks' perspective, it's a sweet deal." Thus, when "President Obama proposed ending
this scandal-plagued program, at a savings of $87 billion over 10 years, the banking community was
taken aback .... Cutting out the middleman makes a lot of sense."
Richard Hunt, president of the Consumer Bankers Association, writes in an "opposing view" op-ed
for USA Today (3/4) ''The Obama administration has described passage of the Student Aid and Fiscal
Responsibility Act as a 'no-brainer' and presented arguments to support that conclusion. However,
closer examination of the issues surrounding SAFRA suggests that there is more to this story and
that enactment of the bill in its current form would be a grave mistake." Ultimately, Congress "should
adopt the proposal put forward by the private sector."
Eric Hardmeyer, president of the Bank of North Dakota, writes in a letter to the Washington Times
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(3/4), "I could not agree more with your contention that the Student Aid and Fiscal Responsibility Act
'is a bad idea because it takes away consumer choice' ('Academic malpractice,' Editorials, Feb. 18).
The elimination of the Federal Family Education Loan (FFEL) Program would force all private and
public universities and colleges to use exclusively the Direct Loan Program."
Duncan Calls Education Bill Critical To College Affordability. The Tufts Daily (3/4, Kan) reports,
"Secretary of Education Arne Duncan in a live web chat yesterday highlighted the importance of
passing the Student Aid and Fiscal Responsibility Act (SAFRA), saying it would have a huge impact
on college affordability ... . Yesterday's chat was open to questions from the public and also featured
Melody Barnes, assistant to the president and director of the Domestic Policy Council."
College Students Rally Over Tuition, Education Quality. USA Today (3/4, Marklein) reports,
"College students on more than 100 campuses nationwide plan walkouts, rallies and other actions
Thursday to protest budget cuts, layoffs and tuition increases, which they say erode quality of
education and limit access. Students in at least 32 states are expected to join the grass-roots
campaign. It has been bubbling up since demonstrations last fall in California, where students, faculty
and unions protested plans for a 32% tuition increase amid the state's fiscal crisis."
Taxes Supporting For-Profit Fi rms As They Acquire Colleges. Bloomberg News (3/4, Golden)
reports, "ITI Educational Services Inc. paid $20.8 million for debt-ridden Daniel Webster College in
June," and in "return, the company obtained an academic credential that may generate a taxpayer-
funded bonanza worth as much as $1 billion." ED, "which doled out $129 billion in federal financial aid
to students at accredited postsecondary schools in the year ended Sept. 30, is examining whether
these kinds of acquisitions circumvent a federal law that new for-profit colleges can't qualify for
assistance for two years, Deputy Undersecretary of Education Robert Shireman said in a telephone
interview."
Tough Real Estate Market "A Silver Lining" For Overcrowded Colleges. Inside Higher Ed reports
on USA Today's (3/4, Moltz) website, "Community college leaders eyeing institutional expansion have
found a silver lining to the depressed real estate market. Though dwindling state appropriations have
halted new construction on many campuses, burgeoning student enrollments have inspired some
college officials to buy dilapidated storefronts and acquire public property for development." Among
the examples cited in the article is St. Louis Community College in Missouri , which is considering "an
abandoned Circuit City" near one of its campuses. Carla Chance, vice chancellor for finance, said the
former store was "ideal ," since it was relatively inexpensive, and had "a pretty much open floor plan,"
allowing the school to easily redesign the space to suit its needs. Chance said, "The cost of the
acquisition of this property and the renovation will be a third of what we would have spent building a
new building from the ground up."
Chronicle
Duncan Defends Planned Switch to Direct Lending in Appearance Before House Panel
By Libby Nelson
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Washington
Testifying before the House education committee on Wednesday morning, Education Secretary Arne
Duncan defended the Obama administration's plan to move all colleges to direct lending and said
such a switch could still be accomplished by July without major glitches.
At the committee hearing on President Obama's proposed education budget for the 2011 fiscal year,
Mr. Duncan dismissed concerns raised by Republican members that the switch to direct lending
would be too difficult for colleges to accomplish quickly.
"We understand this transition, and what a big deal it is, and we want to make sure we do this
absolutely smoothly if possible," Mr. Duncan said.
The Student Aid and Fiscal Responsibility Act, which would end bank-based lending to students and
move to 1 00-percent direct lending, in which federal money is lent directly to students, would require
that all colleges switch to direct lending by July 1. The House passed the bill in September, but it has
been stalled in the Senate.
Thousands of colleges have switched to direct lending on their own in the past few years, Mr. Duncan
told the committee in response to several questions. For most institutions, the transition has taken
place in a matter of weeks, he said.
"We've gone from 1,000 universities participating to 2,300 participating, and I don't think you've heard
a peep," he said. "There haven't been any huge stories about lack of service."
Republicans, though, repeatedly questioned the wisdom of switching to direct lending this summer,
citing fears that students would be unable to get their loans in time for fall classes.
Rep. Glenn Thompson Jr. , a Republican of Pennsylvania, argued that the institutions that voluntarily
switched might not represent the direct-lending experience nationally. Large colleges have an easier
time with direct lending than do smaller institutions because they have more resources, he said.
"I think we've cherry-picked, voluntarily, those who are best adapted," Mr. Thompson said. "What sort
of Plan B does the department have in place in case the plans to convert don't go as smoothly as
what you'd like?"
Reiterating that many colleges have already switched successfully, Mr. Duncan said the department
has "Plan A, Plan B, Plan C." But he decl ined to provide details on alternate plans.
"We're really focused on Plan A right now," he said.
Questions on Teacher Training
Mr. Duncan defended the cost of the Obama administration's education budget for 2011 at a separate
hearing on Capitol Hill last week. telling the House Budget Committee that a proposed 7.5-percent
increase in education spending was necessary for long-term economic development. Questions at
Wednesday's hearing, which lasted more than 90 minutes, dealt with policy issues.
The questions about student lending were a rare moment in the spotlight for higher education at a
hearing that focused on elementary and secondary education. Many questions tackled the Obama
administration's proposed changes in the Elementary and Secondary Education Act, the federal law
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governing precollege education that is now called No Child Left Behind. The act is overdue for
renewal , and although legislation to reauthorize it has not yet been introduced in Congress, the issue
is a top priority for legislators, said the committee's chairman, Rep. George Miller.
"We would really like to get this done this session of Congress," said Mr. Miller, a Democrat of
California.
In response to questions about proposed changes in the act, Mr. Duncan, who has often criticized
schools of education) said colleges and universities should be more focused on providing hands-on
training and should instruct future teachers on how to use data.
He repeated his support for alternative-certification programs, which bypass teachers' colleges to
draw potential teachers from other fields. Some teachers' colleges are skeptical of such programs,
which have become a point of controversy in discussing revisions to the Elementary and Secondary
Education Act.
"I always think these are false dichotomies," he said of the divide between traditional and alternative
certification. "We just need more great teachers coming in."
Grief in the Age of Facebook
Courtesy of Kelsey Butler
After the death of Casey Feldman (right), many of her friends changed their photographs of
themselves on their Facebook profiles to a snapshot of them with Casey. Above, Kelsey Butler's
Facebook photo, with Casey.
Courtesy of Kelsey Butler
After the death of Casey Feldman (right), many of her friends changed their photographs of
themselves on their Facebook profiles to a snapshot of them with Casey. Above, Kelsey Butler's
Facebook photo, with Casey.
By Elizabeth Stone
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On July 17 last year, one of my most promising students died. Her name was Casey Feldman, and
she was crossing a street in a New Jersey resort town on her way to work when a van went barreling
through a stop sign. Her death was a terrible loss for everyone who knew her. Smart and dogged,
whimsical and kind, Casey was the news editor of the The Observer, the campus paper I advise, and
she was going places. She was a finalist for a national college reporting award and had just been
chosen for a prestigious television internship for the fall, a fact she conveyed to me in a midnight text
message, entirely consistent with her all-news-all-the-time mind-set. Two days later her life ended.
I found out about Casey's death the old-fashioned way: in a phone conversation with Kelsey, the
layout editor and Casey's roommate. She'd left a neutral-sounding voice mail the night before, asking
me to call when I got her message, adding, "It's OK if it's late." I didn't retrieve the message till
midnight, so I called the next morning, realizing only later what an extraordinary effort she had made
to keep her voice calm. But my students almost never make phone calls if they can help it, so
Kelsey's message alone should have raised my antenna. She blogs, she tweets, she texts, and she
pings. But voice mail? No.
Paradoxically it was Kelsey's understanding of the viral nature of her generation's communication
preferences that sent her rushing to the phone, and not just to call boomers like me. She didn't want
anyone to learn of Casey's death through Facebook. It was summer, and their friends were scattered,
but Kelsey knew that if even one of Casey's 801 F acebook friends posted the news, it would
immediately spread.
So as Kelsey and her roommates made calls through the night, they monitored Facebook. Within an
hour of Casey's death, the first mourner posted her respects on Casey's Facebook wall , a post that
any of Casey's friends could have seen. By the next morning, Kelsey, in New Jersey, had reached
The Observer's editor in chief in Virginia, and by that evening, the two had reached fellow editors in
California, Missouri , Massachusetts, Texas, and elsewhere-and somehow none of them already
knew.
In the months that followed, I've seen how markedly technology has influenced the conventions of
grieving among my students, offering them solace but also uncertainty. The day after Casey's death,
several editorial-board members changed their individual Facebook profile pictures. Where there had
been photos of Brent, of Kelsey, of Kate, now there were photos of Casey and Brent, Casey and
Kelsey, Casey and Kate.
Now that Casey was gone, she was virtually everywhere. I asked one of my students why she'd
changed her profile photo. "It was spontaneous," she said. "Once one person did it, we all joined in."
Another student, who had friends at Virginia Tech when, in 2007, a gunman killed 32 people, said
that's when she first saw the practice of posting Facebook profile photos of oneself with the person
being mourned.
Within several days of Casey's death, a Facebook group was created called "In Loving Memory of
Casey Feldman," which ran parallel to the wake and funeral planned by Casey's family. Dozens wrote
on that group's wall , but Casey's own wall was the more natural gathering place, where the
comments were more colloquial and addressed to her: "casey im speechless for words right now,"
wrote one friend. " i cant believe that just yest i txted you and now your gone ... i miss you soo much.
rest in peace."
Though we all live atomized lives, memorial services let us know the dead with more dimension than
we may have known them during their lifetimes. In the responses of her friends, I was struck by how
much I hadn't known about Casey-her equestrian skill, her love of animals, her interest in
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photography, her acting talent, her penchant for creating her own slang ("Don't be a cow"), and her
curiosity-so intense that her friends affectionately called her a "stalker."
This new, uncharted form of grieving raises new questions. Traditional mourning is governed by
conventions. But in the age of Facebook, with selfhood publicly represented via comments and
uploaded photos, was it OK for her friends to display joy or exuberance online? Some weren't sure.
Six weeks after Casey's death, one student who had posted a shot of herself with Casey wondered
aloud when it was all right to post a different photo. Was there a right time? There were no
conventions to help her. And would she be judged if she removed her mourning photo before most
others did?
As it turns out, Facebook has a "memorializing" policy in regard to the pages of those who have died.
That policy came into being in 2005, when a good friend and co-worker of Max Kelly, a Facebook
employee, was killed in a bicycle accident. As Kelly wrote in a Facebook blog post last October, "The
question soon came up: What do we do about his Facebook profile? We had never really thought
about this before in such a personal way. How do you deal with an interaction with someone who is
no longer able to log on? When someone leaves us, they don't leave our memories or our social
network. To reflect that reality, we created the idea of 'memorialized' profiles as a place where people
can save and share their memories of those who've passed."
Casey's Facebook page is now memorialized. Her own postings and lists of interests have been
removed, and the page is visible only to her Facebook friends. (I thank Kelsey Butler for making it
possible for me to gain access to it.) Eight months after her death, her friends are still posting on her
wall, not to "share their memories" but to write to her, acknowledging her absence but maintaining
their ties to her-exactly the stance that contemporary grief theorists recommend. To me, that seems
preferable to Freud's prescription, in "Mourning and Melancholia," that we should detach from the
dead. Quite a few of Casey's friends wished her a merry Christmas, and on the 17th of every month
so far, the postings spike. Some share dreams they've had about her, or post a detail of interest. "I
had juice box wine recently," wrote one. "I thought of you the whole time :( Miss you girl!" From
another: "i miss you. the new lady gaga cd came out, and if i had one wish in the world it would be
that you could be singing (more like screaming) along with me in my passenger seat like old times."
It was against the natural order for Casey to die at 21 , and her death still reverberates among her
roommates and fellow editors. I was privileged to know Casey, and though I knew her deeply in
certain ways, I wonder-l'm not sure, but I wonder-if I should have known her better. I do know,
however, that she would have done a terrific trend piece on "Grief in the Age of Facebook."
Elizabeth Stone is a professor of English, communication, and media studies at Fordham University.
She is the author of the memoir A Boy I Once Knew: What a Teacher Learned From Her Student
(Algonquin, 2002).
Younger Professors Say a Successful Career Should Not Require Long Hours
By Robin Wilson
In conversations with a dozen faculty members, researchers with a project on work-life issues run by
Harvard University have found that "Generation X" professors value efficiency over "face time" and
believe that quality is more important than quantity in academic work.
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The Collaborative on Academic Careers in Higher Education, a long-term project run by Harvard's
Graduate School of Education, conducted interviews with 12 professors born between 1964 and 1980
on three campuses in the mid-Atlantic: a liberal-arts college, a private master's-degree-granting
university, and a large public institution. Neither the interview subjects nor the institutions are named
in the report.
The Generation X professors said they did not want to be holed up in their campus offices until 11
p.m. , and talked about the "diminishing returns" of working too many hours. The professors perceive
their attitudes to be different from those of older faculty members, who they see as being completely
devoted to their jobs and unable to say no to more work.
"My biggest concern ... is that I want to be able to be good at my job but work 8:00 to 6:00 five days a
week," one Gen X faculty member told the interviewers. "I want to succeed, but I don't want to work
18 hours a day."
The report, "New Challenges, New Priorities: The Experience of Generation X Faculty," is to be
posted today on the project's Web site.
Inside Higher Ed
You Say You Want a Revolution?
March 4, 2010
By Jeff Abernathy
It seems everybody is talking revolution in higher ed these days.
How many times have I read in the higher ed news of the coming revolution in classroom instruction,
in the major, in the tenure system, in governance?
Google "higher education revolution" and you find radical reform rising in every direction. Many are
sparked by the billions state systems are losing as our economy lurches out of the tank, others by the
increasing commodification of the college degree. Some promise to "transform" the American
university as they have transformed-- egad!-- the American newspaper. New models of for-profit
education promise a revolution in the higher education business model that is already threatening the
viability of traditional colleges across the country.
But I can't help wondering if we've spirited all our revolutionary rhetoric for another day at the office.
We tend to talk ourselves right past revolutions in higher education. Our burning impulse to revitalize
learning often concludes with a return to the status quo: we end up arguing, say, over our respective
roles in shared governance, or over the turf we'd have to give up for genuine improvement in learning.
We can do better.
At a recent conference, I had a glimpse into how the real transformation might unfold. The Teagle
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Foundation brought together professors, administrators and researchers from across the country to
discuss with its board members key questions the foundation has been addressing in recent years:
How might we make systematic improvements in student learning?
What evidence is there that we're using what we know about student learning to reform
academe?
These, of course, were the very same questions asked by the ill-fated Spellings Commission. Teagle
has found success by engaging the strengths of the academy -- and especially the talents and
creativity of faculty--by supporting liberal arts college in piloting solutions to the challenges before
academe. In doing so, they have started transformative efforts that will deepen student learning while
also balancing resources.
With the public university system in crisis-- Clark Kerr's master plan for California has been set adrift
along with the strategies for renewal in state after state -- a focus on liberal arts colleges could seem
to some like a boutique project. The Teagle Foundation's great insight has been that the nation's
liberal arts colleges remain a bellwether for the health of the academy and that small colleges have a
great opportunity to model what the 21st century higher education might become.
Teagle has funded dozens of collaborative efforts at liberal arts colleges over the past six years
supporting faculty-driven, ground-up assessment projects of student learning outcomes at colleges
and universities across the country.
The work that colleges are doing in these Teagle pilots tests the basic assumptions of a college
education. Some have examined the meaning and value of general education, exploring radical
revision of the ways in which general education might come to be embedded in helping students to
think about the ways they will live their lives. One project brought four colleges together to assess
how effectively undergraduate students acquire and refine the spiritual values that lie at the heart of
their institutional missions. Another explores effective models of community-based learning efforts at
three prominent colleges.
Such work aims to deepen student learning and growth at colleges across the country. As
importantly, it will help small colleges to think about ways to distinguish themselves in a landscape
that increasingly sees no difference between a liberal arts college degree and a degree from, say, the
University of Phoenix. Liberal arts colleges must, to use Robert Zemsky's phrase, be "market-smart
and mission-centered," and the pilots that Teagle has funded in recent years point us toward
solutions to drifting missions and to struggling finances alike.
At Augustana College, we are taking seriously the Teagle Foundation's charge to find ways to use
what we know about student learning for reform. Working in a Teagle-funded collaborative of seven
colleges across the Midwest-- Alma, Augustana, Illinois Wesleyan, Luther, Gustavus Adolphus,
Washington and Jefferson, and Wittenberg -- over the past five years, we have begun to question the
1 00-year-old credit model system that is at the heart of the American baccalaureate. Our consortium
of colleges has begun to ask whether we can still justify the existence of a system that was brought
into being mostly to serve the needs of our business offices.
Will federal pressure for transferability of credit only make more secure a system that is now straining
under the weight of new understanding of learning and the new pedagogies that follow? In an era
when we ask faculty to be deeply engaged with students through interdisciplinary education,
undergraduate research, international study, and other high impact practices, can we continue to
justify a credit system that has remained unchanged for a century? We are questioning whether the
44
course unit as now constituted-- that three- or four-hour sl iver of a college degree or the correlating
seat time - is the best means of measuring student learning.
My colleagues at Augustana and I have begun other pilots that will explore the other hard questions
before our college, and all colleges: how will we make better use of vital resources while
demonstrating the value of a liberal education to parents, employers, and graduate schools?
We have developed a series of experiments that may answer the question. Our faculty have created
a senior capstone program -- Senior Inquiry -- by using a backward design model to re-envision
nearly every major on campus, ensuring that all Augustana students will have the sort of hands-on,
experiential learning opportunity that will demonstrate their skills to employers and graduate schools
alike (even as it provides us with a great chance to evaluate all they have done in four years here).
We have redefined scholarship in the Boyer model , embracing the scholarship of teaching and
learning. We are piloting new partnerships with universities, community colleges and high schools; we
are asking how technology might deepen the advantages of traditional classroom learning models.
And we have built our newest program-- Augie Choice-- around the idea that experiential learning--
through research, international study and internships -- ought to be the heart of a liberal arts
education.
We don't yet know where all of these experiments will lead us. But, in our 150th year at Augustana,
we have learned from the Teagle Foundation that pilots may help us to ensure that we will thrive for
the next 150 years.
That, I'm certain, is revolution enough.
Jeff Abernathy is vice president and dean of the college at Augustana College, in Illinois. This
summer, he will become president of Alma College, in Michigan.
Medical Schools Expand -- and Contract
March 4, 2010
In the span of a week in September 2008, the "rubber band" that held together the University of Utah
School of Medicine broke.
First, the federal government cut $10 million in Medicaid funding to the university' s hospital. Then,
days later, the state Legislature eliminated $2.5 mill ion in support. In all , the medical school lost 40
percent of its education budget nearly instantly, with no revenue-creating solution in sight.
"We were a rubber band stretched to the extreme," says David Bjorkman, the school' s dean. "We
were already spending every dollar we had, maximally cross-subsidizing with clinical revenue from
our health system." After months of lobbying and left with no other choice, the school shrunk the size
of its fall 2009 entering class to 82 from 102. While the rest of the university raised tuition by 1 0
percent, medical school tuition went up 15 percent.
Though Utah's medical school has seen more dramatic cuts than most, the economic realities of a
prolonged recession are forcing medical schools across the United States to reduce the number of
seats available for new students or to curtail expansion efforts initiated during better economic times,
45
even as demand far outstrips supply in many experts' projections on the size of the future physician
work force.
State higher education budget cuts mean that Indiana University School of Medicine's entering class
this fall will be 13 percent smaller than last fall' s. One scenario for higher education cuts in Nevada
would include shutting down the University of Nevada School of Medicine, the state's only medical
school. Development of a new medical school at the University of California at Merced has stalled.
And more cuts could be on the way.
Edward S. Salsberg, director of the Association of American Medical Colleges' Center for Workforce
Studies, says he has seen some evidence of medical schools taking in fewer first-year students or
slowing their planned growth rates. "It's up to the individual schools to make decisions that work for
them," he says. Public medical schools "have to go to their state legislatures to get support and we
know state budgets aren't in good condition in most states."
For the medical establishment, t ight budgets and enrollment cuts couldn't have come at a worse time.
The Council on Graduate Medical Education estimated in 2005 that the United States would face a
shortage of 85,000 to 96,000 physicians by 2020 unless medical schools were able to increase the
number of new M.D.'s they graduate each year by several thousand. Other groups, too, project a
physician shortage or at least the need to draw physicians to underserved regions and toward
practicing high-demand specialties such as internal medicine and geriatrics.
In June 2006, the AAMC responded by undertaking an effort to expand medical school enrollments
by 30 percent nationwide by 2015 (after initially suggesting 15 percent growth). To meet the goal,
U.S. medical schools would need to enroll21,434 first year students in 2015-- nearly 5,000 more
than they did in 2002, when first-year enrollments totaled 16,488.
The AAMC envisioned that the creation of new medical schools and the expansion of existing ones
would provide additional slots that, in all , would total close to 20,000 across all four years of traditional
allopathic medical school.
Universities and hospital systems heeded the call. Dozens initiated or stepped up efforts to expand
their medical schools, adding seats to their first-year classes and opening branch campuses to
broaden their geographical reach. Others began laying the groundwork for new medical schools that
would at once build institutional prestige and contribute to the larger national goal.
By last fall , enrollments had grown 11.5 percent over 2002 levels, with 18,390 students in the entering
class. Close to 200 of those seats were in medical schools that opened in 2009: Commonwealth
Medical College in Scranton, Pa. ; Florida International University College of Medicine in Miami ; Texas
Tech University Health Sciences Center's PaulL. Foster School of Medicine in El Paso; and the
University of Central Florida College of Medicine in Orlando.
Before the AAMC began its expansion efforts, it estimated that medical schools would add 919 new
first-year seats between the fall of 2005 and the fall of 2010. Instead, between the creation of new
schools and the expansion of existing ones, close to 1,400 spots were created by the fall of 2009.
"We're encouraged that schools and communities are listening to our recommendations," Salsberg
says. "We're encouraged because we do think the goal is happening."
46
But economic realities are clearly having an effect on just how quickly medical schools are being
created and expanding. And even in good economic times, it might be a stretch to add 3,000 seats in
half a dozen years.
Even if expansion continues at its current rate for the next six entering classes, U.S. medical schools
won't reach the goal on time, Salsberg says. "We don't think that we' ll make it by 2015," he says. "We
recommended, but it' s up to the schools to make the expansion happen .... We're making progress,
just not as much as we would have liked. "
Salsberg anticipates that there will be 20 or 21 percent more first-year seats in American medical
schools in 2014 than there were in 2002. The degree to which future enrollment cuts may erode those
numbers -- even with growth elsewhere - is unclear.
Sharp Declines for the Hoosiers
The Indiana University School of Medicine had plotted expansion by the AAMC book. After a work
force study of the state' s physicians "confirmed that the 30 percent national estimate was true in
Indiana as well ," says Peter Nalin, interim executive associate dean for educational affairs, the school
set its sights on expanding its entering class size with the goal of growing enrollment 30 percent by
2013.
"The rationale has always been that there is a need for family physicians, primary care physicians,
physicians in underserved areas," he says. "We need to respond to an aging population and
increasing demand for health care overall in society."
To expand the first-year class from 280 students in the fall of 2006 to 364 in 2013, administrators
planned to add 14 more seats to each of the school's entering classes. Through August 2009, the
plan was right on track, with 322 students starting at the medical school. The school was promised $5
million in state appropriations to pay for the expansion
When the state whittled that $5 million down to $3 million in its October estimate of the 2010 budget,
the medical school responded by extending its expansion plan to reach the 30 percent goal. The
school would've added six new seats in 2010 and eventually reached the goal of 364 first-year seats
by 2015.
Then the budget picture got worse.
In December, Gov. Mitch Daniels cut funding to the state's public colleges and universities by $150
million, more than a third of which would be taken from Indiana University's state appropriations. By
then, Michael McRobbie, the university's president, had already made one-time cuts of $79 million
and recurring cuts totaling $98 million annually.
With what amounted to a $59 million hole in state funding, McRobbie decided to trim $7 million from
the medical school's budget, a choice that a spokesman told the Indianapolis Star was simply part of
distributing the pain throughout the university. "Every single school and every department, even the
president's office, is cutting a proportional amount of their budget," the spokesman said. "No one was
excluded. Not one dean has been spared the pain of having to cut something. "
Daniels' office issued a statement deflecting blame. "The university made the decision about how to
implement the reduction. We don't have any comment about why IU decided this was the best
direction to take among the many areas it likely reviewed."
47
On its own, the $7 million in cuts might have slowed or even stopped the medical school' s expansion
effort. But, when coupled with the realization that the $5 million that had dwindled to $3 million would
not materialize at all , the blow was even blunter, Nalin says. In all , the school's state funding would be
$12 million below what administrators had projected for the 2010-11 academic year.
So, not only did the medical school lose its funding for future expansion but it also lost the financial
capacity to sustain the growth that had taken place in the last few years. The class that enters in
August will probably total 280, Nalin says, the same that it was in pre-expansion 2006. "Our goal is
ultimately to respond to that target of 30 percent-- it remains our vision of where we'd like to be," he
says. "However, we must roll it back based on the current financial situation and hope that we'll
eventually be able to achieve that 30 percent."
Nalin says the school hopes to restart its expansion efforts (which, at first, would be efforts to restore
classes to the size they reached last fall) in the next year or two. In a worst-case scenario, he'd like to
see class size expand again by 2014. Any growth, though, depends on the state. "We respect the fact
that if there aren't state revenues then appropriated monies can't be realized. But we hope those
revenues will return."
New Medical Schools
In raw numbers, the greatest contribution to the expansion is coming from new medical schools.
Schools that were already building their facilities or applying for accreditation by the Liaison
Committee on Medical Education have not lost momentum.
Besides the four medical schools that took their first students last fall , eight more have already started
the official accreditation process. Virginia Tech's Carilion School of Medicine is screening applicants
this spring and will open in the fall with 42 first-year students. The Hofstra University School of
Medicine, which is affiliated with the North Shore-Long Island Jewish Health System, aims to open in
2012.
Candice Chen, co-principal investigator of the Medical Education Futures Study at the George
Washington University School of Public Health and Health Services, says she hasn't seen state cuts
and lagging philanthropy doing too much damage-- so far, anyway. "We haven't seen a slowdown in
new schools saying 'We were getting close to opening but now we're not,' " she says. "You never
know if there would've been more right now if the economy was doing better."
But some medical schools that were early on in the planning stages have put their plans on hold until
local economies and state budgets loosen up a bit.
The University of California at Merced, which opened in 2005, was well on its way to planning a
medical school. A consultant had conducted a feasibility study, the UC Board of Regents had
approved the continuation of the planning process, and the university' s chancellor had appointed a
vice provost for health sciences to oversee the school' s development. Administrators predicted that
the school could take its first students in the fall of 2013.
All of that progress had happened by mid-Sept. 2008. Then the financial sky fell , across the nation
and in California. Since then, says Patti lstas, a spokeswoman for Merced, the ambitions have
become far less grandiose and immediate. "All these changes in the economy and the state budget
have slowed things down," she says. "We're still in the infancy stages. It's too early to pinpoint when
the school might be able to open. "
48
Though Merced is "still hoping to open a fully accredited school of our own," the university focused on
"lots of concurrent activities while waiting for the funding to be allocated, " says lstas.
A team at Merced is working to create a branch campus of another UC medical school-- possibly
Davis or San Francisco- that could provide basic science instruction for the first two years of medical
school. Faculty and administrators are also building up the university's health-related research
operations that could provide some of the foundation needed to fund and operate a medical school.
The economy has touched those efforts, too, though, lstas says. "It has slowed things down."
More than 300 miles to the south, in Riverside, a new UC medical school has already applied for
accreditation by the LCME and plans to enroll 50 first-year students in the fall of 2012. The difference
between the two projects: the timing.
Riverside was ahead of Merced in first considering its medical school --faculty started debating the
possibility of establishing a school in 2003 -- and continued to be ahead of Merced as the planning
process progressed. Perhaps fortuitously (as lstas puts it, "timing is everything"), Riverside got final
approval by the UC Board of Regents in July 2008, just before most people came to see just what a
bad state the economy was in.
Before the end of 2008, Riverside secured some state funding, as well as the support of several
foundations and local medical centers. Development continued and fortune continued to be in the
school' s favor. Construction began on a new health science building and the university made plans to
renovate existing instructional buildings.
In December, President Obama signed an appropriations bill for the U.S. Department of Health and
Human Services that included an earmark of $4 million to support construction at Riverside.
G. Richard Olds, who became the school's founding dean in February. "I wouldn't have taken this job
if I thought this wasn't going to happen, " he says. "When no new programs were being added to the
UC budget, the president still put our medical school into the budget. It was a bold thing to do and
makes it clear that UC is serious about starting this medical school."
Cutting Class Size, But Not Budgets
Though the Pritzker School of Medicine at the University of Chicago isn't facing big budget cuts, its
leaders decided more than two years ago that the best way to serve students and the community was
to shrink its enrollment. After welcoming entering classes of 104 students for more than three
decades, Pritzker had a first-year class of just 88 in the fall of 2009.
The 15 percent drop in class size is an effort "to more powerfully fund each of the students who enroll
here," says Holly Humphrey, the school' s dean. The goal, she says, is to produce better-trained
doctors who won't face financial barriers in choosing to practice in underserved areas or low-paying--
but high need --fields.
"Without any new big donations, we became convinced that reducing class size would be the best
way to ... increase supervision and feedback, redirect learning and impact performance in a way that
would truly benefit our students, " she says.
One new program funded by the savings that came with the enrollment cut is Repayment for
Education to Alumni in Community Health (REACH), an effort to attract Pritzker graduates who have
just completed their residencies to work in the underserved South Side of Chicago. In addition to their
49
salaries, graduates in the program will be paid $40,000 a year for up to four years to help ease the
burden of loan repayments. By reducing the debt burden on alumni , Humphrey says, Chicago hopes
to see more graduates take jobs that strategically target areas in need of more physicians.
The average American medical student graduates with $140,000 in debt, but Humphrey hopes that
by reducing class size, Pritzker will put its graduates well below that average. "One of the questions
that isn't often asked about expanding medical school class size is whether you're also expanding
financial aid dollars," she says. "And the answer is often No."
Though this year' s first-year class has 16 fewer students than last year' s, the class is still receiving
the same total dollar amount in institutional aid. "We're taking the same number of scholarship dollars
and applying it to a smaller group, Humphrey says. "Short of getting a philanthropist to underwrite a
big chunk of aid -- without considering whether or not you can sustain that over time -- this was the
best way for us to try to reduce debt for the largest number of our students."
After announcing the class size reduction, Humphrey says, the school got "lots of questions--
medicine and health care in general are accustomed to growing, expanding and getting bigger, so
why on earth would we make something smaller rather than bigger?" Her answer: the changes make
sense for the school and students, even if they may on the surface seem to run contrary to AAMC' s
goal and the needs of the nation.
And, if Pritzker can figure out ways to cut costs or boost revenues, "we will expand the class as
quickly as we can," Humphrey says. "But that's going to take us a few years to figure out."
- Jennifer Epstein
'Harnessing America's Wasted Talent'
March 4, 201 0
Peter P. Smith's career in and out of higher education has not followed the straight and narrow.
Amid forays into politics (as a member of Congress and lieutenant governor of Vermont) and
international affairs (at UNESCO), Smith has been a higher education innovator, helping to found the
statewide Community College of Vermont in 1970 and serving for 10 years as founding president of
California State University's Monterey Bay campus, beginning in 1995.
In those jobs and his current one, as senior vice president for academic strategies and development
at Kaplan Higher Education, Smith has pushed existing colleges and universities to better serve the
adults and other students who have been least well served by traditional higher education. In his new
book, Harnessing America's Wasted Talent: A New Ecology of Learning (Jessey-Bass), he argues
that the country needs to reach deeper into its population than it historically has to produce a
sufficient number of educated and skilled workers, and that the thousands of current colleges cannot
do that job.
He responded via e-mail to questions about the book ..
Q. You write that only a third of American ninth graders even take a shot at college, and that
the country can't continue to function effectively, let alone compete economically and
internationally, unless those in the "middle third"-- that is, those who finish high school but
50
do not experience college-- get some postsecondary training. What have been the biggest
factors preventing them from doing so until now?
A. The middle third also includes people who have some college experience, but no certificate or
degree. I think of this phenomenon as a "failure to thrive" educationally. Many of the reasons
described in the book - mode of teaching and learning, lack of recognition of transfer credit and
learning done outside of school - contribute.
There is a huge expectations gap. Like the student named Bob, whom I mentioned in the book,
people have been acculturated to believe that college is not for them, an expectation that is reinforced
throughout high school. This ties directly to the lack of personalization and customization in the
traditional model. The real low-hanging fruit here are the estimated one million high school graduates
every year who are qualified but simply don't go to college. So, we have to work on how we offer
post-secondary education to capture this audience. We also have to work on communicating to the
public that people have potential and capacity, and that college is for them.
Q. You argue that the existing higher education system (or, more accurately, "non-system," as
you point out) won't be able to educate that middle third-- that it is both "maxed out" in terms
of capacity and incapable of changing (or unwilling to change) the nature of teaching and
learning to accommodate the different needs of today's learners. Why do the students you're
most worried about hit a "dead end" in our current education system?
A. There is a long list of reasons why students hit a dead end, some of which colleges and
universities cannot control. For example, when I was at California State University, Monterey Bay, we
had to work very hard to keep first-generation Latino students in school because cultural norms called
for them to live at home and work rather than attending college.
The metaphor that I would use to describe this challenge is swimming under water. The longer you
are under water, the more it hurts. And, if your goal is to swim to the other end of the pool , but you
have never known anyone who did it, it is easier to simply climb out of the water and walk away. On
the other hand, if you believe you are meant to swim, it is easier to fight through the pain and reach
your goal.
With first-generation learners, it is critical to connect with them personally, customize the learning to
their needs, offer unwavering support, and respect their personal story and the learning that comes
with it.
Q. An underlying theme of your book is that higher education has essentially failed to
innovate sufficiently. Yet your own career path-- starting two different (and, at their time,
innovative) types of institutions, and now working at a third that is part of a emerging sector
trying new approaches --would seem to challenge that view. How do those square?
A. In the first two cases, I watched as the rest of the field either ignored or explained their success as
an exception. I am frankly astonished that there has never (to my knowledge, anyway) been a
replication of the Community College of Vermont model. Cal State Monterey Bay is a terrific institution
that incorporates several core "best practices" in its operations. But that institution is still subject to
the same constraints that I described in the book. For example, with the current budget crisis in
California, each CSU has faced employee furloughs and student body caps, leaving thousands
without access to higher education. One reason that I chose to come to Kaplan Higher Education
after my time at UNESCO is to experience a culture without these types of constraints.
51
At Kaplan Higher Education, we do have some fairly traditional practices, but we also have the
capacity to innovate, develop, and continuously improve. For instance, if we want to implement
diagnostics in the post-enrollment process, we can do so and then evaluate, refine, and improve our
processes. The traditional model lacks this type of nimbleness and flexibility. Without the constraints
inherent in the traditional model , we can model emerging best practices, help define them and, in
effect, help lead the change we seek.
Q. Define the "personal learning" that you think is undervalued/under-recognized by the
current higher education system. And do the current mechanisms that exist to account for
knowledge gained outside the classroom (the Council for Adult and Experiential Learning's
prior learning assessments, and the American Council on Education's military credit system,
for instance) not get at this issue?
A. Students are rarely asked, in depth, what they want from their college education and are almost
never engaged in an ongoing conversation about it with someone who can affect their higher
education experience. Until institutions personally connect the learner with the curriculum and the
college experience, the learner is vulnerable. And the "at risk" learner is always more vulnerable.
Additionally, the older one becomes the more experience one has to compare with what they are
being taught. So, to fail to integrate someone's experience into the curriculum both trivializes and
frustrates them. That's why starting with the assessment of prior learning is such an educationally
important thing to do.
As one of the founding board members of CAEL, I agree wholeheartedly that its prior learning
assessment and other approaches like the ACE military credit system are central to the issue. What
people involved in both of these efforts, and others like them, will tell you is that the credits awarded
are often honored "in the breach. " That's a nice way of saying that they are not honored by other
institutions and, in some cases, by other departments in the institution that awarded them. The
biggest pain point for most of these approaches is that the credit will be included in a transcript, but
not counted towards the degree.
What I am calling for in the book is the mainstreaming of these concepts and the development of a
market that honors credit awarded by accredited institutions as progress towards a degree at other
institutions.
Q. How much is this a credentialing problem? Are we as a society basically under
credentialing (failing to give credentials for knowledge, etc., that isn't now recognized) or over
credentialing (is there too much emphasis, by employers, etc., on credentials, rather than on
the underlying knowledge that Americans have)?
A. Credentialing is part of the problem, but only part of it. As a society, we fail to recognize what
people know. So, if a soldier returning from active duty service has not only courses but also
experiences, why shouldn't those things be acknowledged and included in his degree plan?
Also, as educators, we do not adequately value reflection on the part of the learner. I view reflection
as the process through which the learner distinguishes between their broad experience (in a course
or in life) and what they learned because of it. This is where and when learning is real ized. Employers
want accurate information about the qualifications of people wishing to advance in or enter a
profession. So, while a credential might well be the exponent of that, the learning outcome and a
validated third-party guarantee that the learning occurred will be increasingly important.
52
Q. What are the developments (you call them "game changers") that make you believe the
time is right to create an alternate path to a postsecondary education for these students?
A. You see evidence every day. When AARP solicits proposals for a learning platform for its
members, the balance has shifted. When the Peer-to-Peer University moves into its second "term,"
the balance has shifted. When Straighterline is recognized for its courseware alone, the balance has
shifted. When the global OpencourseWare Consortium gets three million hits a month, the balance
has shifted.
In the book, I devoted a chapter to the "End of Scarcity" and its impact on higher education. It is
difficult to overestimate the significance of this trend. Colleges are built and organized around scarcity
-the expertise of faculty is in short supply, classrooms and labs are limited because they are
expensive, and the authority to offer a course of study is limited. Additionally, reputation is built
around who you exclude as much as it is who you include and who succeeds. In fact, the whole
concept of meritocracy is built on the notion of scarcity because there is not enough room "at the top"
for everyone.
Put this set of assumptions, and the practices that are in place because of them, up against the
current reality. Excellent content is increasingly commodified and available. Time and place are no
longer determinants of when a person can learn. And in the ultimate reversal, the educational
challenge vis a vis the workforce can no longer winnow people out and validate merit. Instead,
employers must help create merit because there are now more jobs that require higher education
than there are people qualified for them. And this is projected to be the case for years to come.
Q. Explain the newfangled institution(s) that you envision-- Colleges for the 21st Century-- as
a potential environment for these students. Do any existing colleges and universities (like
your current employer) qualify? If so, which? If not, who would be likeliest to create them?
A. That is the big question. The reason I developed the characteristics of the Colleges for the 21st
Century (C21 C) and did not suggest a model is that I don't know what it will look like. As Justice
Potter Stewart said when discussing pornography, "I can't define it, but I know it when I see it. "
What won't change, however, are the elements in the higher education teaching-learning value
proposition, although they might be rearranged. At its heart lies the transfer of information, the impact
of that information on the receiver, and the assessment and reflection that assures the transfer is
complete and meets a high standard. All of these things are organized around the human, intellectual,
civic, and economic development of the learner. From a teaching-learning perspective, the focus will
increasingly be on learning outcomes, the standards they reflect, and the process by which they are
employed.
I believe that the services modeled by places like AcademyOne and its founder, David Moldoff, will
change the back office of higher education profoundly, transforming learner mobility from a risk factor
to a fact of life.
And I certainly hope (and expect) that when the list of C21 Cs is first published that Kaplan Higher
Education will be on it. And I believe that many in the market-driven sector will play roles in
developing the concept of the C21 C precisely because we are metric-driven laboratories of
innovation. Having said that, Burck Smith has proven with Straighterline that core change can come
from any direction, not just those in the academy. In a world where learner choice and control is a
driving force; where the learning platform, not the campus, is the basic architecture; and where the
network, not the faculty, defines the process, new organizational structures will develop.
53
-Doug Lederman
Washington Post
Area students will protest higher education tuition hikes
By Jenna Johnson and Daniel de Vise
Washington Post Staff Writer
Thursday, March 4, 201 0; 7:15 AM
Leaders of a California-born protest movement will try to spread their message across the nation
Thursday, with student rallies, panel discussions and other events to express opposition to budget
cuts and tuition hikes at public colleges and universities.
Organizers say they hope the events will dramatize the frustration that has been building as the
recession forces deep cuts in higher education budgets, especially in California, where the fiscal
situation is especially dire. Colleges there have raised tuition sharply, reduced enrollment and cut
faculty pay.
Students in California have declared Thursday as a Day of Action to Defend Public Education. Rallies
are planned for nearly every college and university campus in the state, in addition to several K-12
schools. Organizers said there would be events in 30 states.
"There are student activists all over the country who are looking to California as something to
emulate," said Doug Singsen, 32, a graduate student at the City University of New York who has
helped organize events outside of California. "We want this to be the beginning of a movement that
gets stronger."
At the University of Maryland in College Park, students plan to walk out of classes at noon, meet in
the student union and then march to an academic building. There they plan to occupy the building
while they talk about "hip-hop and education, race and gender in the classroom, the corporate
university, sports and education, and whatever else we want," according to an invitation on a
Facebook site created by organizers.
Organizer Bob Hayes said Maryland students are angry that their tuition dollars are going to pay for
development projects and the salaries of administrators, instead of better instruction.
We feel disconnected from our education," Hayes said. "We're being run by a Fortune 500 company
instead of by a university."
California has long been considered one of the top public higher education systems in the nation, but
drastic decreases in state funding have strained services, sparking protests.
At the University of California, Berkeley, students and faculty members plan to strike today and will
form picket lines at 7 a.m. Unlike picket lines during past protests, when students just walked around
in circles with their signs, the plan is to link arms and aggressively hinder people from entering
campus buildings, said Callie Maidhof, a Berkeley graduate student who is serving as the
movement's spokeswoman.
54
At noon the crowd plans to rally on campus and march five miles to Oakland. Some Oakland teachers
plan to bring their classes to the march, even if that means organizing a ''field trip or impromptu tours
of the neighborhood," Maidhof said. "There's really been a dedication at Berkeley for us to come out
of our ivory tower and go to Oakland," Maidhof said.
Last week a riot erupted at the Berkeley as more than 200 people set fires, shattered windows and
clashed with the six police agencies that were called in. On Monday five students were arrested in
Sacramento for refusing to leave a state assemblyman's office because he wouldn't sign a letter
promising increased financial support. Wednesday morning students broke into the Humanities
building at California State University, Fullerton and barricaded themselves inside for several hours.
Please follow the Post's Education coverage on Facebook. Twitter or our Education and Higher
Education pages. Bookmark them!
Tuition crunch
HOUSTON CHRONCLE
Tuition increases threaten affordable public higher education
March 3, 2010, 7:50PM
The Texas Legislature's ill-considered deregulation of state university tuition in 2003 was a blunder
that just keeps on taking from the state's students and their families.
Because Texas lawmakers subsequently have failed to adequately fund higher education, regents at
the University of Houston and other state systems are caught in a fiscal squeeze. They must choose
between damaging academic quality with layoffs and program cuts or passing along the pain to
students. One exception: Texas Tech imposed a tuition freeze this past year. But for the most part it
is the students who are paying more to shore up Lone Star universities.
Last month University of Houston System regents approved tuition increases, including nearly 4
percent at the central campus, 16.5 percent at its law school , 4.5 percent at UH-Ciear Lake and more
than 5 percent at UH-Downtown. The bill for a 12-hour semester for a resident undergraduate at the
main campus is now $3,483, and at UH-Downtown $2,205.
The current cost of a year of UH law school for residents, just over $21 ,000, will rise above $26,000.
The UH System will raise more than $8 million in additional tuition revenue.
The action provoked a letter to UH Chancellor Renu Khator from Houston state Sen. John Whitmire,
a UH graduate and lawyer. He was most concerned about the UH-Downtown increase, since it is a
gateway for working, older students who may not qualify for student assistance.
"Chancellor, how many of the students at UH-Downtown have you or the Regents met with
personally?" asked Whitmire in his letter. "I know them well, they are my constituents and I know that
many of them are struggling to get by even at current tuition rates."
Whitmire's sentiments were seconded by UH regent and law school graduate Nandita Berry, the lone
trustee to vote against the tuition hike.
55
Chancellor Khator did not answer Whitmire's letter, but a request by the Chronicle brought a response
issued by the UH administration. According to the statement, the university leaders share Whitmire's
concern about families and students, and the board of regents "is committed to meeting its
responsibilities to provide quality higher education in this community. " The statement points out that
UH guarantees free tuition and mandatory fees for four years to incoming in-state freshmen whose
families make below $45,000.
The UH administration and Whitmire are in agreement that state universities desperately need more
funding from the Legislature to reduce their dependence on tuition for revenue.
Right now both universities and their students are victims of state government's misplaced spending
priorities. Until lawmakers increase higher-education funding, continuing tuition raises will restrict
access to our institutions of higher learning at a t ime when our economy demands a highly educated
work force.
Voters should support state legislators on the ballot this year who back affordable higher education
for our young people and older working students.
56
From:
Sent:
To:
Subject:
Bennett, Ron
Monday, May 18, 2009 9:39AM
Sherrer, Valerie; Parker, Larry; Hardy, Noel; Perkins, Shenel; Washington, Carolyn; Seidel,
Brenda; Ware, Brenda; Sutton, Willie; Wade, Renee; Byrne, Lynn
Fw: Newsclips for Monday, May 18, 2009
Ron Bennett, Director
Systems Integration Division
Business Operations
Federal Student Aid
U.S. Department of Education
(202) 377-3181 office
(202) 557-1010 cell
From: Way, Crystal
Sent: Mon May 18 08:38:36 2009
Subject: Newsclips for Monday, May 18, 2009
Today there are seven Postsecondary articles from connectED, six articles from The
Chronicle of Higher Education and one article from Inside Higher ED for your review.
POSTSECONDARY EDUCATION
Tight Job Market Making Job Hunting More Difficult For New
College Grads. The Washington Post <http://www.washingtonpost.com/wp-
dyn/content/article/2009/05/ 16/AR2009051602263.html> (5/ 17, AJcindor) reported, "Typically, 10 to 15
percent of members of a graduating class haven't nailed down a j ob or plans for graduate school, said Paul
Villell a, chief executive ofHireStrategy, a recruiting and staffing company based in Reston. But after
contacting between eight and 10 area schools this year, he said, 'about 35 to 40 percent are graduating without
jobs or a predetermined plan in place."' According to the Post, the "National Association of Colleges and
Employers said in its spring 'Job Outlook' that employers plan to hire 22 percent fewer new graduates from the
class of2009 than they hired from the class of2008."
Maryland District Implements "Seven Keys To College Readiness"
Campaign. The Washington Post <http://www.washingtonpost.com/wp-
dyn/content/ article/2009/05/17/AR2009051701884.html> (5/18, De Vise) reports that educators in Montgomery
County, MD, "are blitzing parents and students with information on what they call 'Seven Keys to Coll ege
Readiness."' The brochures and a website dedicated to the initiative spell "out in detail the courses and tests that
officials say point toward academic prosperity." The information explains to parents "how their children should
score on each test, and which courses they should take -- and when -- if they wish to earn a college degree."
Although some of the information is common knowledge, the "campaign also suggests that a chil d can be
57
deemed college-bound from a first-grade reading score or a fifth-grade math course." Meanwhile, "some parents
say the campaign is costly and unnecessary."
Muslim Scholars Hope To Open Islamic College In US. The AP
<http://www.washingtonpost.com/wp-dyn/content/article/2009/05/17/ AR2009051701263.html> (5/17, Zoll)
reported, "A group of American Muslims, led by two prominent scholars, is moving closer to fulfilling a vision
of founding the first four-year accredited Islamic college in the United States, what some are calling a 'Muslim
Georgetown.' Advisers to the project have scheduled a June vote to decide whether the proposed Zaytuna
College can open in the fall of next year, a major step toward developing the faith in America." Imam Zaid
Shakir and Sheik Hamza Yusuf "of California have spent years planning the school , which will offer a liberal
arts education and training in Islamic scholarship."
"Thousands Of Veterans" Could Benefit From New GI Bill. usA Today
<http://www.usatoday.com/news/education/2009-05-17-Glbill N.htm> (5/18, Michaels) says a "small but
growing number" of students at Dartmouth are a "reflection of a broader effort that encourages today's veterans
to enter college in much the same way the World War IT-era GI Bill gave their grandparents a shot at higher
education. That effort has been led by two former Marines: Dartmouth President James Wright" and US Sen.
Jim Webb (D-VA), who helped pass the Post-9/11 Gl Bill , which "could open college doors to thousands of
veterans." According to USA Today, the "bill takes effect Aug. 1."
St Michael's Students, Parents Question Value Of Liberal Arts
Education. The Christian Science Monitor <http://www.csmonitor.com/2009/0515/p02sl0-usgn.html>
(5/ 15, Khadaroo) reported "Standing head and shoulders above the others on stage, clad in academic regalia"
during the St. Michael's College's commencement excercises, Secretary of Education Arne Duncan
"acknowledged the costs: 'With those college loans to pay back, you're probably wondering, 'Just how much is a
li beral arts education really worth?"" The "real value of a li beral arts education is that it teaches you .. . how to
analyze a situation and make a choice," Duncan said. The Monitor adds, "For parents paying most of the bills at
a place where tuition and living expenses added up to nearly $40,000 this year, it's difficult not to wonder what
the payoff will be when the career path isn't immediately clear for their child."
Northern Virginia Community College Enrollment Surges Amid
Recession. The Washington Post <http://www.washingtonpost.com/wp-
dyn/content/article/2009/05117 I AR200905170203 5 .html> (5/ 18, Helderman, Kumar) reports that Northern
Virginia Community College "is a place of aspirations, where the unemployed and underemployed toil long
hours to become more computer-savvy, learn a foreign language, win a technical certification-- anything to
make them more appealing to employers. But it is a place, too, where high school graduates who had expected
to attend a four-year university wind up when their parents' savings evaporate in the stock market." Also, it "is
there that the three men seeking the Democratic nomination for governor in Virginia will go tomorrow for their
fina1 debate before the June 9 primary, their last opportunity to meet head-to-head in a campaign whose central
question has been which candidate can best handle the economic crisis." The Post notes that at Northern
Virginia Community College, "enrollment is up 10 percent from last year, as the economically vulnerable grasp
for the promise of education."
ED Rules On Federal Loan Repayment Seen As Firm. Liz Pulli am Weston
wrote in a "Money Talk" column in the Los Angeles Times <http://www.latimes.com/business/la-fi-montalkl7-
2009may17,0, 1863696.column> (5/ 17) regarding a question on reducing federal student loan debt, "In most
cases, [ED] won't negotiate with borrowers over the amount they owe on federal student loans, said student loan
58
expert Mark Kantrowitz ofFinAid.org. That's because the department has extraordinary powers to force you to
pay." Student Joan debt "can't be discharged in bankruptcy and the department can intercept tax refunds, garnish
your wages and take a portion of many government benefits, including Social Security checks, if you default."
Weston added, "Given its arsenal , the government can take a tough stance, Kantrowitz said. But he has heard
that the department sometimes will agree to forgive a portion of accrued interest and fees if the remaining
balance will be paid off in full."
THE CHRONICLE OF HIGHER EDUCATION
A Lifetime of Student Debt? Not Likely
Many college graduates borrow lightly or not at all, statistics show
By ROBIN WILSON
One college graduate had smashed a ceramic piggy bank, while another had adorned a life-size human statue
with nothing but a silver ball and chain. A third drew a picture of a woman in a red coat stumbling down a
seemingly endless pathway. The objects were all part of an art show last month in which graduates expressed
fear and frustration over their student-loan debt.
The show joins a number of increasingly high-pitched campaigns aimed at exposing what some consider a
national crisis: Student-loan borrowing that is threatening the financial future oftoday's college students. In
January a lawyer with $100,000 in education debt started a Facebook campaign urging the federal government
to "free us of our obligations to repay our out-of-control student loan debt." Forbes magazine published an
article that same month called "The Great College Hoax," which said that the decision to borrow to attend
college often amounts to a "financial disaster." A month later, a book came out decrying college debt, with the
title The Student Loan Scam: The Most Oppressive Debt in U.S. History and How We Can Fight Back (Beacon
Press).
But is it really all that bad?
"There are some really poignant, painful stories," says Michael S. McPherson, an economist and president of
the Spencer Foundation, which supports educational research. "But they aren't the typical American
experience."
In fact, despite stories of a large number of students who face gargantuan debt, about a third of graduates leave
college with no debt at all for their education. Of the 65 percent who face debt, the average they owe is around
$20,000. That's just below the starting price of a 2009 Ford Escape.
"Most people borrow a reasonable amount of money, they pay it back, and they are better for having gone to
college, " says Mr. McPherson.
But for a vocal minority of borrowers, problems with student-loan debt are very real. About 8 percent of
undergraduates borrow at least double the national average.
Why do some students borrow more than $40,000 for a bachelor's degree when average borrowing is only half
that? The answer is almost never that they are from very low-income families and need that much money to get
a four-year degree. Public four-year colleges charged an average of just $6,585 for in-state tuition and fees in
2008-9. The total cost, including textbooks, room and board, and other living expenses, averages $18,326 a year
-and financial aid brings that figure down for many students.
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More often, the problem among students who go heavily into debt is that they are determined to attend their
dream college, no matter the cost.
"People don't pay attention to the debt, " says Mark Kantrowitz, publisher ofFinAid, a Web site about student
aid. "They want to be able to pay for the school they have wanted to go to for as long as they can remember,
and they are willing to do whatever it takes."
'Life Sentence'?
Students whom financial-aid experts call "overborrowers" capture most of the media's attention. "If you are a
writer vying for a story on Page 1, which story do you want to write?" asks Mr. McPherson. "Is it going to be
the careful story driven by the data, or is it going to be the headline that can scare people?"
He's talkjng about headlines like the one on a CNN report in 2006 that called student loans "A Life Sentence"
and said: "Forget about getting married and buying a home. This generation is thinking about next month's
payment."
But data on the average student-loan borrower tell a very different story. Figures compiled by the U.S.
Education Department show that while roughly two-thirds of students graduated from four-year colleges in
2003-4 with some education debt, on average they borrowed $19,202. Those who attended public institutions
graduated with an average debt of $17,277, and those from private colleges $21,957.
The data have been updated by the Project on Student Debt, a nonprofit research-and-policy organization,
which found that for the Class of2007, graduates' average debt was $18,482 at public colleges and $23,065 at
private ones.
Jill McCusker graduated in 2007 from Stonehill College, a Roman Catholic institution in Massachusetts. Her
$30,000 in education loans put her above the average, but she is managing her $300-a-month payments by
living with her mother for now. She doesn't regret her decision to attend Stonehill or even to borrow $30,000-
although it has caused her to delay her plans to live in an apartment in Boston with a friend. "I really love the
school and I felt it would look good on a resume," says Ms. McCusker, who earns $39,000 a year working in an
entry-level position for buyers at the headquarters ofTalbots, a chain of women's clothing stores.
Ms. McCusker is among the silent majority of borrowers who are repaying their student loans without much
complaint (see related articles). Her story stands in stark contrast to thousands of others on a new Facebook
page that calls on the U.S. government to forgi ve all student loans. Robert Applebaum, who started the page,
has been amazed to attract 188,766 friends and counting. With nearly $100,000 in education debt, though, he
has a story far different from Ms. McCusker's. Mr. Applebaum incurred his loans during law school, for wruch
the average graduate borrowed $70,933 in 2003-4.
Part of the confusion over the student-loan issue is that undergraduate debt is frequently conflated with graduate
and professional-school debt- which is typically much, much higher. In 2003-4, for example, medical-school
graduates borrowed an average of$113,661. Student-aid experts say the higher debt makes sense for people
who earn degrees in law, business, and medicine because they are much more capable of landing high-paying
jobs and paying offlarger loans. (Mr. Applebaum has struggled because he went to an expensive law school but
then took a low-paying job with the district attorney's office in Brooklyn, N.Y.)
Still , many economists say borrowing for any kind of higher education is generally a smart idea. That's partly
because student loans typically carry low interest rates. "College is a very good investment, and most students
take out too few loans, not too many," says Caroline M. Hoxby, a professor of economics at Stanford
University.
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Anthony P. Carnevale, director of Georgetown University's Center on Education and the Workforce, agrees.
"From an economist's point of view, debt is the very best way to pay for education because you're shifting the
cost forward until you'll be earning more money," he says. "You borrow cheap money. It's really a very good
bargain."
Patrick M. Callan, president of the National Center for Public Policy and Higher Education, is not as sanguine
about the value of borrowing. Still, "the only thing worse than borrowing," he says, "is not borrowing and not
going to college at all."
Data on salaries back him up. According to the Census Bureau, the average college graduate earned $57,181 in
2007, while the average high-school graduate earned just $31,286. That means college graduates earned about
80 percent more that year than high-school graduates did. Over a lifetime, those extra earnings stack up.
According to a 2002 report by the Census Bureau, a college graduate can expect to earn nearly $1-million more
in lifetime earnings than a high-school graduate can.
"Alarmists have tried to change the public story on student-loan debt" by questioning whether borrowing for
college is worth it, says Sandy Baum, a senior analyst at the College Board. But a student who graduates with
$20,000 in debt should be able to make at least that amount in extra earnings in one to two years' time, she
calculates, simply by having earned a college diploma.
Even in this economy, college graduates are much better off than high-school graduates. Yes, white-collar
employees are losing their jobs. But the unemployment rate for people over 25 years old who hold at least a
bachelor's degree is 4.4 percent, compared with 9.3 percent for people that age who hold only a high-school
diploma, according to the Bureau of Labor Statistics.
Borrowing Risk
People concerned about student-loan debt say the problem is not that college isn't worth borrowing for, or even
that today's average loan amount is too much.
What bothers advocacy groups like the Project on Student Debt is how many more students are borrowing now
compared with a decade ago, how much more they are borrowing, and what that says about the affordability of
a college education.
In 1993, the project has found, fewer than half of graduating seniors had loans, compared with 65 percent in
2003-4. Among those with loans, the average debt has more than doubled, from $9,250 in 1993 to $19,200 in
2003-4.
"It used to be that, 10 to 20 years ago, if you went to a four-year public institution, had a low to moderate
income, and worked a reasonable amount part time in school, there was enough aid. and public institutions were
better financed, so you could come out with no debt," says Lauren J. Asher, acting president of the group. "That
same student now would have to borrow to get their education. A college degree is still a good investment, but
the financial risk for the student has increased."
Indeed, Ms. Asher points out that more college graduates are carrying unmanageably high student-loan debts of
at least $40,000. A study by the project found that in 1993, only about 1.3 percent of graduating seniors had
borrowed the current equivalent of at least $40,000. By 2004 the proportion had risen to 7. 7 percent.
High student-loan debt, says Ms. Asher, "can ruin someone for life." Many borrowers who find themselves in
trouble use options under the federal loan program that allow them to postpone repayments on their loans for
years. The problem is that because interest keeps racking up during such a deferment and after a default, the
amount a borrower owes can soar.
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That's what happened to Alan M. Collinge, founder of StudentLoanJustice.org, an advocacy group. He took out
$38,000 in loans, which included $15,000 for an undergraduate degree and $23,000 for a master's program in
aerospace engineering. In 1999 he took a research posit1on at the University of Southern California at $35,000 a
year. By 2001, after he had spent $6,000 on an invention that didn't pan out and had a car accident that cost him
$1,500, he realized that he could no longer pay his bills, including his $362-a-month education debt. He went to
his boss, asked for a 30-percent pay raise, and quickly found himself out of a job and in default on his student
loans. His student-loan debt now has reached $120,000.
In February, Mr. Collinge published The Student Loan Scam, which blames lenders for using harsh collect1on
tactics and failing to work with distressed borrowers- some of whose stories he deta11s in the book and on his
Web site. He acknowledges that these borrowers fall at the margins of the student-loan experience, but argues,
"The margins are important because those are real people."
It is not that difficult for borrowers to find themselves in trouble, Ms. Asher says. "People lose control of their
finances, and sometimes they make choices you wish they hadn't made."
That could probably be said of Darla M. Horn, who organized the student-loan-debt art show last month in
Long Island City, N.Y. Ms. Hom says she has taken responsibility for repaying her $80,000 in undergraduate
student loans. Until recently she earned $100,000 a year and could afford her repayments of $650 a month. (She
is between jobs now and recently put her loans in forbearance while she worked on the art show, which she said
was meant "to boost awareness of the growing burden of student-loan debt in an ever-tightening, ever-
globalizing economy.") But she says she is not sure anyone should lend college students so much money, even
if they are willing to take it.
Ms. Horn didn't have to borrow all that she did to earn a four-year degree, but she wanted to get far away from
the small Texas town on the Louisiana border where she grew up. So she enrolled at the State University of
New York College at Purchase and borrowed about $25,000 a year for the final three years to pay her out-of-
state tuition. "There really wasn't a whole lot of thinking behind it," says Ms. Horn, whose parents hadn't saved
much for her higher education. "I could have gone to a public school in Texas for less, but I wanted to go to
New York and start a new life."
When she graduated, she realized that she didn't even know how much money she had borrowed. "I can humbly
say that I was completely financially illiterate," she says. "I was just signing the documents and faxing them
back."
Experiences like Ms. Horn's aren't uncommon, say higher-education experts. Indeed, heavy borrowers are not
necessarily poor students who would have been forced to forgo higher education if they hadn't received
extravagant sums. Rather, some students enroll in high-priced for-profit programs onJy to learn later that their
certificates or degrees are not as useful on the job market as they had expected. Students who attend four-year
programs at for-profit institutions borrow much more on average- about $28,138 each in 2003-4- than
students at nonprofit inst1tutions do. Others borrow large amounts to attend pricey traditional four-year colleges
but have no idea what kind of jobs they might land upon graduation and so have no way to judge whether they
will be able to repay their loans.
'Intimidated by the Complexity'
Meanwhile, it is no one's job to talk with students about whether the amounts they are borrowing line up with
their professional aspirations or even their immediate job prospects.
"College academic advisers are intimidated by the complexity of financial aid," says Jacqueline E. King,
assistant vice president for policy analysis at the American Council on Education. Financial-aid offices say to
students, "You make the academic decisions, and we will try to get you the money to pay for it," she says.
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Sitting down with each student to judge the wisdom of the amount he or she has borrowed would be impossible,
particularly at large universities, she says.
Donald A. Saleh, vice president for enrollment management at Syracuse University, says it does try to advise
students. According to a recent analysis by US. News & World Report, 63 percent of students in Syracuse's
Class of2007 took out education loans, borrowing an average of $27,152. That landed the university on the
magazine's list of universities with the heaviest student borrowing. (US. News uses the mean when calculating
average debt, while Syracuse uses the median, which is only $22,600 on average per student.)
"We can advise students about what we think is right, and we will caution students," says Mr. Saleh. "But if
they have the legal ability to borrow the money, we can't prevent that from happening."
New York University- where student borrowers graduated with an average of$33,637 in debt in 2007- has
begun contacting high-school seniors it has admitted to make sure they understand the debt load they could
incur if they enroll (The Chronicle. <http://chronicle.com/week/y/v55/i34/34a0180J.htm> May 1).
Deanne Loonin, director of the Student Loan Borrower Assistance Project at the National Consumer Law
Center, says students shouldn't rely on their colleges to warn them about overborrowing. "It's too great a
conflict of interest for schools that are essentially selling a product to be expected to be the ones who are going
to be conservative financial counselors," she says.
Besides, students are not always open to such advice. "Making the college choice is a very emotional decision,"
says Allesandra Lanza, a spokeswoman for American Student Assistance, a loan-guarantee agency in Boston.
"It is not just the education you are receiving, but this whole idea of an experience that will change your life,"
she says. That makes it difficult for people to step back and ask, "Is this the most valuable use of your dollars?"
Sometimes the hopes and dreams of an entire family can get caught up in a decision about where to attend
college. That's particularly the case at religious institutions, says John Maguire, who is chairman of Maguire
Associates, a higher-education consulting firm in Bedford, Mass. "For families who believe deeply in the
mission of a Christian college, this is a school they'll spend any amount of money on," he says. "When people
are saying, 'This will make a huge difference in my kid's life,' they are not talking about income. They are
talking about whether their kid is going to go to church on Sundays, whether they will raise their own kids in
the church, or even whether they will get into heaven."
Robert A. Sevier, senior vice president at Stamats Inc. , a higher-education marketing firm in Cedar Rapids,
Iowa, doesn't have a lot of sympathy for college graduates who find they cannot repay their education loans.
Overborrowing for college isn't much different than overborrowing for a home, he says. "People live outside
their means."
But that doesn't describe most college graduates, he adds. "In spite of all the hysterical extremes, there are a lot
of people in the middle who are making things work. They are graduating from college with $20,000 in debt,
they are going to graduate school , getting jobs, and buying homes within their means."
Online Education at U. of Texas Faces Financing Gap
By MARC PARRY
The future of the University of Texas' online-education arm is under scrutiny as the system phases out a major
subsidy that has supported the venture for years, The Chronicle has learned.
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The UT TeleCampus is the latest virtual university to confront hard questions as online education matures from
its upstart days. Analysts see an overall shift from the development of new programs to a point where
universities and state legislators are beginning to question the business models of existing programs.
The UT TeleCampus counts as a relative veteran in its field, one of several state or system-level efforts begun in
the late 1990s. The virtual campus does not grant degrees, but it encourages campuses within the Texas system
to put programs online, facilitates collaborative degrees that pool courses from different campuses, and offers
services like marketing and faculty training.
The University of Texas, the biggest system in the country' s second-most-populous state, has invested roughly
$22-million from endowment earnings into the TeleCampus over more than a decade. Next year's proposed
budget would reduce the subsidy to $983,000 of the TeleCampus' s $2.5-rnillion budget, according to the
service's director, Robert L. Robinson. The plan is to phase out the subsidy entirely by 2012.
"We've got to find a way to fill the gap," said Darcy Hardy, assistant vice chancellor for academic affairs and
executive director of the TeleCampus.
Michael K. Moore, senior vice provost at the system's Arlington campus, sees huge growth opp01tunities as
more students take classes online. He worries that Texas is "hamstringing our efforts to compete in that world
without an aggressive budget that will allow us to do so."
"I'm very concemed about the future viability of the TeleCampus without a clear, robust revenue stream," said
Mr. Moore, whose institution is a big participant in the service.
The Online-Education 'Shakeout'
David B. Prior, who has jurisdiction over the TeleCampus as the system's executive vice chancellor, told .The
Chronicle on Friday that "the system role vis-a-vis the campuses is to stimulate activity on those campuses and
then get out of the way."
He added, "We are indeed pursuing aggressively continuing activities in distance education on our campuses.
But we're just going to be doing it a different way."
The TeleCampus is not the only virtual university in a tough spot.
Because of the recession, similar services in other states are being cut or stretched or asked to find income from
other sources, said Russell C. Poulin, associate director ofWCET, a higher-education e-learning membership
group based in Boulder, Colo.
" What we're seeing is a shakeout," said Mr. Poulin, who has written about the financing of online universities.
"Those that have been able to provide services that are of value to their constituent institutions have done well.
And then those that have not been able to provide those services are starting to go away."
Also going away is a major national source of money for online education. The Alfred P. Sloan Foundation last
month revealed plans to end a grant program <http://chronicle.com/weekly/v55/i32/32a01601.htm> that had
funneled roughly $80-million into university online-education ventures since the early 1990s. The program
director, A. Frank Mayadas, explained that move by saying that foundations are in the business of starting new
things, not sustaining them.
This Thursday, meanwhile, the University oflllinois Board of Trustees is expected to revisit the issue of its
Global Campus <http://chronicle.com/wiredcampus/article/?id=3689> distance-education program, which has
fallen short of enrollment projections and generated friction within the system.
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New Sources of Revenue
The UT TeleCampus saw steady enrollment growth over the past decade.
"They' re a victim of their own success to some extent," said Richard Garrett, program director and senior
research analyst with Eduventures Inc., a consulting firm in Boston. "In a particularly troubled financial
environment, they may be seen as something that could survive on its own."
Mr. Moore, who is participating in talks about the future of the TeleCampus, sees several potential scenarios
that could help sustain the service.
One could be to levy a student fee for the service, he said. A second idea could be to charge more to the
campuses, whose annual fees already make up a significant source of revenue for the TeleCampus. A third
option would be to increase the amount of for-profit contract work the TeleCampus does, like providing
distance training for companies.
Another avenue the TeleCampus is exploring is the development of high-enrollment programs for the
completion of bachelor' s degrees.
Texas must double its number of graduates by 2020 to meet state and national mandates, according to a plan
overview provided to The Chronicle by the TeleCampus called "Bridges to Bachelor Completion. " Reaching
out to the 3.5 million adult Texans who started college but never finished is a necessary part of meeting that
goal, the paper says.
For-profit colleges are already significant players in that market, Mr. Garrett said. But he argued that online
education is overrepresented at the graduate level and underrepresented at the undergraduate level.
With its experience, he said, the University of Texas has "a strong hand to play."
And the risks?
"The biggest risk," Mr. Robinson said, "is that if we fail, the TeleCampus will have to close, given the budget
cuts."
Will Higher Education Be the Next Bubble to Burst?
By JOSEPH MARR CRONJN and HOWARD E. HORTON
The public has become all too aware of the term "bubble" to describe an asset that is irrationally and artificially
overvalued and cannot be sustained. The dot-com bubble burst by 2000. More recently the overextended
housing market collapsed, helping to trigger a credit meltdown. The stock market has declined more than 30
percent in the past year, as companies once considered flagship investments have withered in value.
Is it possible that higher education might be the next bubble to burst? Some early warnings suggest that it could
be.
With tuitions, fees, and room and board at dozens of colleges now reaching $50,000 a year, the ability to sustain
private higher education for all but the very well-heeled is questionable. According to the National Center for
Public Policy and Higher Education, over the past 25 years, average college tuition and fees have risen by 440
percent- more than four times the rate of inflation and almost twice the rate of medical care. Patrick M.
Callan, the center's president, has warned that low-income students will find college unaffordable.
Meanwhile, the middle class, which has paid for higher education in the past mainly by taking out loans, may
now be precluded from doing so as the private student-loan market has all but dried up. In addition, endowment
cushions that allowed colleges to engage in steep tuition discounting are gone. Declines in housing valuations
are making it difficult for fami li es to rely on home-equity loans for college financing. Even when the equity is
there, parents are reluctant to further leverage themselves into a future where job security is uncertain.
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Consumers who have questioned whether it is worth spending $1,000 a square foot for a home are now asking
whether it is worth spending $1,000 a week to send their kids to college. There is a growing sense among the
public that higher education might be overpriced and under-delivering.
In such a climate, it is not surprising that applications to some community colleges and other public institutions
have risen by as much as 40 percent. Those institutions, particularly community colleges, will become a more-
attractive option for a larger swath of the collegebound. Taking the first two years of college while living at
home has been an attractive option since the 1920s, but it is now poised to grow significantly.
With a drift toward higher enrollments in public institutions, all but the most competitive highly endowed
private colleges are beginning to wonder if their enrollments may start to evaporate. In an effort to secure
students, some institutions, like Merrimack College near Boston, are freezing their tuition for the first time in
decades.
Could it get worse for colleges in the coming years? The numbers of college-aged students in the "baby-boom
echo, " which crested with this year's high-school senior class, will decline over the next decade. Certain Great
Plains and Northeastern states may lose 10 percent of the 12th-graders eligible for college. Vermont is expected
to lose 20 percent by 2020.
In the meantime, online, nontraditional institutions are becoming increasingly successful at challenging high-
priced private colleges and those public universities that charge $25,000 or more per year. The best known is
the for-profit University of Phoenix, whjch now teaches courses to more than 300,000 students a year-
including traditional-aged college students- half of them online. But other competitors are emerging. In
collaboration with an organization called Higher Ed Holdings, some state universities have begun taking back
market share by attracting thousands of students to online programs at reduced tuition rates. One such
institution is Lamar University, in Texas, which has seen its enrollment mushroom since working with Higher
Ed Holdings to increase access to some of its programs.
Moreover, increases in federal financial aid and state scholarships have been unable to keep up with the
incessant annual increases in tuition at traditional four-year colleges. For example, Congress has raised the Pel!
Grant limits from $4,731 to $5,350 a year by scrubbing the federal loan programs of bank subsidies thought to
be excessive. But $5,350 pays for onJy about four to six weeks at a high-priced private college.
A few prominent universities, including Harvard and Princeton, have made commitments to reduce or eliminate
loans for those students from families earning less than $75,000 or even $100,000 a year. But the hundreds of
less-endowed colleges cannot reduce the price of education in that fasruon. It is those colleges that are most at
risk.
What can they do to keep the bubble from bursting? They can look for more efficiency and other sources of
tuition.
Two former college presidents, Charles Karelis of Colgate University and Stephen J. Trachtenberg of George
Washington University, recently argued for the year-round university, noting that the two-semester format now
in vogue places students in classrooms barely 60 percent of the year, or 30 weeks out of 52. They propose a IS-
percent increase in productivity without adding buildings if students agree to study one summer and spend one
semester abroad or in another site, like Washington or New York. Such a model may command attention if
more education is offered without more tuition.
Brigham Young University-Idaho charges only $3,000 in tuition a year, and $6,000 for room and board. Classes
are held for three semesters, each 14 weeks, for 42 weeks a year. Faculty members teach three full semesters,
which has helped to increase capacity from 25,000 students over two semesters to close to 38,000 over three,
with everyone taking one month (August) off. The president, Kim B. Clark, is a former dean of the Harvard
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Business School and an authority on using technology to achieve efficiencies. By 2012 the university also plans
to increase its online offerings to 20 percent of all courses, with 120 online courses that students can take to
enrich or accelerate degree completion.
Coll eges can also make productivity gains by using technology andre-engineering courses. For the past 10
years, the National Center for Academic Transformation, supported by the Pew Charitable Trusts, has helped
major universities use technology to cut instructional costs by an average of 40 percent while reducing the
number of large course sections, graduate teaching assistants, and faculty time on correcting quizzes. Grades
have increased, and fewer students have dropped out. Meanwhile, students have a choice of learning styles and
ways to get help online from either fellow students or faculty members. That "transformation" requires a
commitment to break away from the medieval guild tradition of one faculty member controlling all forms of
communication, and to give serious attention to helping students think and solve problems in new formats.
The economist Richard Vedder of Ohio University, a member of the federal Spellings Commission, offers more
radical solutions. He urges that university presidents' salaries include incentives to contain and reduce costs, to
make "affordability" a goal. In addition, he proposes that state policy makers conduct cost-benefit studies to see
what the universities that receive state support are actually accomplishing.
Fortunately, some other forces are at work that might help save higher education. The federal government
recently raised significantly the amount of money that returning veterans might claim to pursue higher-
education degrees, so it reaches at least the level of tuition and fees at many public universities.
In addition, the rest of the world respects American higher education, and whether studying at a college here or
an American-based one abroad, the families of international students usually pay in full. The number of
international students could rise from 600,000 to a million a year if visa reviews are e x p e d i t e d ~ the crisis of
September 11, 2001, temporaril y reduced the upward trajectory of overseas enrollments in American coll eges.
Accrediting agencies could also develop standards to expedite the exporting of American education into the
international market.
But colleges cannot, and should not, rely on those trends. Although questions about the mounting prices of
colleges have been raised for more than 30 years and just a few private coll eges have closed, the stakes and
volume of the warnings are mounting. Only during a critical moment in economic history can one warn of
bubbles and suggest that the day of reckoning for higher education is, in fact, drawing near.
Joseph Marr Cronin is the former Massachusetts secretmy of educational affairs, and Howard E. Horton is the
president of New England College of Business and Finance.
A Year of College for All: What the President's Plan Would Mean for
the Country
By KELLY FIELD
President Obama hasn't met Serena Baker, but she may be j ust who he had in mind when he challenged every
American to commit to a "year or more" of higher education or training.
A 28-year-old mother of four, she had spent eight years as a part-time cashier at a grocery store in Baltimore
when she decided, just over a year ago, "to begin a career." After scanning the local job listi ngs, she chose
medical assisting, one of the nation's fastest-growing fields, and enrolled in a 13-month certificate program at
the Community College of Baltimore County.
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This week she will trade in her cashier's apron for hospital scrubs and a job at Baltimore's Mercy Hospital. Her
salary won't go up much initially, but she hopes to make $10,000 to $15,000 a year more once she is certified.
She sits for the test in July.
The president wants more Americans to follow Ms. Baker's example. In a speech before Congress in February,
he called the nation's steep high-school dropout rates and low college-completion rates a "prescription for
economic decline," and he urged all Americans to commit to a year of college, technical training, or
apprenticeship.
If the country complies, the economic returns could be extraordinary. Nationwide some 101.5 million adults
over the age of 18- a full 45 percent of Americans- have never attended college, according to the Census
Bureau. If each of them took a year's worth of college courses, their earnings would grow by $70-billion,
according to estimates by the Center on Education and the Workforce, at Georgetown University.
The nation's employment picture would probably improve, too. Although the economic downturn has affected
Americans at all education levels, it has hit the least educated hardest. In April people without a high-school
diploma were twice as likely to be unemployed as those with "some college" or an associate degree, according
to the U.S. Bureau of Labor Statistics.
But getting to the president's goal will not be easy, and skeptics say it is not even necessary. While a college
degree may lead to higher earnings, it still is not a requirement for most jobs.
Indeed, nearly 35 percent of jobs in 2006 required less than a month of on-the-job experience and informal
training, and another 18 percent required less than a year, according to the Department of Labor.
Critics of the president's plan say it would be a waste of time and money for all Americans to get a full year of
postsecondary education.
"This is essentially a 'consume-more-education' policy," argued Neal McCluskey, associate director of the
Center for Educational Freedom, at the libertarian Cato Institute, at a recent forum. "We're encouraging people
to consume education that they're either not prepared for or aren't really interested in by subsidizing it and
having our leaders tell us it's the ticket to the middle class and the American dream."
A More 'Modem' Approach
Mr. Obama is not the first president to aspire to universal higher education. In a 1996 commencement address at
Princeton University, President Bill Clinton urged all Americans to get two years of college and proposed a tax
credit to help them pay for it.
But while President Clinton set the standard at two years of college, the pragmatic Mr. Obama set it at one. And
while Mr. Clinton imagined "college" for all, Mr. Obama envisions "community college or a four-year school,
vocational training, or an apprenticeship."
Anthony P. Carnevale, director of Georgetown's Center on Education and the Workforce, says the president's
proposal is "more modern" and more inclusive than his predecessor's.
"He's talking about the system in a much more comprehensive way," he says.
The president has not said why he picked one year over two, and White House officials would not comment on
the record. But a White House press officer said the idea originated with the White House chief of staff, Rahm
Emanuel , a former Democratic congressman from TI!inois. Last year Mr. Emanuel wrote an editorial in The
Wall Street Journal in which he argued that Americans should be required to have a year of trainjng and
education after high school.
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"In an era in which you earn what you learn, Americans should no longer be allowed to drop out of school at
age 16," he wrote.
While Mr. Obama's target is less ambitious than Mr. Clinton's, it may be more realistic. Many working adults
don't have the time or money to attend college for two years. They want to earn the credential that will get them
a job as quickly as possible, and at the lowest cost possible.
"They need a job and they need it quickly, " says Jeannie Tighe, who got a surgical-technology certificate four
years ago at age 44 and now teaches in the Community College of Baltimore County's surgical-technology
program. "They don't have two years."
With the nation's unemployment rate at its highest point in 25 years, the president seems more concerned with
quickly getting Americans bankable skills than in achieving an ideal. In a recent interview with The New York
Times Magazine, he stressed that it is not just the credential that matters, but its marketability.
"If you're only going to go to school for two years ... then making sure that you're enrolled in a program where
at the end of the journey you can see a job or a career or a field that is growing instead of contracting certainly
can make some sense, " he said.
That includes health-care jobs, which are expected to grow at twice the nationa1 average, according to the Labor
Department. Demand for medical assistants like Ms. Baker, who help doctors with exams and perform
administrative tasks, among other duties, is projected to grow by 35 percent between 2006 and 2016, making it
the eighth fastest-growing occupation in the country.
Mr. Carnevale, who has served as a consultant to the Obama administration, says the president is "thinking as
an economist" when it comes to college experience: "He's essentially looking at the earnings returns."
College's Labor-Market Value
There is considerable evidence that college pays. In 2007 workers with some college courses or associate
degrees earned 12 percent more than high-school graduates, while workers with bachelor's degrees earned 63
percent more than those with some college or an associate degree, according to the Census Bureau.
The least educated are also the most vulnerable during economic downturns. In April the unemployment rate for
Americans who didn't finish high school was 14.6 percent; among students with some college or an associate
degree, it was 7.4 percent.
While there is relatively little national data on the labor-market value of "a year of higher education, " or a
yearlong certificate, several studies suggest that each year of college credit provides a roughly 5-percent
increase in earnings. A certificate provides an additional 1-percent bump, according to an analysis of Census
Bureau data by the Center on Education and the Workforce.
Some research suggests that a year of college plus a certificate may be the tipping point in terms of earnings. In
2005 researchers in Washington State found that students who took a year's worth of courses and got a
credentia1 earned considerably more than students who enrolled in shorter-term training or adult basic-skills
education. While short-term and basic-skills training gave students the tools they needed to enter the work
force, it generally did not help them advance beyond low-paying jobs.
Julian L. Alssid, executive director of the Workforce Strategy Center, a New York nonprofit group, says Mr.
Obama's proposal "recognizes that college is the entry point to the middle class."
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According to Labor Department projections to 2016, 15 of the 30 fastest growing occupations will require a
bachelor's degree or higher, while seven will require a certificate or other vocational award or associate degree.
Those occupations, which include home health aides, computer-software engineers, personal financial advisers,
and makeup artists, are expected to add 2.3 million jobs over the 2006-16 period.
Still, about a third of all new jobs- more than 4.6 million- will require a month or less of on-the-job
training, and 34 percent of all jobs in 2016 will require that amount.
Critics of the president's plan say those statistics show that it would be a waste of time, and of money, to push
all Americans into yearlong programs.
"To suggest that every kid have a year of postsecondary education isn't realistic and it isn't necessary for all kids
to get a job," says Dennis Redovich, executive director of the Center for the Study of Jobs and Education in
Wisconsin and the United States. "The fact of the matter is that a majority of jobs require short-term, on-the-job
training."
President Obama is already taking steps to achieve his goal. This month he announced that his administration
would work with colleges and states to help unemployed workers receive Pell Grants and keep their jobless
benefits when they enroll in college.
In many states, workers lose their unemployment benefits when they enroll in college. At the same time, their
prior year's earnings may disqualify them for a Pell Grant. These factors can discourage unemployed workers
from attending college.
Under the president's plan, the Labor Department will ask states to make exceptions during economic
downturns, while the Education Department will encourage colleges to factor in the financial situation of
unemployed applicants when awarding aid. Whether the plan succeeds will, of course, depend on the
cooperation of colleges and states, and available resources.
Meanwhile, the president and Congress have poured billions into job-training programs and student aid, while
providing states with billions more to ease budget cuts to colleges and schools. An economic-stimulus bill
signed into law in February contained $4-billion for job training, $17-billion for Pell Grants, and $200-million
for Federal Work-Study, and increased a tax credit for tuition from $1,800 to $2,500.
But it will take more than just money to reach his goal of higher education for all, experts say. High schools will
have to do a better job of preparing people for college, so they don't spend their "year of college" in remedial
education, and colleges will have to do more to reach out to students who typically don't enroll.
"Higher education needs to do a better job of lifting aspirations and communicating that college is possible,"
says Brian K. Fitzgerald, executive director of the Business-Higher Education Forum.
At the same time, community colleges must continue to work with business leaders to ensure that they are
preparing students for high-growth careers, says Arthur J. Rothkopf, senior vice president of the U.S. Chamber
of Commerce.
Public perceptions about college will also need to change. While a majority of adult students enroll in
community colleges, many Americans still think of college as a four-year bachelor's degree.
"We have to demystify attending college, " says Bob Jones, president ofEducation Workforce Policy LLP, a
public-policy consulting company.
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Brian Foley, provost of the Medical Education Campus ofNorthern Virginia Community College, says the
country must "elevate the status of technical jobs."
"These jobs keep our economy running," he says.
For Ms. Baker, a year of education has increased her status in the work force, and in her family. Her children,
she says, "like to think I'm a doctor."
She thinks the president's goal for the country is realistic, at least for those who aspire to it.
"I never wanted to attend college for four years," she says. "But who can't give up a year of their life to get
educated?"
Megan Eckstein contributed to this report.
http :1 I chronicle. com
New Private Universities in Kuwait Pin Their Hopes on U.S. Partners
By ANDREW MILLS
Kuwait
Sharply dressed in black suits and bright red ties, the two recruiters latch onto high-school students as they walk
through the gates of Exhibition Hall No. 8 at the Kuwait fairgrounds.
"I want to tell you about the American University of the Middle East," one of the recruiters says, following a
visitor into the university fair.
"We're affiliated with Purdue University, from the United States. Do you know Purdue?" his sidekick adds,
brandishing a clipboard emblazoned with the Purdue logo. "Would you like more information? Just fill out this
card and visit our booth. We have a coffee bar there."
These recruiters have figured out that the key to selling private higher education in Kuwait is to emphasize what
may be their year-old institution's most important asset: its affiliation with a top foreign university.
"The international affiliation is very important. Purdue is a good American university. Its reputation is known, "
says Ahmad Al-Jaber, one of many high-school seniors who swarm around the American University of the
Middle East's booth. "And it's not going to put its name with a school that is not good. Is it?"
This implied assurance of quality is more than just an institutional strategy. It's a national one. When Kuwait
lifted a ban on private higher education less than a decade ago, it decided that the best way to ensure the
development of academically sound universities was to require all new institutions to have foreign partners.
That policy has helped the country rapidly build a credible private higher-education system where none existed
before. In only eight years, eight private colleges have opened in this sprawling city-state, catering to some
13,000 students. Nine additional institutions have been authorized to open in the next few years.
Two other Kuwaiti universities have paired with American colleges. The Gulf University for Science and
Technology, a polytechnjc, teamed up with the University of Missouri at St. Louis; and the American
University of Kuwait, a liberal-arts college, is in partnership with Dartmouth College. Other private colleges
have Australian or European partners.
To be sure, Kuwait's private universities have not yet established the kind of academic profile needed to place
the small natlon on the academic map. When it comes to the Mjddle East's higher-education renaissance,
nobody mentions Kuwait's colleges in the same breath as New York University's soon-to-open campus in Abu
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Dhabi or Qatar's Education City, whose six U.S. branch campuses have established Doha as a college town on
the Persian Gulf.
But here in Kuwait, the private universities have transformed the local scene.
For more than three decades, private higher education was banned in Kuwait. The giant, state-owned Kuwait
University was the only option for students who wanted to earn a college degree in this emirate at the northern
end of the Persian Gulf.
But as the number of Kuwaitis edged close to a million during the 1990s, Kuwait University simply could not
keep up with the demand.
Qatar and the United Arab Emirates faced similar challenges. But the unopposed rulers of those petrodollar-rich
monarchies could set aside the kind of public money needed to build flashy campuses and lure top foreign
universities to fill them up.
Politics are much more complicated in Kuwait, an aspiring democracy where a tumultuous parliament
frequently exercises its power to oppose the ruling family's decisions, including on the national budget. Public
money has never been as easily available as it has been among Kuwait's neighbors.
So the Ministry of Higher Education settled on a more cost-effective approach: It turned to the private sector.
The government has set out a number of requirements for private investors wishing to develop their own
universities. The foreign partner must be ranked among the top 200 by The Times Higher Education Supplement
or appear on U S. News and World Report's top tier of colleges. The relationship between the Kuwaiti
institution and its foreign partner must be a meaningful one.
"We don't want to be in a situation where we're buying degrees- fancy degrees, with fancy names, but not
enough meat," says Imad Alatiqi, secretary general of the Private Universities Council, which regulates all
private universities in Kuwait. "We want substantive relationships, where there is a commitment of quality from
the local people and from the international people."
Within those requirements, though, there is quite a bit of variety. The University of Maastricht Business School ,
in the Netherlands, and the Box Hill Institute, in Australia, have opened branch campuses or franchises of their
home institutions in Kuwait. The Kuwaiti partners take a back seat when it comes to day-to-day operations.
Other local investors have chosen to seek advice from their foreign partners, but manage their own academics
and operations.
In those cases, the .Private Universities Council requires the foreign partner to submit a formal opinion every
time the Kuwaiti university makes a major academic decision, such as starting a program or hiring an academic
officer.
The council, which licenses and accredits all institutions, also sets the standards it expects private universities in
Kuwait to meet.
"Any arrangement between the two universities that can deliver those standards, we welcome, " Mr. Alatiqi says.
A Liberal-Arts Alternative
In 2003 a group of investors led by Sheikha Dana Nasser Al-Sabah, a member of Kuwait's ruling family,
wanted to establish an American-style liberal-arts college. They approached Dartmouth, which offered the kind
of curriculum and approach to teaching they hoped to emulate.
72
They first called Dale F. Eickelman, a Dartmouth anthropologist. It was clear to him, he says, that the Kuwaiti
investors wanted to develop a deep relationship.
"From the start, their instinct was to say to us, 'We don't just want you to sign off on things for us, we want you
to help us aim for the highest level ,"' says Mr. Eickelman, who has spent more than three decades working in
the Middle East.
Dartmouth found the idea of helping build a liberal-arts college in the Middle East, a relatively uncommon
concept here, hard to resist.
Six years later, hundreds of students now mingle in the shaded courtyards of the American University of
Kuwait, switching seamlessly from Arabic to English and back again.
The compact campus on the outskirts of this dusty city, with its palm trees and glass buildings, could not seem
farther from Hanover, N.H. But inside its classrooms, the approach to learning is similar.
The largely Western-educated faculty members do not expect their students to memorize lectures, as is common
in Middle Eastern universities. Instead, Dartmouth has helped the American University of Kuwait set up the
kind of curriculum and structure that, Mr. Eickelman says, encourage students to learn how to form their own
opmwns.
The university emphasizes a broad liberal education. After the Private Universities Council concluded that
Kuwait had no need for anthropologists, Dartmouth worked with university officials to successfully argue that
degrees in anthropology and sociology would prepare students for a wide variety of careers.
Dartmouth's agreement with the American University of Kuwait, which extends until at least 2013, is
intentionally vague, says Laurel R. Stavis, executive director of the Dartmouth College-American University of
Kuwait Project. There is no pro forma checklist of things the two institutions must do for each other.
Instead the relationship is an "organic" one that changes to meet the Kuwaiti university's needs as it matures,
Ms. Stavis says.
Administrators and faculty members from the American University of Kuwait are able to turn to a group of
Dartmouth consultants, selected by Ms. Stavis and Mr. Eickelman, for advice on issues like governance, faculty
recruiting, and communications.
Students from both universities have begun traveling back and forth. This summer an American University of
Kuwait faculty member will be awarded a fellowship to spend a month conducting research in Hanover.
Ms. Stavis is also helping develop a dual-degree program that would enable Kuwaiti students interested in
engineering degrees, which are not offered by the American University of Kuwait, to complete their studies in
New Hampshire, earning a Dartmouth degree.
The Kuwaiti university covers aJI of Dartmouth's expenses, but it is hardly a money-making opportunity for the
college, Mr. Eickelman says.
"The amount of money is a joke. Let's just say it's tremendously little for the work that is being done, " he says,
declining to say exactly how much money Dartmouth has brought in.
Building Up the Sciences
Joel Glassman, associate provost and director of the Center for International Studies at the University of
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Missouri at St. Louis, says his university is more interested in helping to build indigenous institutions overseas
than in cloning the home campus and transplanting it to the other side of the world.
"It's not so mysterious," says Mr. Glassman, who heads up Missouri's work with the Gulf University for Science
and Technology. "They're asking for our advice. Academics are not shy people. There is nothing we love more
than being asked for advice."
Administrators and faculty members from St. Louis have helped the Kuwaiti university develop academic
programs and curriculum, recruit faculty and staff members, and build the university's administrative
organization.
The GulfUnjversity for Science and Technology, which opened in 2002 and enrolls about 2,600 students,
modeled its programs after those offered in Missouri. Students can earn undergraduate degrees in computer
science, English, business, and mass communications, and a master's in business administration.
Like the American University of Kuwait, it requires all undergraduates to take a set of general-education
courses.
The university has ambitious plans to spend $100-million to expand its campus to house a full-fledged
engineering college.
This is Missouri's second such partnership in the Persian Gulf. It has advised the Modem College of Business
and Science, in Muscat, Oman, since it opened in the early 1990s.
Now Missouri is helping the science-and-technology university as it seeks accreditation from AACSB
International: the Association to Advance Collegiate Schools ofBusiness.
Robert Cook, vice president for academic affrurs at the university in Kuwait, is in the process of hiring 38
faculty members.
He says the relationship with the Missouri campus has given the university's recruitment efforts a boost.
Attracting quality faculty members is often the biggest challenge new universities face in the region.
"For potential faculty members who have never been to the Middle East before, Kuwait can seem an
intimidating place, " says Mr. Cook. "So we did all the interviews for American candidates on the St. Louis
campus, and a University of Missouri-St. Louis faculty member in the same field sat in on the interviews."
That assured candidates that the Gulf University for Science and Technology is a serious institution, strongly
linked to a serious U.S. university, Mr. Cook says.
The Kuwaiti university has not yet built much of a regional reputation, but here in Kuwait its skills-based
programs are highly regarded.
Mr. Cook boasts that 80 percent of its graduates are employed within six months of graduation. Unlike most
public-university graduates, who are automatically given government jobs, graduates of the Gulf University for
Science and Technology typically find work in the private sector, where employers demand the best candidates,
he says.
Gaining Credibility
Back at the university fair, the American University of the Mjddle East's recruiters have done their job: The
uni versity's booth is surrounded by teenagers filling out applications for next fall.
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The campus is still in its first year of operation. About 100 students are enrolled in three degree programs-
business, design, and information technology -which operate out of a single building at the edge of a
windswept stretch of land.
Purdue has agreed to help the Kuwaiti university design and build "some very Purdue-like programs that will ,
over time, morph into the kind of programs they need in Kuwait," says Andrew Gillespie, Purdue's associate
dean of international programs.
Kuwait's private universities face a clear challenge as they continue to expand. The best Kuwaiti students still
prefer to study abroad. And two out of every five students- 20,000 of them- take advantage of generous
overseas government scholarships every year.
Mr. Al-Jaber, the Kuwaiti student, says that his first choice is to study abroad and his second choice is to study
at the American University of Kuwait. But, he adds, the American University of the Middle East is not a bad
third choice.
While that suggests that many Kuwaiti students still don't have confidence in the quality of their own higher-
education system, Mr. Alatiqi, of the Private Universities Council, prefers to see the students as an untapped
market.
"So you can see why we're so concerned about building quality universities, " says Mr. Alatiqi, snapping his
fingers. "We can pick up 20,000 more students just like that."
America Must Put Community Colleges First
By SARA GOLDRICK-RAE
President Obama has embraced an audacious ambition -to renew America's status as the world leader in
college attainment. That goal is daunting, and it leads many people to conclude that we should focus federal
investments on four-year colleges. If we want to realize the president's goal, that would be a terrible mistake.
Located in neighborhoods across the nation, charging lower-than-average tuition, public two-year colleges have
the potential to lead the charge to significantly increase the number of Americans holding college degrees. But
to succeed, they need a renewed government commitment to their support and leadership. The country has for
too long put elite four-year colleges and universities on a pedestal, focusing the hopes and plans of students and
families on them. But those institutions reach only a small portion of the populace, whereas community colleges
touch much larger numbers of students as well as many other people in their towns and regions.
Faced with high tuition, a weak economy, and substantial competition for admission to four-year colleges,
today's students are more likely than ever to attend one of the nation's 1,045 community colleges. According to
Department ofEducation statistics, enrollment at community colleges grew by 741 percent from 1963 to 2006,
compared with 197 percent at public four-year institutions and 170 percent at private four-year colleges. It
increased from about two million in 2000 to 6.2 million in the first half of this decade alone. Yet, based on data
from the Delta Project on Postsecondary Education Costs, Productivity, and Accountability, community
colleges receive less than one-third the level of federal support per full-time-equivalent student ($790) that
public four-year colleges do ($2,600), and have correspondingly poorer outcomes.
With many of the fastest-growing occupations requiring some postsecondary education, but not necessarily a
bachelor's degree, serious challenges await if community-college performance does not improve. We must give
those colleges the resources they need to succeed in getting more students to the finish line, while demanding
more from such institutions. If the nation's goal is to produce great gains in college attainment without
significantly increasing spending, we need to invest in our largest educational provider. A culture of evidence
75
focused on student achievement- coupled with capacity-building efforts to make success possible- can have
a rapid and transformative impact.
In a paper published by the Brookings Institution, Douglas N. Harris, an assistant professor of educational-
policy studies at the University of Wisconsin at Christopher Mazzeo, associate director of policy and
research at the University of Chicago's Consortium on Chicago School Gregory Kienzl, director of
research and evaluation at the Institute for Higher Education Policy; and I call on the Obama administration to
consider four key federal reforms:
Development of national goals and a performance-measurement system. The overarching goal of national
higher-education policy should be to effectively educate students at the postsecondary level. While colleges
should focus on the needs of their students, it is important that they also have clearly defined goals along those
lines, with incentives to match. Success in a new system should be measured by progress. Right now
appropriations to community colleges are primarily based on enrollment, without regard to whether their
students earn degrees or get good jobs. That gears incentives toward inputs and process, rather than outcomes.
The federal government should invest resources specifically to promote greater success for students. Colleges
that receive more money should be required to track and report student results, consistent with the many
community-college missions, such as whether they completed a minimum number of credits, transferred, or
earned a degree. Over time, a majority of federal dollars would be awarded based not on enrollment but on
colleges' performance on such crucial measures.
Expanded federal support. To bring community colleges to the table and convey its strong support for their
work, the federal government should double its current level of direct support, from $2-billion to $4-billion.
Resource needs are significant and pressing. Since 1974, the net number of new community colleges has been
just 149, a growth rate of only l 7 percent. The result: Many campuses today are bursting at the seams, and
increasing numbers of students must be turned away. In the short-term, federal spending would support
infrastructure upgrades that truly stimulate the economy. Over the longer term, that investment would add
modestly to higher-education expenditures but more than pay off by increasing the number of students who can
enroll , graduate, and contribute to the nation's economy.
Innovation to enhance educational quality. We further call on the Department of Education to focus half of
the proposed $2.5-billion college access and completion incentive fund on efforts to create innovative
community-college policies and practices and then evaluate them. The two-year sector is not only overutilized
and underresourced, but it also has too little information about how to effectively improve student outcomes.
That problem can and must be remedied by connecting practitioners with well-trained researchers who share a
common goal of helping community colleges succeed in meeting goals and gaining more support in return. For
example, practitioners and researchers could collaborate on putting in place and evaluating approaches that
accelerate progress in developmental education, integrate occupational and academic content in new curricula,
or develop systemwide assessment and placement policies.
Accountability through student data systems. Finally, the federal government should support the
improvement of student-level data systems to track community-college performance. That is the only way to
operationalize real accountability and track progress and improvement. Most states do not have the ability to
track individual outcomes throughout the education system and into the labor force. But thanks to the federal
stimulus package, more will have that opportunity. Those efforts must be continued, for without the ability to
evaluate outcomes based on hard data, student and institutional progress cannot be measured.
Right now countless Americans embrace a very narrow view of community colleges' potential. By casting such
institutions as providers of vocational training that benefits only local families and employers, such an approach
essentially excuses the federal government from providing much support. That generates two problems. First, it
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makes community colleges overly dependent on dollars from their local and state governments, and today's
negative budget outlooks portend deep cuts in appropriations at those levels. That hampers community colleges'
ability to serve as gateways to economic opportunity.
Second, that narrow public image ignores the widespread benefits of coll ege access that such institutions
provide, benefits that increasingly accrue to the nation. Coll ege-educated adults are more likely than those who
didn't attend to be economically secure and live healthier lives while continuing to pay taxes- not only to their
local governments, but also to Washington. Accordingly, Washington should actively participate in the
transformation of community colleges.
It is now time to put community coll eges, long on the sidelines in public support and policy debates, first.
Ensuring that American workers are trained to compete in the global marketplace, are economically secure, and
can fulfill their responsibilities as citizens requires expanding and improving experiences with postsecondary
education. By better supporting the most affordable and accessible coll eges found within all communities, and
asking more of them in exchange, we can put our nation and its famili es back on the path to economic
prosperity.
Sara Goldrick-Rab is an assistant professor of educational policy studies and sociology at the University of
Wisconsin at Madison.
INSIDE HIGHER ED
Budget Cut or Logical Inevitability?
May 18, 2009
The newspaper headlines have to sting: "Funding Cut Puts HBCU's on the Chopping Block.
<http://www.npr.org/templates/story/story.php?storyld=104082329>" And the blog posts about how the Obama
administration's 2010 budget would treat historically black universities and other colleges that serve minority
students are even harsher: "After Destroying the DC Voucher Program, What Does Obama Do For An Encore?
Defunds Historical Black Colleges.
<http://www.sunti mes.com/news/blogentries/index.html?bbPostid=CzCPvaTMX6PZcCz8cP2sgl5IZOB3PClU
BdeuZfCz8Cp WDOrdC8A&bbParentWidgetid=B8k88rW w Xopuz5ST gLe VwBLu>"
Here's the trick: The administration is actually proposing a small increase, not a cut, to the annual budgets of
the main programs for minority serving colleges, at a time when the Education Department is proposing to hold
the budgets for most federal education programs flat at their 2009 levels. What the administration's budget does,
however, is acknowledge the expiration of nearly half a billion dollars in temporary funds that Congress
directed to the colleges in 2007 <http://www.insidehighered.com/news/2007/10/09/black>.
The money, which was generated by a set of one-time changes to the federal student loan programs, was
designed to use that windfall to supplement the amounts that lawmakers normally appropriate to programs for
historicall y black, Hispanic, tribal and AJaskan/Native Hawaiian colleges each year. The Strengthening
Historically Black Colleges and Universities program received $85 million on top of its usual allocation of
federal funds in both 2007-8 and 2008-9, for instance.
"The mandatory funds that have become an issue were clearly temporary-- the authorizing language from
Congress had them expire at the end of2009, " said Robert Shireman, the deputy under secretary of education.
"From a budgeting standpoint, they are not in the baseline. While that may sound like budgetspeak, it means
77
that they were not in the expected ongoing spending of the government. If the institutions were expecting it to
continue, they misread the program and why it was there."
The recipients of the funds held "no expectation that they should automatically be extended," said Lezli
Baskerville, president of the National Association for Equal Opportunity in Higher Education, which represents
many of the nation's historically black colleges and universities. But by letting the money for historically black,
Hispanic and tribal colleges vanish, Baskerville said, the Obama administration is sending a signal that it views
the institutions as a low priority. "You allow those programs to sunset that are not aligned with your priorities, "
she said. "He could have signaled that it will be a priority for this administration."
The disagreement between minority colleges and the administration about the permanence of mandatory funds
has relevance well beyond their particular situation, now more than ever. The Education Department has
already signaled its intent to let two major student grant programs (the Academic Competitiveness and SMART
Grant Progams) expire after 2010 and, more significantly, colleges and schools will lean heavily this year and
next on tens of billions of dollars in economic stimulus funds. What happens then? If the economy hasn't
recovered, are they likely to beg for the funds to continue?
Mandatory vs. Discretionary
Mandatory funds, for those of you whose last American government course (or the practical equivalent) is a
distant reflection in the rearview mirror, are federal monies disbursed by Congress in special "budget
reconciliation" laws rather than through the annual appropriations process that finances the federal government's
normal operations. (Money allocated through the latter process is called "discretionary, " as in at the discretion
of Congress.)
Congress has gone to the "mandatory" side of the federal budget to benefit higher education twice in recent
years: in 2006, <http://www.insidehighered.com/news/2006/0l/24/smart> when it carved nearly $18 billion out
of subsidies for student loan providers and used some of the proceeds to create two new grant programs
designed to lure low-income students into science fields, and in 2007,
<http://www.insidehighered.com/news/2007/09/07/budget> when the College Cost Reduction and Access Act
squeezed another $22 billion out of lender subsidies and directed the revenue to steadily decrease student loan
rates over four years, inject significant funds into Pell Grants for four years, and finance numerous smaller
purposes.
Among them was $510 million over two years <http://www.insidehighered.com/news/2007 / 1 0/09/black> (fiscal
2007-8 and 2008-9) for minority-serving colleges for a variety of purposes, including to buy lab equipment and
cover instructional costs. Most ofthe money was designed to go to existing programs for groups of institutions
that are accustomed to such funds: $200 million in competitive grants for Hispanic-serving institutions, with an
emphasis on increasing the number of low-income students in science and math fields; $170 million for
historically black colleges and universities; $60 million for tribal colleges; and $30 million for
Alaskan/Hawaiian Native institutions.
But the measure also created three entirely new classifications of colleges that educate students from minority
groups, providing $30 million over two years for "predominantly black" colleges (those that do not have the
"historical" designation of serving black students but have significant black enrollments), $10 million over two
years for Asian/Pacific Islander serving colleges, and $10 million for Native American-serving nontribal
colleges, where at least 10 percent of the undergraduates are American Indian.
The money, as described in the legislation that provided it, was designed to give a financial boost to institutions
that play a unique role in educating students who have historically been underserved by traditional colleges.
78
The minority-serving colleges received their money for 2007-8 but had to fight to keep it last year, when
President Bush's final budget proposal <http://www.insi dehighered.com/news/2008/02/05/edbudget>
recommended subtracting from their annual appropriated funds amounts equivalent to what they were due to
receive in mandatory funds. Minority college leaders, backed by Congressional Democrats, argued at the time
that the temporary funds were designed to supplement, not supplant, the normal annual money for the
institutions. "Our goal in providing funding for minority-serving institutions under the College Cost Reduction
and Access Act was to make up for the severe funding shortfalls these institutions have faced at the hands of the
Bush administration," a House Democratic spokeswoman said then.
Officials of historically black and other institutions reacted with comparable dismay when the Obama
administration released the full details <http://www.insidehighered.com/news/2009/05/08/budget> of its first
proposed budget, for the 2010 fiscal year, this month. An Education Department budget that focused heavily on
ensuring the financial future of the Pell Grant as the bedrock student aid program kept virtually all other
education programs level. The administration proposed that Congress provide relatively small pots of
discretionary money (ranging from $2.6 million to $7.9 million) for the programs the 2007 budget law created
for predominantly black, Asian/Pacific Islander, and nontribal colleges, and small increases in discretionary
funding for the three previously existing programs for minority serving institutions.
But the department's budget table includes big fat zeroes in the 2010 column where there were mandatory funds
for the minority serving colleges in 2010, which Baskerville and others portray-- in a budget process that she
describes as a "priority setting exercise" --as a sign that the administration puts them low on the list.
What's included in the budget and not "is not only a choice," Baskerville said, "but it's an opportunity for the
chief executive to set the climate, to set the tone, and to elevate in importance those programs that are most
important to the administration."
Shireman disputed that view. "These are institutions that could use more support, and they can make a
compelling case that they need help, which is why we've proposed 5 percent increases for them. We felt that we
were being quite generous and demonstrating our support for minority serving institutions by increasing the
discretionary funds for them at more than double the rate of inflation, while other programs across the budget
receive no increases at all. That demonstrates our priorities in the context of discretionary appropriations, " he
said.
"But the money they're talking about was one time mandatory money that's not in the budget baseline, and
there's no process for continuing it, except for further mandatory legislation."
Every spare dollar in the administration's higher education budget is going to "prevent a drop in the Pell Grant
Program," Shireman said. The same law that added temporary mandatory funds for minority serving colleges,
he noted, also boosted the size of the maximum Pell Grant, and when that money expires in 2012, he noted,
"students will experience a $1,400 drop in their Pell Grant. We need to fill in that mandatory money, one way or
the other, and have made a proposal to do that." (Administration officials point out that the Pell Grant increase
will help historically black colleges enormously, as their students are twice as likely as the average
undergraduate to qualify for the need-based grants.)
Shireman said that in letting the mandatory funds for historically black, Hispanic and tribal colleges lapse, the
administration is endorsing a principle that "we are not continuing any program that is created on mandatory
s i d e " ~ the Education Department's 2010 budget blueprint also notes that the administration plans to let the
Academic Competitiveness and SMART Grant programs end after next year, when their funding from 2006
runs out.
79
But to Baskerville and other supporters of minority serving colleges, the administration appears to be picking
and choosing which mandatory money to let lapse and which to continue, noting that the 2010 budget includes
some funds for the new programs created (in the 2007 budget reconciliation law) for predominantly black,
Asian/Pacific Islander and Indian nontribal colleges. "There is no clear pattern that 'we are automatically going
to let all of the mandatory programs lapse .... '"Baskerville said. (Those programs, Shireman points out, were
authorized by Congress for a full five years, while the mandatory funds for HBCU, Hispanic and tribal colleges
were clearly designated as two year grant programs.)
As the Democratic administration spars with some of its normally most avid supporters, some Congressional
Republicans say the disagreement is proof of the dangers of the increasingly common use of budget legislation
to create new social programs. In recent years, said one Republican Congressional aide, Democratic leaders in
Congress have turned to off-budget money to cut student loan interest rates and expand Pell Grants in higher
education, and for similar purposes in k-12. And now billions more are flowing in the stimulus package-- with
a clear end date, creating an inevitable "cliff'' when the money runs out.
"Creating temporary programs is often intended to make the longterm cost, and it's a dangerous budget gimmick
to be playing with," the GOP aide said. "When the money runs out, you've got a real problem. When you've got
a funding infusion into these budgets, they're adjusted accordingly, and they become reliant on it. Schools and
students come to rely on these programs .. . and people feel like promises were made.
"The money shouldn't have been provided in mandatory funding for precisely this reason: because at some point
it is going to feel like a cut."
-Doug Lederman <mailto:doug.lederman@insidehighered.com>
CtystaJ A. Way
Freedom of Information and
Privacy Act Fulfillment Coordinator
FSA Conmmnications
ADDRESS:
US Department of Education
830 First Street, NE
Room 114C1
Washington, DC 20202
TELEPHONE:
(202) 377-4007
80
From: Bennett, Sarah
Sent:
To:
Thursday, March 04, 201 o 11 :08 AM
Noreen Burns
Subj ect:
Attachments:
FW: News clips for March 4th, 2010
image001 .jpg; image002.gif
Good morning - feeling good today? Or at least I hope.
From: Jones, Andrew
Sent: Thursday, March 04, 2010 11:06 AM
To: Newsclips
Subject: News clips for March 4th, 2010
News Clips for March 4, 2010
Today there are fifteen articles for your review
Duncan Outlines Benefits Of Proposed Higher Ed Lending Reforms. Secretary of Education
Arne Duncan wrote in an op-ed for the Buffalo News (3/3) that ED "currently subsidizes student loans
to the tune of $9 billion every year .... President Obama is ready to put an end to that deal. " According
to Duncan, "Based on the president's proposal, the House of Representatives has passed the
Student Aid and Fiscal Responsibility Act," and the Senate "is still working on its version of the
legislation .... These changes are an essential part of our plans to expand college access and relieve
student borrowers of an impossible burden of debt."
Letter: Sallie Mae Back's Duncan's Higher Ed Lending Reform Push. John Remondi, vice
chairman and chief financial officer of Sallie Mae, writes in a letter to the Washington Post (3/4),
"Contrary to Education Secretary Arne Duncan's assertions[" Investing in students, not the banks,"
Washington Forum, Feb. 26], Sallie Mae is not lobbying to preserve today's student-loan program. In
fact, our efforts have been focused on supporting the foundation of the president's proposal with a
few enhancements that would preserve jobs and deliver a better program for students, schools and
taxpayers." According to Remondi, "We stand ready to work with Mr. Duncan to seize this 'once in a
generation' opportunity."
USA Today Backs Obama's Proposed Higher Ed Lending Reforms. The USA Today (3/4)
editorializes, "Under a federal program run by banks, Washington buys or guarantees student loans"
and from the "banks' perspective, it's a sweet deal." Thus, when "President Obama proposed ending
this scandal-plagued program, at a savings of $87 billion over 10 years, the banking community was
taken aback .... Cutting out the middleman makes a lot of sense."
Richard Hunt, president of the Consumer Bankers Association, writes in an "opposing view" op-ed
for USA Today (3/4) 'The Obama administration has described passage of the Student Aid and Fiscal
Responsibility Act as a 'no-brainer' and presented arguments to support that conclusion. However,
closer examination of the issues surrounding SAFRA suggests that there is more to this story and
that enactment of the bill in its current form would be a grave mistake." Ultimately, Congress "should
adopt the proposal put forward by the private sector."
Eric Hardmeyer, president of the Bank of North Dakota, writes in a letter to the Washington Times
(3/4), "I could not agree more with your contention that the Student Aid and Fiscal Responsibility Act
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'is a bad idea because it takes away consumer choice' ('Academic malpractice,' Editorials, Feb. 18).
The elimination of the Federal Family Education Loan (FFEL) Program would force all private and
public universities and colleges to use exclusively the Direct Loan Program."
Duncan Calls Education Bill Critical To College Affordability. The Tufts Daily (3/4, Kan) reports,
"Secretary of Education Arne Duncan in a live web chat yesterday highl ighted the importance of
passing the Student Aid and Fiscal Responsibility Act (SAFRA), saying it would have a huge impact
on college affordability ... . Yesterday's chat was open to questions from the public and also featured
Melody Barnes, assistant to the president and director of the Domestic Policy Council."
College Students Rally Over Tuition, Education Quality. USA Today (3/4, Marklein) reports,
"College students on more than 100 campuses nationwide plan walkouts, rallies and other actions
Thursday to protest budget cuts, layoffs and tuition increases, which they say erode quality of
education and limit access. Students in at least 32 states are expected to j oin the grass-roots
campaign. It has been bubbling up since demonstrations last fall in California, where students, faculty
and unions protested plans for a 32% tuition increase amid the state's fiscal crisis."
Taxes Supporting For-Profit Firms As They Acquire Colleges. Bloomberg News (3/4, Golden)
reports, "ITI Educational Services Inc. paid $20.8 million for debt-ridden Daniel Webster College in
June," and in "return, the company obtained an academic credential that may generate a taxpayer-
funded bonanza worth as much as $1 bill ion." ED, "which doled out $129 billion in federal financial aid
to students at accredited postsecondary schools in the year ended Sept. 30, is examining whether
these kinds of acquisitions circumvent a federal law that new for-profit colleges can't qualify for
assistance for two years, Deputy Undersecretary of Education Robert Shireman said in a telephone
interview."
Tough Real Estate Market "A Silver Lining" For Overcrowded Colleges. Inside Higher Ed reports
on USA Today's (3/4, Moltz) website, "Community college leaders eyeing institutional expansion have
found a silver lining to the depressed real estate market. Though dwindling state appropriations have
halted new construction on many campuses, burgeoning student enrollments have inspired some
college officials to buy dilapidated storefronts and acquire public property for development." Among
the examples cited in the article is St. Louis Community College in Missouri , which is considering "an
abandoned Circuit City" near one of its campuses. Carla Chance, vice chancellor for finance, said the
former store was "ideal ," since it was relatively inexpensive, and had "a pretty much open floor plan,"
allowing the school to easily redesign the space to suit its needs. Chance said, "The cost of the
acquisition of this property and the renovation will be a third of what we would have spent building a
new building from the ground up."
Chronicle
Duncan Defends Planned Switch to Direct Lending in Appearance Before House Panel
By Libby Nelson
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Washington
Testifying before the House education committee on Wednesday morning, Education Secretary Arne
Duncan defended the Obama administration's plan to move all colleges to direct lending and said
such a switch could still be accomplished by July without major glitches.
At the committee hearing on President Obama's proposed education budget for the 2011 fiscal year,
Mr. Duncan dismissed concerns raised by Republican members that the switch to direct lending
would be too difficult for colleges to accomplish quickly.
"We understand this transition, and what a big deal it is, and we want to make sure we do this
absolutely smoothly if possible," Mr. Duncan said.
The Student Aid and Fiscal Responsibility Act, which would end bank-based lending to students and
move to 1 00-percent direct lending, in which federal money is lent directly to students, would require
that all colleges switch to direct lending by July 1. The House passed the bill in September, but it has
been stalled in the Senate.
Thousands of colleges have switched to direct lending on their own in the past few years, Mr. Duncan
told the committee in response to several questions. For most institutions, the transition has taken
place in a matter of weeks, he said.
"We've gone from 1,000 universities participating to 2,300 participating, and I don't think you've heard
a peep," he said. "There haven't been any huge stories about lack of service."
Republicans, though, repeatedly questioned the wisdom of switching to direct lending this summer,
citing fears that students would be unable to get their loans in time for fall classes.
Rep. Glenn Thompson Jr. , a Republican of Pennsylvania, argued that the institutions that voluntarily
switched might not represent the direct-lending experience nationally. Large colleges have an easier
time with direct lending than do smaller institutions because they have more resources, he said.
"I think we've cherry-picked, voluntarily, those who are best adapted," Mr. Thompson said. "What sort
of Plan B does the department have in place in case the plans to convert don't go as smoothly as
what you'd like?"
Reiterating that many colleges have already switched successfully, Mr. Duncan said the department
has "Plan A, Plan B, Plan C." But he decl ined to provide details on alternate plans.
"We're really focused on Plan A right now," he said.
Questions on Teacher Training
Mr. Duncan defended the cost of the Obama administration's education budget for 2011 at a separate
hearing on Capitol Hill last week. telling the House Budget Committee that a proposed 7.5-percent
increase in education spending was necessary for long-term economic development. Questions at
Wednesday's hearing, which lasted more than 90 minutes, dealt with policy issues.
The questions about student lending were a rare moment in the spotlight for higher education at a
hearing that focused on elementary and secondary education. Many questions tackled the Obama
administration's proposed changes in the Elementary and Secondary Education Act, the federal law
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governing precollege education that is now called No Child Left Behind. The act is overdue for
renewal , and although legislation to reauthorize it has not yet been introduced in Congress, the issue
is a top priority for legislators, said the committee's chairman, Rep. George Miller.
"We would really like to get this done this session of Congress," said Mr. Miller, a Democrat of
California.
In response to questions about proposed changes in the act, Mr. Duncan, who has often criticized
schools of education) said colleges and universities should be more focused on providing hands-on
training and should instruct future teachers on how to use data.
He repeated his support for alternative-certification programs, which bypass teachers' colleges to
draw potential teachers from other fields. Some teachers' colleges are skeptical of such programs,
which have become a point of controversy in discussing revisions to the Elementary and Secondary
Education Act.
"I always think these are false dichotomies," he said of the divide between traditional and alternative
certification. "We just need more great teachers coming in."
Grief in the Age of Facebook
Courtesy of Kelsey Butler
After the death of Casey Feldman (right), many of her friends changed their photographs of
themselves on their Facebook profiles to a snapshot of them with Casey. Above, Kelsey Butler's
Facebook photo, with Casey.
Courtesy of Kelsey Butler
After the death of Casey Feldman (right), many of her friends changed their photographs of
themselves on their Facebook profiles to a snapshot of them with Casey. Above, Kelsey Butler's
Facebook photo, with Casey.
By Elizabeth Stone
84
On July 17 last year, one of my most promising students died. Her name was Casey Feldman, and
she was crossing a street in a New Jersey resort town on her way to work when a van went barreling
through a stop sign. Her death was a terrible loss for everyone who knew her. Smart and dogged,
whimsical and kind, Casey was the news editor of the The Observer, the campus paper I advise, and
she was going places. She was a finalist for a national college reporting award and had just been
chosen for a prestigious television internship for the fall, a fact she conveyed to me in a midnight text
message, entirely consistent with her all-news-all-the-time mind-set. Two days later her life ended.
I found out about Casey's death the old-fashioned way: in a phone conversation with Kelsey, the
layout editor and Casey's roommate. She'd left a neutral-sounding voice mail the night before, asking
me to call when I got her message, adding, "It's OK if it's late." I didn't retrieve the message till
midnight, so I called the next morning, realizing only later what an extraordinary effort she had made
to keep her voice calm. But my students almost never make phone calls if they can help it, so
Kelsey's message alone should have raised my antenna. She blogs, she tweets, she texts, and she
pings. But voice mail? No.
Paradoxically it was Kelsey's understanding of the viral nature of her generation's communication
preferences that sent her rushing to the phone, and not just to call boomers like me. She didn't want
anyone to learn of Casey's death through Facebook. It was summer, and their friends were scattered,
but Kelsey knew that if even one of Casey's 801 F acebook friends posted the news, it would
immediately spread.
So as Kelsey and her roommates made calls through the night, they monitored Facebook. Within an
hour of Casey's death, the first mourner posted her respects on Casey's Facebook wall , a post that
any of Casey's friends could have seen. By the next morning, Kelsey, in New Jersey, had reached
The Observer's editor in chief in Virginia, and by that evening, the two had reached fellow editors in
California, Missouri , Massachusetts, Texas, and elsewhere-and somehow none of them already
knew.
In the months that followed, I've seen how markedly technology has influenced the conventions of
grieving among my students, offering them solace but also uncertainty. The day after Casey's death,
several editorial-board members changed their individual Facebook profile pictures. Where there had
been photos of Brent, of Kelsey, of Kate, now there were photos of Casey and Brent, Casey and
Kelsey, Casey and Kate.
Now that Casey was gone, she was virtually everywhere. I asked one of my students why she'd
changed her profile photo. "It was spontaneous," she said. "Once one person did it, we all joined in."
Another student, who had friends at Virginia Tech when, in 2007, a gunman killed 32 people, said
that's when she first saw the practice of posting Facebook profile photos of oneself with the person
being mourned.
Within several days of Casey's death, a Facebook group was created called "In Loving Memory of
Casey Feldman," which ran parallel to the wake and funeral planned by Casey's family. Dozens wrote
on that group's wall , but Casey's own wall was the more natural gathering place, where the
comments were more colloquial and addressed to her: "casey im speechless for words right now,"
wrote one friend. " i cant believe that just yest i txted you and now your gone ... i miss you soo much.
rest in peace."
Though we all live atomized lives, memorial services let us know the dead with more dimension than
we may have known them during their lifetimes. In the responses of her friends, I was struck by how
much I hadn't known about Casey-her equestrian skill, her love of animals, her interest in
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photography, her acting talent, her penchant for creating her own slang ("Don't be a cow"), and her
curiosity-so intense that her friends affectionately called her a "stalker."
This new, uncharted form of grieving raises new questions. Traditional mourning is governed by
conventions. But in the age of Facebook, with selfhood publicly represented via comments and
uploaded photos, was it OK for her friends to display joy or exuberance online? Some weren't sure.
Six weeks after Casey's death, one student who had posted a shot of herself with Casey wondered
aloud when it was all right to post a different photo. Was there a right time? There were no
conventions to help her. And would she be judged if she removed her mourning photo before most
others did?
As it turns out, Facebook has a "memorializing" policy in regard to the pages of those who have died.
That policy came into being in 2005, when a good friend and co-worker of Max Kelly, a Facebook
employee, was killed in a bicycle accident. As Kelly wrote in a Facebook blog post last October, "The
question soon came up: What do we do about his Facebook profile? We had never really thought
about this before in such a personal way. How do you deal with an interaction with someone who is
no longer able to log on? When someone leaves us, they don't leave our memories or our social
network. To reflect that reality, we created the idea of 'memorialized' profiles as a place where people
can save and share their memories of those who've passed."
Casey's Facebook page is now memorialized. Her own postings and lists of interests have been
removed, and the page is visible only to her Facebook friends. (I thank Kelsey Butler for making it
possible for me to gain access to it.) Eight months after her death, her friends are still posting on her
wall, not to "share their memories" but to write to her, acknowledging her absence but maintaining
their ties to her-exactly the stance that contemporary grief theorists recommend. To me, that seems
preferable to Freud's prescription, in "Mourning and Melancholia," that we should detach from the
dead. Quite a few of Casey's friends wished her a merry Christmas, and on the 17th of every month
so far, the postings spike. Some share dreams they've had about her, or post a detail of interest. "I
had juice box wine recently," wrote one. "I thought of you the whole time :( Miss you girl!" From
another: "i miss you. the new lady gaga cd came out, and if i had one wish in the world it would be
that you could be singing (more like screaming) along with me in my passenger seat like old times."
It was against the natural order for Casey to die at 21 , and her death still reverberates among her
roommates and fellow editors. I was privileged to know Casey, and though I knew her deeply in
certain ways, I wonder-l'm not sure, but I wonder-if I should have known her better. I do know,
however, that she would have done a terrific trend piece on "Grief in the Age of Facebook."
Elizabeth Stone is a professor of English, communication, and media studies at Fordham University.
She is the author of the memoir A Boy I Once Knew: What a Teacher Learned From Her Student
(Algonquin, 2002).
Younger Professors Say a Successful Career Should Not Require Long Hours
By Robin Wilson
In conversations with a dozen faculty members, researchers with a project on work-life issues run by
Harvard University have found that "Generation X" professors value efficiency over "face time" and
believe that quality is more important than quantity in academic work.
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The Collaborative on Academic Careers in Higher Education, a long-term project run by Harvard's
Graduate School of Education, conducted interviews with 12 professors born between 1964 and 1980
on three campuses in the mid-Atlantic: a liberal-arts college, a private master's-degree-granting
university, and a large public institution. Neither the interview subjects nor the institutions are named
in the report.
The Generation X professors said they did not want to be holed up in their campus offices until 11
p.m. , and talked about the "diminishing returns" of working too many hours. The professors perceive
their attitudes to be different from those of older faculty members, who they see as being completely
devoted to their jobs and unable to say no to more work.
"My biggest concern ... is that I want to be able to be good at my job but work 8:00 to 6:00 five days a
week," one Gen X faculty member told the interviewers. "I want to succeed, but I don't want to work
18 hours a day."
The report, "New Challenges, New Priorities: The Experience of Generation X Faculty," is to be
posted today on the project's Web site.
Inside Higher Ed
You Say You Want a Revolution?
March 4, 2010
By Jeff Abernathy
It seems everybody is talking revolution in higher ed these days.
How many times have I read in the higher ed news of the coming revolution in classroom instruction,
in the major, in the tenure system, in governance?
Google "higher education revolution" and you find radical reform rising in every direction. Many are
sparked by the billions state systems are losing as our economy lurches out of the tank, others by the
increasing commodification of the college degree. Some promise to "transform" the American
university as they have transformed-- egad!-- the American newspaper. New models of for-profit
education promise a revolution in the higher education business model that is already threatening the
viability of traditional colleges across the country.
But I can't help wondering if we've spirited all our revolutionary rhetoric for another day at the office.
We tend to talk ourselves right past revolutions in higher education. Our burning impulse to revitalize
learning often concludes with a return to the status quo: we end up arguing, say, over our respective
roles in shared governance, or over the turf we'd have to give up for genuine improvement in learning.
We can do better.
At a recent conference, I had a glimpse into how the real transformation might unfold. The Teagle
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Foundation brought together professors, administrators and researchers from across the country to
discuss with its board members key questions the foundation has been addressing in recent years:
How might we make systematic improvements in student learning?
What evidence is there that we're using what we know about student learning to reform
academe?
These, of course, were the very same questions asked by the ill-fated Spellings Commission. Teagle
has found success by engaging the strengths of the academy -- and especially the talents and
creativity of faculty--by supporting liberal arts college in piloting solutions to the challenges before
academe. In doing so, they have started transformative efforts that will deepen student learning while
also balancing resources.
With the public university system in crisis-- Clark Kerr's master plan for California has been set adrift
along with the strategies for renewal in state after state -- a focus on liberal arts colleges could seem
to some like a boutique project. The Teagle Foundation's great insight has been that the nation's
liberal arts colleges remain a bellwether for the health of the academy and that small colleges have a
great opportunity to model what the 21st century higher education might become.
Teagle has funded dozens of collaborative efforts at liberal arts colleges over the past six years
supporting faculty-driven, ground-up assessment projects of student learning outcomes at colleges
and universities across the country.
The work that colleges are doing in these Teagle pilots tests the basic assumptions of a college
education. Some have examined the meaning and value of general education, exploring radical
revision of the ways in which general education might come to be embedded in helping students to
think about the ways they will live their lives. One project brought four colleges together to assess
how effectively undergraduate students acquire and refine the spiritual values that lie at the heart of
their institutional missions. Another explores effective models of community-based learning efforts at
three prominent colleges.
Such work aims to deepen student learning and growth at colleges across the country. As
importantly, it will help small colleges to think about ways to distinguish themselves in a landscape
that increasingly sees no difference between a liberal arts college degree and a degree from, say, the
University of Phoenix. Liberal arts colleges must, to use Robert Zemsky's phrase, be "market-smart
and mission-centered," and the pilots that Teagle has funded in recent years point us toward
solutions to drifting missions and to struggling finances alike.
At Augustana College, we are taking seriously the Teagle Foundation's charge to find ways to use
what we know about student learning for reform. Working in a Teagle-funded collaborative of seven
colleges across the Midwest-- Alma, Augustana, Illinois Wesleyan, Luther, Gustavus Adolphus,
Washington and Jefferson, and Wittenberg -- over the past five years, we have begun to question the
1 00-year-old credit model system that is at the heart of the American baccalaureate. Our consortium
of colleges has begun to ask whether we can still justify the existence of a system that was brought
into being mostly to serve the needs of our business offices.
Will federal pressure for transferability of credit only make more secure a system that is now straining
under the weight of new understanding of learning and the new pedagogies that follow? In an era
when we ask faculty to be deeply engaged with students through interdisciplinary education,
undergraduate research, international study, and other high impact practices, can we continue to
justify a credit system that has remained unchanged for a century? We are questioning whether the
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course unit as now constituted-- that three- or four-hour sl iver of a college degree or the correlating
seat time - is the best means of measuring student learning.
My colleagues at Augustana and I have begun other pilots that will explore the other hard questions
before our college, and all colleges: how will we make better use of vital resources while
demonstrating the value of a liberal education to parents, employers, and graduate schools?
We have developed a series of experiments that may answer the question. Our faculty have created
a senior capstone program -- Senior Inquiry -- by using a backward design model to re-envision
nearly every major on campus, ensuring that all Augustana students will have the sort of hands-on,
experiential learning opportunity that will demonstrate their skills to employers and graduate schools
alike (even as it provides us with a great chance to evaluate all they have done in four years here).
We have redefined scholarship in the Boyer model , embracing the scholarship of teaching and
learning. We are piloting new partnerships with universities, community colleges and high schools; we
are asking how technology might deepen the advantages of traditional classroom learning models.
And we have built our newest program-- Augie Choice-- around the idea that experiential learning--
through research, international study and internships -- ought to be the heart of a liberal arts
education.
We don't yet know where all of these experiments will lead us. But, in our 150th year at Augustana,
we have learned from the Teagle Foundation that pilots may help us to ensure that we will thrive for
the next 150 years.
That, I'm certain, is revolution enough.
Jeff Abernathy is vice president and dean of the college at Augustana College, in Illinois. This
summer, he will become president of Alma College, in Michigan.
Medical Schools Expand -- and Contract
March 4, 2010
In the span of a week in September 2008, the "rubber band" that held together the University of Utah
School of Medicine broke.
First, the federal government cut $10 million in Medicaid funding to the university' s hospital. Then,
days later, the state Legislature eliminated $2.5 mill ion in support. In all , the medical school lost 40
percent of its education budget nearly instantly, with no revenue-creating solution in sight.
"We were a rubber band stretched to the extreme," says David Bjorkman, the school' s dean. "We
were already spending every dollar we had, maximally cross-subsidizing with clinical revenue from
our health system." After months of lobbying and left with no other choice, the school shrunk the size
of its fall 2009 entering class to 82 from 102. While the rest of the university raised tuition by 1 0
percent, medical school tuition went up 15 percent.
Though Utah's medical school has seen more dramatic cuts than most, the economic realities of a
prolonged recession are forcing medical schools across the United States to reduce the number of
seats available for new students or to curtail expansion efforts initiated during better economic times,
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even as demand far outstrips supply in many experts' projections on the size of the future physician
work force.
State higher education budget cuts mean that Indiana University School of Medicine's entering class
this fall will be 13 percent smaller than last fall' s. One scenario for higher education cuts in Nevada
would include shutting down the University of Nevada School of Medicine, the state's only medical
school. Development of a new medical school at the University of California at Merced has stalled.
And more cuts could be on the way.
Edward S. Salsberg, director of the Association of American Medical Colleges' Center for Workforce
Studies, says he has seen some evidence of medical schools taking in fewer first-year students or
slowing their planned growth rates. "It's up to the individual schools to make decisions that work for
them," he says. Public medical schools "have to go to their state legislatures to get support and we
know state budgets aren't in good condition in most states."
For the medical establishment, t ight budgets and enrollment cuts couldn't have come at a worse time.
The Council on Graduate Medical Education estimated in 2005 that the United States would face a
shortage of 85,000 to 96,000 physicians by 2020 unless medical schools were able to increase the
number of new M.D.'s they graduate each year by several thousand. Other groups, too, project a
physician shortage or at least the need to draw physicians to underserved regions and toward
practicing high-demand specialties such as internal medicine and geriatrics.
In June 2006, the AAMC responded by undertaking an effort to expand medical school enrollments
by 30 percent nationwide by 2015 (after initially suggesting 15 percent growth). To meet the goal,
U.S. medical schools would need to enroll21,434 first year students in 2015-- nearly 5,000 more
than they did in 2002, when first-year enrollments totaled 16,488.
The AAMC envisioned that the creation of new medical schools and the expansion of existing ones
would provide additional slots that, in all , would total close to 20,000 across all four years of traditional
allopathic medical school.
Universities and hospital systems heeded the call. Dozens initiated or stepped up efforts to expand
their medical schools, adding seats to their first-year classes and opening branch campuses to
broaden their geographical reach. Others began laying the groundwork for new medical schools that
would at once build institutional prestige and contribute to the larger national goal.
By last fall , enrollments had grown 11.5 percent over 2002 levels, with 18,390 students in the entering
class. Close to 200 of those seats were in medical schools that opened in 2009: Commonwealth
Medical College in Scranton, Pa. ; Florida International University College of Medicine in Miami ; Texas
Tech University Health Sciences Center's PaulL. Foster School of Medicine in El Paso; and the
University of Central Florida College of Medicine in Orlando.
Before the AAMC began its expansion efforts, it estimated that medical schools would add 919 new
first-year seats between the fall of 2005 and the fall of 2010. Instead, between the creation of new
schools and the expansion of existing ones, close to 1,400 spots were created by the fall of 2009.
"We're encouraged that schools and communities are listening to our recommendations," Salsberg
says. "We're encouraged because we do think the goal is happening."
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But economic realities are clearly having an effect on just how quickly medical schools are being
created and expanding. And even in good economic times, it might be a stretch to add 3,000 seats in
half a dozen years.
Even if expansion continues at its current rate for the next six entering classes, U.S. medical schools
won't reach the goal on time, Salsberg says. "We don't think that we' ll make it by 2015," he says. "We
recommended, but it' s up to the schools to make the expansion happen .... We're making progress,
just not as much as we would have liked. "
Salsberg anticipates that there will be 20 or 21 percent more first-year seats in American medical
schools in 2014 than there were in 2002. The degree to which future enrollment cuts may erode those
numbers -- even with growth elsewhere - is unclear.
Sharp Declines for the Hoosiers
The Indiana University School of Medicine had plotted expansion by the AAMC book. After a work
force study of the state' s physicians "confirmed that the 30 percent national estimate was true in
Indiana as well ," says Peter Nalin, interim executive associate dean for educational affairs, the school
set its sights on expanding its entering class size with the goal of growing enrollment 30 percent by
2013.
"The rationale has always been that there is a need for family physicians, primary care physicians,
physicians in underserved areas," he says. "We need to respond to an aging population and
increasing demand for health care overall in society."
To expand the first-year class from 280 students in the fall of 2006 to 364 in 2013, administrators
planned to add 14 more seats to each of the school's entering classes. Through August 2009, the
plan was right on track, with 322 students starting at the medical school. The school was promised $5
million in state appropriations to pay for the expansion
When the state whittled that $5 million down to $3 million in its October estimate of the 2010 budget,
the medical school responded by extending its expansion plan to reach the 30 percent goal. The
school would've added six new seats in 2010 and eventually reached the goal of 364 first-year seats
by 2015.
Then the budget picture got worse.
In December, Gov. Mitch Daniels cut funding to the state's public colleges and universities by $150
million, more than a third of which would be taken from Indiana University's state appropriations. By
then, Michael McRobbie, the university's president, had already made one-time cuts of $79 million
and recurring cuts totaling $98 million annually.
With what amounted to a $59 million hole in state funding, McRobbie decided to trim $7 million from
the medical school's budget, a choice that a spokesman told the Indianapolis Star was simply part of
distributing the pain throughout the university. "Every single school and every department, even the
president's office, is cutting a proportional amount of their budget," the spokesman said. "No one was
excluded. Not one dean has been spared the pain of having to cut something. "
Daniels' office issued a statement deflecting blame. "The university made the decision about how to
implement the reduction. We don't have any comment about why IU decided this was the best
direction to take among the many areas it likely reviewed."
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On its own, the $7 million in cuts might have slowed or even stopped the medical school' s expansion
effort. But, when coupled with the realization that the $5 million that had dwindled to $3 million would
not materialize at all , the blow was even blunter, Nalin says. In all , the school's state funding would be
$12 million below what administrators had projected for the 2010-11 academic year.
So, not only did the medical school lose its funding for future expansion but it also lost the financial
capacity to sustain the growth that had taken place in the last few years. The class that enters in
August will probably total 280, Nalin says, the same that it was in pre-expansion 2006. "Our goal is
ultimately to respond to that target of 30 percent-- it remains our vision of where we'd like to be," he
says. "However, we must roll it back based on the current financial situation and hope that we'll
eventually be able to achieve that 30 percent."
Nalin says the school hopes to restart its expansion efforts (which, at first, would be efforts to restore
classes to the size they reached last fall) in the next year or two. In a worst-case scenario, he'd like to
see class size expand again by 2014. Any growth, though, depends on the state. "We respect the fact
that if there aren't state revenues then appropriated monies can't be realized. But we hope those
revenues will return."
New Medical Schools
In raw numbers, the greatest contribution to the expansion is coming from new medical schools.
Schools that were already building their facilities or applying for accreditation by the Liaison
Committee on Medical Education have not lost momentum.
Besides the four medical schools that took their first students last fall , eight more have already started
the official accreditation process. Virginia Tech's Carilion School of Medicine is screening applicants
this spring and will open in the fall with 42 first-year students. The Hofstra University School of
Medicine, which is affiliated with the North Shore-Long Island Jewish Health System, aims to open in
2012.
Candice Chen, co-principal investigator of the Medical Education Futures Study at the George
Washington University School of Public Health and Health Services, says she hasn't seen state cuts
and lagging philanthropy doing too much damage-- so far, anyway. "We haven't seen a slowdown in
new schools saying 'We were getting close to opening but now we're not,' " she says. "You never
know if there would've been more right now if the economy was doing better."
But some medical schools that were early on in the planning stages have put their plans on hold until
local economies and state budgets loosen up a bit.
The University of California at Merced, which opened in 2005, was well on its way to planning a
medical school. A consultant had conducted a feasibility study, the UC Board of Regents had
approved the continuation of the planning process, and the university' s chancellor had appointed a
vice provost for health sciences to oversee the school' s development. Administrators predicted that
the school could take its first students in the fall of 2013.
All of that progress had happened by mid-Sept. 2008. Then the financial sky fell , across the nation
and in California. Since then, says Patti lstas, a spokeswoman for Merced, the ambitions have
become far less grandiose and immediate. "All these changes in the economy and the state budget
have slowed things down," she says. "We're still in the infancy stages. It's too early to pinpoint when
the school might be able to open. "
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Though Merced is "still hoping to open a fully accredited school of our own," the university focused on
"lots of concurrent activities while waiting for the funding to be allocated, " says lstas.
A team at Merced is working to create a branch campus of another UC medical school-- possibly
Davis or San Francisco- that could provide basic science instruction for the first two years of medical
school. Faculty and administrators are also building up the university's health-related research
operations that could provide some of the foundation needed to fund and operate a medical school.
The economy has touched those efforts, too, though, lstas says. "It has slowed things down."
More than 300 miles to the south, in Riverside, a new UC medical school has already applied for
accreditation by the LCME and plans to enroll 50 first-year students in the fall of 2012. The difference
between the two projects: the timing.
Riverside was ahead of Merced in first considering its medical school --faculty started debating the
possibility of establishing a school in 2003 -- and continued to be ahead of Merced as the planning
process progressed. Perhaps fortuitously (as lstas puts it, "timing is everything"), Riverside got final
approval by the UC Board of Regents in July 2008, just before most people came to see just what a
bad state the economy was in.
Before the end of 2008, Riverside secured some state funding, as well as the support of several
foundations and local medical centers. Development continued and fortune continued to be in the
school' s favor. Construction began on a new health science building and the university made plans to
renovate existing instructional buildings.
In December, President Obama signed an appropriations bill for the U.S. Department of Health and
Human Services that included an earmark of $4 million to support construction at Riverside.
G. Richard Olds, who became the school's founding dean in February. "I wouldn't have taken this job
if I thought this wasn't going to happen, " he says. "When no new programs were being added to the
UC budget, the president still put our medical school into the budget. It was a bold thing to do and
makes it clear that UC is serious about starting this medical school."
Cutting Class Size, But Not Budgets
Though the Pritzker School of Medicine at the University of Chicago isn't facing big budget cuts, its
leaders decided more than two years ago that the best way to serve students and the community was
to shrink its enrollment. After welcoming entering classes of 104 students for more than three
decades, Pritzker had a first-year class of just 88 in the fall of 2009.
The 15 percent drop in class size is an effort "to more powerfully fund each of the students who enroll
here," says Holly Humphrey, the school' s dean. The goal, she says, is to produce better-trained
doctors who won't face financial barriers in choosing to practice in underserved areas or low-paying--
but high need --fields.
"Without any new big donations, we became convinced that reducing class size would be the best
way to ... increase supervision and feedback, redirect learning and impact performance in a way that
would truly benefit our students, " she says.
One new program funded by the savings that came with the enrollment cut is Repayment for
Education to Alumni in Community Health (REACH), an effort to attract Pritzker graduates who have
just completed their residencies to work in the underserved South Side of Chicago. In addition to their
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salaries, graduates in the program will be paid $40,000 a year for up to four years to help ease the
burden of loan repayments. By reducing the debt burden on alumni , Humphrey says, Chicago hopes
to see more graduates take jobs that strategically target areas in need of more physicians.
The average American medical student graduates with $140,000 in debt, but Humphrey hopes that
by reducing class size, Pritzker will put its graduates well below that average. "One of the questions
that isn't often asked about expanding medical school class size is whether you're also expanding
financial aid dollars," she says. "And the answer is often No."
Though this year' s first-year class has 16 fewer students than last year' s, the class is still receiving
the same total dollar amount in institutional aid. "We're taking the same number of scholarship dollars
and applying it to a smaller group, Humphrey says. "Short of getting a philanthropist to underwrite a
big chunk of aid -- without considering whether or not you can sustain that over time -- this was the
best way for us to try to reduce debt for the largest number of our students."
After announcing the class size reduction, Humphrey says, the school got "lots of questions--
medicine and health care in general are accustomed to growing, expanding and getting bigger, so
why on earth would we make something smaller rather than bigger?" Her answer: the changes make
sense for the school and students, even if they may on the surface seem to run contrary to AAMC' s
goal and the needs of the nation.
And, if Pritzker can figure out ways to cut costs or boost revenues, "we will expand the class as
quickly as we can," Humphrey says. "But that's going to take us a few years to figure out."
- Jennifer Epstein
'Harnessing America's Wasted Talent'
March 4, 201 0
Peter P. Smith's career in and out of higher education has not followed the straight and narrow.
Amid forays into politics (as a member of Congress and lieutenant governor of Vermont) and
international affairs (at UNESCO), Smith has been a higher education innovator, helping to found the
statewide Community College of Vermont in 1970 and serving for 10 years as founding president of
California State University's Monterey Bay campus, beginning in 1995.
In those jobs and his current one, as senior vice president for academic strategies and development
at Kaplan Higher Education, Smith has pushed existing colleges and universities to better serve the
adults and other students who have been least well served by traditional higher education. In his new
book, Harnessing America's Wasted Talent: A New Ecology of Learning (Jessey-Bass), he argues
that the country needs to reach deeper into its population than it historically has to produce a
sufficient number of educated and skilled workers, and that the thousands of current colleges cannot
do that job.
He responded via e-mail to questions about the book ..
Q. You write that only a third of American ninth graders even take a shot at college, and that
the country can't continue to function effectively, let alone compete economically and
internationally, unless those in the "middle third"-- that is, those who finish high school but
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do not experience college-- get some postsecondary training. What have been the biggest
factors preventing them from doing so until now?
A. The middle third also includes people who have some college experience, but no certificate or
degree. I think of this phenomenon as a "failure to thrive" educationally. Many of the reasons
described in the book - mode of teaching and learning, lack of recognition of transfer credit and
learning done outside of school - contribute.
There is a huge expectations gap. Like the student named Bob, whom I mentioned in the book,
people have been acculturated to believe that college is not for them, an expectation that is reinforced
throughout high school. This ties directly to the lack of personalization and customization in the
traditional model. The real low-hanging fruit here are the estimated one million high school graduates
every year who are qualified but simply don't go to college. So, we have to work on how we offer
post-secondary education to capture this audience. We also have to work on communicating to the
public that people have potential and capacity, and that college is for them.
Q. You argue that the existing higher education system (or, more accurately, "non-system," as
you point out) won't be able to educate that middle third-- that it is both "maxed out" in terms
of capacity and incapable of changing (or unwilling to change) the nature of teaching and
learning to accommodate the different needs of today's learners. Why do the students you're
most worried about hit a "dead end" in our current education system?
A. There is a long list of reasons why students hit a dead end, some of which colleges and
universities cannot control. For example, when I was at California State University, Monterey Bay, we
had to work very hard to keep first-generation Latino students in school because cultural norms called
for them to live at home and work rather than attending college.
The metaphor that I would use to describe this challenge is swimming under water. The longer you
are under water, the more it hurts. And, if your goal is to swim to the other end of the pool , but you
have never known anyone who did it, it is easier to simply climb out of the water and walk away. On
the other hand, if you believe you are meant to swim, it is easier to fight through the pain and reach
your goal.
With first-generation learners, it is critical to connect with them personally, customize the learning to
their needs, offer unwavering support, and respect their personal story and the learning that comes
with it.
Q. An underlying theme of your book is that higher education has essentially failed to
innovate sufficiently. Yet your own career path-- starting two different (and, at their time,
innovative) types of institutions, and now working at a third that is part of a emerging sector
trying new approaches --would seem to challenge that view. How do those square?
A. In the first two cases, I watched as the rest of the field either ignored or explained their success as
an exception. I am frankly astonished that there has never (to my knowledge, anyway) been a
replication of the Community College of Vermont model. Cal State Monterey Bay is a terrific institution
that incorporates several core "best practices" in its operations. But that institution is still subject to
the same constraints that I described in the book. For example, with the current budget crisis in
California, each CSU has faced employee furloughs and student body caps, leaving thousands
without access to higher education. One reason that I chose to come to Kaplan Higher Education
after my time at UNESCO is to experience a culture without these types of constraints.
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At Kaplan Higher Education, we do have some fairly traditional practices, but we also have the
capacity to innovate, develop, and continuously improve. For instance, if we want to implement
diagnostics in the post-enrollment process, we can do so and then evaluate, refine, and improve our
processes. The traditional model lacks this type of nimbleness and flexibility. Without the constraints
inherent in the traditional model , we can model emerging best practices, help define them and, in
effect, help lead the change we seek.
Q. Define the "personal learning" that you think is undervalued/under-recognized by the
current higher education system. And do the current mechanisms that exist to account for
knowledge gained outside the classroom (the Council for Adult and Experiential Learning's
prior learning assessments, and the American Council on Education's military credit system,
for instance) not get at this issue?
A. Students are rarely asked, in depth, what they want from their college education and are almost
never engaged in an ongoing conversation about it with someone who can affect their higher
education experience. Until institutions personally connect the learner with the curriculum and the
college experience, the learner is vulnerable. And the "at risk" learner is always more vulnerable.
Additionally, the older one becomes the more experience one has to compare with what they are
being taught. So, to fail to integrate someone's experience into the curriculum both trivializes and
frustrates them. That's why starting with the assessment of prior learning is such an educationally
important thing to do.
As one of the founding board members of CAEL, I agree wholeheartedly that its prior learning
assessment and other approaches like the ACE military credit system are central to the issue. What
people involved in both of these efforts, and others like them, will tell you is that the credits awarded
are often honored "in the breach. " That's a nice way of saying that they are not honored by other
institutions and, in some cases, by other departments in the institution that awarded them. The
biggest pain point for most of these approaches is that the credit will be included in a transcript, but
not counted towards the degree.
What I am calling for in the book is the mainstreaming of these concepts and the development of a
market that honors credit awarded by accredited institutions as progress towards a degree at other
institutions.
Q. How much is this a credentialing problem? Are we as a society basically under
credentialing (failing to give credentials for knowledge, etc., that isn't now recognized) or over
credentialing (is there too much emphasis, by employers, etc., on credentials, rather than on
the underlying knowledge that Americans have)?
A. Credentialing is part of the problem, but only part of it. As a society, we fail to recognize what
people know. So, if a soldier returning from active duty service has not only courses but also
experiences, why shouldn't those things be acknowledged and included in his degree plan?
Also, as educators, we do not adequately value reflection on the part of the learner. I view reflection
as the process through which the learner distinguishes between their broad experience (in a course
or in life) and what they learned because of it. This is where and when learning is real ized. Employers
want accurate information about the qualifications of people wishing to advance in or enter a
profession. So, while a credential might well be the exponent of that, the learning outcome and a
validated third-party guarantee that the learning occurred will be increasingly important.
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Q. What are the developments (you call them "game changers") that make you believe the
time is right to create an alternate path to a postsecondary education for these students?
A. You see evidence every day. When AARP solicits proposals for a learning platform for its
members, the balance has shifted. When the Peer-to-Peer University moves into its second "term,"
the balance has shifted. When Straighterline is recognized for its courseware alone, the balance has
shifted. When the global OpencourseWare Consortium gets three million hits a month, the balance
has shifted.
In the book, I devoted a chapter to the "End of Scarcity" and its impact on higher education. It is
difficult to overestimate the significance of this trend. Colleges are built and organized around scarcity
-the expertise of faculty is in short supply, classrooms and labs are limited because they are
expensive, and the authority to offer a course of study is limited. Additionally, reputation is built
around who you exclude as much as it is who you include and who succeeds. In fact, the whole
concept of meritocracy is built on the notion of scarcity because there is not enough room "at the top"
for everyone.
Put this set of assumptions, and the practices that are in place because of them, up against the
current reality. Excellent content is increasingly commodified and available. Time and place are no
longer determinants of when a person can learn. And in the ultimate reversal, the educational
challenge vis a vis the workforce can no longer winnow people out and validate merit. Instead,
employers must help create merit because there are now more jobs that require higher education
than there are people qualified for them. And this is projected to be the case for years to come.
Q. Explain the newfangled institution(s) that you envision-- Colleges for the 21st Century-- as
a potential environment for these students. Do any existing colleges and universities (like
your current employer) qualify? If so, which? If not, who would be likeliest to create them?
A. That is the big question. The reason I developed the characteristics of the Colleges for the 21st
Century (C21 C) and did not suggest a model is that I don't know what it will look like. As Justice
Potter Stewart said when discussing pornography, "I can't define it, but I know it when I see it. "
What won't change, however, are the elements in the higher education teaching-learning value
proposition, although they might be rearranged. At its heart lies the transfer of information, the impact
of that information on the receiver, and the assessment and reflection that assures the transfer is
complete and meets a high standard. All of these things are organized around the human, intellectual,
civic, and economic development of the learner. From a teaching-learning perspective, the focus will
increasingly be on learning outcomes, the standards they reflect, and the process by which they are
employed.
I believe that the services modeled by places like AcademyOne and its founder, David Moldoff, will
change the back office of higher education profoundly, transforming learner mobility from a risk factor
to a fact of life.
And I certainly hope (and expect) that when the list of C21 Cs is first published that Kaplan Higher
Education will be on it. And I believe that many in the market-driven sector will play roles in
developing the concept of the C21 C precisely because we are metric-driven laboratories of
innovation. Having said that, Burck Smith has proven with Straighterline that core change can come
from any direction, not just those in the academy. In a world where learner choice and control is a
driving force; where the learning platform, not the campus, is the basic architecture; and where the
network, not the faculty, defines the process, new organizational structures will develop.
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-Doug Lederman
Washington Post
Area students will protest higher education tuition hikes
By Jenna Johnson and Daniel de Vise
Washington Post Staff Writer
Thursday, March 4, 201 0; 7:15 AM
Leaders of a California-born protest movement will try to spread their message across the nation
Thursday, with student rallies, panel discussions and other events to express opposition to budget
cuts and tuition hikes at public colleges and universities.
Organizers say they hope the events will dramatize the frustration that has been building as the
recession forces deep cuts in higher education budgets, especially in California, where the fiscal
situation is especially dire. Colleges there have raised tuition sharply, reduced enrollment and cut
faculty pay.
Students in California have declared Thursday as a Day of Action to Defend Public Education. Rallies
are planned for nearly every college and university campus in the state, in addition to several K-12
schools. Organizers said there would be events in 30 states.
"There are student activists all over the country who are looking to California as something to
emulate," said Doug Singsen, 32, a graduate student at the City University of New York who has
helped organize events outside of California. "We want this to be the beginning of a movement that
gets stronger."
At the University of Maryland in College Park, students plan to walk out of classes at noon, meet in
the student union and then march to an academic building. There they plan to occupy the building
while they talk about "hip-hop and education, race and gender in the classroom, the corporate
university, sports and education, and whatever else we want," according to an invitation on a
Facebook site created by organizers.
Organizer Bob Hayes said Maryland students are angry that their tuition dollars are going to pay for
development projects and the salaries of administrators, instead of better instruction.
We feel disconnected from our education," Hayes said. "We're being run by a Fortune 500 company
instead of by a university."
California has long been considered one of the top public higher education systems in the nation, but
drastic decreases in state funding have strained services, sparking protests.
At the University of California, Berkeley, students and faculty members plan to strike today and will
form picket lines at 7 a.m. Unlike picket lines during past protests, when students just walked around
in circles with their signs, the plan is to link arms and aggressively hinder people from entering
campus buildings, said Callie Maidhof, a Berkeley graduate student who is serving as the
movement's spokeswoman.
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At noon the crowd plans to rally on campus and march five miles to Oakland. Some Oakland teachers
plan to bring their classes to the march, even if that means organizing a ''field trip or impromptu tours
of the neighborhood," Maidhof said. "There's really been a dedication at Berkeley for us to come out
of our ivory tower and go to Oakland," Maidhof said.
Last week a riot erupted at the Berkeley as more than 200 people set fires, shattered windows and
clashed with the six police agencies that were called in. On Monday five students were arrested in
Sacramento for refusing to leave a state assemblyman's office because he wouldn't sign a letter
promising increased financial support. Wednesday morning students broke into the Humanities
building at California State University, Fullerton and barricaded themselves inside for several hours.
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Tuition crunch
HOUSTON CHRONCLE
Tuition increases threaten affordable public higher education
March 3, 2010, 7:50PM
The Texas Legislature's ill-considered deregulation of state university tuition in 2003 was a blunder
that just keeps on taking from the state's students and their families.
Because Texas lawmakers subsequently have failed to adequately fund higher education, regents at
the University of Houston and other state systems are caught in a fiscal squeeze. They must choose
between damaging academic quality with layoffs and program cuts or passing along the pain to
students. One exception: Texas Tech imposed a tuition freeze this past year. But for the most part it
is the students who are paying more to shore up Lone Star universities.
Last month University of Houston System regents approved tuition increases, including nearly 4
percent at the central campus, 16.5 percent at its law school , 4.5 percent at UH-Ciear Lake and more
than 5 percent at UH-Downtown. The bill for a 12-hour semester for a resident undergraduate at the
main campus is now $3,483, and at UH-Downtown $2,205.
The current cost of a year of UH law school for residents, just over $21 ,000, will rise above $26,000.
The UH System will raise more than $8 million in additional tuition revenue.
The action provoked a letter to UH Chancellor Renu Khator from Houston state Sen. John Whitmire,
a UH graduate and lawyer. He was most concerned about the UH-Downtown increase, since it is a
gateway for working, older students who may not qualify for student assistance.
"Chancellor, how many of the students at UH-Downtown have you or the Regents met with
personally?" asked Whitmire in his letter. "I know them well, they are my constituents and I know that
many of them are struggling to get by even at current tuition rates."
Whitmire's sentiments were seconded by UH regent and law school graduate Nandita Berry, the lone
trustee to vote against the tuition hike.
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Chancellor Khator did not answer Whitmire's letter, but a request by the Chronicle brought a response
issued by the UH administration. According to the statement, the university leaders share Whitmire's
concern about families and students, and the board of regents "is committed to meeting its
responsibilities to provide quality higher education in this community. " The statement points out that
UH guarantees free tuition and mandatory fees for four years to incoming in-state freshmen whose
families make below $45,000.
The UH administration and Whitmire are in agreement that state universities desperately need more
funding from the Legislature to reduce their dependence on tuition for revenue.
Right now both universities and their students are victims of state government's misplaced spending
priorities. Until lawmakers increase higher-education funding, continuing tuition raises will restrict
access to our institutions of higher learning at a t ime when our economy demands a highly educated
work force.
Voters should support state legislators on the ballot this year who back affordable higher education
for our young people and older working students.
100
From: Bergeron, David
Sent:
To:
Cc:
Tuesday, April27, 2010 12:48 PM
Yuan, Georgia; Shireman, Bob
McFadden, Elizabeth
Subject: RE: This article names the analyst
Thanks for sharing. Kelly Flynn's name doesn't ring a bell with me.
-----Original Message-----
From: YuanJ Georgia
Sent: TuesdayJ April 27J 2010 12:24 PM
To: ShiremanJ Bob; BergeronJ David
Cc: McFaddenJ Elizabeth
Subject: This article names the analyst
DeVry leads ed. stocks lower as Credit Suisse downgrades on regulatoryJ job market concerns
Associated Press
04/26/10 9:30AM PDT
NEW YORK - DeVry led decliners in education stocks Monday after a Credit Suisse analyst said
the for-profit school could be hurt by proposed regulatory changes and an improving job
market that could slow enrollment.
The administration has pushed hard for gainful employment regulationsJ which stipulate that
graduates of schools must not spend more than 8 percent of their income on paying student
loans.
It's meant to help improve school quality- making sure students are qualified and the
courses help increase their incomes - as student loan defaults soar.
If schools failed to pass this testJ the government could block their access to federal loans
for studentsJ the bulk of their revenues.
In early AprilJ the Education Department said schools with 50 percent graduation rates and 70
percent job placement rates would be exempt from a proposed rule linking graduates' incomes
to required debt payments.
Analyst Kelly FlynnJ howeverJ said Washington sources believe the more lenient proposal might
not wind up in a draft of the law that will be posted by mid-May or June.
Flynn downgraded DeVry and ITT Educational Services Inc. to "neutral" from "outperformJ"
cutting target prices to $65 from $75 and $110 from $135J respectively.
Shares of DeVry Inc. fell $4.59J or 6.6 percentJ to $64.87J while ITT stock dropped fell
$2.07J or 1.8 percentJ to $109.71.
Shares of Apollo Group Inc.J which runs the largest for-profit schoolJ the University of
PhoenixJ also slid 93 centsJ or 1.5 percentJ to $62.60J while Corinthian Colleges Inc. stock
fell 59 centsJ or 3.3 percentJ to $17.30. Career Education Corp. fell 61 centsJ or 1.8
percentJ to $33.49 and Strayer Education Inc. dropped $2.54J or 1 percentJ to $250.49.
MeanwhileJ Flynn cited DeVry's warning on slower enrollment growth in one of its divisions
and ITT's warning on higher advertising spending.
101
For-profit schools have seen big gains in enrollment because of the recession and high
unemployment. As the job market people may not feel as much as a need to bolster
their resumes.
102
From:
Sent:
To:
Subject:
BRIAN FALER, BLOOMBERG/ NEWSROOM: [bfaler@bloomberg.net]
Friday, April30, 2010 3:34PM
Dannenberg, Michael
(BN) Homeless Dropouts From High School Lured by For-Profit
dude i would have taken this story
+------------------------------------------------------------------------------+
Homeless Dropouts From High School Lured by For-Profit Colleges 2010-04-30 04:01:00.4 GMT
By Daniel Golden
April 30 (Bloomberg) -- Benson Rollins wants a college degree. The unemployed high
school dropout who attends Alcoholics Anonymous and has been homeless for 10 months is being
courted by the University of Phoenix. Two of its recruiters got themselves invited to a
Cleveland shelter last October and pitched the advantages of going to the largest
for-profit college to 70 destitute men.
Their visit spurred the 23-year-old Rollins to fill out an online form expressing
interest. Phoenix salespeople then barraged him with phone calls and urging a tour
of its Cleveland campus. uif higher education is important to you for professional
and to achieve your academic why wait any longer? Classes start soon and space is
one Phoenix employee e-mailed him on April 15. be happy to walk you through
the entire application process.
experience is increasingly common. The boom in for-profit driven by
a political consensus that all Americans need more than a high school has
intensified efforts to recruit the Bloomberg Businessweek magazine reports in its
May 3 issue. Such disadvantaged students are desirable because they qualify for federal
grants and which are largely responsible for the prosperity of for-profit colleges.
Federal aid to students at for-profit colleges jumped to $26.5 billion in 2009 from
$4.6 billion in 2000. Publicly traded higher education companies derive three-fourths of
their revenue from federal with Phoenix at 86 up from just 48 percent in 2001
and approaching the 90 percent limit set by federal law.
Biweekly Stipend
The privately held Drake College of which trains people to be medical and
dental relied on taxpayers for 87 percent of its revenue in 2007. Almost 5
percent of the student body at its New JerseyJ branch is homelessJ says Jean AounJ
director of admissions and student services there.
Late in 2008J it began offering a $350 biweekly stipend to students who show up for 80
percent of classes and maintain a cu average.
ItJs basically known in the community: If youJre homelessJ and you need some moneyJ go
to DrakeJ'' says Carmella HutsonJ a case manager at the Goodwill Rescue Mission in Newark,
where about 20 clients have enrolled at Drake in the past two years. It would put money in
my pocketJ help me buy a carJu
adds Jerome Nickens, 45, who lived at the mission when he talked to a Drake representative
but decided not to enroll.
Formal Investigation
After Bloomberg Businessweek called the Accrediting Council for Independent Colleges &
Schools to inquire about the stipendsJ the council opened an investigation into the college's
103
recruitment practices. The inquiry could lead to revoking Drake>s accreditation> leaving it
ineligible for federal aid.
Chancellor University in Cleveland> which counts Jack Welch as an investor and features
a weekly video for students by the former General Electric Co. chief executive> explicitly
focused recruiting efforts on local shelters after it realized that Phoenix> owned by Apollo
Group Inc.> was doing so. Chancellor has stopped pursuing the homeless> and Phoenix says any
recruiting by its employees in Cleveland shelters was unauthorized. Phoenix>s business code
prohibits recruiting at shelters> and any employee violating the ban could face termination>
Apollo says.
Phoenix wants to ensure that ((only students who have a reasonable chance to succeed
enroll in our programs>" Apollo spokesman Manny Rivera said in an e-mail.
Welfare Population
Other schools see nothing wrong with reaching out to the disadvantaged. uwe don>t
exclusively target the homeless>"
says Ziad Fadel> chief executive of Drake> which also sends recruiters to welfare and
employment agencies. uwe are in a community that is low-income and happens to have a lot of
people on welfare."
The every-other- Friday payment encourages Drake students to stay in school and graduate>
he says. The stipend> which about three-fourths of Drake>s 1>200 students receive> is not ((a
gimmick to just get students in the front door>" Fadel says. He adds that a sample analysis
of 30 graduates placed by Drake>s career services office found ((some very substantial
improvements in income."
While many caseworkers for the homeless are gratified by the attention> some see only
exploitation. The companies ((are preying upon people who are already vulnerable and can>t
make it through a university>" says Sara Cohen> a case manager at Shelter Now in Meriden>
Conn. urt>s evil."
The current state of for -profit education has an element of deja vu. Twenty years ago
the sector had grown wild and unruly> as fly- by-night trade schools siphoned off students
from welfare and unemployment lines> ostensibly to train them as truck drivers or
hairdressers. Often these enterprises provided little or no schooling; their aim was the
federal student aid. Default rates on student loans skyrocketed to 22 percent before Congress
enacted tough regulations in 1992. Among them were limits on default rates for individual
colleges as well as a cap on the percentage of their revenue that they could receive from the
government . The schools were also forbidden to pay recruiters based on how many students they
enrolled.
The reforms injected discipline into the industry and brought down default rates. Then>
a decade later> the Bush administration relaxed the ban on incentive compensation for
recruiters> opening the door for the aggressive wooing of the homeless.
((Targeting vulnerable populations who are not likely to benefit is one example of
overzealous recruiting that can be driven by paying based on enrollment numbers>" says Robert
Shireman> Deputy Under Secretary of the U.S. Education Department> which is pushing to
tighten the rules.
Unleashing Potential
The Bush Administration also sought to unleash online education>s potential. Phoenix now
boasts 458>600 students> with more than 200>000 in its two-year online program. Enrollment in
for - profit colleges grew to 1.8 million in 2008 from 673>000 in 2000. Revenue rose to an
estimated $29.2 billion this year from
$9 billion in 2000> says Jeffrey Silber> an analyst for BMO Capital Markets in New York.
Operating margins averaged 21 percent in 2009; schools typically charge $10>000 to $20>000 a
year> well above comparable programs at community colleges.
104
The industry is now fully mainstream. Goldman Sachs Group Inc. owns 38 percent of the
for-profit Education Management Corp. in Pittsburgh) which has 136)000 students in programs
ranging from fashion to culinary artsJ and former President Bill Clinton took a position as
honorary chancellor of Laureate International Universities) owned by Baltimore-based Laureate
Education Inc. Investors are flocking to the industry) drawn by the stability of government
funding and the profit potential of online classes. But some of the unsavory practices that
spurred Congress to act are springing back to lifeJ with a new wrinkle or two.
Homeless Circuit
In Cleveland) Chancellor and Phoenix were both hitting the homeless shelters last year.
Byron Thompson) who joined Phoenix in 2009 as a recruiter) soon made presentations at Y
HavenJ Salvation Army Harbor Light and Transitional Housing) all of which serve the cityJs
homeless.
Thompson) 29J says the recruiting served a social purpose:
"I feel the homeless are a real population that canJt be ignored. Borrowing by the homeless
to pay tuition "is no different from a middle-class student who has to take out a loan) he
says. He also hoped to boost his pay. "The month I signed up two or three women from
Transitional Housing was a good monthJ he admits. (Phoenix recruiters in Cleveland had a
quota of five students a monthJ according to a former employee.)
Legal Settlement
Thompson) who left Phoenix in January) acknowledges that his bosses didnJt endorse his
efforts to recruit the homeless.
Apollo Group agreed last December to pay $78.5 million to settle a federal lawsuit in
California alleging that compensation for Phoenix recruiters violated restrictions on
incentive pay. The company) which admitted no wrongdoing) says itJs changing its compensation
model.
While Thompson says he was "welcomed with open arms at the shelters) some staff members
were wary. "The question in my mind about Phoenix wasJ cwhy are they doing this?J says Bruce
ShagovacJ a counselor at Y Haven. "ThereJs got to be some payoff for them.
One homeless woman whom Thompson steered to Phoenix was Marisol Lugo. Lugo ran away from
her Chicago home at age 12J became a heroin addict) and lived on the streets for 22 yearsJ
eating out of restaurant trash bins and sleeping in parks and abandoned cars. After detoxJ
she moved in 2008 to Transitional Housing) obtained a high school equivalency degree) and got
to know Thompson. "He gave me wonderful words of encouragement)
says Lugo.
With federal grants and loans covering the $10)000-plus annual tuition) she began
pursuing a two -year business degree online at Phoenix last August. She soon ran into academic
difficulties) failing a course in critical thinking.
Retaining Information
"Sometimes) having used so much drugsJ I have trouble retaining information) says LugoJ
who now has her own apartment and a maintenance job at the shelter. According to Phoenix) she
left the school in November. She says she is still r egistered and there is a payment dispute.
PhoenixJs forays into shelters were noted by a new Cleveland rival. In 2008J investors
bought nonprofit Myers University) which was under court receivership) and renamed it
Chancellor. A year later Welch acquired a stake in it; the university named its new masterJs
degree program in business administration after himJ and Welch helped develop the curriculum.
At a faculty function last August) Darius NavranJ dean of ChancellorJs School of
Professional Studies) sought out Jeffrey Perkins Jr.J an adjunct professor of public
administration) and asked how Chancellor could boost its enrollment of about 400.
Nontraditional Students
105
"If we don't tap into that population, Phoenix will,
Perkins says he told Navran, meaning the homeless. The dean agreed.
Chancellor's small classes and low student-to-faculty ratio are suited to nontraditional
students such as the homeless, Perkins says. He e-mailed managers of Cleveland social service
agencies in September, inviting them to a lunch at Chancellor to "discuss our new plans to
recruit the economically disadvantaged and at-risk groups. Many of them are targeted for on-
site recruitment at local transitional housing, halfway houses, and other human service
facilities.''
Sixteen human services managers showed up for the lunch.
Two days later, in a memo to Navran, Perkins predicted that the program would produce rca
minimum of at least 19 enrollees by spring term.
cHeavy-Handed'
In the ensuing weeks, Perkins and other Chancellor officials gave presentations at a
dozen social service programs.
Their pitch was "very heavy-handed, says Phillip Hines, housing coordinator for the
Community Women's Shelter. "It was beating the drum, eGo to Chancellor. This is what we
offer.
Financial aid, financial aid, financial aid.'
Afterward, Hines says, Chancellor hounded him with phone calls and e-mails to ((get these
women rolling. Chancellor's initiative reaped only one or two students and was discontinued.
It "had all the best intentions, CEO Bob Barker said in an e- mail, "but the time and effort
generated very little interest.
In one view, the rise of for-profit colleges represents a laudable merger of public
interest and the private sector. With public colleges beset by budget cuts, for-profit
colleges offer an opportunity for people who are down and out to get ahead.
Students with no assets or collateral can tap federal grants and loans on the theory that
degrees will lead to well-paying jobs that enable borrowers to repay.
Tuition Hikes
The trouble is the cost. Education companies charge high prices that require students to
take on debt. Chancellor charges $9,759 a year -- about four times the $2,499 tab at nearby
Cuyahoga Community College. Poor students can pay Cuyahoga's tuition with federal grants and
don't have to take out loans.
Student advisers from Cuyahoga make the rounds at Cleveland area shelters, helping the
homeless choose colleges and fill out applications.
And for-profit tuitions are rising fast. Drake hiked its tuition from $4,999 in 2997-
2998 to $15,799 this year, which Fadel attributes to new equipment and additional staff.
Borrowers who earned bachelor's degrees from for-profit colleges in 2997-2998 had a median
debt of $32,653, well above the
$22,375 and $17,799 for graduates of four-year private nonprofit and public colleges,
respectively .
Such burdens can be difficult for homeless people who are more likely to suffer from
mental illness and substance abuse than the general population. Bad credit doesn't go away
easily.
In the Cleveland shelters, you can still find people with trade school debts from 29 years
ago. Those who don't repay their student loans may forfeit their chances for public housing
and are also ineligible for federal financial aid to return to college.
Default Consequences
((If the homeless have a bad student loan, they can't find a place to live, they can't go
back to school, and in this economy there's not a lot of work, said Ardretta Jones, a case
manager at Tacoma Rescue Mission in Tacoma, Washington, "That leaves a person with no
options."
106
Because they donJt have to repay their educational loans until they leave schoolJ some
homeless students spend beyond their means. Kim RoseJ a recovering crack cocaine addict and
ex- offender in RaleighJ North CarolinaJ began pursuing an online bachelorJs degree in
business last November at Capella Education Co.Js Capella UniversityJ based in Minneapolis.
At the time she was staying in a drug-free program with Internet access.
Big Splurge
RoseJ 38J receives almost $4J000 each academic quarter in federal grants and loans for
tuition and living expenses. She splurged last ChristmasJ spending $700 of her financial aid
on presents for her seven-year-old sonJ who has lived with his grandmother. I got him
everything he wantedJ'' Rose said in a telephone interview. GamesJ toys. HeJs a guitar freak,
I got him a guitar. To make up for me not being there.
In February, Rose moved into a shelter where the only computer was broken. As a result,
she has struggled to keep up, dropping an English composition course. Rose isn't typical of
Capella students, most of whom are midcareer professionals seeking graduate degrees, says
university spokeswoman Irene
Silber: we would not intentionally recruit someone who is in a life crisisJ much less one as
significant as homelessness.
Given the troubled pasts of some homeless students, even a college education hardly
assures a well-paying job. Brenda Torchia, another recovering crack cocaine addict in Raleigh
who has served several prison terms for drug offenses, was in a shelter and looking online
for work when she saw an ad that asked if she wanted to further her education. She answered
yes and was directed to the website of a for-profit school called ECPI College of Technology
based in Virginia Beach, Virginia.
Placement Test
Torchia applied, passed a placement test, and started ECPI's medical administration
program on March 1. The 40-year- old mother of four is borrowing about half of the $23,000
tab from the federal government, with grants and scholarships paying the rest. ECPI officials
are aware of her background and guarantee me a job in the field, Torchia says. My school
is veryJ very supportive of me. I guess God opened up their hearts to receive me for whom I
am.
Torchia's history would be a red flag for health-care employers because hospitals and
clinics have drugs on site, says Susan Eget, communications director of the American Academy
of Medical Administrators. While ECPI doesnJt promise jobs, President Mark Dreyfus saysJ
medical administration offers Torchia's best chance because not all employers check
backgrounds and she could process records in a back office where drugs aren't accessible.
In the end, Benson Rollins didn't succumb to Phoenix's hard sell. He is taking a class
for his high school equivalency degree and hopes to study law enforcement in college. For
nowJ he would like a job so he can pay child support for his 1-year- old daughter, whom he
rarely sees. The Phoenix recruiters, he says, failed to mention a critical point: He would
have to take out a government loan at 5 percent to 7 percent interest to pay the $10,000-plus
annual tuition. I'm in a homeless shelter, and money is hard to come by, Rollins says.
It's not worth going to school to end up in debt.
For Related News and Information:
Stories about education: NI EDU <GO>
U.S. colleges and universities: USUV <GO> Education organizations: EDOR <GO> Stories about
the Department of Education:
NI EDN <GO>
--With assistance from Marybeth Sandell in Stockholm and Rodney Yap in Los Angeles. Editors:
Robin D. SchatzJ Hugo Lindgren
To contact the reporter on this story:
107
Daniel Golden in Boston at +1 -617-210-4610 or dlgolden@bloomberg.net.
To contact the editor responsible for this story:
Jonathan Kaufman at +1 -617-210-4638 or Jkaufman17@bloomberg.net.
108
From:
Sent:
To:
Subject:
Excellent job Justin.
From: Hamilton, Justin
Cunningham. Peter
Wednesday, June 16,2010 6:18AM
Hamilton, Justin
RE: Neg-Reg Press
Sent: Wednesday, June 16, 2010 12:41 AM
To: Cunningham, Peter; Rogers, Margot; Martin, Carmel; Gomez, Gabriella; Miller, Tony; Kanter, Martha; Weiss, Joanne;
Abrevaya, Sandra; Yuan, Georgia
Subject: Neg-Reg Press
Still looking for the WaPo story, but here's where we are:
NYT: U.S. Education Dept. Delays Rules on For-Profit Colleges
WSJ/DOW JONES: US Education Dept Avoids 'Gainful Employment' In Reform Draft
AP: Proposed new rules for college recruitment
USA TODAY: Education Department takes aim at for- profit colleges
Reuters: U.S. to go after deceptive colleges, delays job rule
POLITICO: Eyes on for- profit college oversight
BLOOMBERG: Obama Targets For-Profit College Recruiting Practices in Proposed Rules
U.S. Education Dept. Delays Rules on For-Profit Colleges
By TAMAR LEWIN
The Education Department
<http://topics.nytimes.com/top/reference/timestopics/organizations/e/education department/index.html?inline=nyt-org>
said Tuesday that it had split off and delayed a decision on the most controversial part of proposed new student-aid
regulations - the treatment of for-profit college programs whose graduates do not earn enough to repay their loans.
While a package of proposed new student-aid regulations was released Tuesday, a department official said no decision had
been reached about what debt-to-income ratio would make for-profit programs ineligible for federal aid.
"This is about accountability, and protecting students," said Education Secretary Arne Duncan
<http://topics.nytimes.com/top/reference/timestopics/people/d/arne duncan/index.html?inline=nyt-per> . "We have many
areas of agreement where we can move forward. But some key issues around gainful employment are complicated, and we
want to get it right so we will be coming back with that shortly."
In the original draft of the gainful employment rules released this year, the department suggested cutting off federal aid to
programs whose graduates could not repay their student loans <http://www.nytimes.com/info/student-loans/?inline=nyt-
classifier> in 10 years with 8 percent of the income.
Consumer advocates and many education groups say that the rules will protect students and taxpayers al ike from expensive
programs that eat up billions of dollars of federal money, and leave graduates struggling in dead-end jobs.
But the Career College Association, which represents the for-profit institutions, aggressively lobbied against that proposal,
saying it would not solve any problem but would lead to the closing of important job-training programs for needy students.
109
For-profit colleges get the bulk of their revenues from federal aid, and their students are far more likely to default on their
loans than those at nonprofit or public colleges. With for-profit colleges booming, and getting $20 billion in federal aid, the
government has been taking a closer look at how that money is used. Last week, Tom Harkin
<http://topics.nytimes.com/top/reference/timestopics/people/h/tom harkin/index.html?inline=nyt-per>, the Iowa
Democrat who is chairman of the Senate Committee on Health, Education, Labor and Pensions, announced that he would hold
hearings on the issue.
"I am pleased to see the Department of Education releasing proposed regulations around for-profit higher education," he said
on Tuesday. " For-profit colleges must work for students and taxpayers, not just shareholders."
At a briefing on Tuesday, Deputy Under Secretary Robert Shireman said that the department still intended "to hold programs
accountable with some metrics that will come in a proposal later this summer" - but that to avoid delaying the whole
regulatory package, it had decided to go ahead with everything but the specific gainful employment measures.
The new regulations, to be published in the Federal Register on Friday, would require for-profit colleges to disclose their
programs' job-placement rates and graduation rates, and provide information that would let the department calculate
graduates' debt load and income.
The new regulations also help protect students from aggressive or misleading recruiting practices and ensure that only eligible
students receive aid.
The regulations also tighten the prohibition against paying recruiters by the number of students they enroll - a practice that
has sometimes led to boiler-room call centers that pressure those with little chance of academic success to enroll.
While incentive compensation was already illegal, the current rules allowed some exceptions that the department said had
been abused. The new rules would eliminate those exceptions.
After a 45-day comment period, the department expects to publish final rules by Nov. 1, to take effect beginning July 2011.
WSJ/DOW JONES: US Education Dept Avoids 'Gainful Employment' In Reform
Draft
NEW YORK (Dow Jones)--The U.S. Department of Education on Wednesday will propose sweeping reforms to a number
of issues governing higher education, including attempting to define a credit hour, penalizing schools for
misrepresenting their qualifications or offerings and tightening rules governing recruiter compensation.
Most notable about the recommendations, known as a Notice of Proposed Rulemaking, is what's absent, as the
Education Department chose not to tackle a hotly debated measure that would punish schools for graduating students
with high debt-to-income ratios in an attempt to measure how well they prepare students for gainful employment in a
recognized occupation. For-profit schools have warned they may need to cut tuition or shut programs if that proposal
were pushed through.
The Education Department will return to the measure later this summer, the agency said. "Some key issues around
gainful employment are complicated and we want to get it right so we will be coming back with that shortly," Education
Secretary Arne Duncan said in a statement.
The Education Department said it is still developing metrics to hold programs accountable for their ability to prepare
students for gainful employment. For now, it is recommending schools disclose graduation and job-placement rates and
their students' median debt levels.
110
For months, shares of schooling companies have sighed and swooned with every rumor of what would or wouldn't be
included in the draft proposal. Investors have remained anxious since the final of three discussions ended without
resolution on a handful of issues, and analysts say continued uncertainty could mean more volatility.
Even without the meatiest gainful-employment measure included in the proposal, a number of schools may face
fundamental operational changes. For example, the department recommends tightening oversight of "Ability to Benefit"
tests, exams on which many institutions rely to enroll students who don't have high school diplomas. The tests came
under scrutiny last year when a Government Accountability Office found proctors willing to help students cheat.
The department also recommends strengthening the metrics by which students must show academic progress so
schools can't receive federal-aid funds, from students who continue to post near-failing grades.
In addition, the Education Department proposes to eliminate 12 "safe harbors" from a ban on incentive compensation,
which an agency official referred to as "loopholes" to the original 1992 rule. A number of for-profit schools have been
the subject of lawsuits alleging overzealous recruiting tactics.
The draft also proposes a new definition of a credit hour, the fundamental measure of a program's rigor. Students are
assigned part- or full-time status based on how many credits they take, and some schools have been accused of inflating
their credits in order to receive more federal funds. A major accrediting agency was recently slammed by the Education
Department's Office of Inspector General for accrediting Career Education Corp.'s (CECO) American Intercontinental
University despite having concerns about its credit-hour structure. The House Committee on Education and Labor will
hold a hearing Thursday on accreditation and credit hours.
The Education Department's draft rules will be open to public comment for 45 days, and the Education Department
plans to issue a final rule by Nov. 1. Any changes will take effect beginning July 1, 2011.
AP: Proposed new rules for college recruitment
By DONNA GORDON BLANKINSHIP
ASSOCIATED PRESS WRITER
Colleges would no longer be allowed to pay recruiters for students or engage in aggressive or misleading recruitment
under proposed new federal regulations that target the practices of for-profit colleges.
The proposed new Department of Education rules were to be announced Wednesday. They apply to all colleges but are
of particular interest to the for-profit world, where some institutions have been accused of misleading students about
the cost and value of their programs.
"This is about accountability and protecting students," said Education Secretary Arne Duncan, in a statement.
The "notice of proposed rulemaking" is set to be published in the Federal Register on Friday and will be open to public
comment until Aug. 2. Final rules are scheduled to be announced in November and would take effect in July 2011.
Under the proposed new rules, colleges would be required to do the following:
-Give prospective students their graduation and job placement rates.
-Supply data to the federal government that would allow officials to determine student debt levels and incomes after
they graduate.
111
- Make sure only students with val id high school diplomas are enrolled.
- Ensure students are making satisfactory academic progress.
The new rules would strengthen the federal government's ability to take action against institutions that engage in
deceptive advertising, marketing and sales practices. All loopholes in rules that already prohibit colleges from paying
recruiters for students would be closed.
The role of individual states in monitoring colleges would be clarified. The rules would also more clearly define the
courses eligible for financial aid and the amount of aid that is appropriate.
Studies show students at for-profit schools- the fastest growing sector of higher education- are much more likely to
default on their loans than students at other kinds of colleges.
The federal government is paying more attention to these schools as large amounts of federal aid go to these schools in
the form of student loans and grants.
Sen. Tom Harkin, D-lowa, chairman of the Senate Health, Education, Labor and Pensions Committee, has said he plans to
hold hearings starting June 24 to look at federal education spending at for-profit colleges.
The rules were not released until after the stock markets closed Tuesday, but investors have driven down the value of
for-profit colleges as concern over the rules mounted. The worry is that schools like the University of Phoenix or ITI
Technical Institutes could lose students and revenue if loans are tougher to come by.
"Investors are nervous across the board," said Corey Greendale, an analyst with First Analysis Securities Corp. in Chicago.
"Nobody knows exactly what this is going to do. "
Shares of Apollo Group Inc., which owns the University of Phoenix, have sunk about 22 percent since Aprill, while
shares of ITI Educational Services are down 13 percent.
Schools most at risk of losing business are those that offer longer programs, which translate into more debt for students,
Greendale said.
Representatives from for-profit colleges and their business associations were among those who negotiated the new
rules during meetings this past winter.
One major area of contention was left out of the proposed regulations.
To qualify for financial aid, most career colleges and vocational training programs need to show they are giving students
the skills they need for "gainful employment." The definition of gainful employment will be set in another set of
proposed rules to be issued later this summer, the department said.
Harris Miller, president of the Career College Association, said he was glad to hear the federal government plans to keep
negotiating about gainful employment, but noted one other area of contention in the rules proposed this week.
The plan to eliminate all kinds of recruitment pay instead of a more subtle reform of the practice does not make sense
and will hurt students and legitimate institutions, Miller said.
Miller said he assumes his organization and the Obama administration are in agreement on the other proposed rules.
USA TODAY: Education Department takes aim at for-profit colleges
112
By Mary Beth Marklein
The Education Department is proposing a number of rules today designed to protect college students and taxpayers
from abusive or fraudulent practices, including aggressive recruitment tactics and allowing ineligible students to enroll
and receive aid.
Though all colleges that receive federal aid would be affected by the changes, the most controversial proposals are
aimed at for-profit colleges, which have come under more scrutiny as their enrollments have increased.
In an effort to rein in student debt and high default rates, for example, one proposal would require colleges to disclose
graduation and job placement rates and information about the effectiveness of their career and technical programs.
Federal data show that 44% of 2007 graduates who defaulted on loans within three years attended for-profit
institutions.
Most of the 14 key issues, outlined in a 503-page document shown to reporters Tuesday, were developed through
negotiations over the past year with the higher education community. A final version of the rules would take effect in
July 2011.
Education officials will follow up this summer with details on a proposal that would cut off federal aid to for-profit
colleges whose graduates can't earn enough to repay their loans.
The issues are complicated "and we want to get it right," Education Secretary Arne Duncan
<http://content.usatoday.com/topics/topic/People/Politicians,+Government+Officials,+Strategists/Executive/Arne+Dun
can> says. "This is about accountability, and protecting students."
Next week, a Senate education committee will examine federal spending at for-profit schools.
Advocates of stricter regulations are encouraged by a preliminary review of the proposals.
"There's a real concern that taxpayers are subsidizing programs that are overpromising and under-delivering," says
Pauline Abernathy of the California-based Institute for College Access & Success.
Harris Miller <http://content.usatoday.com/topics/topic/Harris+Miller>, president of the Career College Association,
which represents about 1,450 for-profit institutions, said the group doesn't agree with all the proposals, but "we agree
that students need to be protected at all times from schools that color outside the lines."
REUTERS: U.S. to go after deceptive colleges, delays job rule
Diane Bartz
Under proposals unveiled on Tuesday, the department partially addressed the issue by requiring for-profit schools to release
data to students on graduation and job placement rates.
But it stopped short of requiring for-profit institutions to demonstrate that they prepare students for jobs before students
would be eligible for federal grants and loans, a step advocated by Robert Shireman, a deputy undersecretary at the
Department of Education.
Education Secretary Arne Duncan said in a statement that the gainful employment issue was complicated: "we want to get it
right so we will be coming back with that shortly."
Proposals affecting all colleges and universities would tighten rules against deceptive advertising and would close loopholes
on paying recruiters in hopes of removing incentives for them to enroll unqualified people or deceive prospective students.
113
The institutions would be required to ensure that their students have a valid high school diploma or otherwise show that they
are ready for coll ege.
Shireman has repeatedly called for tightened regulation of companies such as Corinthian Colleges Inc and Career Education
Corp.
Shares in the for-profit sector got a boost last month on word that Shireman plans to step down on July 1, although he will
remain an advisor to the department.
Jeff Silber, a stock analyst with BMO Capital Markets, said a delay in the gainful employment rule should be welcomed
cautiously.
" If this thing is being delayed, it doesn't mean that it's going away," he said. "I don't think it's bad news. (But) I wouldn't
declare victory here."
Corinthian Colleges spokesman Kent Jenkins called the announced rules and the delay on gainful employment "a step in the
right direction."
"We don't know where they will come down (on gainful employment) but the fact that they are being very careful and very
cautious speaks well for them, " he said.
Efforts to reach other for-profit schools for a reaction to the proposed rules were unsuccessful.
The schools, which offer higher education programs in fields like healthcare and criminal justice, have been criticized for their
student loan practices and the quality of the education students receive.
The for-profit industry has also been criticized because students, who tend to be low-income, are most likely to end up with
outsized -- and sometimes unpayable -- debt.
Fifty-three percent ended up owing more than $30,500, compared with 12 percent for students who attended a public four-
year coll ege, according to a study by the Coll ege Board.
U.S. Senator Tom Harkin, an Iowa Democrat, said he was pleased with the announced rules.
"The federal government must ensure that the more than $20 billi on in student aid that these schools receive is being well
spent and students are being well informed and well served," he said. "For-profit colleges must work for students and
taxpayers, not just shareholders."
The draft regulations will be put out for public comment on Friday. There will be a 45-day comment period. The goal is to issue
a final rule by November 1, which would go into effect on July 1, 2011.
POLITICO: Eyes on for-profit college oversight
The Obama administration will propose tightening oversight of for-profit colleges on Wednesday to thwart misleading
recruiting and reign in federal funding.
The new rules will be released for public comment after a year of negotiations between the Education Department and higher
education community. Whil e the regulations encompass all higher education institutions, for-profit universities like Kaplan,
DeVry and University of Phoenix are likely to bear the brunt of the changes.
"This is about accountabi li ty, and protecting students," said Education Secretary Arne Duncan, who aims to finalize the rules
by November, in a statement. The rules will go after aggressive recruiting practices. It will grant the department new powers
114
to take action against deceptive advertising, marketing and sales. It also will end the practice of schools compensating
admissions recruiters based on securing student enrollment.
The proposed regulations will ensure only eligible students- those that have a high school diploma or pass an equivalence
test- receive federal funds. And they will clarify what courses are eligible for federal aid and how much taxpayer money they
can obtain.
But the department only partially addresses the much-debated "gainful employment" proposal that would cut off federal
funding to programs whose graduates don't earn enough to pay off their student loans. The new rules order institutions to
provide their prospective students graduation and job placement rates, as well as hand over data on student debt and
incomes after graduation. But the department won't unveil the metrics to hold them accountable until later this summer.
"Given controversy, we want to make sure we get it right," a department official told reporters.
Fighting the proposal is already the top cause of Students for Academic Choice, a grassroots-sounding group backed by the
Career College Associat ion, a lobbying group for 1,400 for-profit schools. More than 32,000 people signed a petition saying it
would "treat career college students as separate and inherently unequal," as well as limit vocational and technical programs
for more than 300,000 students who want to go into fields like health care. <.b!!2JLstudentsforacademicchoice.org/>
Enrollment in for-profit universities is on the rise, jumping from 673,000 students nationwide in 2000 to 1.8 million in 2008.
And federal aid to students at for-profit colleges soared to $26.5 billion in 2009 from $4.6 billion in 2000.
While these schools offer people an educational alternative, they often come with a mountain of debt, observers say. A recent
College Board study concluded that students who attend for-profit colleges graduate on average with bigger student loans
than those who attended private nonprofit or public schools. More than half of bachelor's degree recipients left school at
least $30,500 in debt <http:ljwww.collegeboard.com/press/releases/211932.html> .
Harris Miller, president of the Career College Association, has repeatedly rejected the idea that for-profit schools leave
students will unmanageable debt. He said the default rate on loans for students at for-profit institutions is about the same as
students who attend community colleges and other nonprofits. " Let' s try to turn this into a fact-based conversation," he said.
Meanwhile Congress is also jumping into the conversation. Beginning next week Sen. Tom Harkin (D-Iowa) will hold a series of
hearings to examine federal education spending at these institutions.
Read more: http:ljwww.politico.com/news/stories/0610/38598.html#ixzzOqzFnXDyJ
BLOOMBERG: Obama Targets For-Profit College Recruiting Practices in Proposed
Rules
By John Hechinger- Jun 16, 2010
The Obama administration proposed banning for-profit colleges from tying recruiters' pay to the number of people they
enroll, saying high-pressure sales tactics induced students to take out government loans they can't afford.
The rules would prohibit paying sales incentives at Apollo Group
<http://preview .bloomberg.com/apps/quote ?T =en10/quote. wm&ticker=APOL: US> Inc., ITT Educational Services
<http://preview.bloomberg.com/apps/quote ?T =en10/quote.wm&ticker=ESI:US> Inc., Career Education Corp
<http://preview.bloomberg.com/apps/quote?T=en10/quote.wm&ticker=CECO:US>. and other for-profit colleges, according
to a copy of the proposal by the U.S. Department of Education to be made public today. At for-profit colleges, recruiters
contact potential students, often after they express interest over the Internet.
U.S. Secretary of Education Arne Duncan
<http://search.bloomberg.com/search?site=wnews&client=wnews&proxystylesheet=en10 wnews&output=xml no dtd&ie=
115
UTF-8&oe=UTF-8&filter=p&getfields=wnnis&partialfields=-wnnis: NOA VSYN D&sort=date: D :S:d1&1r=-
lang ja&q=Arne%20Duncan> is seeking to protect taxpayers from loan defaults and to stop students from taking on debt for
programs that don't lead to higher incomes. For-profit colleges can receive up to 90 percent of their revenue from federal
grants and loans. Federal aid to for-profit colleges jumped to $26.5 billion last year from $4.6 billion in 2000, according to the
Education Department.
"This is about accountability and protecting students," Duncan said in a statement.
The Obama administration delayed the release of a proposed rule that would disqualify for-profit colleges from receiving
federal aid if their graduates spend more than 8 percent of their starting salaries repaying student loans.
The Education Department is still analyzing the proposal and expects to release the rule, known as gainful employment,
between now and August, the agency said in a statement.
Industry Opposition
For-profit colleges lobbied against the gainful-employment rule, which could disqualify programs enrolling 300,000 students,
according to an April study commissioned by the Washington-based Career College Association, which represents more than
1,400 for-profit colleges.
Education stocks last week rallied on analysts' reports citing the potential delay of the gainful employment rule. Apollo, based
in Phoenix, rose 70 cents, or 1.5 percent, to close at $48.30 in Nasdaq Stock Market composite trading yesterday. Career
Education, based in Hoffman Estates, Illinois, rose 71 cents, or 2.7 percent, to $26.91. ITT, based in Carmel, Indiana, rose
$1.39, or 1.5 percent, to $97.18 in New York Stock Exchange Composite trading.
Colleges would no longer be allowed to tie recruiters' pay to enrollment under any circumstances, according to the new rules.
The current regulations prohibit the practice while allowing exceptions, or "safe harbors."
'Unscrupulous Actors'
"Unscrupulous actors routinely rely on these safe harbors" to get around the law, the Education Department said. While the
proposed rules apply to all colleges, they are designed to target abuses among for-profits, the department said.
The Education Department's description of recruiting violations among for-profits amounts to "a lot of hyperbole," Harris
Miller
<http://search.bloomberg.com/search?site=wnews&client=wnews&proxystylesheet=en10 wnews&output=xml no dtd&ie=
UTF-8&oe=UTF-8&filter=p&getfields=wnnis&partialfields=-wnnis:NOAVSYND&sort=date:D:S:d1&lr=-
lang ja&q=Harris%20Miller>, the Career College Association's president, said in an interview. Colleges should be allowed to
continue taking enrollment into account among other factors in compensating recruiters, Miller said.
The new rule on recruiter pay could have a broad impact on the industry, Matt Snowling
<http://search.bloomberg.com/search?site=wnews&client=wnews&proxystylesheet=en10 wnews&output=xml no dtd&ie=
UTF-8&oe=UTF-8&filter=p&getfields=wnnis&partialfields=-wnnis:NOAVSYND&sort=date:D:S:d1&1r=-
lang ja&g=Matt%20Snowling>, an analyst with FBR Capital Markets in Arlington, Virginia, said in a phone interview.
"The incentive compensation rule is probably a bigger threat to the industry than gainful employment," Snowling said. "By
limiting the schools ability to market themselves, it takes away some of their ability to grow."
Apollo Settlements
Apollo's University of Phoenix last December agreed to pay $67.5 million to the U.S. and $11 million in legal fees to plaintiffs
to settle a whistleblower suit arising from allegations from former employees that that company improperly paid recruiters
based on enrollment numbers. Apollo admitted no wrongdoing. The company, without admitting fault, paid $9.8 million in
2004 to the Department of Education to settle similar claims.
116
Apollo started reviewing recruiter compensation 18 months ago, with a focus on "enhancing student satisfaction and student
experience," spokeswoman Sara Jones said in an e-mail.
"We anticipate that our new compensation will be in compliance with the forthcoming regulations by the U.S. Department of
Education but cannot confirm until the rules are finalized," Jones said.
Today's proposed rules also would require colleges to disclose information about employment prospects to students and
strengthen the Education Department's authority to take action against institutions engaging in "deceptive, marketing and
sales practices," the department said in a statement. The proposed rules, being issued for public comment, could be made
final November 1 and take effect in July 2011.
117
From:
Sent:
To:
Subject:
Hi BobJ
DAN GOLDEN, BLOOMBERG/ NEWSROOM: [dlgolden@bloomberg.net]
Friday, April30, 2010 9:45AM
Shireman, Bob
(BN) Homeless Dropouts From High School Lured by For-Profit
How are you? Here's the article on recruiting the homeless. It's also in the current
issue of Business Week. Thanks very much for your help. Talk to you soon.
YoursJ
Dan
+------------------------------------------------------------------------------+
Homeless Dropouts From High School Lured by For-Profit Colleges 2010-04-30 04:01:00.4 GMT
By Daniel Golden
April 30 (Bloomberg) -- Benson Rollins wants a college degree. The unemployed high
school dropout who attends Alcoholics Anonymous and has been homeless for 10 months is being
courted by the University of Phoenix. Two of its recruiters got themselves invited to a
Cleveland shelter last October and pitched the advantages of going to the countryJs largest
for-profit college to 70 destitute men.
Their visit spurred the 23-year -old Rollins to fill out an online form expressing
interest. Phoenix salespeople then barraged him with phone calls and e-mailsJ urging a tour
of its Cleveland campus. ((If higher education is important to you for professional growthJ
and to achieve your academic goalsJ why wait any longer? Classes start soon and space is
limitedJn one Phoenix employee e-mailed him on April 15. ((IJll be happy to walk you through
the entire application process.
RollinsJs experience is increasingly common. The boom in for -profit educationJ driven by
a political consensus that all Americans need more than a high school diplomaJ has
intensified efforts to recruit the homelessJ Bloomberg Businessweek magazine reports in its
May 3 issue. Such disadvantaged students are desirable because they qualify for federal
grants and loansJ which are largely responsible for the prosperity of for-profit colleges.
Federal aid to students at for - profit colleges jumped to $26.5 billion in 2009 from
$4.6 billion in 2000. Publicly traded higher education companies derive three-fourths of
their revenue from federal fundsJ with Phoenix at 86 percentJ up from just 48 percent in 2001
and approaching the 90 percent limit set by federal law.
Biweekly Stipend
The privately held Drake College of BusinessJ which trains people to be medical and
dental assistantsJ relied on taxpayers for 87 percent of its revenue in 2007. Almost 5
percent of the student body at its NewarkJ New JerseyJ branch is homelessJ says Jean AounJ
director of admissions and student services there.
Late in 2008J it began offering a $350 biweekly stipend to students who show up for 80
percent of classes and maintain a ucn average.
uitJs basically known in the community: If youJre homelessJ and you need some moneyJ go
to DrakeJn says Carmella HutsonJ a case manager at the Goodwill Rescue Mission in NewarkJ
where about 20 clients have enrolled at Drake in the past two years. uit would put money in
my pocketJ help me buy a carJn
118
adds Jerome Nickens> 45> who lived at the mission when he talked to a Drake representative
but decided not to enroll.
Formal Investigation
After Bloomberg Businessweek called the Accrediting Council for Independent Colleges &
Schools to inquire about the stipends> the council opened an investigation into the college>s
recruitment practices. The inquiry could lead to revoking Drake>s accreditation> leaving it
ineligible for federal aid.
Chancellor University in Cleveland> which counts Jack Welch as an investor and features
a weekly video for students by the former General Electric Co. chief executive> explicitly
focused recruiting efforts on local shelters after it realized that Phoenix> owned by Apollo
Group Inc.> was doing so. Chancellor has stopped pursuing the homeless> and Phoenix says any
recruiting by its employees in Cleveland shelters was unauthorized. Phoenix>s business code
prohibits recruiting at shelters> and any employee violating the ban could face termination>
Apollo says.
Phoenix wants to ensure that aonly students who have a reasonable chance to succeed
enroll in our programs>)) Apollo spokesman Manny Rivera said in an e-mail.
Welfare Population
Other schools see nothing wrong with reaching out to the disadvantaged. awe don>t
exclusively target the homeless>))
says Ziad Fadel> chief executive of Drake> which also sends recruiters to welfare and
employment agencies. awe are in a community that is low-income and happens to have a lot of
people on welfare.))
The every-other-Friday payment encourages Drake students to stay in school and graduate>
he says. The stipend> which about three-fourths of Drake>s 1>200 students receive> is not ua
gimmick to just get students in the front door>)) Fadel says. He adds that a sample analysis
of 30 graduates placed by Drake>s career services office found asome very substantial
improvements in income.))
While many caseworkers for the homeless are gratified by the attention> some see only
exploitation. The companies aare preying upon people who are already vulnerable and can>t
make it through a university>)) says Sara Cohen> a case manager at Shelter Now in Meriden>
Conn. ait>s evil.))
The current state of for-profit education has an element of deja vu. Twenty years ago
the sector had grown wild and unruly> as fly-by-night trade schools siphoned off students
from welfare and unemployment lines> ostensibly to train them as truck drivers or
hairdressers. Often these enterprises provided little or no schooling; their aim was the
federal student aid. Default rates on student loans skyrocketed to 22 percent before Congress
enacted tough regulations in 1992. Among them were limits on default rates for individual
colleges as well as a cap on the percentage of their revenue that they could receive from the
government. The schools were also forbidden to pay recruiters based on how many students they
enrolled.
The reforms injected discipline into the industry and brought down default rates. Then>
a decade later> the Bush administration relaxed the ban on incentive compensation for
recruiters> opening the door for the aggressive wooing of the homeless .
((Targeting vulnerable populations who are not likely to benefit is one example of
overzealous recruiting that can be driven by paying based on enrollment numbers>)) says Robert
Shireman> Deputy Under Secretary of the U.S. Education Department> which is pushing to
tighten the rules.
Unleashing Potential
119
The Bush Administration also sought to unleash online education's potential. Phoenix now
boasts 458,600 students, with more than 200,000 in its two-year online program. Enrollment in
for-profit colleges grew to 1.8 million in 2008 from 673,000 in 2000. Revenue rose to an
estimated $29.2 billion this year from
$9 billion in 2000, says Jeffrey Silber, an analyst for BMO Capital Markets in New York.
Operating margins averaged 21 percent in 2009; schools typically charge $10,000 to $20,000 a
year, well above comparable programs at community colleges.
The industry is now fully mainstream. Goldman Sachs Group Inc. owns 38 percent of the
for-profit Education Management Corp. in Pittsburgh, which has 136,000 students in programs
ranging from fashion to culinary arts, and former President Bill Clinton took a position as
honorary chancellor of Laureate International Universities, owned by Baltimore-based Laureate
Education Inc. Investors are flocking to the industry, drawn by the stability of government
funding and the profit potential of online classes. But some of the unsavory practices that
spurred Congress to act are springing back to life, with a new wrinkle or two.
Homeless Circuit
In Cleveland, Chancellor and Phoenix were both hitting the homeless shelters last year.
Byron Thompson, who joined Phoenix in 2009 as a recruiter, soon made presentations at Y
Haven, Salvation Army Harbor Light and Transitional Housing, all of which serve the city's
homeless.
Thompson, 29, says the recruiting served a social purpose:
"I feel the homeless are a real population that can't be ignored. Borrowing by the homeless
to pay tuition "is no different from a middle-class student who has to take out a loan, he
says. He also hoped to boost his pay. "The month I signed up two or three women from
Transitional Housing was a good month, he admits. (Phoenix recruiters in Cleveland had a
quota of five students a month, according to a former employee.)
Legal Settlement
Thompson, who left Phoenix in January, acknowledges that his bosses didn't endorse his
efforts to recruit the homeless.
Apollo Group agreed last December to pay $78.5 million to settle a federal lawsuit in
California alleging that compensation for Phoenix recruiters violated restrictions on
incentive pay. The company, which admitted no wrongdoing, says it's changing its compensation
model.
While Thompson says he was "welcomed with open arms at the shelters, some staff members
were wary. "The question in my mind about Phoenix was, ~ w h y are they doing this?' says Bruce
Shagovac, a counselor at Y Haven . "There's got to be some payoff for them.
One homeless woman whom Thompson steered to Phoenix was Marisol Lugo. Lugo ran away from
her Chicago home at age 12, became a heroin addict, and lived on the streets for 22 years,
eating out of restaurant trash bins and sleeping in parks and abandoned cars. After detox,
she moved in 2008 to Transitional Housing, obtained a high school equivalency degree, and got
to know Thompson. "He gave me wonderful words of encouragement,
says Lugo.
With federal grants and loans covering the $10,000-plus annual tuition, she began
pursuing a two-year business degree online at Phoenix last August. She soon ran into academic
difficulties, failing a course in critical thinking.
Retaining Information
"Sometimes, having used so much drugs, I have trouble retaining information, says Lugo,
who now has her own apartment and a maintenance job at the shelter. According to Phoenix, she
left the school in November. She says she is still registered and there is a payment dispute.
Phoenix's forays into shelters were noted by a new Cleveland rival. In 2008, investors
bought nonprofit Myers University, which was under court receivership, and renamed it
120
Chancellor. A year later Welch acquired a stake in it; the university named its new masterJs
degree program in business administration after himJ and Welch helped develop the curriculum.
At a faculty function last AugustJ Darius NavranJ dean of ChancellorJs School of
Professional StudiesJ sought out Jeffrey Perkins Jr.J an adjunct professor of public
administrationJ and asked how Chancellor could boost its enrollment of about 400.
Nontraditional Students
"If we donJt tap into that populationJ Phoenix willJ
Perkins says he told NavranJ meaning the homeless. The dean agreed.
ChancellorJs small classes and low student-to-faculty ratio are suited to nontraditional
students such as the homelessJ Perkins says. He e-mailed managers of Cleveland social service
agencies in SeptemberJ inviting them to a lunch at Chancellor to "discuss our new plans to
recruit the economically disadvantaged and at - risk groups. Many of them are targeted for on-
site recruitment at local transitional housingJ halfway housesJ and other human service
facilities.
Sixteen human services managers showed up for the lunch.
Two days laterJ in a memo to NavranJ Perkins predicted that the program would produce ((a
minimum of at least 10 enrollees by spring term.
cHeavy-HandedJ
In the ensuing weeksJ Perkins and other Chancellor officials gave presentations at a
dozen social service programs.
Their pitch was "very heavy-handedJ says Phillip HinesJ housing coordinator for the
Community WomenJs Shelter. ((It was beating the drumJ eGo to Chancellor. This is what we
offer.
Financial aidJ financial aidJ financial aid.J
AfterwardJ Hines saysJ Chancellor hounded him with phone calls and e-mails to ((get these
women rolling. ChancellorJs initiative reaped only one or two students and was discontinued.
It ((had all the best intentionsJ CEO Bob Barker said in an e- mailJ abut the time and effort
generated very little interest.
In one viewJ the rise of for-profit colleges represents a laudable merger of public
interest and the private sector. With public colleges beset by budget cutsJ for-profit
colleges offer an opportunity for people who are down and out to get ahead.
Students with no assets or collateral can tap federal grants and loans on the theory that
degrees will lead to well-paying jobs that enable borrowers to repay.
Tuition Hikes
The trouble is the cost. Education companies charge high prices that require students to
take on debt. Chancellor charges $9J750 a year -- about four times the $2J400 tab at nearby
Cuyahoga Community College. Poor students can pay CuyahogaJs tuition with federal grants and
donJt have to take out loans .
Student advisers from Cuyahoga make the rounds at Cleveland area sheltersJ helping the
homeless choose colleges and fill out applications.
And for-profit tuitions are rising fast. Drake hiked its tuition from $4J000 in 2007-
2008 to $15J700 this yearJ which Fadel attributes to new equipment and additional staff.
Borrowers who earned bachelorJs degrees from for-profit colleges in 2007-2008 had a median
debt of $32J653J well above the
$22J375 and $17J700 for graduates of four -year private nonprofit and public collegesJ
respectively.
Such burdens can be difficult for homeless people who are more likely to suffer from
mental illness and substance abuse than the general population. Bad credit doesnJt go away
easily.
121
In the Cleveland shelters> you can still find people with trade school debts from 20 years
ago. Those who don>t repay their student loans may forfeit their chances for public housing
and are also ineligible for federal financial aid to return to college.
Default Consequences
((If the homeless have a bad student loan> they can>t find a place to live> they can>t go
back to school> and in this economy there>s not a lot of work>" said Ardretta Jones> a case
manager at Tacoma Rescue Mission in Tacoma> Washington> ((That leaves a person with no
options."
Because they don>t have to repay their educational loans until they leave school> some
homeless students spend beyond their means. Kim Rose> a recovering crack cocaine addict and
ex- offender in Raleigh> North Carolina> began pursuing an online bachelor>s degree in
business last November at Capella Education Co.>s Capella University> based in Minneapolis.
At the time she was staying in a drug-free program with Internet access.
Big Splurge
Rose> 38> receives almost $4>000 each academic quarter in federal grants and loans for
tuition and living expenses. She splurged last Christmas> spending $700 of her financial aid
on presents for her seven-year-old son> who has lived with his grandmother. I got him
everything he wanted>'' Rose said in a telephone interview. ((Games> toys. He> s a guitar freak,
I got him a guitar. To make up for me not being there."
In February> Rose moved into a shelter where the only computer was broken. As a result>
she has struggled to keep up> dropping an English composition course. Rose isn>t typical of
Capella students> most of whom are midcareer professionals seeking graduate degrees> says
university spokeswoman Irene
Silber: ((We would not intentionally recruit someone who is in a life crisis> much less one as
significant as homelessness."
Given the troubled pasts of some homeless students> even a college education hardly
assures a well-paying job. Brenda Torchia> another recovering crack cocaine addict in Raleigh
who has served several prison terms for drug offenses> was in a shelter and looking online
for work when she saw an ad that asked if she wanted to further her education. She answered
yes and was directed to the website of a for-profit school called ECPI College of Technology
based in Virginia Beach> Virginia.
Placement Test
Torchia applied> passed a placement test> and started ECPI>s medical administration
program on March 1. The 40-year - old mother of four is borrowing about half of the $23,000
tab from the federal government, with grants and scholarships paying the rest. ECPI officials
are aware of her background and guarantee me a job in the field," Torchia says. ((My school
is very, very supportive of me. I guess God opened up their hearts to receive me for whom I
am."
Torchia's history would be a red flag for health-care employers because hospitals and
clinics have drugs on site, says Susan Eget, communications director of the American Academy
of Medical Administrators. While ECPI doesn't promise jobs, President Mark Dreyfus says,
medical administration offers Torchia's best chance because not all employers check
backgrounds and she could process records in a back office where drugs aren't accessible.
In the end, Benson Rollins didn't succumb to Phoenix's hard sell. He is taking a class
for his high school equivalency degree and hopes to study law enforcement in college. For
now, he would like a job so he can pay child support for his 1-year- old daughter, whom he
rarely sees. The Phoenix recruiters, he says, failed to mention a critical point: He would
have to take out a government loan at 5 percent to 7 percent interest to pay the $10,000-plus
annual tuition. ((I'm in a homeless shelter, and money is hard to come by," Rollins says.
((It's not worth going to school to end up in debt."
122
For Related News and Information:
Stories about education: NI EDU <GO>
U.S. colleges and universities: USUV <GO> Education organizations: EDOR <GO> Stories about
the Department of Education:
NI EDN <GO>
- -With assistance from Marybeth Sandell in Stockholm and Rodney Yap in Los Angeles. Editors:
Robin D. S c h a t z ~ Hugo Lindgren
To contact the reporter on this story:
Daniel Golden in Boston at +1-617-210-4610 or dlgolden@bloomberg.net.
To contact the editor responsible for this story:
Jonathan Kaufman at +1 -617-210-4638 or Jkaufman17@bloomberg.net.
123
From:
Sent:
To:
Subject:
Hi BobJ
DAN GOLDEN, BLOOMBERG/ NEWSROOM: [dlgolden@bloomberg.net]
Friday, March 05, 2010 9:04AM
Shireman, Bob
(BN) Your Taxes Support For-Profits as They Buy Colleges
How are you? Here's my piece on for - profit acquisitions of struggling regionally
accredited colleges. Hope you like itJ and thanks for the help.
YoursJ
Dan
+------------------------------------------------------------------------------+
Your Taxes Support For-Profits as They Buy Colleges (Update3)
2010-03-04 22:02:10.950 GMT
(Updates with closing share price for ITT Educational in the 10th paragraph.)
By Daniel Golden
March 4 (Bloomberg) -- ITT Educational Services Inc. paid
$20.8 million for debt-ridden Daniel Webster College in June. In returnJ the company obtained
an academic credential that may generate a taxpayer -funded bonanza worth as much as $1
billion.
ITT EducationalJ the U.S.Js third-biggest higher education company with a market value
of $3.8 billionJ may increase it by
26 percentJ or $1 billionJ within five years because of the purchase of 1J200-student Daniel
Webster in NashuaJ New HampshireJ according to Michael CliffordJ an investor in Del MarJ
CaliforniaJ who has participated in the acquisitions of four nonprofit colleges. At least 75
percent of new revenue would come from access to the more than $100 billion a year in
financial aid the u.s. hands out to college studentsJ he said.
Key to tapping that money is WebsterJs regional accreditationJ which is the same gold
standard of academic quality enjoyed by Harvard University and helps students transfer course
credits from one college to another. Daniel WebsterJs accreditation was its "most attractive"
feature to ITT EducationalJ said Michael GoldsteinJ an attorney at Dow LohnesJ a Washington
law firm that has represented the company.
"Companies are buying accreditationJ" said Kevin KinserJ an associate professor at the
State University of New York at AlbanyJ who studies for-profit higher education. "You can get
accreditation a lot of waysJ but all of the others take time.
They donJt have time. They want to boost enrollment 100 percent in two years."
Exploiting Loopholes
The nationJs for -profit higher education companies have tripled enrollment to 1.4
million students and revenue to $26 billion in the past decadeJ in part through the
recruitment of low-income students and active-duty military. Now theyJre taking a new tack in
their quest to expand. By exploiting loopholes in government regulation and an accreditation
system that wasnJt designed to evaluate for-profit takeoversJ theyJre acquiring struggling
nonprofit and religious colleges -- and their coveted accreditation. TypicallyJ the goal is
to transform the schools into online behemoths at taxpayer expense.
124
For- profit education companies, including ITT Educational Services, based in Carmel,
Indiana, and Laureate Education Inc., in Baltimore, have purchased at least 16 nonprofit
colleges with regional accreditation since 2004, according to corporate announcements and
filings with the U.S. Securities and Exchange Commission. Jack Welch, the former chief
executive of General Electric Co., and Michael Milken, the U.S. junk bond pioneer, have
invested in for-profit companies that bought or formed partnerships with nonprofit,
regionally accredited schools.
Academic Status
By acqu1r1ng regional accreditation, trade and online colleges gain a credential usually
associated with the traditional academic culture of liberal arts, faculty scholarship and
selective admissions. Normally the accreditation process takes about five years and requires
evaluations by outside professors. The regional bodies examine financial stability, academic
rigor and commitment to "teaching, learning, service and scholarship, according to the Web
site of the Commission on Institutions of Higher Education, which accredits colleges in New
England.
Enrollment at Grand Canyon University, a Christian college in Phoenix bought by
investors in 2004, has soared to 37,700, as of Dec. 31, up from 1,500, said Brian Mueller,
chief executive of Grand Canyon Education Inc. Ninety-two percent of students now take
classes online, according to the company,s most recent 10-K. Bridgepoint Education Inc.,
based in San Diego, has boosted enrollment of two regionally accredited colleges it bought in
2005 and 2007 to 53,688 students as of Dec. 31, up from 400 combined, according to a company
filing. Ninety-nine percent of those students take courses exclusively online.
Growth Potential
Daniel Webster "could parallel Grand Canyon or Bridgepoint,s growth curve, said
Clifford, who was part of the investor group that purchased Grand Canyon.
ITT Educational rose two cents, or less than one percent, to $109.80 at 4:15 p.m. today
in Nasdaq stock market trading.
The company rose 2.5 percent in the 12 months ended today.
ITT Educational declined to comment for this story. The company plans to open more
Daniel Webster campuses and also expand online offerings, Kevin Modany, ITT Educational,s
chairman and chief executive officer, said in a Feb. 22 presentation to analysts. The company
expects to introduce programs including accounting, education and health sciences, he said.
Daniel Webster will attract more students "a little on the higher end in income whose
tuition would be paid by private employers rather than federal financial aid, Modany said.
New Regulations
The U.S. Department of Education, which doled out $129 billion in federal financial aid
to students at accredited postsecondary schools in the year ended Sept. 30, is examining
whether these kinds of acquisitions circumvent a federal law that new for-profit colleges
can,t qualify for assistance for two years, Deputy Undersecretary of Education Robert
Shireman said in a telephone interview.
Under federal regulations taking effect July 1, accrediting bodies may also have to
notify the secretary of education if enrollment at a college with online courses increases
more than 50 percent in one year.
"It,s an area that we are watching closely, Shireman said. "It certainly has been a
challenge both for accreditors and the Department of Education to keep up with the new
creative arrangements that have been developing.
Immediate Benefits
Buying accreditation lets the new owners benefit immediately from federal student aid,
which provides more than 80 percent of revenue for some for-profit colleges, instead of
125
having to wait at least two years. Traditional colleges are also more inclined to offer
transfer credits for courses taken at regionally approved institutions, making it easier to
attract students nationwide.
The six nonprofit regional accrediting bodies, which rely on academic volunteers, bestow
the valuable credential with scant scrutiny of the buyers' backgrounds, Barmak Nassirian,
associate executive director of the American Association of Collegiate Registrars &
Admissions Officers in Washington, said in a telephone interview.
While accrediting bodies treat these purchases as changes of ownership, the
acquisitions, in reality, create new colleges that should be required to earn certification
from scratch, Kinser said.
Maintain Mission
For accreditation to continue once the college is sold, the buyer must promise not to
change its mission, Steven Crow, former executive director of the Chicago- based Higher
Learning Commission, the largest regional body, said in a telephone interview. Once
accreditation is maintained, the acquirer seeks permission, which is usually granted, to
start branch campuses and online programs, Crow said.
vou knew by month six they would come back to you with a new game plan," said Crow, now
a consultant to publicly traded Corinthian Colleges Inc., based in Santa Ana, California. It
acquired regionally accredited San Francisco-based Heald College on Jan. 4.
Obama administration officials have recently questioned whether the accreditation system
is effective in protecting academic standards. Accrediting decisions lack transparency and
take too long, Undersecretary of Education Martha Kanter said in a Jan. 26 speech in
Washington to the annual meeting of the Council for Higher Education Accreditation.
Considering Termination
The inspector general of the Education Department in December urged the agency to
consider terminating recognition of the Higher Learning Commission, which has approved more
for- profit colleges than its counterparts around the country.
The inspector general criticized the commission's decision to accredit Career Education
Corp.'s online American Intercontinental University, citing concerns about how much time
students spent in class. The approval was appropriate, the commission and Hoffman Estates,
Illinois- based Career Education said.
More vigilance by the Education Department and accrediting groups is likely to slow
enrollment growth and the share prices of higher education companies that rely on
acquisitions, said Clifford. While publicly held postsecondary education companies rose 29.9
percent in the 12 months ended March 3, they lagged behind the S&P 500, which increased 60.7
percent over the same period, said Jeffrey Silber, an analyst for BMO Capital Markets in New
York. The shortfall reflected investors' fears of tighter federal regulation of for-profit
colleges, Silber said.
Accreditation's Worth
Regional accreditation is worth $10 million to a for -profit acquirer, Clifford said in a
telephone interview. That's how much it would cost to start a regionally accredited college,
a process that can take 10 years and has only a 50- 50 chance of success, he said. On top of
the $10 million, buyers typically pay $23,000 to $50,000 per enrolled student, making the
purchase of Daniel Webster a bargain, Clifford said.
Clifford and his fellow investors popularized the strategy of acquiring nonprofit
colleges with regional accreditation by purchasing Grand Canyon University in 2004 and
building online enrollment.
Grand Canyon is the same institution," Mueller said in an e-mail. "It was important to
the new leadership group that the mission of providing a high-quality Christian-based
education remain intact."
Grand Canyon, which went public in November 2008, derived
126
83 percent of its revenue from federal financial aid in 2009, according to a company filing.
Bridgepoint, Ashford
Bridgepoint Education bought the regionally accredited Franciscan University of the
Prairies in 2005 and Colorado School of Professional Psychology in 2007. It renamed them
Ashford University and University of the Rockies, respectively, and refocused them online.
Ashford gained 86 percent of its revenue from federal student aid in 2009 and University of
the Rockies got 85 percent, according to a 10- K filing by Bridgepoint, which went public in
April.
"There are several meaningful continuities from the colleges before they were acquired,
including campus athletic and social events, Shari Rodriguez, a Bridgepoint spokeswoman,
wrote in an e-mail.
Clifford participated in the 2008 purchase of Myers University in Cleveland, which was
renamed Chancellor University. Chancellor attracted Welch as an investor last year and named
its new online management institute after him. Welch collaborated with faculty in developing
curricula for a master's program in business administration, Clifford said.
New'
"We chose to work with Chancellor University because it gave us the flexibility to start
something new, Welch said through a spokeswoman, Betsy Linaberger. "As a for - profit venture,
we have the resources to invest in the student experience and the very best faculty, and we
want to provide a high quality business education.
Knowledge Universe Learning Group, chaired by Milken, entered into a partnership in 2007
with regionally accredited Sierra Nevada College in Incline Village, Nevada, agreeing to
provide as much as $15 million in return for an opportunity to share in online revenue,
Geoffrey Moore, a senior adviser to Milken, said in an e-mail. The company is a unit of Santa
Monica, California-based Knowledge Universe Inc., of which Milken is co-founder and chairman.
Knowledge Universe Learning Group has three seats on the nonprofit college's nine-member
board, Moore said.
Character'
"This partnership preserved the existing character of Sierra Nevada College, he said.
"That was important to us and the college.
A 2006 regulatory change fostered online growth and made takeovers more attractive,
said Silber, the BMO analyst. That year, Congress eliminated a rule prohibiting colleges that
offered more than half of their courses online from receiving federal financial aid.
ITT Educational Services Inc. didn't buy Daniel Webster just for its 52- acre red- brick
campus and science and technology programs including training pilots and air traffic
controllers.
"Regional accreditation was very important to the company, said Goldstein, co- leader of
the higher education practice at Dow Lohnes. "I don't think there's any question that was the
most attractive element.
Of the $20.8 million purchase price, $20.6 million went to pay off the college's debt,
according to an ITT Educational 10-Q filing.
Making Changes
ITT Educational Services, which was spun off from ITT Corp.
in the 1990s, wasted no time making changes at Daniel Webster.
It renovated a main building and razed a dilapidated dormitory.
It also dismissed one fourth of the staff, fired President Robert Myers, and has been accused
by faculty members of misleading the New England accreditor, the Commission on Institutions
of Higher Education, based in Bedford, Massachusetts.
127
"ITT didn>t really have much interest in anything other than having acquired a
regionally accredited institution," said Myers, now president of the New England Culinary
Institute in Montpelier, Vermont. "If I had it to do all over again, I wouldn>t have gone
anywhere near ITT. The fundamental nature of the college has changed."
"we>re making fantastic progress with the cultural assimilation" of Daniel Webster,
Modany said in a Jan. 21 call with analysts. "Things are going really well there, great group
of staff and faculty, and everybody is getting on board."
Different>
Barbara Brittingham, director of the Commission on Institutions of Higher Education,
declined to comment on its approval of the Daniel Webster sale.
In general, "when these institutions are bought, they are not at the moment successful
in the financial sense or they wouldn>t be for sale," Brittingham said. "There>s an
understanding that whoever buys them is going to want to do something different."
Accreditation is higher education>s way of regulating itself. The nonprofit associations
set standards on financial stability, governance, faculty and academic programs and use
volunteers from college presidents to professors to assess quality. It is a peer review
system: a marketing professor is more likely than a poet to evaluate a business school.
For more than a century, regional organizations have evaluated most public and private
universities. Starting in the 1950s, leaders of for-profit colleges, which were then
ineligible for regional approval, established seven national accrediting bodies for career
education and training. The regions dropped their for-profit ban in the 1960s.
Cachet, Credits
Apollo Group Inc.>s University of Phoenix, whose enrollment of 455,600 makes it the
nation>s second-largest university behind the State University of New York system, is
accredited by a regional body, the Higher Learning Commission. Students enrolled at both
regionally and nationally accredited colleges can receive federal grants and loans.
Regional accreditation is important to for-profit colleges because students are
attracted to its cachet and can transfer course credits more easily. Only 14 percent of
nonprofit universities accept credits transferred from nationally certified schools,
according to a 2006 study by the University Continuing Education Association, in Washington.
The six regional associations scrutinize takeovers of nonprofit colleges in advance, and
then follow up afterward, accrediting officials said in telephone interviews. They could cite
few, if any, cases in which they refused to continue accreditation, they said.
Heald Purchase
Corinthian Colleges> past difficulties with California state regulators didn>t matter to
accreditors when it purchased Heald Capital LLC, parent company of Heald College, for $395
million. Corinthian, the country>s seventh-largest higher education company by market value,
has more than 100 campuses in North America, and had 106,052 students as of Dec. 31,
including Heald, said Anna Marie Dunlap, a Corinthian spokeswoman.
Corinthian paid a $6.5 million settlement in July 2007 to the California attorney
general>s office, over allegedly misrepresenting graduates> job placement rates and salaries.
It also agreed to cease enrolling students in 11 programs at nine campuses. The Santa Ana,
California-based Corinthian said in a 10-K filing that it didn>t admit wrongdoing.
"We strongly disagreed with the Attorney General>s conclusions, but we are pleased to
have settled the matter,"
Dunlap said in an e-mail.
Exclusively Online
Regionally accredited Heald College had 11 campuses with 12,900 students, primarily in
two-year health-care and business programs, as of Dec. 31. The college was nonprofit before
128
its purchase in 2ee7 by Palm Ventures LLC, a Greenwich, Connecticut, investment company.
Heald expects to start enrolling exclusively online students this year, Corinthian Chief
Executive Peter Waller wrote in an e-mail.
The Accrediting Commission for Community & Junior Colleges in Novato, California, which
certifies two-year institutions in California and Hawaii, approved the change in Heald's
ownership.
((We judge the college we accredit," said Barbara Beno, president of the commission. ((It
would be unfair to say, cHeald, you've been bought by a parent corporation that doesn't have
as fine a track record as you do. Therefore, we'll condemn you,'" she said in a telephone
interview.
Heald will ((continue to meet ACCJe s accreditation standards and eligibility
requirements," Waller said.
The scrutiny ((doesn't remotely satisfy the sloppiest of due-diligence requirements,"
said Nassirian of the American Association of Collegiate Registrars & Admissions Officers.
((There is no methodical review of who has bought the college.
If the Cosa Nostra applied, you would think you'd take a look."
csame AnimaP
The nation's biggest regional accreditor is starting to take a closer look. The Higher
Learning Commission, which certifies more than 1,eee colleges from Arkansas to Wisconsin,
stiffened its rules on ownership changes last year.
Buyers must wait from one to four years to reapply for accreditation if the college
won't stay ((the same animal,''
President Sylvia Manning said in a telephone interview. The commission now charges $1e,eee
for ownership changes to pay for more extensive research. New owners must be approved by its
board, rather than at the staff level, Manning said.
The commission applied its newfound rigor to Mayes Education Inc.'s purchase of Waldorf
College in Forest City, Iowa, putting the brakes on online expansion. A subsidiary of online
privately held Columbia Southern University in Orange Beach, Alabama, Mayes agreed in May to
buy the assets of Waldorf, an Evangelical Lutheran college with see students, for an
undisclosed sum. The deal closed on Jan. 8.
Approval Condition
As a condition of approval, the commission stipulated that Waldorf can't offer online-
only degrees at least until 2e11- 2e12. Mayes Education plans to boost Waldorf's enrollment
to 2,3ee students in three years through programs combining online classes with face -to-face
instruction at temporary sites around the country, Jessica Brown, a spokeswoman for Columbia
Southern, said in a telephone interview.
The sale ((barely made it through" the commission, former Waldorf president Richard
Hanson said in a telephone interview.
((Columbia Southern wanted to ramp up the online program quickly. The commissioners said,
cif we maintain accreditation, Waldorf has to remain the college we know.'"
Columbia Southern wasn't the only for - profit that expressed interest in buying Waldorf,
Hanson said. Another company that lacked regional accreditation also contacted him: ITT
Educational Services.
ITT Educational, runs 12e nationally accredited technical institutes with 8e,eee
students, most of whom pursue associate degrees.
Graduation Rate
The cost of attending an ITT Technical Institute, including tuition, fees and off- campus
room and board, was $26,775 in 2ee8-e9, according to the National Center for Education
Statistics . Of students who entered ITT's two-year schools in 2ee4, 29 percent graduated. ITT
derived 7e percent of its 2ee9 revenue from federal financial aid, according to a company
filing.
129
ITT Educational is in the preliminary stages of seeking regional accreditation for its
technical institutes through the Higher Learning Commission, which sent a team to visit the
company in late 2009, a commission spokeswoman, Susan Van Kollenburg, said in an e-mail. The
commission hasn't acted on this evaluation, she said.
Daniel Webster is ITT Educational's first regionally accredited campus. Founded in 1965
as the New England Aeronautical Institute, the college is tucked beside Nashua's municipal
airport, and keeps its fleet of Pipers and Cessnas there. The campus includes an aviation
center, a library, an administration building, classrooms, dormitories, and a student center
called the Common Thread.
Reputation'
Over the years, the college expanded from flight instruction into training air traffic
controllers and airline managers, as well as teaching computer science, engineering, and
business.
It has "a longstanding good reputation," said Gary Kiteley, executive director of the
Aviation Accreditation Board International in Auburn, Alabama, which licenses the college's
aviation programs.
Financially, Daniel Webster never enjoyed a cushion. With an endowment that peaked at
about $3 million in 2008, it relied on tuition revenue, Myers said. The airline industry's
decline after 9/11 and the collapse of Internet stocks hurt enrollment in aviation and
computer science, said former provost Michael Fishbein, who said he suffered a heart attack
from the stress of keeping the college alive.
Red Ink
Just as trustees reached consensus on a strategic plan in 2008, fuel costs skyrocketed,
and "we were running red ink again," Rodney Conard, the former chairman of the board, said in
a telephone interview.
The Commission on Institutions of Higher Education and the U.S. Department of Education
expressed concerns that Daniel Webster didn't meet their financial standards, placing its
accreditation and eligibility for federal aid in jeopardy, according to a filing last April
23, by the college in a New Hampshire court.
ITT Educational contacted Myers in December 2008, he said.
Modany visited Daniel Webster the next month, and the parties reached agreement in April. The
acquisition would enable the company to target a more upscale audience, Modany told Wall
Street analysts on April 23.
While ITT Educational's institutes drew unskilled "career changers," the regionally
accredited college would appeal to "career advancers" seeking to enhance their capabilities,
Modany said.
The Commission on Institutions of Higher Education approved the sale that same month.
Interest'
"It's in the public interest to have these small institutions continue to function,"
said Bruce Mallory, a commission member and education professor at the University of New
Hampshire in Durham. "If a proprietary school can come in, continue to provide the same level
of education and assure viability, that's all for the better."
Modany promised to leave Daniel Webster's administrators in charge because they were
experts in running a four -year residential college, Myers and Fishbein said. At a campus
event introducing the ITT Educational chief executive to the college community, Modany said
the company was growing and there would be ample job opportunities, said Myers.
Growing Suspicions
As Myers negotiated the sale, he came to suspect that the company wasn't being
forthright about its intentions, he said.
130
When he and ConardJ who chaired the collegeJs board of trusteesJ worked out at a YMCA a week
before the June closingJ they discussed canceling the dealJ Myers said. Only after consulting
colleagues did they decide to go through with itJ he said.
"We had lots of conversations when it was on the tableJ"
said ConardJ a management consultant. "Should we take it? We didnJt have to take it. There
was a point where we realizedJ they were going to be more businesslike about it. It didnJt
feel as comfy as we were hoping."
Going through with the sale was the right decisionJ Conard said.
ITT is in this for the long haulJ and IJm very comfortable with where they plan to take
Daniel WebsterJ"
Conard said.
Another former trusteeJ Cathy TrowerJ went along with the sale as a last resort to save
the college and honor commitments to studentsJ she said.
A for -profit should not be able to buy accreditationJ"
TrowerJ a research director at Harvard UniversityJs Graduate School of Education in
CambridgeJ MassachusettsJ said in a telephone interview. "To meJ thatJs almost like buying a
degree and not actually earning it."
Duplicating Functions
In JulyJ ITT Educational dismissed more than 20 Daniel Webster employeesJ Myers said. It
believed they were duplicating functions that the companyJs corporate offices in Indiana
could provideJ two people familiar with the companyJs thinking said.
ITT Educational also replaced ConardJ Trower and the other trustees.
Appointees to the collegeJs new board included Charles CookJ former director of the
Commission on Institutions of Higher EducationJ which accredits Daniel Webster. Cook soon
resigned because of a potential conflict of interest with his position as a director of
CorinthianJs Heald CollegeJ he said in a telephone interview.
I was never substantively involved with Daniel WebsterJ"
Cook said.
Questioning Changes
At the time of the firingsJ Myers was circulating a draft report questioning whether
some of ITT EducationalJs changes were in accord with the standards of the accreditation
commissionJ which call for a faculty role in curriculum and governanceJ he said.
"ITT came in and saidJ ewe only want faculty to teachJJ
Myers said. weJll develop curricula in CarmelJ IndianaJ and give them to you."
On August SJ ITT Educational ousted himJ Myers said. Nadine DowlingJ director of the
WoburnJ MassachusettsJ campus of ITT TechJ became interim president.
In an unusual move in credential-conscious academiaJ ITT Educational also named an
assistant professor without an advanced degree to a deanship. When Triant FlourisJ who has a
doctorate and has written four booksJ resigned as dean of aviation sciencesJ he was replaced
by David PriceJ who only has a bachelorJs degree.
Price is weeks away from completing a masterJs degree at Daniel WebsterJ and will enroll
in a doctoral program in the coming academic year at President DowlingJs requestJ he said in
a telephone interview. "ITT has continued the strong emphasis weJve always had on getting a
higher degreeJ" he said.
Fewer Worries
The biggest difference at Daniel Webster under new ownership is "worrying lessJ Price
said.
There are a lot of schools that would just go underJ students would be out of a schoolJ
faculty and staff would be out of a job that they love passionately. IJm allowed to stay in
the position IJm in because of ITT."
131
In NovemberJ faculty members told a team from the New England commission visiting the
campus that ITT Educational had rewritten a college self- study report prepared by professors
and staff for the accrediting group. Faculty members complained that the companyJs rev1s1ons
glossed over inadequacies in such areas as governanceJ according to two people who attended
the session.
When asked about the allegations concerning the self-study reportJ Richard SchneiderJ
president of Norwich University in NorthfieldJ VermontJ who chaired the teamJ said that in
his experience colleges donJt try to deceive accrediting bodies.
Facebook Group
About 450 people have joined a Facebook group entitledJ ui went to Daniel Webster before
it sold outJ" including Chad Los SchumacherJ 20. After his sophomore year at Daniel WebsterJ
where he majored in homeland security and joined the paintball clubJ Los Schumacher
transferred for the current academic year to Saint Leo University in Saint LeoJ Florida.
((It was a very hard decision to come toJ but I knew I could not stay thereJ" Los
Schumacher said.
Los Schumacher was bothered by an ITT Educational policy that students receiving
financial assistance through work- study programs sign an agreement that the company owned
their intellectual outputJ he said.
((If I created the next Facebook or TwitterJ it would be theirsJ" Schumacher said.
Matthew McinnisJ a flight operations majorJ stayed at Daniel Webster.
((A lot of big names in aviation have come through here and taught here," the senior
from BeverlyJ Massachusetts, said as he headed to the aviation center on Jan. 27. ((Looking in
the long term, the ITT buyout should add value. Hopefully, it will attract better professors
and more students."
Personnel Moves
The personnel moves took New Hampshire regulators aback, the officials said.
ITT Educational ((did give me the sense they would continue as before," said Kathryn
Dodge, executive director of the New Hampshire Postsecondary Education Commission, in
Concord, which approved the sale in May. we did not expect to see the turnover in staffing
happen when it happened."
As a result of the Webster case, Dodge said, she is proposing to require colleges in
ownership transition to outline plans for faculty and staff contracts and internal
governance.
uitJs a cultural issueJ" Dodge said. ((Unless weJre extremely specific in our requests,
for-profits arenJt as forthcoming as nonprofits."
For Related News and Information Stories about education: {NI EDU <GO>} U. S. colleges and
universities: {USUV <GO>} Education
organizations: {EDOR <GO>} Stories about the Department of
Education: {NI EDN <GO>}
--With assistance from Marybeth Sandell in Stockholm. Editors:
Robin D. Schatz, Jeffrey Tannenbaum
To contact the reporter on this story:
Daniel Golden in Boston at +1 - 617- 210-4610 or dlgolden@bloomberg.net
To contact the editor responsible for this story:
Jonathan Kaufman at +1 -617-210-4638 or jkaufman17@bloomberg.net.
132
From:
Sent:
To:
Subject:
Hi BobJ
DAN GOLDEN, BLOOMBERG/ NEWSROOM: [dlgolden@bloomberg.net]
Tuesday, December 15, 2009 8:55AM
Shireman, Bob
(BN) Soldier Can't Recall His Course Lessons at For-Profit
How are you? Attached is my opus on for - profit colleges gaining market share in military
educationJ which finally came out today.
I hope you'll get a chance to take a look. In particularJ there's a section about how the
University of Phoenix is seeking more military students to stay below the 90% threshold in
the 90-10 law. Even though it's federal moneyJ Defense Department tuition assistance for
military students counts toward the 10%J not the 90%.
It might make a follow-up news story if decision makers like yourself have any concerns
about what might strike some as a loophole in the 90-10 law. Please do let me know if you'd
like to chat about this.
YoursJ
Dan Golden
+------------------------------------------------------------------------------+
Soldier CanJt Recall His Course Lessons at For- Profit College
2009-12-15 05:01:00.14 GMT
By Daniel Gol den
Dec. 15 (Bloomberg) -- Marine Corps Corporal James Long knows heJs enrolled at Ashford
UniversityJ one of at least a dozen for-profit colleges making money off active-duty military
with subsidies from American taxpayers. He just canJt remember what course heJs taking.
The 22-year -old from DaltonJ GeorgiaJ suffered a brain injury that impaired his ability
to concentrate when artillery shells hit his Humvee in Iraq in 2006J he said. Long signed up
for the online collegeJ a unit of Bridgepoint Education Inc.J after its recruiter gave a
sales pitch this year at a barracks for wounded Marines at Camp Lejeune in North Carolina.
Under base rul esJ the barracks are off-limits to college recruitersJ said Robert SongerJ
director of lifelong learning at Lejeune.
For-profit online colleges are taking over higher education of the U.S. militaryJ lured
by a Defense Department pledge of free schooling up to $4J500 a year for active members of
the armed servicesJ costing taxpayers more than $3 billion since 2000. The schools account
for 29 percent of college enrollments and 40 percent of the half-billion-dollar annual tab in
federal tuition assistance for active-duty studentsJ displacing public and private nonprofit
collegesJ according to Defense Department and military data.
The shift is leading to educational shortcuts and over- zealous marketingJ said Greg von
LehmenJ chief academic officer of the University of Maryland University College in AdelphiJ
the adult-education branch of the state system and one of the earliest and biggest providers
of military education.
FasterJ Easier
"In these school sJ the rul e is faster and easierJ von Lehmen said. "TheyJre
characterized by increasingly compressed course lengths and low academic expectations. One
has to ask : Is the Department of Defense getting what it is seeking?
133
Some online schools offer free laptops or fast degrees. At Apollo Group Inc.Js
University of PhoenixJ the biggest for- profit collegeJ active-duty military personnel can
earn an associateJs degreeJ which typically takes two years of studyJ in five weeks.
Taxpayers picked up $474 million for college tuition for 400J000 active-duty personnel
in the year ended Sept. 30J 2008J more than triple the spending a decade earlierJ Defense
Department statistics show. Any college degree provides a boost toward military promotionJ
said James PappasJ vice president for outreach at the University of Oklahoma. Credentials
from onlineJ for-profit schools are less helpful in getting civilian jobsJ especially in a
tight labor marketJ Barmak NassirianJ associate executive director of the American
Association of Collegiate Registrars and Admissions Officers in WashingtonJ said in an e-
mail.
Disappointed Grads
((IJm afraid that the ease with which these outfits hand out diplomas is matched only by
the disappointment of their graduates when they find out how little their degrees are
actually worthJ Nassirian said.
Mike ShieldsJ a retired Marine Corps colonel and human resources director for U.S. field
operations at Schindler Elevator Corp.J rejects about 50 military candidates each year for
the companyJs management development program because their graduate degrees come from online
for-profitsJ he said in an interview. Schindler Elevator is the North American operating
entity of Schindler Holding AG in HergiswilJ SwitzerlandJ the worldJs second-largest elevator
maker.
we donJt even consider them/) Shields said. For the caliber of individuals and
credentials weJre looking forJ we need what we feel is a more broadened and in-depth
educational experience. He does hire service members with online degrees for jobs on non-
leadership tracksJ he said.
Several online for-profit schools have become a concern on military bases because of
practices that exploit soldiers and the federal subsidies they are promisedJ said Songer at
Camp Lejeune.
Marine cPreyJ
some of these schools prey on MarinesJ Songer said.
((Day and nightJ they call youJ they e-mail you. These servicemen get caught in that. Nobody
in their families ever went to college. They donJt know about college.
Most online for-profitsJ such as American Public Education Inc.Js American Military
UniversityJ ado a very good job taking care of studentsJ Songer said.
Executives at for-profit colleges said they pay more attention to customer service than
traditional schools doJ and their online format suits military students who move frequently.
rtJs about flexibility and optionsJ said Rick CooperJ vice president of military and
corporate programs at Columbia Southern University in Orange BeachJ Alabama. You can enroll
any day of the weekJ any week of the year.
Columbia Southern grants transfer credits to soldiers for courses in which they earned
grades as low as D. Grantham University in Kansas CityJ MissouriJ has handed out free laptop
computers and American Military in Charles TownJ West VirginiaJ gives free textbooks as
recruitment inducements.
Less Demanding
Online schools such as American Military University have relocated their headquarters to
obtain certification from regional boards with less demanding standardsJ according to
interviews with for-profit college officials and accrediting agencies. Or theyJre approved by
less established organizations, leaving students hard-pressed to transfer credits to other
colleges or find jobs at major corporations.
Holders of master's degrees in business administration from for-profits Phoenix and
American Intercontinental University earn less than graduates with the same degrees from
134
Oklahoma or MarylandJs University CollegeJ according to Payscale.comJ a provider of employee
compensation data.
Salary Comparisons
Recent MBA graduates from University College and Oklahoma have median annual incomes of
$78J600 and $68J400J respectivelyJ compared with $60J200 from Phoenix and $54J600 from
American IntercontinentalJ the data show. Recent bachelorJs graduates from University College
earn a higher median salary ($55J200) than their counterparts at Phoenix ($50J500) and
American Intercontinental ($43J100). OklahomaJ at $41J100J trails Maryland and the two for-
profit schools.
Travis DaunJ a 33-year-old former Navy lieutenant commander who trained as a nuclear
engineer on a submarineJ left the service in August after receiving an online MBA from
American IntercontinentalJ a unit of Career Education Corp.J based in Hoffman EstatesJ
Illinois.
"I was disappointed in the rigor and challenge of the coursesJ" Daun said in an
interviewJ adding that each course lasted five weeksJ with at most two hours a week of class
time.
"I donJt think I had a 4.0 effortJ yet I had a 4.0 grade-point average."
Daun is unemployed. His college roommateJ who also became a nuclear engineer in the Navy
and earned an MBA from the University of MarylandJs University CollegeJ did find workJ Daun
said. "His MBA from Maryland definitely helped him a lot more than my AIU degree is helping
meJ" he said.
HeadhunterJs Perspective
Daun is working with Lucas GroupJ an executive search firm that specializes in placing
former military personnel.
"Does his masterJs from American Intercontinental open a lot of doors for him? NoJ it
doesnJtJ'' said Lee CohenJ an IrvineJ California-based managing partner at Lucas.
American Intercontinental provides a high-quality education for adult studentsJ said
Jeff LeshayJ a spokesman for Career Education. Leshay said the company doesnJt track where
graduates find jobs.
While deployed in IraqJ Christopher Brotherton earned a bachelorJs degree in homeland
security from American Military in 2007. When the staff sergeant retired from the Army in
JuneJ his degreeJ which included courses in geography and historyJ helped him find a job
teaching social studies in a middle school in ArdmoreJ Oklahoma.
"The stateJ when they saw my transcript from AMUJ they had no problems with any of it,"
Brotherton, 42, said. "It was a respected school to them."
Brian KilgoreJs quest for a college degree was set back in 2007. Then a petty officer
first class in the NavyJ Kilgore needed two more courses to earn an associateJs degree from
Grantham when the online for-profit college eliminated the software engineering program he
was taking, he said in an interview. Kilgore switched to computer science and soon left
school, still four classes short of that degree. "I was upsetJ" said Kilgore, 38J who
recently retired from the military and works in aviation maintenance. rcGoshJ I was almost
there." The program was eliminated due to lack of interestJ Grantham said.
When service members do earn degrees from online for- profits, human resources
executives at Fortune 500 firms are often reluctant to hi re themJ said Cohen, citing three
where he has placed candidates. ((There are some firms that are heavily credential-orientedJ"
he said. ((McKinsey & Co. is one of them.
They might balk. Amazon might balk. Shell Oil is another one."
McKinseyJ Amazon.com and Shell declined to comment.
135
Career Disadvantage
Bradford chief executive of Techexpo Top Secret in New which runs job fairs
for defense contractors recruiting recent said a degree from an online for - profit
is a disadvantage. ((You have two people of the same one has a degree from a real
one has a degree from a going to favor the one from the live
Rand said. more more credible."
The Defense Department plans to subject online programs to review by the American
Council on Education in which already monitors face-to-face classes on military
defense officials said. The new online which the department began to
develop in have taken longer than expected and are a year away from being
Tommy deputy undersecretary of defense for military community and family said
in an e-mail.
Of the dozen colleges with the biggest active-duty five are for - profits that
conduct most or all of their courses online. Three -- American Military
and closely held Grantham -- charge $250 a or $750 a which allows
them to receive the maximum reimbursed by U.S. taxpayers without service members having to
pay any out-of-pocket tuition. Publicly funded community colleges offer classes on military
bases for as little as $50 a according to their Web sites.
American Public Education has risen 72 percent since the company went public in November
2007. It closed yesterday at
$34.41 in Nasdaq composite up 3 percent from the previous day. Apollo shares closed
at $62.06 in Nasdaq falling 19 percent this as of yesterday.
The expansion of online for - profit colleges into the military comes as the companies face
U.S. government inquiries into their tactics in recruiting and educating civilians. The Obama
administration is tightening scrutiny of from the content of their pitches to
prospective students to their increasing reliance on federal financial Robert
deputy undersecretary of the U.S. Education said in an interview.
SEC Probe
In the Securities and Exchange Enforcement Division has begun an
informal probe into how Apollo Group books revenue. Apollo intends to cooperate fully with
the the company said.
By expanding its military Phoenix has been able to enroll more civilian
students who are supported by grants and loans from the Education without
violating federal law that dictates how much revenue the school can receive from the
government. Phoenix derived 86 percent of its $3.77 billion in revenue in fiscal 2009 from
the Education according to its annual 10-K up f r om 48 percent in 2001 and
approaching the limit of 90 percent set by a 1992 law known as the 90/10 rule.
Tuition payments to for-profit schools by the military count toward the 90 percent
ceiling. One way that Phoenix plans to stay below the legal threshold is building its
military Gregory co- chief executive of which is based in
said in a June 29 conference call with investors.
Military Market
When the law was for - profits yet moved into the military so the
sponsors focused on Defense Department tuition Sarah
who helped draft the law as the specialist in federal student said in
an interview. The law was intended to ensure that for-profit colleges offered an education
good enough that some students were willing to pay for said now vice president
of the National Association of Independent Colleges and Universities in Washington.
136
((Counting Defense Department funding for servicemenJs education as part of the money
thatJs supposed to come out of consumersJ pockets violates the purpose of the original
legislationJ" Flanagan said.
Apollo spokeswoman Sara Jones said in an e-mail that Phoenix began serving military
students long before the advent of ((the misguided 90/10 rule."
Phoenix Recruitment
Phoenix ranks among the top five colleges serving military studentsJ including about 5J000
in the Army and 2J700 in the NavyJ according to the two services. While Phoenix offers
campus-based graduate programs in education and management at Air Force bases in the PacificJ
most of its active-duty students take classes onlineJ school officials said. Phoenix has 452
recruiters in its military divisionJ up from 91 in 2003J said Scott McLaurinJ its executive
enrollment counselor at Camp LejeuneJ the largest Marine Corps base on the East Coast.
Military enrollment at exclusively online for-profits is soaring. American Military has
36J772 active-duty studentsJ up from 632 in 2000J it said. It has the most Air Force and
Marine Corps students of any college. Closely held Columbia Southern has 9J582 service
membersJ up from 649 in 2002J it said. Closely held TUI in CypressJ CaliforniaJ has more than
doubled active- duty enrollment to 7J665 in the first quarter of 2009J from
3J661 in 2004J it said.
While six public and private non-profit colleges hold face- to-face classes on Camp
LejeuneJ none has the highest active- duty enrollment there. That distinction belongs to
American MilitaryJ with 1J623 studentsJ up from 11 in 1999. PhoenixJs enrollment there has
risen to 296 from 15 over the same period.
Slumping Enrollment
Active-duty enrollment at public and nonprofit schools has slumped. The University of
OklahomaJ once the leading provider of graduate degrees to service membersJ has lost half of
its military enrollment in a decadeJ said PappasJ the vice president for outreach.
aA decade from nowJ you may not find traditional national public and private universities
in military educationJ" Pappas said. aThatJs one of the real dangers."
Faculty members at online for-profit collegesJ usually part - timers with practical
experience in their fieldsJ have less control over curriculum than in conventional academiaJ
said Benjamin BolgerJ who has taught at the University of Phoenix and the College of William
& Mary in WilliamsburgJ Virginia.
Professors assign reading and writing and discussion topics prescribed by the school.
Students donJt have to log on at a specific time. At their convenienceJ they complete weekly
coursework and respond to classmates on discussion boards.
Trimming Requirements
While many colleges adopt what are known as ((military- friendly" practicesJ the online
for-profits go further than most . They accelerate course and degrees for service membersJ
trimming requirements and granting abundant transfer credits.
At PhoenixJ members of the armed forces can earn an associateJs degree by taking one
five-week online classJ ((Written Communication." They can make up for the other 19 courses
required for an associateJs degree with credits for classes taken elsewhereJ military
experience including basic trainingJ and passing grades on tests that gauge knowledge of a
subject area.
Civilians seeking the same degree must take at least six Phoenix courses and can use
credits from outside sources for no more than 14. TraditionallyJ two-year students must take
10 coursesJ or half of the required loadJ from the school that awards their degreesJ so it
can vouch for their trainingJ Nassirian said.
Fast Track
137
Only a handful of active-duty students choose Phoenix>s one- course option> called the
Associate of Arts Degree Through Credit Recognition> said Mike Bibbee> the university>s
director of military programs.
At Columbia Southern> students can finish courses in three weeks and gain credit for as
many as three classes taken at other colleges in which they received grades as low as D>
according to its catalog. All exams are open-book.
ait would be quite unorthodox for traditional institutions to grant transfer credit to
coursework completed below a grade of C>" Nassirian said. Columbia Southern>s academic
quality is comparable to a state or nonprofit university> Cooper said. The University of
Alabama> in Tuscaloosa> also accepts D>s for transfer courses> according to its Web site.
On Oct. 16> several Marines waited their turn on benches outside American Military>s
office in the education center at Camp Lejeune. Inside> AMU education coordinator Brian
Miller made his pitch to Jyher Lazarre and Hyunwoo Kim. Lazarre> 19> of Orlando> Florida> and
Kim> 20> of Leonia> New Jersey> joined the Marines in 2008 and are roommates at Lejeune> they
said.
Cutting Time
Of 20 courses needed for a two-year degree> they could satisfy eight through basic
training and other military experience> Miller said. They could test out of seven more>
leaving them to take five classes.
ai can cut the time of this degree literally in half>"
Miller told them. ait>s going to make you competitive toward promotion as well."
((If we can cut it down> that>s really good>" Kim said.
Conflicts with accrediting associations that certify academic quality have dogged
several online for-profits.
American Military> founded in Virginia in 1991 by a former Marine Corps officer> applied in
1998 for accreditation by the Commission on Colleges of the Decatur> Georgia-based Southern
Association of Colleges and Schools. The southern association is one of six regional bodies
that approve public and nonprofit institutions and represent the gold standard in
accreditation.
Early Step
In June 1999> the commission denied American Military a candidacy visit> an early step in
the accreditation process> said Ann Chard> commission vice president. The university didn>t
meet the requirements of having full-time professors and a library> instead relying on part-
time faculty and a lending library network> said James Herhusky> a trustee.
American Military then shifted its headquarters to West Virginia to seek regional
accreditation by the Higher Learning Commission of the North Central Association> according
to the minutes of a July 2002 meeting of the Virginia Council of Higher Education> based in
Richmond. In 2006> North Central approved American Military> which offers degrees in fields
including homeland security> counter-terrorism studies and weapons-of- mass-destruction
preparedness .
(More Accommodating>
((At the time> North Central was the only region we knew that was accrediting totally
online institutions/) Herhusky said. awe found their criteria to be less prescriptive and
more accommodating."
American Military now has 160 full-time professors and an online library> Herhusky said.
The school has almost quadrupled active-duty enrollment since 2005> when it hired James
Sweizer> former head of education for the Air Force> to run its military programs.
ai came to AMU with the philosophy of relationship marketing/) Sweizer said in an
interview. avou cater to the needs of key influencers. ))
Sweizer said he>s seen ((dramatic improvement" in how American Military manages courses
and faculty.
138
Probationary Period
American Intercontinental, which ranked 20th in tuition assistance from the Marine Corps
in fiscal 2009, also didn't meet the standards of the Southern Association of Colleges and
Schools. It was placed on probation from 2005 to 2007 for academic and administrative
shortcomings, including an inadequate number of full -time professors, according to
accreditation records. The school addressed the association's concerns, and the improvements
it made during those two years have strengthened the university, Career Education spokesman
Leshay said in an e-mail.
American Intercontinental moved its headquarters this year from Atlanta to Chicago and
was accredited by North Central.
American Intercontinental relocated because its online campus is based there, Career
Education spokesman Leshay said.
Two other for -profits in the military market, Grantham and Columbia Southern, have a
status known as national accreditation. Newer than the regional groups, the seven national
bodies mostly approve for -profit colleges, including vocational and distance-education
programs. Only 14 percent of colleges accept credits transferred from nationally accredited
institutions, according to a 2006 study by the University Continuing Education Association in
Washington.
Expanding Market
Three policy changes in the past decade opened the military market to for-profit
colleges. The Defense Department, which had paid tuition assistance mainly to regionally
accredited schools, began in 1999 to reimburse nationally accredited colleges as well. It
increased funding in 2002 from 75 percent to 100 percent of tuition up to the $250- per- credit
ceiling. In 2006 and 2007, the Army cut 233 counselors who used to guide soldiers through
college choices, replacing them with interactive Web sites that offer information, said Army
spokesman Wayne V. Hall.
These moves coincided with the rise of Internet courses.
For-profits were ahead of most traditional colleges in online education, which helps service
members deployed worldwide keep up their studies. In fiscal 2008, the first year that the
Defense Department collected such data, 64 percent of active- duty students took distance-
education classes.
War Zones
Soldiers even take online classes in war zones. While in Afghanistan, Army sergeant
Patrick Peake earned a bachelor's degree in criminal justice from American Military,
enrolling in as many as four online courses at a time.
Cavalry scouts "set up a wireless connection at the mud- brick building we were at,n
Peake, 29, said in an interview.
After studying counter-terrorism at AMU, Peake said, he told friends in Army intelligence
about terrorist groups in the region. "This dumb grunt helped them out a little, he said.
Unlike most traditional schools, for - profits vie to offer inducements to students.
American Military gives textbooks for free to undergraduates, who may resell them to the
school's vendor after use for $30 to $50 per book, Miller said. Columbia Southern is
considering a similar buyback program, according to Cooper.
Grantham, the seventh- biggest recipient of undergraduate tuition money from the Army in
fiscal 2008, gave new laptop computers made by Dell Inc., from March to July to active-duty
students who had completed at least four courses with grades of C or better. The free laptops
were part of a pilot research project on student retention, said Tim Arrington, Grantham
director of military programs.
Laptop Largesse
139
Michael Lambert> executive director of the Distance Education Training Council> which
accredits Grantham> advised the school to stop the laptop largesse> he said.
"The concern is> schools will outdo each other and we>ll have an arms race> he said.
"Free laptops> free Kindles> free iPods> all coming out of taxpayers> pockets.
Servicemembers Opportunity Colleges> a Defense Department Washington-based contractor
that develops policies for 1>800 colleges involved in military education> is also considering
guidelines to limit laptop giveaways and other inducements. "I don>t think it>s out of hand>
but the potential is there>'' said Kathy Snead> the group>s director.
Former Marines
Career Blazers Learning Center> a New York-based vocational school> gave away laptops
loaded with instructional software to Marines about to be deployed to combat zones, owner
Paul Viboch said. It also hired former Marines as recruiters and paid referral fees to
students for signing up other service members.
Entire units enrolled, and Career Blazers received $4.5 million in tuition assistance from
the Marine Corps in 2006, the most of any post -secondary provider.
Career Blazers charged $4500 -- the maximum that the military reimburses in a year -- for
self-paced lessons on how to perform basic computer applications or balance checkbooks.
Much of the material was available for less expense at workshops or community college classes
on bases, education specialists said.
"The military overpaid for laptops, said Johanna Rose, an education technician at Camp
Lejeune.
Relocated to Martinsburg, West Virginia, and renamed Martinsburg Institute, Career
Blazers stopped giving away laptops three months ago. Its tuition assistance from the Marine
Corp. slipped to $616,000 in fiscal 2009, as education officials on some Marine bases
discouraged service members from enrolling, Viboch said. "I was too successful, too quickly,
he said.
(Underhanded' Techniques
Unauthorized marketing pitches by for-profit recruiters have become widespread on
military bases.
"Some of these schools are a little underhanded, said Pat Jeffress, branch manager of
lifelong learning at Camp Pendleton, a Marine Corps base in California, said. "They try to
backdoor me. They come onto the base when they don't have permission and they set up shop.
One recruiter for Ashford University recently ignored the anti-solicitation rule at Camp
Lejeune, said Songer, the base>s lifelong learning director. Bridgepoint, based in San Diego,
has climbed 67 percent since the company went public on April 14.
Bridgepoint closed yesterday at 17.58, up 7.6 percent from the previous day.
Songer said he told the recruiter, whose husband is in the military, that she could only
meet students at the base's education center. Instead, she pitched the online for-profit in
the recreation room of a barracks for wounded Marines. About 30 Marines showed up, said Brad
Drake, a corporal who attends Ashford.
(Attractive' Recruiter
"It helped she was really attractive> said Drake, 23, who suffered a traumatic brain
injury in Afghanistan when a rocket hit his truck. "That got everyone's attention.
The recruiter spoke at the barracks with the approval of the unit's commanding officer>
Bridgepoint spokeswoman Shari Rodriguez said in an e-mail. "We keep our students' needs at
the forefront of all we do.
Unit commanders are often unfamiliar with educational rules, Songer said. He told the
recruiter, "(If you cross that line again, you'll never be allowed on this base, he said.
Ashford's Enrollment
1 ~
Ashford ranked sixth in Marine Corps enrollment in the year ended Sept. 30, 2009, with
1,018 students. At Camp Lejeune, Ashford had 119 active-duty students, up from 25 in the
previous year, and six in fiscal 2007. About eight to 10 wounded Marines signed up for
Ashford after the recruiter,s presentation, among them Corporal Long, the brain- injured
soldier, who also walks with a cane.
Long is pursuing a bachelor,s degree in organizational management through Ashford. In
his first class, students could retake the final test until they passed, he said.
"I took it 10 times, he said. "I kept getting the same answers wrong.
Long, who aspires to be an occupational or physical therapist, said he wonders if he can
graduate. He is married and says he needs to provide for his family.
"I got my doubts, he said. "My family,s more important than my doubts. That keeps me
going.
For Related News and Information:
Stories about Apollo Group Earnings: APOL US <Equity> TCNI ERN <GO> Stories about education:
NI EDU <GO> U.S. colleges and universities: USUV <GO> Education organizations: EDOR <GO>
Stories about the Department of Education: EDN <GO>
--Editors: Jonathan Kaufman, Robin D. Schatz
To contact the reporter on this story:
Dan Golden in Boston at +1-617-21-4610 or dlgolden@bloomberg.net.
To contact the editor responsible for this story:
Jonathan Kaufman at +1-617-210-4638 or
jkaufman17@bloomberg.net
141
From:
Sent:
To:
Subject:
DAN GOLDEN, BLOOMBERG/ NEWSROOM: [dlgolden@bloomberg.net]
Friday, October 30, 2009 9:59AM
Shireman, Bob
(BN) Apollo Weakness for Phoenix Revenues Spurring Short
Thanks so much for the help, particularly at the last mi nute. Talk to you soon.
Dan
+- -----------------------------------------------------------------------------+
Apollo Weakness for Phoenix Revenues Spurring Short Sellers 2009-10- 30 04:00:01.2 GMT
By Daniel Golden
Oct. 30 (Bloomberg) -- The University of Phoenix, the largest for -profit college in the
U.S., may have set off on a collision course with the federal government and investors in
2001. That,s when its founder, John Sperling, urged executives at his 80th birthday party to
boost enrollment fivefold to half a million students, a goal it has almost accomplished.
Now, Phoenix,s parent, Apollo Group Inc., is facing challenges to its growth. The
Securities and Exchange Commission is investigating how Apollo books revenue, the company
said Oct.
27. Apollo recorded a charge of $80.5 million to cover costs it expects to pay to settle a
lawsuit alleging that it violated federal student recruitment rules. Profit in the quarter
ended Aug. 31 fell 60 percent largely because of that charge.
Apollo shares, which had more than doubled since 2006, may have difficulty rebounding
from an 18 percent decline the day after the SEC probe was disclosed. Phoenix may also face
scrutiny as the U.S. Education Department examines for-profit universities that rely heavily
on taxpayer-supported financial aid. In fiscal 2009, Phoenix derived 86 percent of its $3.77
billion in revenue from federal grants and loans, up from 48 percent in 2001, and approaching
a federal limit of 90 percent.
((The outlook for Apollo next year has definitely become a lot tougher," said Robert
Wetenhall, an analyst for RBC Capital Markets in New York, who lowered his rating on Apollo
shares on Oct. 28 to uunderperform."
Axia,s Growth
Phoenix,s enrollment has almost doubled to 443,000 from 227,800 in fiscal 2004. About 90
percent of that growth has come from a two-year online college called Axia, created in 2004.
While Phoenix originally focused on bachelor,s degree and graduate degree programs for
managers whose employers paid their tuition, Axia attracts students with lower income and
less academic preparation, the majority of whom depend on federal financial aid.
Apollo,s revenue was $1.1 billion during the three months ended Aug. 31, five times the
amount during the same per iod in 2001. Net income rose almost threefold to $91.5 million.
The company,s shares fell $1.91, or 3.2 percent, to $58.15 on Oct. 29 in New York Stock
Exchange composite trading. Before the close on Oct. 27, the stock had fallen 4.8 percent
this year, compared with an 18 percent rise in the Standard & Poor,s see Index.
Investors have bet against Apollo, with 10 percent of its shares sold short as of Oct.
15, compared with 3.5 percent for the New York Stock Exchange as a whole. Apollo,s short
interest has risen to 13.4 million shares from 6.6 million a year ago.
142
Obama Administration
Phoenix now has to deal with the Obama administrationJ which is tightening review of
for-profits and has close ties to community colleges that compete with Axia. Driven in part
by the shift to AxiaJ PhoenixJs growing reliance on taxpayer funds is drawing government
attention. The average annual tuition is $10J350J $500 less than what federal aid will pay
for a low- income freshman under age 24. By comparisonJ annual tuition at public community
colleges this year averages $2J544J according to the College BoardJ the New York- based
nonprofit organization that owns the SAT college admissions test.
"It makes sense to examine institutions that rely heavily on federal aidJn Robert
ShiremanJ Deputy Undersecretary of EducationJ said in an interview without singling out any
university. "CertainlyJ one of the data points we look at for triggering possible program
reviews is a large growth in the use of federal financial aid.
Uncover Problems
Such a program review would be designed to uncover problems with financial management or
signing up students who are unqualified or arenJt fully aware theyJre taking out loansJ and
may result in finesJ suspensions or terminations from eligibility for financial aidJ Shireman
said.
Students are reliant on aid because of the recession and rising college costsJ said Sara
JonesJ an Apollo spokeswoman.
Phoenix expanded into online two-year degrees to continue its shift from a niche institution
for degree completion into a comprehensive universityJ not to obtain more financial aid
dollarsJ she said. The 90 percent limit on federal revenueJ enacted in 1992J penalizes
schools for having low- income studentsJ said Gregory CappelliJ Apollo Co-Chief Executive
Officer.
"We want to help peopleJ '' Cappelli said in a Sept. 9 interview at the companyJ s Phoenix
headquarters. "They need to be able to read and write and compete at the college level. Know
what? We donJt want your money otherwise.
The company believes the revenue recognition policies being investigated by the SEC are
appropriateJ Brian SchwartzJ ApolloJs chief financial officer and treasurerJ said in an Oct.
27 conference call.
Few Graduate
While Phoenix has succeeded in drawing studentsJ most donJt graduateJ leaving them
without degrees and often burdened by loans. Only 8.9 percent of Phoenix students without
prior college experience complete a degree in six yearsJ including 5 percent of those who
attend classes onlineJ according to the National Center for Education StatisticsJ in
Washington. The national graduation rate is 56.1 percent for four-year schools and 30.9
percent for two-year schools.
Besides leaving school prematurelyJ many students arenJt able to pay their billsJ with
U.S. taxpayers picking up the balance. Of Phoenix students who should have begun repaying
loans in 2007J 9.3 percent have defaultedJ up from a 7.2 percent rate a year earlier and more
than the national average of 6.7 percentJ according to the Education Department.
The university works closely with lenders and delinquent students to stave off defaultsJ
said Robert CollinsJ ApolloJs vice president for financial aid.
CurveJ
PhoenixJs dropout rate means the school needs to recruit 250J000 new students a year - -
equivalent to six University of Michigans -- to maintain current enrollmentsJ said former
Apollo manager Mark DeFuscoJ now an education investment banker at BerkeryJ Noyes & Co. in
New York.
"The replacement curve is astronomicalJn DeFusco said.
143
"You have to feed the beast."
PhoenixJs growth is hardly uncontrolledJ said JonesJ the Apollo spokeswoman. The
university has "more than 200 campuses and learning centers" which means it can add 1J000
students a day by enrolling five at each oneJ she said. Phoenix gained 102J000 new students
in the quarter ended Aug. 31J according to Charles B. EdelsteinJ Apollo Co-CEO.
The question of whether recruiters sign up unqualified students is the focus of the
lawsuit that Phoenix said it expects to settle for $80.5 million. The 2003 suit brought by
two former employees in federal court in California alleges that Phoenix violated a 1992 ban
on paying recruiters on the basis of enrollment numbers. The company has denied wrongdoing.
as DoornailJ
In a deposition in the lawsuitJ Jennifer KahnJ a recruiter who left Phoenix in 2006J
said she complained to her boss about a prospect who couldnJt handle college.
"I had a studentJ letJs refer to him as dumb as a doornailJ" Kahn said. "And my manager
told meJ him.
ItJs not our call to say who has a right to an education.J As a consequenceJ he startedJ he
went to the first nightJ he knew he was in deep doo-dooJ and dropped. He never should have
been there."
Tom CorbettJ a former director of online enrollment at Phoenix who provided an affidavit
in the lawsuitJ said in an interview that the schoolJs recruiters were like brokers peddling
subprime mortgages.
"The University of PhoenixJs management culture is fueled by greedJ the same as the
housing scenarioJ" Corbett said.
"There was no emphasis on the studentJs actual valuesJ goalsJ backgroundJ experiences."
Compensation Methods
Timothy HatchJ an outside counsel for Phoenix and a partner in the Los Angeles office of
GibsonJ Dunn & CrutcherJ said the school enrolled the student mentioned by Kahn because he
had completed an associateJs degree at another for-profit college.
PhoenixJs compensation methods are legal because teamwork and student retention figure
into its salary adjustments along with enrollment expectationsJ he said. The criticisms by
Corbett and other former employees donJt reflect the views of Phoenix recruiters and managers
in generalJ he said.
The Education Department may tighten 2002 rules that let colleges pay recruiters partly
on the basis of enrollmentJ according to ShiremanJ the deputy undersecretary.
The department announced on Sept. 9 that it may prohibit misrepresentations of
information provided to students and prospective students. The move was prompted partly by
reports the department received about Axia recruitersJ according to a federal official
familiar with the matter.
Prospective Students
In tape - recorded telephone calls heard by Bloomberg NewsJ Axia recruiters told Wall
Street researchers posing as potential applicants that its credits could be transferred to
Harvard University and Columbia University. Those schools donJt grant transfer credit for
online undergraduate coursesJ the universitiesJ spokesmen said in e-mails.
Cappelli said he isnJt aware of the alleged misrepresentations.
"ThereJs not a mandate or a directive from anyone in the management team to fool or hurt
peopleJ" he said. "Traditional colleges make errorsJ too."
Phoenix has a pilot program to improve student readiness for collegeJ Cappelli said
during a conference call with analysts on Oct. 27. Lower retention rates and extra remedial
instruction and other support services for Axia students have damped Apollo profitsJ he said
in September .
EffortJ
144
((We are making a concerted effort to get back our focus on bachelor's and master's
degrees," said Cappelli, a former Credit Suisse research analyst who joined Apollo in 2007.
((The return to the student is better if they stay in school and complete their bachelor's
degree. The return to us is better, too. Not all of our growth is coming from Axia anymore."
The company supports a proposal in Congress that would allow colleges to exceed the 90
percent ceiling on the portion of revenues from financial aid until 2012, and not to count
increases in student loan limits as federal revenue.
The proposal, which passed the House last month as part of a broader education bill,
isn't included in a Senate version, said Mark Kantrowitz, publisher of the FinAid.org and
FastWeb.com financial-aid Web sites based in Cranberry Township, Pennsylvania.
Phoenix officials said the 8.9 percent graduation rate measured by the government counts
only first-time students.
Including transfer students, 27 percent of Axia students graduate, according to the
university's 2008 Academic Annual Report. Of those pursuing bachelor's degrees, Phoenix said
38 percent graduate.
No Placement
Phoenix doesn't help graduates land jobs, nor does it track where they find employment,
Jones, the Apollo spokeswoman, said.
She said most Phoenix students already have jobs.
Simon Saffery, 30, a Hawaii resident, transferred to Phoenix's online program as a
junior in 2006 and graduated last year with a 3.9 average out of 4.0 in computer science. He
said he has applied for 25 entry-level information technology jobs without receiving a single
interview. Almost half of the openings he sought were at Apollo itself, Saffery said. He is
unemployed, owes $45,000 in student loans and may declare bankruptcy, Saffery said.
Jones declined to comment on individual students, citing privacy considerations.
According to a 2008 survey by Phoenix, graduates of its associate and bachelor's degree
programs earned average increases in personal income of 19 percent and 28 percent,
respectively.
Founder's Dream
Sperling, who has an economic history Ph.D. from Cambridge University in England,
founded Phoenix in 1976. His mission was to give working professionals a convenient way to
get back to school and boost their academic credentials without having to quit their jobs,
according to his 2000 autobiography, ((Rebel With a Cause.'' Students, who learned in teams
and took five- week courses in business, nursing and other fields, tended to be managers in
their mid-30s whose employers reimbursed them for tuition.
Richard Chait, a professor of higher education at Harvard in Cambridge, Massachusetts,
who has studied Sperling's university, said the school ((saves money everywhere" by hiring
part -time faculty, leasing real estate, and centralizing administration.
((The genius of the University of Phoenix is that it spends
$1 million to develop one course that it gives a thousand times," Chait said in an interview
in his office. ((Community colleges spend almost nothing developing a thousand courses that
they will use once."
Expanding Eastward
In the 1990s, Phoenix expanded eastward, opening facilities in Michigan, Maryland and
Pennsylvania. Today, according to its Web site, the university has campuses in 39 states, the
District of Columbia, Puerto Rico, and two Canadian provinces. From 1995 to 2000, Apollo's
stock rose more than 10-fold, making it one of the 30 top-performing stocks in the Russell
3000 Index .
145
When enrollment was about 20,000, Sperling told executives Phoenix would have 100,000
students by 2000, Bob Barker, a former Phoenix executive vice president, said in an
interview.
At his 80th birthday party in 2001, Sperling raised his sights to see,eee, DeFusco said.
Apollo never formally adopted Sperling,s vision, said Jones, the spokeswoman. She said
Sperling was unavailable for interviews.
As fast as Phoenix was growing, it was drawing from a limited customer base of mid-
career managers, former Apollo president Brian Mueller, CEO of for-profit Grand Canyon
Education Inc. in Phoenix, said in an interview. Students had to be at least 23 years old and
have two years of work experience and as many as 60 credits from other colleges.
Rapid Growth
By 2004, the university had eliminated its credit and age requirements, Jones said.
DeFusco, who worked at Apollo from 1994 to 2003 in academic affairs and then opening
campuses for Phoenix, said Axia,s tuition was set just under the federal limit for financial
aid so government grants and loans could cover most, if not all, of the cost.
The college,s tuition-pricing ((was a financial-aid play," DeFusco said.
Apollo spokeswoman Jones said that was not the case.
Unlike students who came to Phoenix to complete degrees, the company said that three out
of five Axia attendees haven,t gone to college before.
uit,s no longer the mid -career manager, it,s somebody working a minimum-wage job
somewhere and looking to get out of that dead end," said Laura Palmer Noone, a former Phoenix
president who is now CEO of Piccolo International University, an online school based in
Scottsdale, Arizona.
Career Aspirations
Sabrina Bogan, 39, a criminal-justice major, said in an interview that Axia has improved
her writing. The Richmond, Virginia, mother of three, who has a high school equivalency
degree and used to work as an assistant manager at a convenience store, said she has written
essays on the death penalty and energy conservation.
((The person that I was before I started taking those classes could not have done that,"
Bogan said . She said she hopes to land a job in a lawyer,s office after she finishes her
associate,s degree next year.
Not all Axia students benefit. Laura Holder, 29, has a diploma from Prairie Grove High
School in Prairie Grove, Arkansas, where she took special-education classes, she said.
According to her mother, Beatrice McCormack, Holder has an IQ of
65 to 70, within a range the Washington-based American Association on Intellectual and
Developmental Disabilities defines as intellectually disabled.
Axia Recruiter
Holder, who lives in an apartment with her husband, said she learned about Phoenix on the
Internet and contacted the school in hopes that a college degree would help her find work as
a preschool teacher. The Axia recruiter, she said, asked if she had graduated from high
school, not whether she was in special education.
((They said once I go through the classes, I would get a job in teaching," Holder said.
Holder enrolled at Axia in October 2006 and realized the classes were too hard for her,
she said. She left school amid a payment dispute without completing a course. A collection
agency dunned her for a tuition balance of $1,710.
Jones, the Phoenix spokeswoman, said the school is aware of a handful of instances in
which intellectually disabled students enrolled and soon demonstrated that they didn,t have
the ability to succeed. In those cases, she said, Phoenix worked to help the students
withdraw without financial obligation.
Community Colleges
1 ~
Axia may soon face more competition for students. The Obama administration has proposed
allocating $12 billion to publicly run community which also give two-year degrees.
While Sally a former Apollo oversaw post -secondary education in the George
W. Bush former community-college leader Martha Kanter plays a similar role
now.
asome in the if they were advising students who had a choice of going to
a community college or a for-profit would cPick the community said
Scott a Washington lobbyist who represents Apollo.
The Education Department out to ((shut down or maim))
Cappelli said.
aif Obama means what he that he wants everyone to have one year of how do
you accomplish that without for-profit higher ed?JJ he said.
For Related News and Information:
Stories about education: NI EDU <GO>
U.S. colleges and universities: USUV <GO> Education organizations: EDOR <GO> Stories about
technology: {NI TEC}
--With assistance from Robin D Schatz and Jeffrey Tannenbaum in New York. Editors: Jim
Jonathan Kaufman
To contact the reporter on this story:
Dan Golden in Boston at +1-617-21-4610 or dlgolden@bloomberg.net.
To contact the editor responsible for this story:
Jonathan Kaufman at +1-617-210-4638 or
jkaufman17@bloomberg.net
147
From:
Sent:
To:
Subject:
Dannenberg, Michael
Thursday, March 04, 201 o 11 :45 AM
Plotkin, Hal
FW: Bloomberg News: Your Taxes Support For-Profits as They Buy Colleges
As per our conversation.
Your Taxes Support For-Profits as They Buy Colleges (Update1)
By Daniel Golden
March 4 (Bloomberg)-- ITT Educational Services Inc. paid $20.8 million for debt-ridden Daniel
Webster College in June. In return, the company obtained an academic credential that may generate
a taxpayer-funded bonanza worth as much as $1 billion.
ITT Educational, the U.S.'s third-biggest higher education company with a market value of $3.8
billion, may increase it by 26 percent, or $1 billion, within five years because of the purchase of 1,200-
student Daniel Webster in Nashua, New Hampshire, according to Michael Clifford, an investor in Del
Mar, California, who has participated in the acquisitions of four nonprofit colleges. At least 75 percent
of new revenue would come from access to the more than $100 billion a year in financial aid the U.S.
hands out to college students, he said.
Key to tapping that money is Webster's regional accreditation, which is the same gold standard of
academic quality enjoyed by Harvard University and helps students transfer course credits from one
college to another. Daniel Webster's accreditation was its "most attractive" feature to ITT Educational,
said Michael Goldstein, an attorney at Dow Lohnes, a Washington law firm that has represented the
company.
"Companies are buying accreditation," said Kevin Kinser, an associate professor at the State
University of New York at Albany, who studies for-profit higher education. "You can get accreditation
a lot of ways, but all of the others take time. They don't have time. They want to boost enrollment 100
percent in two years. "
Exploiting Loopholes
The nation' s for-profit higher education companies have tripled enrollment to 1.4 million students and
revenue to $26 billion in the past decade, in part through the recruitment of low-income students and
active-duty military. Now they're taking a new tack in their quest to expand. By exploiting loopholes in
government regulation and an accreditation system that wasn't designed to evaluate for-profit
takeovers, they're acquiring struggling nonprofit and religious colleges -- and their coveted
accreditation. Typically, the goal is to transform the schools into online behemoths at taxpayer
expense.
For-profit education companies, including ITT Educational Services, based in Carmel, Indiana, and
Laureate Education Inc., in Baltimore, have purchased at least 16 nonprofit colleges with regional
accreditation since 2004, according to corporate announcements and filings with the U.S. Securities
148
and Exchange Commission. Jack Welch, the former chief executive of General Electric Co., and
Michael Milken, the U.S. junk bond pioneer, have invested in for-profit companies that bought or
formed partnerships with nonprofit, regionally accredited schools.
Academic Status
By acquiring regional accreditation, trade and online colleges gain a credential usually associated
with the traditional academic culture of liberal arts, faculty scholarship and selective admissions.
Normally the accreditation process takes about five years and requires evaluations by outside
professors. The regional bodies examine financial stability, academic rigor and commitment to
"teaching, learning, service and scholarship," according to the Web site of the Commission on
Institutions of Higher Education, which accredits colleges in New England.
Enrollment at Grand Canyon University, a Christian college in Phoenix bought by investors in 2004,
has soared to 37,700, as of Dec. 31 , up from 1 ,500, said Brian Mueller, chief executive of Grand
Canyon Education Inc. Ninety-two percent of students now take classes online, according to the
company' s most recent 10-K. Bridgepoint Education Inc., based in San Diego, has boosted
enrollment of two regionally accredited colleges it bought in 2005 and 2007 to 53,688 students as of
Dec. 31 , up from 400 combined, according to a company filing. Ninety-nine percent of those students
take courses exclusively online.
Growth Potential
Daniel Webster "could parallel Grand Canyon or Bridgepoint's growth curve," said Clifford, who was
part of the investor group that purchased Grand Canyon.
ITI Educational rose 87 cents, or less than one percent, to $110.65 at 10:11 a.m. today in Nasdaq
stock market trading. The company declined 1.4 percent in the 12 months ended March 3.
ITI Educational declined to comment for this story. The company plans to open more Daniel Webster
campuses and also expand online offerings, Kevin Modany, ITI Educational' s chairman and chief
executive officer, said in a Feb. 22 presentation to analysts. The company expects to introduce
programs including accounting, education and health sciences, he said.
Daniel Webster will attract more students "a little on the higher end" in income whose tuition would be
paid by private employers rather than federal financial aid, Modany said.
New Regulations
The U.S. Department of Education, which doled out $129 billion in federal financial aid to students at
accredited postsecondary schools in the year ended Sept. 30, is examining whether these kinds of
acquisitions circumvent a federal law that new for-profit colleges can't qualify for assistance for two
years, Deputy Undersecretary of Education Robert Shireman said in a telephone interview.
Under federal regulations taking effect July 1, accrediting bodies may also have to notify the secretary
of education if enrollment at a college with online courses increases more than 50 percent in one
year.
"It's an area that we are watching closely," Shireman said. "It certainly has been a challenge both for
accreditors and the Department of Education to keep up with the new creative arrangements that
have been developing."
149
Immediate Benefits
Buying accreditation lets the new owners benefit immediately from federal student aid, which provides
more than 80 percent of revenue for some for-profit colleges, instead of having to wait at least two
years. Traditional colleges are also more inclined to offer transfer credits for courses taken at
regionally approved institutions, making it easier to attract students nationwide.
The six nonprofit regional accrediting bodies, which rely on academic volunteers, bestow the valuable
credential with scant scrutiny of the buyers' backgrounds, Barmak Nassirian, associate executive
director of the American Association of Collegiate Registrars & Admissions Officers in Washington,
said in a telephone interview.
While accrediting bodies treat these purchases as changes of ownership, the acquisitions, in reality,
create new colleges that should be required to earn certification from scratch, Kinser said.
Maintain Mission
For accreditation to continue once the college is sold, the buyer must promise not to change its
mission, Steven Crow, former executive director of the Chicago-based Higher Learning Commission,
the largest regional body, said in a telephone interview. Once accreditation is maintained, the
acquirer seeks permission, which is usually granted, to start branch campuses and online programs,
Crow said.
"You knew by month six they would come back to you with a new game plan," said Crow, now a
consultant to publicly traded Corinthian Colleges Inc., based in Santa Ana, California. It acquired
regionally accredited San Francisco-based Heald College on Jan. 4.
Obama administration officials have recently questioned whether the accreditation system is effective
in protecting academic standards. Accrediting decisions lack transparency and take too long,
Undersecretary of Education Martha Kanter said in a Jan. 26 speech in Washington to the annual
meeting of the Council for Higher Education Accreditation.
Considering Termination
The inspector general of the Education Department in December urged the agency to consider
terminating recognition of the Higher Learning Commission, which has approved more for- profit
colleges than its counterparts around the country.
The inspector general criticized the commission's decision to accredit Career Education Corp. ' s
online American Intercontinental University, citing concerns about how much time students spent in
class. The approval was appropriate, the commission and Hoffman Estates, Illinois-based Career
Education said.
More vigilance by the Education Department and accrediting groups is likely to slow enrollment
growth and the share prices of higher education companies that rely on acquisitions, said Clifford.
While publicly held postsecondary education companies rose 25.6 percent in the 12 months ended
March 2, they lagged behind the S&P 500, which increased 59.6 percent over the same period. The
shortfall reflected investors' fears of tighter federal regulation of for-profit colleges, said Jeffrey Silber,
an analyst for BMO Capital Markets in New York.
Accreditation's Worth
150
Regional accreditation is worth $10 million to a for-profit acquirer, Clifford said in a telephone
interview. That's how much it would cost to start a regionally accredited college, a process that can
take 10 years and has only a 50-50 chance of success, he said. On top of the $10 million, buyers
typically pay $23,000 to $50,000 per enrolled student, making the purchase of Daniel Webster a
bargain, Clifford said.
Clifford and his fellow investors popularized the strategy of acquiring nonprofit colleges with regional
accreditation by purchasing Grand Canyon University in 2004 and building online enrollment.
Grand Canyon "is the same institution," Mueller said in an e-mail. "It was important to the new
leadership group that the mission of providing a high-quality Christian-based education remain intact."
Grand Canyon, which went public in November 2008, derived 83 percent of its revenue from federal
financial aid in 2009, according to a company fil ing.
Bridgepoint, Ashford
Bridgepoint Education bought the regionally accredited Franciscan University of the Prairies in 2005
and Colorado School of Professional Psychology in 2007. It renamed them Ashford University and
University of the Rockies, respectively, and refocused them online. Ashford gained 86 percent of its
revenue from federal student aid in 2009 and University of the Rockies got 85 percent, according to a
1 0-K filing by Bridgepoint, which went public in April.
"There are several meaningful continuities" from the colleges before they were acquired, including
campus athletic and social events, Shari Rodriguez, a Bridgepoint spokeswoman, wrote in an e-mail.
Clifford participated in the 2008 purchase of Myers University in Cleveland, which was renamed
Chancellor University. Chancellor attracted Welch as an investor last year and named its new online
management institute after him. Welch collaborated with faculty in developing curricula for a master's
program in business administration, Clifford said.
' Something New'
"We chose to work with Chancellor University because it gave us the flexibility to start something
new," Welch said through a spokeswoman, Betsy Linaberger. "As a for-profit venture, we have the
resources to invest in the student experience and the very best faculty, and we want to provide a high
quality business education."
Knowledge Universe Learning Group, chaired by Milken, entered into a partnership in 2007 with
regionally accredited Sierra Nevada College in Incline Village, Nevada, agreeing to provide as much
as $15 million in return for an opportunity to share in online revenue, Geoffrey Moore, a senior
adviser to Milken, said in an e-mail. The company is a unit of Santa Monica, California-based
Knowledge Universe Inc. , of which Milken is co-founder and chairman. Knowledge Universe Learning
Group has three seats on the nonprofit college's nine-member board, Moore said.
'Existing Character'
"This partnership preserved the existing character of Sierra Nevada College," he said. "That was
important to us and the college. "
151
A 2006 regulatory change fostered online growth and made takeovers more attractive, said Silber, the
BMO analyst. That year, Congress eliminated a rule prohibiting colleges that offered more than half of
their courses online from receiving federal financial aid.
ITI Educational Services Inc. didn't buy Daniel Webster just for its 52-acre red-brick campus and
science and technology programs including training pilots and air traffic controllers.
"Regional accreditation was very important" to the company, said Goldstein, co-leader of the higher
education practice at Dow Lohnes. "I don't think there' s any question that was the most attractive
element. "
Of the $20.8 million purchase price, $20.6 million went to pay off the college's debt, according to an
ITI Educational 1 0-Q filing.
Making Changes
ITI Educational Services, which was spun off from ITI Corp. in the 1990s, wasted no time making
changes at Daniel Webster. It renovated a main building and razed a dilapidated dormitory. It also
dismissed one fourth of the staff, fired President Robert Myers, and has been accused by faculty
members of misleading the New England accreditor, the Commission on Institutions of Higher
Education, based in Bedford, Massachusetts.
"ITI didn't really have much interest in anything other than having acquired a regionally accredited
institution," said Myers, now president of the New England Culinary Institute in Montpelier, Vermont.
"If I had it to do all over again, I wouldn't have gone anywhere near ITI. The fundamental nature of
the college has changed. "
"We're making fantastic progress with the cultural assimilation" of Daniel Webster, Modany said in a
Jan. 21 call with analysts. "Things are going really well there, great group of staff and faculty, and
everybody is getting on board. "
' Something Different'
Barbara Brittingham, director of the Commission on Institutions of Higher Education, declined to
comment on its approval of the Daniel Webster sale.
In general, "when these institutions are bought, they are not at the moment successful in the financial
sense or they wouldn't be for sale," Brittingham said. "There's an understanding that whoever buys
them is going to want to do something different."
Accreditation is higher education's way of regulating itself. The nonprofit associations set standards
on financial stability, governance, faculty and academic programs and use volunteers from college
presidents to professors to assess quality. It is a peer review system: a marketing professor is more
likely than a poet to evaluate a business school.
For more than a century, regional organizations have evaluated most public and private universities.
Starting in the 1950s, leaders of for-profit colleges, which were then ineligible for regional approval ,
established seven national accrediting bodies for career education and training. The regions dropped
their for-profit ban in the 1960s.
Cachet, Credits
152
Apollo Group Inc.' s University of Phoenix, whose enrollment of 455,600 makes it the nation's second-
largest university behind the State University of New York system, is accredited by a regional body,
the Higher Learning Commission. Students enrolled at both regionally and nationally accredited
colleges can receive federal grants and loans.
Regional accreditation is important to for-profit colleges because students are attracted to its cachet
and can transfer course credits more easily. Only 14 percent of nonprofit universities accept credits
transferred from nationally certified schools, according to a 2006 study by the University Continuing
Education Association, in Washington.
The six regional associations scrutinize takeovers of nonprofit colleges in advance, and then follow up
afterward, accrediting officials said in telephone interviews. They could cite few, if any, cases in which
they refused to continue accreditation, they said.
Heald Purchase
Corinthian Colleges' past difficulties with California state regulators didn't matter to accreditors when
it purchased Heald Capital LLC, parent company of Heald College, for $395 million. Corinthian, the
country's seventh-largest higher education company by market value, has more than 100 campuses
in North America, and had 106,052 students as of Dec. 31 , including Heald, said Anna Marie Dunlap,
a Corinthian spokeswoman.
Corinthian paid a $6.5 million settlement in July 2007 to the California attorney general's office, over
allegedly misrepresenting graduates' job placement rates and salaries. It also agreed to cease
enrolling students in 11 programs at nine campuses. The Santa Ana, California-based Corinthian said
in a 10-K filing that it didn't admit wrongdoing.
"We strongly disagreed with the Attorney General's conclusions, but we are pleased to have settled
the matter," Dunlap said in an e-mail.
Exclusively Online
Regionally accredited Heald College had 11 campuses with 12,900 students, primarily in two-year
health-care and business programs, as of Dec. 31. The college was nonprofit before its purchase in
2007 by Palm Ventures LLC, a Greenwich, Connecticut, investment company. Heald expects to start
enrolling exclusively online students this year, Corinthian Chief Executive Peter Waller wrote inane-
mail.
The Accrediting Commission for Community & Junior Colleges in Novato, California, which certifies
two-year institutions in California and Hawaii, approved the change in Heald's ownership.
"We judge the college we accredit," said Barbara Beno, president of the commission. "It would be
unfair to say, 'Heald, you've been bought by a parent corporation that doesn't have as fine a track
record as you do. Therefore, we'll condemn you,"' she said in a telephone interview.
Heald will "continue to meet ACCJC's accreditation standards and eligibility requirements," Waller
said.
The scrutiny "doesn't remotely satisfy the sloppiest of due-diligence requirements," said Nassirian of
the American Association of Collegiate Registrars & Admissions Officers. "There is no methodical
review of who has bought the college. If the Cosa Nostra applied, you would think you'd take a look. "
153
'Same Animal'
The nation' s biggest regional accreditor is starting to take a closer look. The Higher Learning
Commission, which certifies more than 1,000 colleges from Arkansas to Wisconsin, stiffened its rules
on ownership changes last year.
Buyers must wait from one to four years to reapply for accreditation if the college won't stay "the
same animal ," President Sylvia Manning said in a telephone interview. The commission now charges
$10,000 for ownership changes to pay for more extensive research. New owners must be approved
by its board, rather than at the staff level , Manning said.
The commission applied its newfound rigor to Mayes Education Inc.'s purchase of Waldorf College in
Forest City, Iowa, putting the brakes on online expansion. A subsidiary of online privately held
Columbia Southern University in Orange Beach, Alabama, Mayes agreed in May to buy the assets of
Waldorf, an Evangelical Lutheran college with 500 students, for an undisclosed sum. The deal closed
on Jan. 8.
Approval Condition
As a condition of approval , the commission stipulated that Waldorf can' t offer online-only degrees at
least until2011- 2012. Mayes Education plans to boost Waldorfs enrollment to 2,300 students in
three years through programs combining online classes with face-to-face instruction at temporary
sites around the country, Jessica Brown, a spokeswoman for Columbia Southern, said in a telephone
interview.
The sale "barely made it through" the commission, former Waldorf president Richard Hanson said in a
telephone interview.
"Columbia Southern wanted to ramp up the online program quickly. The commissioners said, 'If we
maintain accreditation, Waldorf has to remain the college we know. "'
Columbia Southern wasn't the only for-profit that expressed interest in buying Waldorf, Hanson said.
Another company that lacked regional accreditation also contacted him: ITT Educational Services.
ITT Educational, runs 120 nationally accredited technical institutes with 80,000 students, most of
whom pursue associate degrees.
Graduation Rate
The cost of attending an ITT Technical Institute, including tuition, fees and off-campus room and
board, was $26,775 in 2008-09, according to the National Center for Education Statistics. Of students
who entered ITT' s two-year schools in 2004, 29 percent graduated. ITT derived 70 percent of its 2009
revenue from federal financial aid, according to a company filing.
ITT Educational is in the preliminary stages of seeking regional accreditation for its technical institutes
through the Higher Learning Commission, which sent a team to visit the company in late 2009, a
commission spokeswoman, Susan Van Kollenburg, said in an e-mail. The commission hasn't acted
on this evaluation, she said.
Daniel Webster is ITT Educational' s first regionally accredited campus. Founded in 1965 as the New
England Aeronautical Institute, the college is tucked beside Nashua's municipal airport, and keeps its
154
fleet of Pipers and Cessnas there. The campus includes an aviation center, a library, an
administration building, classrooms, dormitories, and a student center called the Common Thread.
'Good Reputation'
Over the years, the college expanded from flight instruction into training air traffic controllers and
airline managers, as well as teaching computer science, engineering, and business.
It has "a longstanding good reputation," said Gary Kiteley, executive director of the Aviation
Accreditation Board International in Auburn, Alabama, which licenses the college's aviation programs.
Financially, Daniel Webster never enjoyed a cushion. With an endowment that peaked at about $3
million in 2008, it relied on tuition revenue, Myers said. The airline industry' s decline after 9/11 and
the collapse of Internet stocks hurt enrollment in aviation and computer science, said former provost
Michael Fishbein, who said he suffered a heart attack from the stress of keeping the college alive.
Redlnk
Just as trustees reached consensus on a strategic plan in 2008, fuel costs skyrocketed, and "we were
running red ink again," Rodney Conard, the former chairman of the board, said in a telephone
interview.
The Commission on Institutions of Higher Education and the U.S. Department of Education
expressed concerns that Daniel Webster didn't meet their financial standards, placing its accreditation
and eligibility for federal aid in jeopardy, according to a filing last April 23, by the college in a New
Hampshire court.
ITT Educational contacted Myers in December 2008, he said. Modany visited Daniel Webster the
next month, and the parties reached agreement in April. The acquisition would enable the company to
target a more upscale audience, Modany told Wall Street analysts on April 23.
While ITT Educational's institutes drew unskilled "career changers," the regionally accredited college
would appeal to "career advancers" seeking to enhance their capabilities, Modany said.
The Commission on Institutions of Higher Education approved the sale that same month.
' Public Interest'
"It's in the public interest to have these small institutions continue to function," said Bruce Mallory, a
commission member and education professor at the University of New Hampshire in Durham. "If a
proprietary school can come in, continue to provide the same level of education and assure viability,
that's all for the better."
Modany promised to leave Daniel Webster' s administrators in charge because they were experts in
running a four-year residential college, Myers and Fishbein said. At a campus event introducing the
ITT Educational chief executive to the college community, Modany said the company was growing
and there would be ample job opportunities, said Myers.
Growing Suspicions
155
As Myers negotiated the sale, he came to suspect that the company wasn't being forthright about its
intentions, he said. When he and Conard, who chaired the college' s board of trustees, worked out at
a YMCA a week before the June closing, they discussed canceling the deal , Myers said. Only after
consulting colleagues did they decide to go through with it, he said.
"We had lots of conversations when it was on the table," said Conard, a management consultant.
"Should we take it? We didn't have to take it. There was a point where we real ized, they were going
to be more businesslike about it. It didn't feel as comfy as we were hoping. "
Going through with the sale was the right decision, Conard said.
"ITI is in this for the long haul , and I'm very comfortable with where they plan to take Daniel
Webster," Conard said.
Another former trustee, Cathy Trower, went along with the sale as a last resort to save the college
and honor commitments to students, she said.
"A for-profit should not be able to buy accreditation," Trower, a research director at Harvard
University's Graduate School of Education in Cambridge, Massachusetts, said in a telephone
interview. "To me, that's almost like buying a degree and not actually earning it."
Duplicating Functions
In July, ITT Educational dismissed more than 20 Daniel Webster employees, Myers said. It believed
they were duplicating functions that the company's corporate offices in Indiana could provide, two
people familiar with the company's thinking said. ITT Educational also replaced Conard, Trower and
the other trustees.
Appointees to the college' s new board included Charles Cook, former director of the Commission on
Institutions of Higher Education, which accredits Daniel Webster. Cook soon resigned because of a
potential conflict of interest with his position as a director of Corinthian' s Heald College, he said in a
telephone interview.
"I was never substantively involved with Daniel Webster," Cook said.
Questioning Changes
At the t ime of the firings, Myers was circulating a draft report questioning whether some of ITT
Educational's changes were in accord with the standards of the accreditation commission, which call
for a faculty role in curriculum and governance, he said.
"ITI came in and said, 'We only want faculty to teach,"' Myers said. "We'll develop curricula in
Carmel , Indiana, and give them to you."
On August 5, ITI Educational ousted him, Myers said. Nadine Dowling, director of the Woburn,
Massachusetts, campus of ITI Tech, became interim president.
In an unusual move in credential-conscious academia, ITI Educational also named an assistant
professor without an advanced degree to a deanship. When Triant Flouris, who has a doctorate and
has written four books, resigned as dean of aviation sciences, he was replaced by David Price, who
only has a bachelor' s degree.
156
Price is weeks away from completing a master's degree at Daniel Webster, and will enroll in a
doctoral program in the coming academic year at President Dowling' s request, he said in a telephone
interview. "ITT has continued the strong emphasis we've always had on getting a higher degree, " he
said.
Fewer Worries
The biggest difference at Daniel Webster under new ownership is "worrying less," Price said.
"There are a lot of schools that would just go under, students would be out of a school, faculty and
staff would be out of a job that they love passionately. I'm allowed to stay in the position I'm in
because of ITT."
In November, faculty members told a team from the New England commission visiting the campus
that ITI Educational had rewritten a college self-study report prepared by professors and staff for the
accrediting group. Faculty members complained that the company's revisions glossed over
inadequacies in such areas as governance, according to two people who attended the session.
When asked about the allegations concerning the self-study report, Richard Schneider, president of
Norwich University in Northfield, Vermont, who chaired the team, said that in his experience colleges
don't try to deceive accrediting bodies.
Face book Group
About 450 people have joined a Facebook group entitled, "I went to Daniel Webster before it sold
out," including Chad Los Schumacher, 20. After his sophomore year at Daniel Webster, where he
majored in homeland security and joined the paintball club, Los Schumacher transferred for the
current academic year to Saint Leo University in Saint Leo, Florida.
"It was a very hard decision to come to, but I knew I could not stay there," Los Schumacher said.
Los Schumacher was bothered by an ITI Educational policy that students receiving financial
assistance through work-study programs sign an agreement that the company owned their intellectual
output, he said.
"If I created the next Facebook or Twitter, it would be theirs, " Schumacher said.
Matthew Mcinnis, a flight operations major, stayed at Daniel Webster.
"A lot of big names in aviation have come through here and taught here," the senior from Beverly,
Massachusetts, said as he headed to the aviation center on Jan. 27. "Looking in the long term, the
ITI buyout should add value. Hopefully, it will attract better professors and more students."
Personnel Moves
The personnel moves took New Hampshire regulators aback, the officials said.
ITI Educational "did give me the sense they would continue as before," said Kathryn Dodge,
executive director of the New Hampshire Postsecondary Education Commission, in Concord, which
approved the sale in May. "We did not expect to see the turnover in staffing happen when it
happened. "
157
As a result of the Webster case, Dodge said, she is proposing to require colleges in ownership
transition to outline plans for faculty and staff contracts and internal governance.
"It's a cultural issue," Dodge said. "Unless we're extremely specific in our requests, for-profits aren't
as forthcoming as nonprofits. "
To contact the reporter on this story: Daniel Golden in Boston at dlgolden@bloomberg.net
Last Updated: March 4, 2010 10:26 EST
158
From:
Sent:
To:
Subject:
Davewave comcast.net]
Thursday, August 19, 2010 9:38 AM
Macias, Wendy; Kvaal , James
ABCNews.com: For-Profit Education: ABC News Goes Undercover to Investigate Recruiters
at the University of Phoenix
http://abcnews . go.com/Thelaw/profit-education-abc-news-undercover-investigate-recruiters-
university/story?id=ll411379
Just a test ... Sure you saw this .
Sent from my iPad
159
From:
Sent:
To:
Subject:
From: Way, Crystal
Dawson, Dawn
Tuesday, May 19, 2009 6:11 AM
Clough, Ann
FW: Newscli ps for Monday, May 18, 2009
Sent: Monday, May 18, 2009 9:39AM
Subject: Newsclips for Monday, May 18, 2009
Today there are seven Postsecondary articles from connectED, six articles from The
Chronicle of Higher Education and one article from Inside Higher ED for your review.
POSTSECONDARY EDUCATION
Tight Job Market Making Job Hunting More Difficult For New
College Grads. The Washington Post <http://www.washingtonpost.com/wp-
dyn/content/ article/2009/05/ 16/AR2009051602263.html> (5/ 17, Alcindor) reported, "Typically, 10 to 15
percent of members of a graduating class haven't nailed down a job or plans for graduate school, said Paul
Vill ell a, chief executive of HireStrategy, a recruiting and staffing company based in Reston. But after
contacting between eight and 1.0 area schools this year, he said, 'about 35 to 40 percent are graduating without
jobs or a predetermined plan in place."' According to the Post, the "National Association of Colleges and
Employers said in its spring 'Job Outlook' that employers plan to hire 22 percent fewer new graduates from the
class of2009 than they hired from the class of2008."
Maryland District Implements "Seven Keys To College Readiness"
Campaign. The Washington Post <http://www.washingtonpost.com/wp-
dyn/content/article/2009/05117/AR2009051701884.html> (5/18, De Vise) reports that educators in Montgomery
County, MD, "are blitzing parents and students with information on what they call 'Seven Keys to College
Readiness."' The brochures and a website dedicated to the initiative spell "out in detai l the courses and tests that
officials say point toward academic prosperity." The information explains to parents "how their children should
score on each test, and which courses they should take -- and when -- if they wish to earn a college degree."
Although some of the information is common knowledge, the "campaign also suggests that a chil d can be
deemed college-bound from a first-grade reading score or a fifth-grade math course." Meanwhile, "some parents
say the campaign is costl y and unnecessary."
Muslim Scholars Hope To Open Islamic College In US. The AP
<http://www.washingtonpost.com/ wp-dynlcontent/article/2009/05/17/ AR2009051701263.html> (5/17, Zoll )
reported, "A group of American Musli ms, led by two prominent scholars, is moving closer to fulfilling a vision
of founding the first four-year accredited Islamic college in the United States, what some are calling a 'Muslim
Georgetown.' Advisers to the project have scheduled a June vote to decide whether the proposed Zaytuna
Coll ege can open in the fall of next year, a major step toward developing the faith in Ameri ca." Imam Zaid
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Shakir and Sheik Hamza Yusuf "of California have spent years planning the school, which will offer a liberal
arts education and training in Islamic scholarship."
"Thousands Of Veterans" Could Benefit From New GI Bill. usA Today
<http://www.usatoday.com/news/education/2009-05-17-Glbill N.htm> (5/18, Michaels) says a "small but
growing number" of students at Dartmouth are a "reflection of a broader effort that encourages today's veterans
to enter college in much the same way the World War II-era GI Bill gave their grandparents a shot at higher
education. That effort has been led by two former Marines: Dartmouth President James Wright" and US Sen.
Jim Webb (D-VA), who helped pass the Post-9/11 GI Bill, which "could open college doors to thousands of
veterans." According to USA Today, the "bill takes effect Aug. 1."
St Michael's Students, Parents Question Value Of Liberal Arts
Education. The Christian Science Monitor <http://www.csmonitor.com/2009/0515/p02sl0-usgn.htrnl>
(5/15, Khadaroo) reported "Standing head and shoulders above the others on stage, clad in academic regalia"
during the St. Michael's College's commencement excercises, Secretary of Education Arne Duncan
"acknowledged the costs: 'With those college loans to pay back, you're probably wondering, 'Just how much is a
li beral arts education real ly worth?"" The "real value of a liberal arts education is that it teaches you ... how to
analyze a situation and make a choice," Duncan said. The Monitor adds, "For parents paying most of the bills at
a place where tuition and living expenses added up to nearly $40,000 this year, it's difficult not to wonder what
the payoff will be when the career path isn't immediately clear for their child."
Northern Virginia Community College Enrollment Surges Amid
Recession. The Washington Post <http://www.washingtonpost.com/wp-
dyn/content/article/2009/05/17/AR2009051702035.html> (5/18, Helderman, Kumar) reports that Northern
Virginia Community College "is a place of aspirations, where the unemployed and underemployed toil long
hours to become more computer-savvy, learn a foreign language, win a technical certification -- anything to
make them more appealing to employers. But it is a place, too, where high school graduates who had expected
to attend a four-year university wind up when their parents' savings evaporate in the stock market." Also, it "is
there that the three men seeking the Democratic nomination for governor in Virginia will go tomorrow for their
final debate before the June 9 primary, their l.ast opportunity to meet head-to-head in a campaign whose central
question has been which candidate can best handle the economic crisis." The Post notes that at Northern
Virginia Community College, "enrollment is up 10 percent from last year, as the economically vulnerable grasp
for the promise of education."
ED Rules On Federal Loan Repayment Seen As Firm. Liz Pulliam Weston
wrote in a "Money Talk" column in the Los Angeles Times <http://www.latimes.com/business/la-fi-montalkl7-
2009mayl7,0,1863696.column> (5/17) regarding a question on reducing federal student loan debt, "In most
cases, [ED] won't negotiate with borrowers over the amount they owe on federal student loans, said student loan
expert Mark Kantrowitz of FinAid.org. That's because the department has extraordinary powers to force you to
pay." Student 1 oan debt "can't be discharged in bankruptcy and the department can intercept tax refunds, garnish
your wages and take a portion of many government benefits, including Social Security checks, if you default."
Weston added, "Given its arsenal, the government can take a tough stance, Kantrowitz said. But he has heard
that the department sometimes will agree to forgive a portion of accrued interest and fees if the remaini ng
balance will be paid off in full."
THE CHRONICLE OF HIGHER EDUCATION
161
A Lifetime of Student Debt? Not Likely
Many college graduates borrow lightly or not at all, statistics show
By ROBIN WILSON
One college graduate had smashed a ceramic piggy bank, while another had adorned a li fe-size human statue
with nothing but a silver ball and chain. A third drew a picture of a woman in a red coat stumbling down a
seemingly endless pathway. The objects were all part of an art show last month in which graduates expressed
fear and frustration over their student-loan debt.
The show joins a number of increasingly high-pitched campaigns aimed at exposing what some consider a
national crisis: Student-loan borrowing that is threatening the financial future of today's coll ege students. In
January a lawyer with $100,000 in education debt started a Facebook campaign urging the federal government
to "free us of our obligations to repay our out-of-control student loan debt." Forbes magazine published an
article that same month called "The Great College Hoax," which said that the decision to borrow to attend
college often amounts to a "financial disaster." A month later, a book came out decrying coll ege debt, with the
title The Student Loan Scam: The Most Oppressive Debt in US. Hist01y and How We Can Fight Back (Beacon
Press).
But is it really all that bad?
"There are some really poignant, painful stories," says Michael S. McPherson, an economist and president of
the Spencer Foundation, which supports educational research. "But they aren't the typical American
experience."
In fact, despite stories of a large number of students who face gargantuan debt, about a third of graduates leave
college with no debt at all for their education. Of the 65 percent who face debt, the average they owe is around
$20,000. That's just below the starting price of a 2009 Ford Escape.
"Most people borrow a reasonable amount of money, they pay it back, and they are better for having gone to
college, " says Mr. McPherson.
But for a vocal min01ity of borrowers, problems with student-loan debt are very real. About 8 percent of
undergraduates borrow at least double the national average.
Why do some students borrow more than $40,000 for a bachelor's degree when average borrowing is only half
that? The answer is almost never that they are from very low-income families and need that much money to get
a four-year degree. Public four-year colleges charged an average of just $6,585 for in-state tuition and fees in
2008-9. The total cost, including textbooks, room and board, and other living expenses, averages $18,326 a year
-and financial aid brings that figure down for many students.
More often, the problem among students who go heavily into debt is that they are determined to attend their
dream college, no matter the cost.
"People don't pay attention to the debt, " says Mark Kantrowitz, publisher ofFinAid, a Web site about student
aid. "They want to be able to pay for the school they have wanted to go to for as long as they can remember,
and they are willing to do whatever it takes."
'Life Sentence'?
Students whom financial-aid experts call "overborrowers" capture most of the media's attention. "If you are a
writer vying for a story on Pagel, which story do you want to write?" asks Mr. McPherson. "Is it going to be
the careful story driven by the data, or is it going to be the headline that can scare people?"
He's talking about headlines like the one on a CNN report in 2006 that called student loans "A Life Sentence"
and said: "Forget about getting married and buying a home. This generation is thinking about next month's
payment."
But data on the average student-loan borrower tell a very different story. Figures compiled by the U.S.
Education Department show that whil e roughly two-thirds of students graduated from four-year colleges in
162
2003-4 with some education debt, on average they borrowed $19,202. Those who attended public institutions
graduated with an average debt of$17,277, and those from private colleges $21,957.
The data have been updated by the Project on Student Debt, a nonprofit research-and-policy organization,
which found that for the Class of2007, graduates' average debt was $18,482 at public colleges and $23,065 at
private ones.
Jill McCusker graduated in 2007 from Stonehill College, a Roman Catholic institution in Massachusetts. Her
$30,000 in education loans put her above the average, but she is managing her $300-a-month payments by
living with her mother for now. She doesn't regret her decision to attend Stonehill or even to borrow $30,000-
although it has caused her to delay her plans to live in an apartment in Boston with a friend. "I really love the
school and I felt it would look good on a resume," says Ms. McCusker, who earns $39,000 a year working in an
entry-level position for buyers at the headquarters ofTalbots, a chain of women's clothing stores.
Ms. McCusker is among the silent majority of borrowers who are repaying their student loans without much
complaint (see related articles). Her story stands in stark contrast to thousands of others on a new Facebook
page that calls on the U.S. government to forgive all student loans. Robe1t Applebaum, who started the page,
has been amazed to attract 188,766 friends and counting. With nearly $100,000 in education debt, though, he
has a story far different from Ms. McCusker's. Mr. Applebaum incurred his loans during law school , for which
the average graduate borrowed $70,933 in 2003-4.
Part of the confusion over the student-loan issue is that undergraduate debt is frequently conflated with graduate
and professional-school debt- which is typically much, much higher. In 2003-4, for example, medical-school
graduates borrowed an average of $113,661. Student-aid experts say the higher debt makes sense for people
who earn degrees in law, business, and medicine because they are much more capable of landing high-paying
jobs and paying off larger loans. (Mr. Applebaum has struggled because he went to an expensive law school but
then took a low-paying job with the district attorney's office in Brooklyn, N.Y.)
Still , many economists say borrowing for any kind of higher education is generally a smart idea. That's partly
because student loans typically carry low interest rates. "College is a very good investment, and most students
take out too few loans, not too many," says Caroline M. Hoxby, a professor of economics at Stanford
University.
Anthony P. Carnevale, director of Georgetown University's Center on Education and the Workforce, agrees.
"From an economist's point of view, debt is the very best way to pay for education because you're shifting the
cost forward until you'll be earning more money," he says. "You borrow cheap money. It's really a very good
bargain."
Patrick M. Callan, president of the National Center for Public Policy and Higher Education, is not as sanguine
about the value of borrowing. Still, "the only thing worse than borrowing," he says, "is not borrowing and not
going to college at all ."
Data on salaries back him up. According to the Census Bureau, the average college graduate earned $57,181 in
2007, while the average high-school graduate earned just $31,286. That means college graduates earned about
80 percent more that year than high-school graduates did. Over a lifetime, those extra earnings stack up.
According to a 2002 report by the Census Bureau, a college graduate can expect to earn nearly $1-million more
in lifetime earnings than a high-school graduate can.
"Alarmists have tried to change the public story on student-loan debt" by questioning whether borrowing for
college is worth it, says Sandy Baum, a senior analyst at the College Board. But a student who graduates with
$20,000 in debt should be able to make at least that amount in extra earnings in one to two years' time, she
calculates, simply by having earned a college diploma.
Even in this economy, college graduates are much better off than high-school graduates. Yes, white-collar
employees are losing their jobs. But the unemployment rate for people over 25 years old who hold at least a
bachelor's degree is 4.4 percent, compared with 9.3 percent for people that age who hold only a high-school
diploma, according to the Bureau of Labor Statistics.
163
Botrowing Risk
People concerned about student-loan debt say the problem is not that college isn't worth borrowing for, or even
that today's average loan amount is too much.
What bothers advocacy groups like the Project on Student Debt is how many more students are borrowing now
compared with a decade ago, how much more they are borrowing, and what that says about the affordability of
a college education.
In 1993, the project has found, fewer than half of graduating seniors had loans, compared with 65 percent in
2003-4. Among those with loans, the average debt has more than doubled, from $9,250 in 1993 to $19,200 in
2003-4.
"It used to be that, 10 to 20 years ago, if you went to a four-year public institution, had a low to moderate
1ncome, and worked a reasonable amount part time in school , there was enough aid. and public institutions were
better financed, so you could come out with no debt," says Lauren J. Asher, acting president of the group. "That
same student now would have to borrow to get their education. A college degree is still a good investment, but
the financial risk for the student has increased."
Indeed, Ms. Asher points out that more college graduates are carrying unmanageably high student-loan debts of
at least $40,000. A study by the project found that in 1993, only about 1.3 percent of graduating seniors had
borrowed the current equivalent of at least $40,000. By 2004 the proportion had risen to 7. 7 percent.
High student-loan debt, says Ms. Asher, "can ruin someone for life." Many borrowers who find themselves in
trouble use options under the federal loan program that allow them to postpone repayments on their loans for
years. The problem is that because interest keeps racking up during such a deferment and after a default, the
amount a borrower owes can soar.
That's what happened to Alan M. Collinge, founder of StudentLoanJustice.org, an advocacy group. He took out
$38,000 in loans, which included $15,000 for an undergraduate degree and $23,000 for a master's program in
aerospace eng1neering. In 1999 he took a research position at the University of Southern California at $35,000 a
year. By 2001, after he had spent $6,000 on an invention that didn't pan out and had a car accident that cost him
$1,500, he realized that he could no longer pay his bills, including his $362-a-month education debt. He went to
his boss, asked for a 30-percent pay raise, and quickly found himself out of a job and in default on his student
loans. His student-loan debt now has reached $120,000.
In February, Mr. Collinge published The Student Loan Scam, which blames lenders for using harsh collection
tactics and failing to work with distressed borrowers- some of whose stories he details in the book and on his
Web site. He acknowledges that these borrowers fall at the margins of the student-loan experience, but argues,
"The margins are important because those are real people."
It is not that difficult for borrowers to find themselves in trouble, Ms. Asher says. "People lose control of their
finances, and sometimes they make choices you wish they hadn't made."
That could probably be said of Darla M. Horn, who organized the student-loan-debt art show last month in
Long [sland City, N.Y. Ms. Hom says she has taken responsibility for repaying her $80,000 in undergraduate
student loans. Until recently she earned $100,000 a year and could afford her repayments of $650 a month. (She
is between jobs now and recently put her loans in forbearance while she worked on the art show, which she said
was meant "to boost awareness of the growing burden of student-loan debt in an ever-tightening, ever-
globalizing economy.") But she says she is not sure anyone should lend college students so much money, even
if they are willing to take it.
Ms. Horn didn't have to borrow all that she did to earn a four-year degree, but she wanted to get far away from
the small Texas town on the Louisiana border where she grew up. So she enrolled at the State University of
New York College at Purchase and borrowed about $25,000 a year for the final three years to pay her out-of-
state tuition. "There really wasn't a whole lot of thinking behind it," says Ms. Horn, whose parents hadn't saved
much for her higher education. "I could have gone to a public school in Texas for less, but I wanted to go to
New York and start a new life."
164
When she graduated, she realized that she didn't even know how much money she had borrowed. "I can humbly
say that I was completely financially illiterate," she says. "I was just signing the documents and faxing them
back."
Experiences like Ms. Horn's aren't uncommon, say higher-education experts. Indeed, heavy borrowers are not
necessarily poor students who would have been forced to forgo higher education if they hadn't received
extravagant sums. Rather, some students enroll in high-priced for-profit programs onJy to learn later that their
certificates or degrees are not as useful on the job market as they had expected. Students who attend four-year
programs at for-profit institutions borrow much more on average- about $28,138 each in 2003-4- than
students at nonprofit institutions do. Others borrow large amounts to attend pricey traditional four-year colleges
but have no idea what kind of jobs they might land upon graduation and so have no way to judge whether they
will be able to repay their loans.
'Intimidated by the Complexity'
Meanwhile, it is no one's job to talk with students about whether the amounts they are borrowing line up with
their professional aspirations or even their immediate job prospects.
"College academic advisers are intimidated by the complexity of financial aid," says Jacqueline E. King,
assistant vice president for policy analysis at the American Council on Education. Financial-aid offices say to
students, "You make the academic decisions, and we will try to get you the money to pay for it," she says.
Sitting down with each student to judge the wisdom of the amount he or she has borrowed would be impossible,
particularly at large universities, she says.
Donald A. Saleh, vice president for enrollment management at Syracuse University, says it does try to advise
students. According to a recent analysis by US. News & World Report, 63 percent of students in Syracuse's
Class of 2007 took out education loans, borrowing an average of $27,152. That landed the university on the
magazine's list of universities with the heaviest student borrowing. (US. News uses the mean when calculating
average debt, while Syracuse uses the median, which is only $22,600 on average per student.)
"We can advise students about what we think is right, and we will caution students," says Mr. Saleh. "But if
they have the legal ability to borrow the money, we can't prevent that from happening."
New York University- where student borrowers graduated with an average of $33,637 in debt in 2007- has
begun contacting high-school seniors it has admitted to make sure they understand the debt load they could
incur if they enroll (The Chronicle, <http://chronicle.com/weekly!v55/i34/34a01801.htm> May 1).
Deanne Loonin, director of the Student Loan Borrower Assistance Project at the National Consumer Law
Center, says students shouldn't rely on their colleges to warn them about overborrowing. "It's too great a
conflict of interest for schools that are essentially selling a product to be expected to be the ones who are going
to be conservative financial counselors," she says.
Besides, students are not always open to such advice. "Making the college choice is a very emotional decision,"
says Allesandra Lanza, a spokeswoman for American Student Assistance, a loan-guarantee agency in Boston.
"It is not just the education you are receiving, but this whole idea of an experience that will change your life,"
she says. That makes it difficult for people to step back and ask, "Is this the most valuable use of your dollars?"
Sometimes the hopes and dreams of an entire family can get caught up in a decision about where to attend
college. That's particularly the case at religious institutions, says John Maguire, who is chairman of Maguire
Associates, a higher-education consulting firm in Bedford, Mass. "For families who believe deeply in the
mission of a Christian college, this is a school they'll spend any amount of money on," he says. "When people
are saying, 'This will make a huge difference in my kid's life,' they are not talking about income. They are
talking about whether their kid is going to go to church on Sundays, whether they will raise their own kids in
the church, or even whether they will get into heaven."
Robert A. Sevier, senior vice president at Stamats Inc. , a higher-education marketing firm in Cedar Rapids,
Iowa, doesn't have a lot of sympathy for college graduates who find they cannot repay their education loans.
165
Overborrowing for college isn't much different than overborrowing for a home, he says. "People live outside
their means."
But that doesn't describe most college graduates, he adds. "In spite of all the hysterical extremes, there are a lot
of people in the middle who are making things work. They are graduating from college with $20,000 in debt,
they are going to graduate school , getting jobs, and buying homes within their means."
Online Education at U. of Texas Faces Financing Gap
By MARC PARRY
The future of the University of Texas' online-education arm is under scrutiny as the system phases out a major
subsidy that has supported the venture for years, The Chronicle has learned.
The UT TeleCampus is the latest virtual university to confront hard questions as online education matures from
its upstart days. Analysts see an overall shift from the development of new programs to a point where
universities and state legislators are beginning to question the business models of existing programs.
The UT TeleCampus counts as a relative veteran in its field, one of several state or system-level efforts begun in
the late 1990s. The virtual campus does not grant degrees, but it encourages campuses within the Texas system
to put programs online, facilitates collaborative degrees that pool courses from different campuses, and offers
services like marketing and faculty training.
The University of Texas, the biggest system in the country' s second-most-populous state, has invested roughly
$22-rnillion from endowment earnings into the TeleCampus over more than a decade. Next year' s proposed
budget would reduce the subsidy to $983,000 of the TeleCampus' s $2.5-rnillion budget, according to the
service's director, Robert L. Robinson. The plan is to phase out the subsidy entirely by 2012.
"We' ve got to find a way to fill the gap," said Darcy Hardy, assistant vice chancellor for academic affairs and
executive director of the TeleCampus.
Michael K. Moore, senior vice provost at the system's Arlington campus, sees huge growth opportunities as
more students take classes online. He worries that Texas is "hamstringing our efforts to compete in that world
without an aggressive budget that will allow us to do so."
' 'I'm very concerned about the future viability of the TeleCampus without a clear, robust revenue stream," said
Mr. Moore, whose institution is a big participant in the service.
The Online-Education 'Shakeout'
David B. Prior, who has jurisdiction over the TeleCampus as the system's executive vice chancellor, told The
Chronicle on Friday that "the system role vis-a-vis the campuses is to stimulate activity on those campuses and
then get out of the way."
He added, "We are indeed pursuing aggressively continuing activities in distance education on our campuses.
But we' re just going to be doing it a different way."
The TeleCampus is not the only virtual university in a tough spot.
Because of the recession, similar services in other states are being cut or stretched or asked to find income from
other sources, said Russell C. Poulin, associate director ofWCET, a higher-education e-learning membership
group based in Boulder, Colo.
"What we' re seeing is a shakeout," said Mr. Poulin, who has written about the financing of online universities.
"Those that have been able to provide services that are of value to their constituent institutions have done well.
And then those that have not been able to provide those services are starting to go away."
Also going away is a major national source of money for online education. The Alfred P. Sloan Foundation last
month revealed plans to end a grant program <http://chronicle.com/weekly/v55/i32/32a01601.htm> that had
funneled roughly $80-million into university online-education ventures since the early 1990s. The program
166
director, A. Frank Mayadas, explained that move by saying that foundations are in the business of starting new
things, not sustaining them.
This Thursday, meanwhile, the University oflllinois Board of Trustees is expected to revisit the issue of its
Global Campus <http://chronicle.com/ wiredcampus/article/?id=3689> distance-education program, which has
fallen short of enrollment projections and generated friction within the system.
New Sources of Revenue
The UT TeleCampus saw steady enrollment growth over the past decade.
"They' re a victim of their own success to some extent," said Richard Garrett, program director and senior
research analyst with Eduventures Inc., a consulting firm in Boston. "In a particularly troubled financial
environment, they may be seen as something that could survive on its own."
Mr. Moore, who is participating in talks about the future of the TeleCampus, sees several potential scenarios
that could help sustain the service.
One could be to levy a student fee for the service, he said. A second idea could be to charge more to the
campuses, whose annual fees already make up a significant source of revenue for the TeleCampus. A third
option would be to increase the amount of for-profit contract work the TeleCampus does, like providing
distance training for companies.
Another avenue the TeleCampus is exploring is the development of high-enrollment programs for the
completion of bachelor' s degrees.
Texas must double its number of graduates by 2020 to meet state and national mandates, according to a plan
overview provided to The Chronicle by the TeleCampus called "Bridges to Bachelor Completion. " Reaching
out to the 3.5 million adult Texans who started college but never finished is a necessary part of meeting that
goal , the paper says.
For-profit colleges are already significant players in that market, Mr. Garrett said. But he argued that online
education is overrepresented at the graduate level and underrepresented at the undergraduate level.
With its experience, he said, the University of Texas has "a strong hand to play."
And the risks?
"The biggest risk," Mr. Robinson said, "is that if we fail , the TeleCampus will have to close, given the budget
cuts."
Will Higher Education Be the Next Bubble to Burst?
By JOSEPH MARR CRONIN and HOWARD E. HORTON
The public has become all too aware of the term "bubble" to describe an asset that is irrationally and artificially
overvalued and cannot be sustained. The dot-com bubble burst by 2000. More recently the overextended
housing market collapsed, helping to trigger a credit meltdown. The stock market has declined more than 30
percent in the past year, as companies once considered flagship investments have withered in value.
Is it possible that higher education might be the next bubble to burst? Some early warnings suggest that it could
be.
With tuitions, fees, and room and board at dozens of colleges now reaching $50,000 a year, the ability to sustain
private higher education for all but the very well-heeled is questionable. According to the National Center for
Public Policy and Higher Education, over the past 25 years, average college tuition and fees have risen by 440
percent -more than four times the rate of inflation and almost twice the rate of medical care. Patrick M.
Callan, the center's president, has warned that low-income students will find college unaffordable.
Meanwhile, the middle class, which has paid for higher education in the past mainly by taking out loans, may
now be precluded from doing so as the private student-loan market has all but dried up. In addition, endowment
cushions that allowed colleges to engage in steep tuition discounting are gone. Declines in housing valuations
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are making it difficult for families to rely on home-equity loans for college financing. Even when the equity is
there, parents are reluctant to further leverage themselves into a future where job security is uncertain.
Consumers who have questioned whether it is worth spending $1,000 a square foot for a home are now asking
whether it is worth spending $1,000 a week to send their kids to college. There is a growing sense among the
public that higher education might be overpriced and under-delivering.
In such a climate, it is not surprising that applications to some community colleges and other public institutions
have risen by as much as 40 percent. Those institutions, particularly community colleges, will become a more-
attractive option for a larger swath of the collegebound. Taking the first two years of college while living at
home has been an attractive option since the 1920s, but it is now poised to grow significantly.
With a drift toward higher enrollments in public institutions, all but the most competitive highly endowed
private colleges are beginning to wonder if their enrollments may start to evaporate. In an effort to secure
students, some institutions, like Merrimack College near Boston, are freezing their tuition for the first time in
decades.
Could it get worse for colleges in the coming years? The numbers of college-aged students in the "baby-boom
echo, " which crested with this year's high-school senior class, will decline over the next decade. Certain Great
Plains and Northeastern states may lose 10 percent of the 12th-graders eligible for college. Vermont is expected
to lose 20 percent by 2020.
In the meantime, online, nontraditional institutions are becoming increasingly successful at challenging high-
priced private colleges and those public universities that charge $25,000 or more per year. The best known is
the for-profit University of Phoenix, which now teaches courses to more than 300,000 students a year-
including traditional-aged college students- half of them online. But other competitors are emerging. In
collaboration with an organization called Higher Ed Holdings, some state universities have begun taking back
market share by attracting thousands of students to online programs at reduced tuition rates. One such
institution is Lamar University, in Texas, which has seen its enrollment mushroom since working with Higher
Ed Holdings to increase access to some of its programs.
Moreover, increases in federal financial aid and state scholarships have been unable to keep up with the
incessant annual increases in tuition at traditional four-year colleges. For example, Congress has raised the Pell
Grant limits from $4,731 to $5,350 a year by scrubbing the federal loan programs of bank subsidies thought to
be excessive. But $5,350 pays for only about four to six weeks at a high-priced private college.
A few prominent universities, including Harvard and Princeton, have made commitments to reduce or eliminate
loans for those students from families earning less than $75,000 or even $100,000 a year. But the hundreds of
less-endowed colleges cannot reduce the price of education in that fashion. It is those colleges that are most at
risk.
What can they do to keep the bubble from bursting? They can look for more efficiency and other sources of
tuition.
Two former college presidents, Charles Karelis of Colgate University and Stephen J. Trachtenberg of George
Washington University, recently argued for the year-round university, noting that the two-semester format now
in vogue places students in classrooms barely 60 percent of the year, or 30 weeks out of 52. They propose a IS-
percent increase in productivity without adding buildings if students agree to study one summer and spend one
semester abroad or in another site, like Washington or New York. Such a model may command attention if
more education is offered without more tuition.
Brigham Young University-Idaho charges only $3,000 in tuition a year, and $6,000 for room and board. Classes
are held for three semesters, each 14 weeks, for 42 weeks a year. Faculty members teach three full semesters,
which has helped to increase capacity from 25,000 students over two semesters to close to 38,000 over three,
with everyone taking one month (August) off. The president, Kim B. Clark, is a former dean of the Harvard
Business School and an authority on using technology to achieve efficiencies. By 2012 the university also plans
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to increase its online offerings to 20 percent of all courses, with 120 online courses that students can take to
enrich or accelerate degree completion.
Colleges can also make productivity gains by using technology and re-engineering courses. For the past 10
years, the National Center for Academic Transformation, supported by the Pew Charitable Trusts, has helped
major universities use technology to cut instructional costs by an average of 40 percent while reducing the
number of large course sections, graduate teaching assistants, and faculty time on correcting quizzes. Grades
have increased, and fewer students have dropped out. Meanwhile, students have a choice of learning styles and
ways to get help online from either fellow students or faculty members. That "transformation" requires a
commitment to break away from the medieval guild tradition of one faculty member controlling all forms of
communication, and to give serious attention to helping students think and solve problems in new formats.
The economist Richard Vedder of Ohio University, a member of the federal Spellings Commission, offers more
radical solutions. He urges that university presidents' salaries include incentives to contain and reduce costs, to
make "affordability" a goal. In addition, he proposes that state policy makers conduct cost-benefit studies to see
what the universities that receive state support are actually accomplishing.
Fortunately, some other forces are at work that might help save higher education. The federal government
recently raised significantly the amount of money that returning veterans might claim to pursue higher-
education degrees, so it reaches at least the level of tuition and fees at many public universities.
In addition, the rest of the world respects American higher education, and whether studying at a college here or
an American-based one abroad, the families of international students usually pay in full. The number of
international students could rise from 600,000 to a million a year if visa reviews are e x p e d i t e d ~ the crisis of
September 11, 2001, temporarily reduced the upward trajectory of overseas enrollments in American colleges.
Accrediting agencies could also develop standards to expedite the exporting of American education into the
international market.
But colleges cannot, and should not, rely on those trends. Although questions about the mounting prices of
colleges have been raised for more than 30 years and just a few private colleges have closed, the stakes and
volume of the warnings are mounting. Only during a critical moment in economic history can one warn of
bubbles and suggest that the day of reckoning for higher education is, in fact, drawing near.
Joseph Marr Cronin is the former Massachusetts secretary of educational affairs, and Howard E. Horton is the
president of New England College of Business and Finance.
A Year of College for All: What the President's Plan Would Mean for
the Country
By KELLY FIELD
President Obama hasn't met Serena Baker, but she may be just who he had in mind when he challenged every
American to commit to a "year or more" of higher education or training.
A 28-year-old mother of four, she had spent eight years as a part-time cashier at a grocery store in Baltimore
when she decided, just over a year ago, "to begin a career." After scanning the local job listings, she chose
medical assisting, one of the nation's fastest-growing fields, and enrolled in a 13-month certificate program at
the Community College of Baltimore County.
This week she will trade in her cashier's apron for hospital scrubs and a job at Baltimore's Mercy Hospital. Her
salary won't go up much initially, but she hopes to make $10,000 to $15,000 a year more once she is certified.
She sits for the test in July.
The president wants more Americans to follow Ms. Baker's example. In a speech before Congress in February,
he called the nation's steep high-school dropout rates and low college-completion rates a "prescription for
economic decline," and he urged all Americans to commit to a year of college, technical training, or
apprenticeship.
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If the country complies, the economic returns could be extraordinary. Nationwide some 101.5 million adults
over the age of 18 -a full 45 percent of Americans- have never attended college, according to the Census
Bureau. If each of them took a year's worth of college courses, their earnings would grow by $70-billion,
according to estimates by the Center on Education and the Workforce, at Georgetown University.
The nation's employment picture would probably improve, too. Although the economic downturn has affected
Americans at all education levels, it has hit the least educated hardest. In April people without a high-school
diploma were twice as likely to be unemployed as those with "some college" or an associate degree, according
to the U.S. Bureau of Labor Statistics.
But getting to the president's goal will not be easy, and skeptics say it is not even necessary. While a college
degree may lead to higher earnings, it still is not a requirement for most jobs.
Indeed, nearly 35 percent of jobs in 2006 required less than a month of on-the-job experience and informal
training, and another 18 percent required less than a year, according to the Department of Labor.
Critics of the president's plan say it would be a waste of time and money for all Americans to get a full year of
postsecondary education.
"This is essentially a 'consume-more-education' policy," argued Neal McCluskey, associate director of the
Center for Educat1onal Freedom, at the libertarian Cato Institute, at a recent forum. "We're encouraging people
to consume education that they're either not prepared for or aren't really interested in by subsidizing it and
having our leaders tell us it's the ticket to the middle class and the American dream."
A More 'Modern' Approach
Mr. Obama is not the first president to aspire to universal higher education. In a 1996 commencement address at
Princeton University, President Bill Clinton urged all Americans to get two years of college and proposed a tax
credit to help them pay for it.
But while President Clinton set the standard at two years of college, the pragmatic Mr. Obama set it at one. And
while Mr. Clinton imagined "college" for all , Mr. Obama envisions "community college or a four-year school ,
vocatlonal training, or an apprenticeshjp."
Anthony P. Carnevale, director of Georgetown's Center on Education and the Workforce, says the president's
proposal is "more modern" and more inclusive than his predecessor's.
"He's talking about the system in a much more comprehensive way, " he says.
The president has not said why he picked one year over two, and White House officials would not comment on
the record. But a White House press officer said the idea originated with the Whjte House chief of staff, Rahm
Emanuel, a former Democratic congressman from lllinois. Last year Mr. Emanuel wrote an editorial in The
Wall Street Journal in which he argued that Americans should be required to have a year of training and
education after high school.
"In an era in which you earn what you learn, Americans should no longer be allowed to drop out of school at
age 16," he wrote.
While Mr. Obama's target is less ambitious than Mr. Clinton's, it may be more realistic. Many working adults
don't have the time or money to attend college for two years. They want to earn the credent1al that will get them
a job as quickly as possible, and at the lowest cost possible.
"They need a job and they need it quickly, " says Jeannie Tighe, who got a surgical-technology certificate four
years ago at age 44 and now teaches in the Community College of Baltimore County's surgical-technology
program. "They don't have two years."
With the nation's unemployment rate at its highest point in 25 years, the president seems more concerned with
quickly getting Americans bankable skills than in achieving an ideal. In a recent interview with The New York
Times Magazine, he stressed that it is not just the credential that matters, but its marketability.
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"If you're only going to go to school for two years ... then making sure that you're enrolled in a program where
at the end of the journey you can see a job or a career or a field that is growing instead of contracting certainly
can make some sense," he said.
That includes health-care jobs, which are expected to grow at twice the national average, according to the Labor
Department. Demand for medical assistants like Ms. Baker, who help doctors with exams and perform
administrative tasks, among other duties, is projected to grow by 35 percent between 2006 and 2016, making it
the eighth fastest-growing occupation in the country.
Mr. Carnevale, who has served as a consultant to the Obama administration, says the president is "thinking as
an economist" when it comes to college experience: "He's essentially looking at the earnings returns."
College's Labor-Market Value
There is considerable evidence that college pays. In 2007 workers with some college courses or associate
degrees earned 12 percent more than high-school graduates, while workers with bachelor's degrees earned 63
percent more than those with some college or an associate degree, according to the Census Bureau.
The least educated are also the most vulnerable during economic downturns. In April the unemployment rate for
Americans who didn't finish high school was 14.6 percent; among students with some college or an associate
degree, it was 7.4 percent.
While there is relatively little national data on the labor-market value of "a year of higher education," or a
yearlong certificate, several studies suggest that each year of college credit provides a roughly 5-percent
increase in earnings. A certificate provides an additional 1-percent bump, according to an analysis of Census
Bureau data by the Center on Education and the Workforce.
Some research suggests that a year of college plus a certificate may be the tipping point in terms of earnings. In
2005 researchers in Washington State found that students who took a year's worth of courses and got a
credential earned considerably more than students who enrolled in shorter-term training or adult basic-skills
education. While short-term and basic-skills training gave students the tools they needed to enter the work
force, it generally did not help them advance beyond low-paying jobs.
Julian L. Alssid, executive director of the Workforce Strategy Center, a New York nonprofit group, says Mr.
Obama's proposal "recognizes that college is the entry point to the middle class."
According to Labor Department projections to 2016, 15 of the 30 fastest growing occupations will require a
bachelor's degree or higher, while seven will require a certificate or other vocational award or associate degree.
Those occupations, which include home health aides, computer-software engineers, personal financial advisers,
and makeup artists, are expected to add 2.3 million jobs over the 2006-16 period.
Still, about a third of all new jobs- more than 4.6 million- will require a month or less of on-the-job
training, and 34 percent of all jobs in 2016 will require that amount.
Critics of the president's plan say those statistics show that it would be a waste of time, and of money, to push
all Americans into yearlong programs.
"To suggest that every kid have a year of postsecondary education isn't realistic and it isn't necessary for all kids
to get a job," says Dennis Redovich, executive director of the Center for the Study of Jobs and Education in
Wisconsin and the United States. "The fact of the matter is that a majority of jobs require short-term, on-the-job
training."
President Obama is already taking steps to achieve his goal. This month he announced that his administration
would work with colleges and states to help unemployed workers recei ve Pell Grants and keep their jobless
benefits when they enroll in college.
In many states, workers lose their unemployment benefits when they enroll in college. At the same time, their
prior year's earnings may disqualify them for a Pel! Grant. These factors can discourage unemployed workers
from attending college.
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Under the president's plan, the Labor Department will ask states to make exceptions during economic
downturns, while the Education Department will encourage colleges to factor in the financial situation of
unemployed appli cants when awarding aid. Whether the plan succeeds will, of course, depend on the
cooperati on of coll eges and states, and available resources.
Meanwhile, the president and Congress have poured bi llions into job-training programs and student aid, while
providing states with billions more to ease budget cuts to coll eges and schools. An economic-stimulus bill
signed into law in February contained $4-billion for job training, $17-billion for Pell Grants, and $200-million
for Federal Work-Study, and increased a tax credit for tuition from $1,800 to $2,500.
But it will take more than j ust money to reach his goal of higher education for all, experts say. High schools will
have to do a better job of preparing people for coll ege, so they don't spend their "year of college" in remedial
education, and colleges will have to do more to reach out to students who typically don't enroll .
"Higher education needs to do a better job of lifting aspirations and communicating that college is possible,"
says Brian K. Fitzgerald, executive director of the Business-Higher Education Forum.
At the same time, community colleges must conti nue to work with business leaders to ensure that they are
preparing students for high-growth careers, says Arthur J. Rothkopf, senior vice president of the U.S. Chamber
of Commerce.
Public perceptions about college will also need to change. While a majority of adult students enroll in
community colleges, many Americans still think of college as a four-year bachelor's degree.
"We have to demystify attending college, " says Bob Jones, president of Education Workforce Policy LLP, a
public-policy consulting company.
Brian Foley, provost of the Medical Education Campus ofNorthern Virginia Community College, says the
country must "elevate the status of technical jobs."
"These jobs keep our economy running," he says.
For Ms. Baker, a year of education has increased her status in the work force, and in her family. Her children,
she says, "like to think I'm a doctor."
She thinks the president's goal for the country is realistic, at least for those who aspire to it.
"I never wanted to attend college for four years," she says. "But who can't give up a year of their life to get
educated?"
Megan Eckstein contributed to this report.
http://chronicle.com
New Private Universities in Kuwait Pin Their Hopes on U.S. Partners
By ANDREW MILLS
Kuwait
Sharply dressed in black suits and bright red ties, the two recruiters latch onto high-school students as they walk
through the gates of Exhibition Hall No. 8 at the Kuwait fairgrounds.
"I want to tell you about the American University of the Middle East," one of the recruiters says, following a
visitor into the university fair.
"We're affiliated with Purdue University, from the United States. Do you know Purdue?" his sidekick adds,
brandishing a clipboard emblazoned with the Purdue logo. "Would you like more information? Just fi ll out this
card and visit our booth. We have a coffee bar there."
These recruiters have figured out that the key to selling private higher education in Kuwait is to emphasize what
may be their year-old institution's most important asset: its affiliation with a top foreign university.
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"The international affiliation is very important. Purdue is a good American university. Its reputation is known,"
says Ahmad Al-Jaber, one of many high-school seniors who swarm around the American University of the
Middle East's booth. "And it's not going to put its name with a school that is not good. Is it?"
This implied assurance of quality is more than just an institutional strategy. It's a national one. When Kuwait
lifted a ban on private higher education less than a decade ago, it decided that the best way to ensure the
development of academically sound universities was to require all new institutions to have foreign partners.
That policy has helped the country rapidly build a credible private higher-education system where none existed
before. In only eight years, eight private colleges have opened in this sprawling city-state, catering to some
13,000 students. Nine additional institutions have been authorized to open in the next few years.
Two other Kuwaiti universities have paired with American colleges. The GulfUniversity for Science and
Technology, a polytechnic, teamed up with the University of Missouri at St. Louis; and the American
University of Kuwait, a liberal-arts college, is in partnership with Dartmouth College. Other private colleges
have Australian or European partners.
To be sure, Kuwait's private universities have not yet established the kjnd of academic profile needed to place
the small nation on the academic map. When it comes to the Middle East's higher-education renaissance,
nobody mentions Kuwait's colleges in the same breath as New York University's soon-to-open campus in Abu
Dhabi or Qatar's Education City, whose six U.S. branch campuses have established Doha as a college town on
the Persian Gulf
But here in Kuwait, the private universities have transformed the local scene.
For more than three decades, private higher education was banned in Kuwait. The giant, state-owned Kuwait
University was the only option for students who wanted to earn a college degree in this emirate at the northern
end ofthePersian Gulf
But as the number ofKuwaitis edged close to a million during the 1990s, Kuwait University simply could not
keep up with the demand.
Qatar and the United Arab Emirates faced similar challenges. But the unopposed rulers of those petrodollar-rich
monarchies could set aside the kind of public money needed to build flashy campuses and lure top foreign
universities to fill them up.
Politics are much more complicated in Kuwait, an aspiring democracy where a tumultuous parliament
frequently exercises its power to oppose the ruling family's decisions, including on the national budget. Public
money has never been as easily available as it has been among Kuwait's neighbors.
So the Ministry ofHigher Education settled on a more cost-effective approach: It turned to the private sector.
The government has set out a number of requirements for private investors wishing to develop their own
universities. The foreign partner must be ranked among the top 200 by The Times Higher Education Supplement
or appear on U.S. News and World Report's top tier of colleges. The relationship between the Kuwaiti
institution and its foreign partner must be a meaningful one.
"We don't want to be in a situation where we're buying degrees- fancy degrees, with fancy names, but not
enough meat," says Imad Alatiqi, secretary general of the Private Universities Council, which regulates all
private universities in Kuwait. "We want substantive relationships, where there is a commitment of quality from
the local people and from the international people."
Within those requirements, though, there is quite a bit of variety. The University of Maastricht Business School,
in the Netherlands, and the Box Hill Institute, in Australia, have opened branch campuses or franchises of their
home institutions in Kuwait. The Kuwaiti partners take a back seat when it comes to day-to-day operations.
Other local investors have chosen to seek advice from their foreign partners, but manage their own academics
and operations.
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In those cases, the Private Universities Council requires the foreign partner to submit a formal opinion every
time the Kuwaiti university makes a major academic decision, such as starting a program or hiring an academic
officer.
The council, which licenses and accredits all institutions, also sets the standards it expects private universities in
Kuwait to meet.
"Any arrangement between the two universities that can deliver those standards, we welcome, " Mr. Alatiqi says.
A Liberal-Arts Alternative
In 2003 a group of investors led by Sheikha Dana Nasser A1-Sabah, a member of Kuwait's ruling family,
wanted to establish an American-style liberal-arts college. They approached Dartmouth, which offered the kind
of curriculum and approach to teaching they hoped to emulate.
They first called Dale F. Eickelman, a Dartmouth anthropologist. It was clear to him, he says, that the Kuwaiti
investors wanted to develop a deep relationship.
"From the start, their instinct was to say to us, 'We don't just want you to sign off on things for us, we want you
to help us aim for the highest level ,"' says Mr. Eickelman, who has spent more than three decades working in
the Middle East.
Dartmouth found the idea of helping build a liberal-arts college in the Middle East, a relatively uncommon
concept here, hard to resist.
Six years later, hundreds of students now mingle in the shaded courtyards of the American University of
Kuwait, switching seamlessly from Arabic to English and back again.
The compact campus on the outskirts of this dusty city, with its palm trees and glass buildings, could not seem
farther from Hanover, N.H. But inside its classrooms, the approach to learning is similar.
The largely Western-educated faculty members do not expect their students to memorize lectures, as is common
in Middle Eastern universities. Instead, Dartmouth has helped the American University of Kuwait set up the
kind of curriculum and structure that, Mr. Eickelman says, encourage students to learn how to form their own
opt mons.
The university emphasizes a broad liberal education. After the Private Universities Council concluded that
Kuwait had no need for anthropologists, Dartmouth worked with university officials to successfully argue that
degrees in anthropology and sociology would prepare students for a wide variety of careers.
Dartmouth's agreement with the American University of Kuwait, which extends until at least 2013, is
intentionally vague, says Laurel R. Stavis, executive director of the Dartmouth College-American University of
Kuwait Project. There is no pro forma checklist of things the two institutions must do for each other.
Instead the relationship is an "organic" one that changes to meet the Kuwaiti university's needs as it matures,
Ms. Stavis says.
Administrators and faculty members from the American University of Kuwait are able to tum to a group of
Dartmouth consultants, selected by Ms. Stavis and Mr. Eickelman, for advice on issues like governance, faculty
recruiting, and communications.
Students from both universities have begun traveling back and forth. This summer an American University of
Kuwait faculty member will be awarded a fellowship to spend a month conducting research in Hanover.
Ms. Stavis is also helping develop a dual-degree program that would enable Kuwaiti students interested in
engineering degrees, which are not offered by the American University of Kuwait, to complete their studies in
New Hampshire, earning a Dartmouth degree.
The Kuwaiti university covers all of Dartmouth's expenses, but it is hardly a money-making opportunity for the
college, Mr. Eickelman says.
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"The amount of money is a joke. Let's just say it's tremendously little for the work that is being done, " he says,
declining to say exactly how much money Dartmouth has brought in.
Building Up the Sciences
Joel Glassman, associate provost and director of the Center for International Studies at the University of
Missouri at St. Louis, says his university is more interested in helping to build indigenous institutions overseas
than in cloning the home campus and transplanting it to the other side of the world.
"It's not so mysterious," says Mr. Glassman, who heads up Missouri's work with the Gulf University for Science
and Technology. "They're asking for our advice. Academics are not shy people. There is nothing we love more
than being asked for advice."
Administrators and faculty members from St. Louis have helped the Kuwaiti university develop academic
programs and curriculum, recruit faculty and staff members, and build the university's administrative
organization.
The GulfUniversity for Science and Technology, which opened in 2002 and enrolls about 2,600 students,
modeled its programs after those offered in Missouri. Students can earn undergraduate degrees in computer
science, English, business, and mass communications, and a master's in business administration.
Like the American University of Kuwait, it requires all undergraduates to take a set of general-education
courses.
The university has ambitious plans to spend $100-million to expand its campus to house a full-fledged
engineering college.
This is Missouri's second such partnership in the Persian Gulf It has advised the Modern College of Business
and Science, in Muscat, Oman, since it opened in the early '1990s.
Now Missouri is helping the science-and-technology university as it seeks accreditation from AACSB
International : the Association to Advance Collegiate Schools of Business.
Robert Cook, vice president for academic affairs at the university in Kuwait, is in the process of hiring 38
faculty members.
He says the relationship with the Missouri campus has given the university's recruitment efforts a boost.
Attracting quality faculty members is often the biggest challenge new universities face in the region.
"For potential faculty members who have never been to the Middle East before, Kuwait can seem an
intimidating place, " says Mr. Cook. "So we did all the interviews for American candidates on the St. Louis
campus, and a University of Missouri-St. Louis faculty member in the same field sat in on the interviews."
That assured candidates that the Gulf University for Science and Technology is a serious institution, strongly
linked to a serious U.S. university, Mr. Cook says.
The Kuwaiti university has not yet built much of a regional reputation, but here in Kuwait its skills-based
programs are highly regarded.
Mr. Cook boasts that 80 percent of its graduates are employed within six months of graduation. Unlike most
public-university graduates, who are automatically given government jobs, graduates ofthe Gulf University for
Science and Technology typically find work in the private sector, where employers demand the best candidates,
he says.
Gaining C1edibility
Back at the university fair, the American University of the Middle East's recruiters have done their job: The
university's booth is surrounded by teenagers filling out applications for next fall.
The campus is still in its first year of operation. About 100 students are enrolled in three degree programs-
business, design, and information technology- which operate out of a single building at the edge of a
windswept stretch of land.
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Purdue has agreed to help the Kuwaiti university design and build "some very Purdue-like programs that will,
over time, morph into the kind of programs they need in Kuwait," says Andrew Gillespie, Purdue's associate
dean of international programs.
Kuwait's private universities face a clear challenge as they continue to expand. The best Kuwaiti students still
prefer to study abroad. And two out of every five students- 20,000 of them- take advantage of generous
overseas government scholarships every year.
Mr. Al-Jaber, the Kuwaiti student, says that his first choice is to study abroad and his second choice is to study
at the American University of Kuwait. But, he adds, the American University of the Middle East is not a bad
third choice.
While that suggests that many Kuwaiti students still don't have confidence in the quality of their own higher-
education system, Mr. Alatiqi, of the Private Universities Council, prefers to see the students as an untapped
market.
"So you can see why we're so concerned about building quality universities, " says Mr. Alatiqi, snapping his
fingers. "We can pick up 20,000 more students just like that."
America Must Put Community Colleges First
By SARA GOLDRICK-RAE
President Obama has embraced an audacious ambition- to renew America's status as the world leader in
college attainment. That goal is daunting, and it leads many people to conclude that we should focus federal
investments on four-year colleges. If we want to realize the president's goal, that would be a terrible mistake.
Located in neighborhoods across the nation, charging lower-than-average tuition, public two-year colleges have
the potential to lead the charge to significantly increase the number of Americans holding college degrees. But
to succeed, they need a renewed government commitment to their support and leadership. The country has for
too long put elite four-year colleges and universities on a pedestal, focusing the hopes and plans of students and
families on them. But those institutions reach only a small portion of the populace, whereas community colleges
touch much larger numbers of students as well as many other people in their towns and regions.
Faced with high tuition, a weak economy, and substantial competition for admission to four-year colleges,
today's students are more likely than ever to attend one of the nation's 1,045 community colleges. According to
Department ofEducation statistics, enrollment at community colleges grew by 741 percent from 1963 to 2006,
compared with 197 percent at public four-year institutions and 170 percent at private four-year colleges. It
increased from about two million in 2000 to 6.2 million in the first half of this decade alone. Yet, based on data
from the Delta Project on Postsecondary Education Costs, Productivity, and Accountability, community
colleges receive less than one-third the level of federal support per full-time-equivalent student ($790) that
public four-year colleges do ($2,600), and have correspondingly poorer outcomes.
With many of the fastest-growing occupations requiring some postsecondary education, but not necessarily a
bachelor's degree, serious challenges await if community-college performance does not improve. We must give
those colleges the resources they need to succeed in getting more students to the finish line, while demanding
more from such institutions. If the nation's goal is to produce great gains in college attainment without
significantly increasing spending, we need to invest in our largest educational provider. A cuJture of evidence
focused on student achievement- coupled with capacity-building efforts to make success possible- can have
a rapid and transformative impact.
In a paper published by the Brookings Institution, Douglas N. Harris, an assistant professor of educational-
policy studies at the University of Wisconsin at Christopher Mazzeo, associate director of policy and
research at the University of Chicago's Consortium on Chicago School Gregory Kienzl, director of
research and evaluation at the Institute for Higher Education and I call on the Obama administration to
consider four key federal reforms:
176
Development of national goals and a performance-measurement system. The overarching goal of national
higher-education policy should be to effectively educate students at the postsecondary level. While colleges
should focus on the needs of their students, it is important that they also have clearly defined goals along those
lines, with incentives to match. Success in a new system should be measured by progress. Right now
appropriations to community colleges are primarily based on enrollment, without regard to whether their
students earn degrees or get good jobs. That gears incentives toward inputs and process, rather than outcomes.
The federal government should invest resources specifically to promote greater success for students. Colleges
that receive more money should be required to track and report student results, consistent with the many
community-college missions, such as whether they completed a minimum number of credits, transferred, or
earned a degree. Over time, a majority of federal dollars would be awarded based not on enrollment but on
colleges' performance on such crucial measures.
Expanded federal support. To bring community colleges to the table and convey its strong support for their
work, the federal government should double its current level of direct support, from $2-billion to $4-billion.
Resource needs are significant and pressing. Since 1974, the net number of new community colleges has been
just 149, a growth rate of only 17 percent. The result: Many campuses today are bursting at the seams, and
increasing numbers of students must be turned away. In the short-term, federal spending would support
infrastructure upgrades that truly stimulate the economy. Over the longer term, that investment would add
modestly to hjgher-education expenditures but more than pay off by increasing the number of students who can
enroll , graduate, and contribute to the nation's economy.
Innovation to enhance educational quality. We further call on the Department of Education to focus half of
the proposed $2.5-billion college access and completion incentive fund on efforts to create innovative
community-college policies and practices and then evaluate them. The two-year sector is not only overutilized
and underresourced, but it also has too little information about how to effectively improve student outcomes.
That problem can and must be remedied by connecting practitioners with well-trained researchers who share a
common goal of helping community colleges succeed in meeting goals and gaining more support in return. For
example, practitioners and researchers could collaborate on putting in place and evaluating approaches that
accelerate progress in developmental education, integrate occupational and academjc content in new curricula,
or develop systemwide assessment and placement policies.
Accountability through student data systems. Finally, the federal government should support the
improvement of student-level data systems to track community-college performance. That is the only way to
operationalize real accountability and track progress and improvement. Most states do not have the ability to
track individual outcomes throughout the education system and into the labor force. But thanks to the federal
stimulus package, more will have that opportunity. Those efforts must be continued, for without the ability to
evaluate outcomes based on hard data, student and institutional progress cannot be measured.
Right now countless Americans embrace a vety narrow view of community colleges' potential. By casting such
institutions as providers of vocational training that benefits only local families and employers, such an approach
essentially excuses the federal government from providing much support. That generates two problems. First, it
makes community colleges overly dependent on dollars from their local and state governments, and today's
negative budget outlooks portend deep cuts in appropriations at those levels. That hampers community colleges'
ability to serve as gateways to economic opportunity.
Second, that narrow public image ignores the widespread benefits of college access that such institutions
provide, benefits that increasingly accrue to the nation. College-educated adults are more llkely than those who
didn't attend to be economically secure and live healthier lives while continuing to pay taxes- not only to their
local governments, but also to Washington. Accordingly, Washington should actively participate in the
transformation of community colleges.
It is now time to put community colleges, long on the sidelines in public support and policy debates, first.
Ensuring that American workers are trained to compete in the global marketplace, are economically secure, and
can fulfill their responsibilities as citizens requires expanding and improving experiences with postsecondary
177
education. By better supporting the most affordable and accessible colleges found within all communities, and
asking more of them in exchange, we can put our nation and its families back on the path to economic
prosperity.
Sara Goldrick-Rab is an assistant p r o f e s s o r ~ ~ educational policy studies and sociology at the University of
Wisconsin at Madison.
INSIDE HIGHER ED
Budget Cut or Logical Inevitability?
May 18, 2009
The newspaper headlines have to st1ng: "Funding Cut Puts HBCU's on the Chopping Block.
<http://www.npr.org/templates/story/story.php?storyld=l04082329>" And the blog posts about how the Obama
administration's 2010 budget would treat historically black universities and other colleges that serve minority
students are even harsher: "After Destroying the DC Voucher Program, What Does Obama Do For An Encore?
Defunds Historical Black Colleges.
<http :1 /www.sunti mes.com/news/bl ogentri es/i ndex. html ?bbPostid=CzCPva TMX6PZcCz8cP2sgi5IZOB3PCIU
BdeuZfCz8Cp WDOrdC8A&bbParentWidgetld=B8k88rWw XopuzS STgLe VwBLu>"
Here's the trick: The administration is actually proposing a small increase, not a cut, to the annual budgets of
the main programs for minority serving colleges, at a time when the Education Department is proposing to hold
the budgets for most federal education programs flat at their 2009 levels. What the administration's budget does,
however, is acknowledge the expiration of nearly half a billion dollars in temporary funds that Congress
directed to the colleges in 2007 <http://www.insidehighered.com/ news/2007/10/09/black>.
The money, which was generated by a set of one-time changes to the federal student loan programs, was
designed to use that windfall to supplement the amounts that lawmakers normally appropriate to programs for
historically black, Hispanic, tribal and Alaskan/Native Hawaiian colleges each year. The Strengthening
Historically Black Colleges and Universities program received $85 million on top of its usual allocation of
federal funds in both 2007-8 and 2008-9, for instance.
"The mandatory funds that have become an issue were clearly temporary -- the authorizing language from
Congress had them expire at the end of2009, " said Robert Shireman, the deputy under secretary of education.
"From a budgeting standpoint, they are not in the baseline. While that may sound like budgetspeak, it means
that they were not in the expected ongoing spending of the government. If the institutions were expecting it to
continue, they misread the program and why it was there."
The recipients of the funds held "no expectation that they should automatically be extended," said Lezli
Baskerville, president of the National Association for Equal Opportunity in Higher Education, which represents
many of the nation's historically black colleges and universities. But by lett1ng the money for historically black,
Hispanic and tribal colleges vanish, Baskerville said, the Obama administration is sending a signal that it views
the institutions as a low priority. "You allow those programs to sunset that are not aligned with your priorities, "
she said. "He could have signaled that it will be a ptiority for this administration."
The disagreement between minority colleges and the administration about the permanence of mandatory funds
has relevance well beyond their particular situation, now more than ever. The Education Department has
already signaled its intent to let two major student grant programs (the Academic Competitiveness and SMART
Grant Progams) expire after 2010 and, more significantly, colleges and schools will lean heavily this year and
next on tens of billions of dollars in economic stimulus funds. What happens then? If the economy hasn't
recovered, are they likely to beg for the funds to continue?
178
Mandatory vs. Discretionary
Mandatory funds, for those of you whose last American government course (or the practical equivalent) is a
distant reflection in the rearview mirror, are federal monies disbursed by Congress in special "budget
reconciliation" laws rather than through the annual appropriations process that finances the federal government's
normal operations. (Money allocated through the latter process is called "discretionary, " as in at the discretion
of Congress.)
Congress has gone to the "mandatory" side of the federal budget to benefit higher education twice in recent
years: in 2006, <http://www.i nsidehighered.com/news/2006/01/24/smart> when it carved nearly $18 billion out
of subsidies for student loan providers and used some of the proceeds to create two new grant programs
designed to lure low-income students into science fields, and in 2007,
<http://www.insidehighered.com/ news/2007/09/07/budget> when the College Cost Reduction and Access Act
squeezed another $22 billion out of lender subsidies and directed the revenue to steadily decrease student loan
rates over four years, inject significant funds into Pell Grants for four years, and finance numerous smaller
purposes.
Among them was $510 million over two years <http://www.insidehighered.com/news/2007110/09/black> (fiscal
2007-8 and 2008-9) for minority-serving colleges for a variety of purposes, including to buy lab equipment and
cover instructional costs. Most of the money was designed to go to existing programs for groups of institutions
that are accustomed to such funds: $200 million in competitive grants for Hispanic-serving institutions, with an
emphasis on increasing the number of low-income students in science and math $170 million for
historically black colleges and $60 million for tribal and $30 million for
AJaskan/Hawaiian Native institutions.
But the measure also created three entirely new classifications of colleges that educate students from minority
groups, provi ding $30 million over two years for "predominantly black" colleges (those that do not have the
"historical" designation of serving black students but have significant black enrollments), $10 million over two
years for Asian/Pacific Islander serving colleges, and $10 million for Native American-serving nontribal
colleges, where at least 10 percent of the undergraduates are American Indian.
The money, as described in the legislation that provided it, was designed to give a financial boost to institutions
that play a unique role in educating students who have historically been underserved by traditional colleges.
The minority-serving colleges received their money for 2007-8 but had to fight to keep it last year, when
President Bush's final budget proposal <http://www. insidehighered.com/ news/2008/02/05/edbudget>
recommended subtracting from their annual appropriated funds amounts equivalent to what they were due to
receive in mandatory funds. Minority college leaders, backed by Congressional Democrats, argued at the time
that the temporary funds were designed to supplement, not supplant, the normal annual money for the
institutions. "Our goal in providing funding for minority-serving institutions under the College Cost Reduction
and Access Act was to make up for the severe funding shortfalls these institutions have faced at the hands of the
Bush administration," a House Democratic spokeswoman said then.
Officials of historically black and other institutions reacted with comparable dismay when the Obama
administration released the full details <http://www.insidehighered.com/news/2009/05/08/budget> of its first
proposed budget, for the 2010 fiscal year, this month. An Education Department budget that focused heavily on
ensuring the financial future of the Pell Grant as the bedrock student aid program kept virtually all other
education programs level. The administration proposed that Congress provide relatively small pots of
discretionary money (ranging from $2.6 million to $7.9 million) for the programs the 2007 budget law created
for predominantly black, Asian/Pacific [slander, and nontribal colleges, and small increases in discretionary
funding for the three previously existing programs for minority serving institutions.
But the department's budget table includes big fat zeroes in the 2010 column where there were mandatory funds
for the minority serving colleges in 2010, which Baskerville and others portray-- in a budget process that she
describes as a "priority setting exercise" --as a sign that the administration puts them low on the list.
179
What's included in the budget and not "is not only a choice," Baskerville said, "but it's an opportunity for the
chief executive to set the climate, to set the tone, and to elevate in importance those programs that are most
important to the administration."
Shireman disputed that view. "These are institutions that could use more support, and they can make a
compelling case that they need help, which is why we've proposed 5 percent increases for them. We felt that we
were being quite generous and demonstrating our support for minority serving institutions by increasing the
discretionary funds for them at more than double the rate of inflation, while other programs across the budget
receive no increases at all. That demonstrates our priorities in the context of discretionary appropriations, " he
said.
"But the money they're talking about was one time mandatory money that's not in the budget baseline, and
there's no process for continuing it, except for further mandatory legislation."
Every spare dollar in the administration's higher education budget is going to "prevent a drop in the Pelt Grant
Program, " Shireman said. The same law that added temporary mandatory funds for minority serving colleges,
he noted, also boosted the size of the maximum Pell Grant, and when that money expires in 2012, he noted,
"students will experience a $1,400 drop in their Pell Grant. We need to fill in that mandatory money, one way or
the other, and have made a proposal to do that." (Administration officials point out that the Pell Grant increase
wilt help historically black colteges enormously, as their students are twice as likely as the average
undergraduate to qualify for the need-based grants.)
Shireman said that in letting the mandatory funds for historically black, Hispanic and tribal colleges lapse, the
administration is endorsing a principle that "we are not continuing any program that is created on mandatory
s i d e " ~ the Education Department's 2010 budget blueprint also notes that the administration plans to let the
Academic Competitiveness and SMART Grant programs end after next year, when their funding from 2006
runs out.
But to Baskerville and other supporters of minority serving colleges, the administration appears to be picking
and choosing which mandatory money to let lapse and which to continue, noting that the 2010 budget includes
some funds for the new programs created (in the 2007 budget reconciliation law) for predominantly black,
Asian/Pacific Islander and Indian nontribal colleges. "There is no clear pattern that 'we are automatically going
to let all of the mandatory programs lapse .... '"Baskerville said. (Those programs, Shireman points out, were
authorized by Congress for a full five years, while the mandatory funds for HBCU, Hispanic and tribal colleges
were clearly designated as two year grant programs.)
As the Democratic administration spars with some of its normally most avid supporters, some Congressional
Republicans say the disagreement is proof of the dangers of the increasingly common use of budget legislation
to create new social programs. In recent years, said one Republican Congressional aide, Democratic leaders in
Congress have turned to off-budget money to cut student loan interest rates and expand Pell Grants in higher
education, and for similar purposes in k-12. And now billions more are flowing in the stimulus package-- with
a clear end date, creating an inevitable "cliff' when the money runs out.
"Creating temporary programs is often intended to make the longterm cost, and it's a dangerous budget gimmick
to be playing with," the GOP aide said. "When the money runs out, you've got a real problem. When you've got
a funding infusion into these budgets, they're adjusted accordingly, and they become reliant on it. Schools and
students come to rely on these programs .. . and people feel like promises were made.
"The money shouldn't have been provided in mandatory funding for precisely this reason: because at some point
it is going to feel like a cut."
-Doug Lederman <mailto:doug.lederman@insidehighered.com>
180
Ctystal A. Way
Freedom of Information and
Privacy Act Fulfillment Coordinator
FSA Communications
ADDRESS:
US Department of Education
830 First Sheet, NE
Room 114C1
Washington, DC 20202
TELEPHONE:
(202) 377-4007
181
From:
Sent:
To:
Subject:
Dunbar, Adrienne
Friday, March 19, 2010 8:33AM
Ceja, Alejandra; Uvin, Johan
NYT article on trade school and debt
In Hard TimesJ Lured Into Trade School and Debt By PETER S. GOODMAN
One fast -growing American industry has become a conspicuous beneficiary of the recession:
for-profit colleges and trade schools.
At institutions that train students for careers in areas like health careJ computers and food
serviceJ enrollments are soaring as people anxious about weak job prospects borrow
aggressively to pay tuition that can exceed $30J000 a year.
But the profits have come at substantial taxpayer expense while often delivering dubious
benefits to studentsJ according to academics and advocates for greater oversight of financial
aid. Critics say many schools exaggerate the value of their degree programsJ selling young
people on dreams of middle-class wages while setting them up for default on untenable debtsJ
low-wage work and a struggle to avoid poverty. And the schools are harvesting growing federal
student aid dollarsJ including Pell grants awarded to low-income students.
((If these programs keep growingJ youJre going to wind up with more and more students who are
graduating and canJt find meaningful employmentJ'' said Rafael I. PardoJ a professor at
Seattle University School of Law and an expert on educational finance. ((They canJt generate
income needed to pay back their loansJ and theyJre going to end up in financial distress."
For- profit trade schools have long drawn accusations that they overpromise and underdeliverJ
but the woeful economy has added to the industryJs opportunities along with the risks to
studentsJ according to education experts. They say these schools have exploited the recession
as a lucrative recruiting device while tapping a larger pool of federal student aid.
((They tell peopleJ 'If you donJt have a college degreeJ you wonJt be able to get a jobJJ "
said Amanda WallaceJ who worked in the financial aid and admissions offices at the KnoxvilleJ
Tenn.J branch of ITT Technical Institute, a chain of schools that charge roughly $40,000 for
two-year associate degrees in computers and electronics. ((They tell themJ 'You'll be making
beaucoup dollars afterwardJ and youJll get all your financial aid covered.' "
Ms. Wallace left her job at ITT in 2008 after five years because she was uncomfortable with
what she considered deceptive recruiting, which she said masked the likelihood that graduates
would earn too little to repay their loans.
As a financial aid officerJ Ms. Wallace was supposed to counsel students. But candid talk
about job prospects and debt obligations risked the wrath of managementJ she said.
((If you said anything that went against what the recruiter said, they would threaten to fire
youJ" Ms. Wallace said. ((The representatives would have already conned them into doing itJ
and you had to just keep your mouth shut."
A spokeswoman for the schoolJs ownerJ ITT Educational Services, Lauren Littlefield, said the
company had no comment.
The average annual tuition for for - profit schools this year is about $14J000J according to
the College Board. The for-profit educational industry says it is fulfilling a vital social
functionJ supplying job training that provides a way up the economic ladder.
182
when the economy is rough and people are threatened with unemployment, they look to
education as the way out,JJ said Harris N. Miller, president of the Career College
Association, which represents approximately 1,400 such institutions. ((We're preparing people
for careers.JJ
Concerned about aggressive marketing practices, the Obama administration is toughening rules
that restrict institutions that receive federal student aid from paying their admissions
recruiters on the basis of enrollment numbers.
The administration is also tightening regulations to ensure that vocational school s that
receive aid dollars prepare students for ((gainful employment.}) Under a proposal being floated
by the Department of Education, programs would be barred from loading students with more debt
than justified by the likely salaries of the jobs they would pursue.
((During a recession, with increased demand for education and more anxiety about the ability
to get a job, there is a heightened level of hazard, JJ said Robert Shireman, a deputy under
secretary of education. ((There is a lot of Pell grant money out there, and we need to make
sure it's being used effectively.})
The administration's push has provoked fierce lobbying from the for-profit educational
industry, which is seeking to maintain flexibility in the rules.
A Lucrative Business
The stakes are enormous: For-profit schools have long derived the bulk of their revenue from
federal loans and grants, and the percentages have been climbing sharply.
The Career Education Corporation, a publicly traded global giant, last year reported revenue
of $1.84 billion. Roughly 80 percent came from federal loans and grants, according to BMO
Capital Markets, a research and trading firm. That was up from 63 percent in 2007.
The Apollo Group - which owns the for-profit University of Phoenix - derived 86 percent of
its revenue from federal student aid last fiscal year, according to BMO. Two years earlier,
it was 69 percent.
For-profit schools have proved adept at capturing Pell grants, which are a centerpiece of the
Obama administration's efforts to make higher education more affordable. The administration
increased financing for Pell grants by $17 billion for 2009 and 2010 as part of its $787
billion stimulus package.
Two years ago, students at for-profit trade schools received $3.2 billion in Pell grants,
according to the Department of Education, less than went to students at two-year public
institutions . By the 2011-12 school year, the administration now estimates, students at for-
profit schools should receive more than $10 billion in Pell grants, more than their public
counterparts. (Those anticipated increases may shrink, depending on the outcome of wrangling
in Congress over health care and student lending.)
Enrollment at for-profit trade schools expanded about 20 percent a year the last two years,
more than double the pace from 2001-7, according to the Career College Association.
Mr. Miller, the association's president, said for-profit schools were securing large numbers
of Pell grants because their financial aid offices were diligent and because the schools
served many low-income students.
But financial aid experts say the surge of federal money reaching such institutions reflects
something else: their aggressive, sometimes deceitful recruiting practices.
183
Jeffrey West was working at a pet store near Philadelphia) earning about $8 an hourJ when he
saw advertisements for training programs offered by WyoTechJ a chain of trade schools owned
by Corinthian Colleges Inc.J a publicly traded company that last year reported revenue of
$1.3 billion.
After Mr. West called the school) an admissions representative drove to his house to sell him
on classes in auto body refinishing and upholstering technology) a nine-month program that
cost about $30)000.
Mr. West blanched at the tuition) he recalled) but the representative assured him the program
amounted to an antidote to hard economic times.
((They said they had a very high placement rateJ somewhere around 90 percent)" he said. ((That
was one of the key factors that caused me to go there. They said I would be earning $50)000
to $70)000 a year."
Some 14 months after he completed the program) Mr. WestJ 21J has failed to find an automotive
job. He is working for $12 an hour weatherizing foreclosed houses.
With loan payments reaching $600 a monthJ he is working six and seven days a week to keep up.
((IJve got $30)000 in student loansJ and I really donJt have much to show for itJ" he said.
artJs really frustrating when youJre trying to better yourself and you wind up back at Square
One."
Corinthian says it bars its recruiters from making promises about pay.
((The majority of our students graduate)" said a spokeswoman) Anna Marie Dunlap) in a written
statement. ((Most see a significant earnings increase."
The increase in market opportunities for the for-profit education industry comes as
governments spend less on education. In states like California) community colleges have been
forced to cut classes just when demand is greatest.
((This is creating a very ripe environment for the for-profit schools to pick off more
students)" said Lauren AsherJ president of the Institute for College Access & Success) a
nonprofit research group based in California that seeks to make higher education more
affordable. ((The risks of exploitation are higher) and the potential rewards of those
practices are higher."
For-profit culinary schools have long drawn criticism for leading students to rack up large
debts. NowJ they are enjoying striking growth. Enrollment at the 17 culinary schools of the
Career Education Corporation - most of them operated under the name Le Cordon Bleu - swelled
by 31 percent in the final months of last year from a year earlier.
When Andrew Newburg called the Le Cordon Bleu College of Culinary Arts in Portland) Ore.J to
seek information) he was feeling pressure to start a new career. It was 2008J and his Florida
mortgage business was a casualty of the housing bust. An associate degree in culinary arts
from a school in the food-obsessed Pacific Northwest seemed like a portal to a new career.
The tuition was daunting - $41)000 for a 15-month or 21-month program - but he said the
admissions recruiter portrayed it as the entrance price to a stable life.
((The recruiter saidJ cThe way the economy isJ with the recession) you need to have a safe way
to be sure you will always have incomeJJ " Mr. Newburg said. a ern todayJs market) chefs will
always have a jobJ because people will always have to eat.J "
184
According to Mr. NewburgJ the recruiter promised the school would help him find a good jobJ
most likely as a line cookJ paying as much as $38J000 a year.
Last summerJ halfway through his program and already carrying debts of about $10J000J Mr.
Newburg was alarmed to see many graduates taking jobs paying as little as $8 an hour washing
dishes and busing tablesJ he said. He dropped out to avoid more debt.
"They have a basic money-making machineJ Mr. Newburg said.
More Bills Than Paychecks
Career Education says admissions staff are barred from making promises about jobs or
salaries. The school requires students to sign disclosures stating that they understand that
its programs afford no guarantees.
But promotional materials convey a sense of promise.
"Our students are given the tools needed to become the future leaders in the industryJ
proclaims the Le Cordon Bleu Web site. <<Many graduates have attained positions of
responsibility) visibility) and entrepreneurship soon after completing their studies.
The job placement results that the school files with accrediting agencies suggest a different
outcome. From July 2007 to June 2008J students who graduated from the culinary arts associate
degree program landed jobs that paid an average of $21J000 a yearJ or about $10 an hour.
OregonJs minimum wage is $8.40 an hour.
The job placement list is cited in a class-action lawsuit filed against the Portland school -
previously known as Western Culinary Institute - by graduates who allege fraudJ breach of
contract and unlawful trade practices. Executives at Career Education denied the allegations
while asserting it would be wrong to judge the school on the basis of its graduates) first
jobs.
< ~ o u go out in the industry and work your way upJ said Brian R. WilliamsJ the companyJs
senior vice president for culinary arts.
On a recent morning at the campus in PortlandJ hundreds of students donning chefJs whites
labored in demonstration kitchens stocked with stainless steel countertops and commercial gas
ranges. A chef inspected plates of boeuf Bourgogne and risotto Milanese. Students melted and
pulled sugar into multicolored ribbons. Others used a chainsaw to sculpture blocks of ice
into decorative centerpieces.
"ItJs employable skills; thatJs what we teach people hereJ said the school president) Jon
Alberts. ((We try to give them as much of an industry experience in the classroom as
possible.
But several local chefs said the program merely simulated what students could learn in entry-
level jobs.
"When they graduate and come in the kitchenJ I tell themJ ~ I J m going to treat you like you
donJt know anythingJJ said Kenneth Giambalvo) executive chef at BluehourJ an upscale
restaurant in PortlandJs Pearl District. "It doesnJt really give them any edge.
What the school does give many students is debtJ often at double-digit interest rates - debt
that even bankruptcy cannot erase without a lengthyJ low-odds legal proceeding.
185
When TJ Williams arrived in Portland from his home in Utah to enroll at Le Cordon Bleu in
2007J he was shocked by the terms of the aid package the school had arranged for him: One
loanJ for nearly $14J000J carried a $7J327 "finance charge and a 13 percent interest rate.
"They told me that halfway through the programJ I could probably refinance to a lower rateJ
he said.
When he tried to refinanceJ the school turned him downJ he says.
Career Education declined to discuss Mr. WilliamsJs caseJ citing privacy restrictions and
saying he had not signed a waiver.
Mr. Williams has been jobless since last fall and recently returned to UtahJ where he moved
in with his mother.
After Graduation
The Career Education Corporation e-mailed The New York Times names and contact information
for four graduates ((with whom we hope youJll touch base for important perspective. One came
with a wrong number. A second had graduated 15 years ago.
A thirdJ Cherie ThompsonJ called the program "a really positive experience but declined to
discuss her debts or earnings. The fourthJ Ericsel TanJ graduated in 2003 and later earned
$42J000 a year overseeing catering at a convention center near Seattle. He said his success
reflected his seven years of kitchen experience prior to culinary school.
Career Education notes that only 5.9 percent of the federal loans to students at the Western
Culinary Institute that began to come due in 2007 - the latest available data - are listed in
default by the Department of Education.
But default rates have traditionally reflected only those borrowers who fail to pay in the
first two years payments are due.
The Department of Education has begun calculating default rates for three years. By that
yardstickJ Western CulinaryJs default rate more than doublesJ to 12.5 percent.
For-profit schools have ramped up their own lending to students to replace loans formerly
extended by Sallie MaeJ the student lending giant.
These loans are risky: Career Education and Corinthian recently told investors they had set
aside roughly half the money allocated this year for private lending to cover anticipated bad
debts.
Financial aid experts say such high rates of expected default prove that graduates will not
earn enough to make their paymentsJ yet the loans make sense for the for-profit school
industry by enabling the flow of taxpayer funds to their coffers: they satisfy federal
requirements that at least 10 percent of tuition money come from students directly or from
private sources.
((TheyJre making so much money off their federal student loans and grants that they can afford
to write off their own loansJ said Ms. Asher of the Institute for College Access & Success.
186
From:
Sent:
Subject:
Attachments:
Importance:
Faunteroy, Victoria [VFAUNTEROY@aarp.org]
Wednesday, March 17,2010 11:14 AM
FW: Trade School Trap
image001 .j pg; -WRDOOO.j pg
High
FYI- Please make sure that your students are aware of the trap- " "Caveat Emptor "!!
Wednesday, March 17. 2010, 9:54AMET- U. S. Markets close in 6 hours and 6 minutes.
In Hard Times, Lured Into Trade School and Debt
by Peter S. Goodman
Monday, March 15, 2010
provided by
One fast- growing American industry has become a conspicuous beneficiary of the recession: for- profit
colleges and trade schools.
At institutions that train students for careers in areas li ke health care, computers and food service, enrollments
are soaring as people anxious about weak job prospects borrow aggressively to pay tuition that can exceed
$30,000 a year.
But the profits have come at substantial taxpayer expense while
often deli vering dubious benefits to students, according to
academics and advocates for greater oversight of financial aid.
Critics say many schools exaggerate the value of their degree
programs, selling young people on dreams of middle-class
wages while setting them up for default on untenable debts,
low- wage work and a struggle to avoid poverty. And the
schools are harvesting growing federal student aid dollars,
including Pell grants awarded to low- income students.
Mor e from NYTimes.com:
Why Financial Plans Are Worthless
Telling Friends Where You Are (or Not)
Overdraft Protection: Why Bother?
"If these programs keep growing, you're going to wind up with more and more students who are graduating and
can't find meaningful employment, " said Rafael I. Pardo, a professor at Seattle University School of Law and
an expert on educational finance. "They can't generate income needed to pay back their loans, and they' re going
to end up in financial distress."
For-profit trade schools have long drawn accusations that they overpromise and underdeliver, but the woeful
economy has added to the industry's opportunities along with the risks to students, according to education
experts. They say these schools have exploited the recession as a lucrative recruiting device whil e tapping a
larger pool of federal student aid.
"They tell people, 'If you don't have a college degree, you won't
be able to get a job,' " said Amanda Wallace, who worked in the
financial aid and admissions offices at the Knoxville, Tenn.,
branch ofiTT Technical fnstitute, a chain of schools that charge
roughly $40,000 for two- year associate degrees in computers
and electronics. "They tell them, 'You'll be making beaucoup
dollars afterward, and you'll get all your financial aid covered.' "
Ms. Wallace left her job at ITT in 2008 after five years because
she was uncomfortable with what she considered deceptive
recruiting, which she said masked the likelihood that graduates
would earn too little to repay their loans.
Popular Stories on Yahoo!:
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As a financial aid officer, Ms. Wallace was supposed to counsel students. But candid talk about job prospects
and debt obligations risked the wrath of management, she said.
"If you said anything that went against what the recruiter said, they would threaten to fire you," Ms. Wallace
said. "The representatives would have already conned them into doing it, and you had to just keep your mouth
shut."
A spokeswoman for the school's owner, ITT Educational Services, Lauren Littlefield, said the company had no
comment.
The average annual tuition for for-profit schools this year is about $14,000, according to the College Board.
The for-profit educational industry says it is fulfilling a vital social function, supplying job training that
provides a way up the economic ladder.
"When the economy is rough and people are threatened with unemployment, they look to education as the way
out," said Harris N. Miller, president of the Career College Association, which represents approximately 1,400
such institutions. "We're preparing people for careers."
Concerned about aggressive marketing practices, the Obama administration is toughening rules that restrict
institutions that receive federal student aid from paying their admissions recruiters on the basis of enrollment
numbers.
The administration is also tightening regulations to ensure that vocational schools that receive aid dollars
prepare students for "gainful employment." Under a proposal being floated by the Department of Education,
programs would be barred from loading students with more debt than justified by the likely salaries of the jobs
they would pursue.
"During a recession, with increased demand for education and more anxiety about the ability to get a job, there
is a heightened level of hazard, " said Robert Shireman, a deputy under secretary of education. "There is a lot of
Pell grant money out there, and we need to make sure it's being used effectively."
The admjnistration's push has provoked fierce lobbying from the for- profit educational industry, which is
seeking to maintain flexibility in the rules.
A Lucrative Business
The stakes are enormous: For- profit schools have long derived the bulk of their revenue from federal loans and
grants, and the percentages have been climbing sharply.
2
The Career Education Corporation, a publicly traded global giant, last year reported revenue of $1.84 billion.
Roughly 80 percent came from federal loans and grants, according to BMO Capital Markets, a research and
trading firm. That was up from 63 percent in 2007.
The Apollo Group- which owns the for-profit Uni versity of Phoenix- derived 86 percent of its revenue
from federal student aid last fiscal year, according to BMO. Two years earlier, it was 69 percent.
For-profit schools have proved adept at capturing Pell grants, which are a centerpiece of the Obama
administration's efforts to make higher education more affordable. The administration increased financing for
Pell grants by $17 billion for 2009 and 2010 as part of its $787 billion stimulus package.
Two years ago, students at for- profit trade schools received $3.2 billion in Pell grants, according to the
Department of Education, less than went to students at two-year public institutions. By the 2011-12 school
year, the administration now estimates, students at for- profit schools should receive more than $10 billion in
Pell grants, more than their public counterparts. (Those anticipated increases may shrink, depending on the
outcome of wrangling in Congress over health care and student lending.)
Enrollment at for- profit trade schools expanded about 20 percent a year the last two years, more than double
the pace from 2001- 7, according to the Career College Association.
Mr. Miller, the association's president, said for-profit schools were securing large numbers ofPell grants
because their financial aid offices were diligent and because the schools served many low- income students.
But financial aid experts say the surge of federal money reaching such institutions reflects something else: their
aggressive, sometimes deceitful recruiting practices.
Jeffrey West was working at a pet store near Philadelphia, earning about $8 an hour, when he saw
advertisements for training programs offered by WyoTech, a chain of trade schools owned by Corinthian
Colleges Inc., a publicly traded company that last year reported revenue of $1.3 billion.
After Mr. West called the school, an admissions representative drove to his house to sell him on classes in auto
body refinishing and upholstering technology, a nine-month program that cost about $30,000.
Mr. West blanched at the tuition, he recalled, but the representati ve assured him the program amounted to an
antidote to hard economic times.
"They said they had a very high placement rate, somewhere around 90 percent," he said. "That was one of the
key factors that caused me to go there. They said I would be earning $50,000 to $70,000 a year."
Some 14 months after he completed the program, Mr. West, 21, has failed to find an automotive job. He is
working for $12 an hour weatherizing foreclosed houses.
With loan payments reaching $600 a month, he is working six and seven days a week to keep up.
"I've got $30,000 in student loans, and 1 really don't have much to show for it," he said. "It's really frustrating
when you're trying to better yourself and you wind up back at Square One."
Corinthian says it bars its recruiters from making promises about pay.
"The majority of our students graduate, " said a spokeswoman, Anna Marie Dunlap, in a written statement.
"Most see a significant earnings increase."
3
The increase in market opportunities for the for-profit education industry comes as governments spend less on
education. In states like California, community colleges have been forced to cut classes just when demand is
greatest.
"This is creating a very ripe environment for the for-profit schools to pick off more students," said Lauren
Asher, president of the Institute for College Access & Success, a nonprofit research group based in California
that seeks to make higher education more affordable. "The risks of exploitation are higher, and the potential
rewards of those practices are higher."
For-profit culinary schools have long drawn criticism for leading students to rack up large debts. Now, they are
enjoying striking growth. Enrollment at the 17 culinary schools of the Career Education Corporation- most
of them operated under the name Le Cordon Bleu - swelled by 31 percent in the final months of last year
from a year earlier.
When Andrew Newburg called the Le Cordon Bleu College of Culinary Arts in Portland, Ore., to seek
information, he was feeling pressure to start a new career. It was 2008, and his Florida mortgage business was
a casualty of the housing bust. An associate degree in culinary arts from a school in the food-obsessed Pacific
Northwest seemed like a portal to a new career.
The tuition was daunting- $41,000 for a 15-month or 21-month program- but he said the admissions
recruiter portrayed it as the entrance price to a stable life.
"The recruiter said, 'The way the economy is, with the recession, you need to have a safe way to be sure you
will always have income,' "Mr. Newburg said. " 'In today's market, chefs will always have a job, because
people will always have to eat.' "
According to Mr. Newburg, the recruiter promised the school would help him find a good job, most likely as a
line cook, paying as much as $38,000 a year.
Last summer, halfway through his program and already carrying debts of about $10,000, Mr. Newburg was
alarmed to see many graduates takingjobs paying as little as $8 an hour washing dishes and busing tables, he
said. He dropped out to avoid more debt.
"They have a basic money- making machine," Mr. Newburg said.
More Bills Than Paychecks
Career Education says admissions staff are barred from making promises about jobs or salaries. The school
requires students to sign disclosures stating that they understand that its programs afford no guarantees.
But promotional materials convey a sense of promise.
"Our students are given the tools needed to become the future leaders in the industry," proclaims the Le Cordon
Bleu Web site. "Many graduates have attained positions of responsibility, visibility, and entrepreneurship soon
after completing their studies."
The job placement results that the school files with accrediting agencies suggest a different outcome. From July
2007 to June 2008, students who graduated from the culinary arts associate degree program landed jobs that
paid an average of$21 ,000 a year, or about $10 an hour. Oregon's minimum wage is $8.40 an hour.
4
The job placement list is cited in a class-action lawsuit filed against the Portland school- previously known
as Western Culinary Institute- by graduates who allege fraud, breach of contract and unlawful trade
practices. Executives at Career Education denied the allegations while asserting it would be wrong to judge the
school on the basis of its graduates' first jobs.
"You go out in the industry and work your way up," said Brian R. Williams, the company's senior vice
president for culinary arts.
On a recent morning at the campus in Portland, hundreds of students donning chers whites labored in
demonstration kitchens stocked with stainless steel countertops and commercial gas ranges. A chef inspected
plates ofboeufBourgogne and risotto M1lanese. Students melted and pulled sugar into multicolored ribbons.
Others used a chainsaw to sculpture blocks of ice into decorative centerpieces.
"It's employable skills; that's what we teach people here," said the school president, Jon Alberts. "We try to
give them as much of an industry experience in the classroom as possible."
But several local chefs said the program merely simulated what students could learn in entry-level jobs.
"When they graduate and come in the kitchen, I tell them, 'I'm going to treat you like you don't know anything,'
" said Kenneth Giambalvo, executive chef at Bluehour, an upscale restaurant in Portland's Pearl District. "It
doesn't really give them any edge."
What the school does give many students is debt, often at double-digit interest rates- debt that even
bankruptcy cannot erase without a lengthy, low-odds legal proceeding.
When TJ Williams arrived in Portland from his home in Utah to enroll at Le Cordon Bleu in 2007, he was
shocked by the terms ofthe aid package the school had arranged for him: One loan, for nearly $14,000, carried
a $7,327 "finance charge" and a 13 percent interest rate.
"They told me that halfway through the program, I could probably refinance to a lower rate," he said.
When he tried to refinance, the school turned him down, he says.
Career Education declined to discuss Mr. Williams's case, citing privacy restrictions and saying he had not
signed a waiver.
Mr. Williams has been jobless since last fall and recently returned to Utah, where he moved in with his mother.
After Graduation
The Career Education Corporation e-mailed The New York Times names and contact information for four
graduates "with whom we hope you'll touch base for important perspective." One came with a wrong number.
A second had graduated 15 years ago.
A third, Cherie Thompson, called the program "a really positive experience" but declined to discuss her debts
or earnings. The fourth, Ericsel Tan, graduated in 2003 and later earned $42,000 a year overseeing catering at a
convention center near Seattle. He said his success reflected his seven years of kitchen experience prior to
culinary school.
5
Career Education notes that only 5. 9 percent of the federal loans to students at the Western Culinary Institute
that began to come due in 2007- the latest available data- are listed in default by the Department of
Education.
But default rates have traditionally reflected only those borrowers who fail to pay in the first two years
payments are due.
The Department of Education has begun calculating default rates for three years. By that yardstick, Western
Culinary's default rate more than doubles, to 12.5 percent.
For-profit schools have ramped up their own lending to students to replace loans formerly extended by Sallie
Mae, the student lending giant.
These loans are risky: Career Education and Corinthian recently told investors they had set aside roughly half
the money allocated this year for private lending to cover anticipated bad debts.
Financial aid experts say such high rates of expected default prove that graduates will not eam enough to make
their payments, yet the loans make sense for the for-profit school industry by enabling the flow of taxpayer
funds to their coffers: they satisfy federal requirements that at least 10 percent of tuition money come from
students directly or from private sources.
"They're making so much money off their federal student loans and grants that they can afford to write off their
own loans, " said Ms. Asher of the Institute for College Access & Success.
6
From: Finley, Steve
Sent: Monday, August 16, 2010 3:27PM
To:
Subject:
Bergeron, David; Yuan, Georgia; McFadden, Elizabeth; Kvaal , James
RE: Repayment rate data -- WSJ articles and FOIA requests
From: Bergeron, David
Sent: Monday, August 16, 2010 3:23PM
To: Finley, Steve; Yuan, Georgia; McFadden, Elizabeth; Kvaal, James
Subject: RE: Repayment rate data -- WSJ articles and FOIA requests
From: Finley, Steve
Sent: Monday, August 16, 2010 1:24PM
To: Yuan, Georgia; McFadden, Elizabeth; Bergeron, David; Kvaal, James
Subject: Repayment rate data -- WSJ articles and FOIA requests
WSJ articles on the impact of the release of the repayment rate data -- note that we should expect a
number of FOIA requests for additional information about the repayment rate data --
Dow Jones Newswires' Mel issa Korn reports:
A number of for-profit colleges may be in more danger than first believed of running afoul of a
regulation proposed by the U.S. Department of Education that would force on them harsh penalties
for graduating students with high debt loads, according to data the agency released late Friday.
The department, in an attempt to show some of the rule' s potential impact were it to be implemented,
posted to its website late Friday a listing of the fiscal 2009 loan repayment rates at more than 8,000
for-profit schools nationwide.
The numbers, disputed by some institutions as being based on faulty or unclear calculations, pushed
schools' shares down sharply premarket as investors weighed how it would translate to the program-
level figures on which the rule would ultimately be based.
7
Strayer Education Inc. ' s stock was off 16%. Shares of ITT Educational Services Inc. were down 9.6%,
DeVry Inc. slid 7.7% and Washington Post- due to its important Kaplan unit- was down about
12% in early trading.
Some for-profit colleges are objecting to U.S. Department of Education data that suggest students are
paying back loans at surprisingly low rates.
Earlier this summer, the department proposed a rule intended to measure how well for-profit schools
train students for gainful employment in a recognized occupation. Late Friday, the department issued
its calculations on loan- repayment rates for more than 8,000 schools in an attempt to preview the
rule's potential impact were it to be implemented. Schools could "pass" based on student loan
repayment rates, or by maintaining a debt-to-income ratio below a certain percent.
The schools could face tough new regulations stripping them of access to federal funds if their
students are found to have heavy debt burdens and if they don't land jobs earning enough to handle
the debt. The regulation sets a 45% repayment rate as the threshold to qualify for student aid. Some
argue the department is punishing schools for having graduates enroll in loan-deferment programs
that the government itself supports.
Some of the schools are arguing their internal estimates of loan repayment rates are better than the
department's findings and are expressing frustration with what they say is the agency's unwillingness
to share data supporting the calculations.
The rule would also apply to non-profit schools with vocational programs, though the government
expects for-profit schools to bear the brunt of any penalties.
"Community colleges are subject to the rule, but we don't believe that they're going to be impacted by
the rule because the vast majority of community college students do not borrow," said David
Bergeron, acting deputy assistant secretary for policy, planning and innovation at the Department's
Office of Postsecondary Education.
Based on Friday's data, Universal Technical Institute Inc. , Grand Canyon Education Inc., American
Public Education Inc. and Bridgepoint Education Inc. had the highest repayment rates among publicly
traded for-profit schools, all above the 45% threshold. Corinthian, Washington Post Co.'s Kaplan and
ITT were among the lowest performers.
Washington Post Co., whose Kaplan unit had a weighted average repayment rate of 28%, expressed
concern Monday about the implications of the department's data. The company said if program-level
repayment rates are similar to the data provided Friday, a significant number of Kaplan schools could
become ineligible for federal student aid, which "could have a materially adverse effect on the future
results of the Company's higher education division."
Shares of for-profit schools sank Monday as investors digested the data, with at least two school
operators hitting new 52-week lows.
8
Strayer Education Inc. , considered among the most shielded from the proposed rule because of its
large proportion of students in bachelor's and graduate degree programs and historically low loan
default rate, was trading off 15% to $169.78. Corinthian Colleges Inc. was down 24.8% to $5.01 after
reaching a year low of $4.94, ITT Educational Services Inc. was off 11.7% to $56.80 after hitting a
new 52-week low of $54.75 and Capella Education Co. was down 16.5% to $58.60.
Strayer, which late last month said it bel ieved its programs would clear the department's highest
proposed hurdle of loan repayment by 45% of graduates, scored a 25% school-wide. The company
had noted last month that it was difficult to measure rates exactly because loan consolidation
complicates the measure of repayment.
The school said on a conference call early Monday that it would file a Freedom of Information Act
request to see some of the data on which the Department based its calculations, calling the data
"inaccurate," "nonsensical" and "arbitrary."
"This discrepancy has significant operational , financial , and public policy implications," Strayer said in
a statement Saturday.
Capella Education also questioned the data, saying the 40% repayment rate across its schools was
inconsistent with findings from an internal analysis it had conducted of its larger programs. According
to that calculation, the programs would have a repayment rate above the 45% threshold. Capella said
it has requested to see the Department's underlying data and methodology.
Apollo Group Inc. shares were up 6% as the company's University of Phoenix posted a repayment
rate of 44.2%, higher than most analysts expected, and Universal Technical Institute shares rose
7.4% to $15.94 as its 52% repayment rate also pleased investors.
9
From:
Sent:
To:
Subject:
Finley, Steve
Monday, August 16, 2010 1 :24 PM
Yuan, Georgia; McFadden, Elizabeth; Bergeron, David; Kvaal, James
Repayment rate data -- WSJ articles and FOIA requests
WSJ articles on the impact of the release of the repayment rate data -- note that we should expect a
number of FOIA requests for additional information about the repayment rate data -
Dow Jones Newswires' Melissa Korn reports:
A number of for-profit colleges may be in more danger than first believed of running afoul of a
regulation proposed by the U.S. Department of Education that would force on them harsh penalties
for graduating students with high debt loads, according to data the agency released late Friday.
The department, in an attempt to show some of the rule' s potential impact were it to be implemented,
posted to its website late Friday a listing of the fiscal 2009 loan repayment rates at more than 8,000
for-profit schools nationwide.
The numbers, disputed by some institutions as being based on faulty or unclear calculations, pushed
schools' shares down sharply premarket as investors weighed how it would translate to the program-
level figures on which the rule would ultimately be based.
Strayer Education Inc. ' s stock was off 16%. Shares of ITT Educational Services Inc. were down 9.6%,
DeVry Inc. slid 7.7% and Washington Post- due to its important Kaplan unit- was down about
12% in early trading.
Some for-profit colleges are objecting to U.S. Department of Education data that suggest students are
paying back loans at surprisingly low rates.
Earlier this summer, the department proposed a rule intended to measure how well for-profit schools
train students for gainful employment in a recognized occupation. Late Friday, the department issued
its calculations on loan- repayment rates for more than 8,000 schools in an attempt to preview the
rule's potential impact were it to be implemented. Schools could "pass" based on student loan
repayment rates, or by maintaining a debt-to-income ratio below a certain percent.
The schools could face tough new regulations stripping them of access to federal funds if their
students are found to have heavy debt burdens and if they don't land jobs earning enough to handle
the debt. The regulation sets a 45% repayment rate as the threshold to qualify for student aid. Some
argue the department is punishing schools for having graduates enroll in loan-deferment programs
that the government itself supports.
10
Some of the schools are arguing their internal estimates of loan repayment rates are better than the
department's f indings and are expressing frustration with what they say is the agency's unwillingness
to share data supporting the calculations.
The rule would also apply to non-profit schools with vocational programs, though the government
expects for-profit schools to bear the brunt of any penalties.
"Community colleges are subject to the rule, but we don't believe that they're going to be impacted by
the rule because the vast majority of community college students do not borrow," said David
Bergeron, acting deputy assistant secretary for pol icy, planning and innovation at the Department's
Office of Postsecondary Education.
Based on Friday's data, Universal Technical Institute Inc., Grand Canyon Education Inc., American
Public Education Inc. and Bridgepoint Education Inc. had the highest repayment rates among publicly
traded for-profit schools, all above the 45% threshold. Corinthian, Washington Post Co.'s Kaplan and
ITT were among the lowest performers.
Washington Post Co. , whose Kaplan unit had a weighted average repayment rate of 28%, expressed
concern Monday about the implications of the department's data. The company said if program-level
repayment rates are similar to the data provided Friday, a significant number of Kaplan schools could
become ineligible for federal student aid, which "could have a materially adverse effect on the future
results of the Company's higher education division.''
Shares of for-profit schools sank Monday as investors digested the data, with at least two school
operators hitting new 52-week lows.
Strayer Education Inc. , considered among the most shielded from the proposed rule because of its
large proportion of students in bachelor's and graduate degree programs and historically low loan
default rate, was trading off 15% to $169.78. Corinthian Colleges Inc. was down 24.8% to $5.01 after
reaching a year low of $4.94, ITT Educational Services Inc. was off 11.7% to $56.80 after hitting a
new 52-week low of $54.75 and Capella Education Co. was down 16.5% to $58.60.
Strayer, which late last month said it believed its programs would clear the department's highest
proposed hurdle of loan repayment by 45% of graduates, scored a 25% school-wide. The company
had noted last month that it was difficult to measure rates exactly because loan consolidation
complicates the measure of repayment.
The school said on a conference call early Monday that it would file a Freedom of Information Act
request to see some of the data on which the Department based its calculations, calling the data
"inaccurate," "nonsensical " and "arbitrary.''
"This discrepancy has significant operational , financial , and public policy implications," Strayer said in
a statement Saturday.
Capella Education also questioned the data, saying the 40% repayment rate across its schools was
inconsistent with findings from an internal analysis it had conducted of its larger programs. According
to that calculation, the programs would have a repayment rate above the 45% threshold. Capella said
it has requested to see the Department's underlying data and methodology.
11
Apollo Group Inc. shares were up 6% as the company's University of Phoenix posted a repayment
rate of 44.2%, higher than most analysts expected, and Universal Technical Institute shares rose
7.4% to $15.94 as its 52% repayment rate also pleased investors.
12
From:
Sent:
To:
Subject:
Finley, Steve
Monday, July 26, 2010 10:49 AM
Siegel, Brian; Burton, Vanessa; Scaniffe, Dawn; Morelli, Denise; Marinucci, Fred; Jenkins,
Harold; Woodward, Jennifer; Wolff, Russell; Sann, Ronald; Wanner, Sarah; Varnovitsky,
Natash a
Pro Publica article: Bogus 'Obama Mom' Grants Lure St udents
Bogus 'Obama Mom' Grants Lure Students
After being laid off from her job as a high school teacher in Dayton, Ohio, Nicole Massey decided to go back to
college. For months, she scoured the Web for ways to fund her tuition, while supporting her 1 0-year-old son,
Tyler. So when ads turned up in Massey's inbox claiming that President Barack Obama had created special
college grants and scholarships for single mothers, her hopes soared.
"You see his picture," Massey said, "so I cl icked on it." The link took her to a new window, where she was
asked to enter her name, age and other information about t he degree she wanted. The site then produced a list of
schools that lined up with Massey's choices.
Almost immediately, recruiters from for-profit colleges, including the University ofPhoenix [3], Kaplan
University [4], Grand Canyon Uni versity [5] and a couple of local schools, bombarded Massey withe-mails and
call s.
"That's when 1 would bring up the thing, 'What about the Obama loans? What about the money for the single
moms in the stimulus?"' she said. "And they would say, 'Well, we'll call you back with more information about
that."'
They never did-- and little wonder: "There is no such thing as an Obama grant for moms," said Robert
Shireman, who until earl y this month was deputy undersecretary at the U.S. Department of Education. "Moms
are eligible for federal financial aid generally -- Pell Grants, student loans and other aid --but nothing specific
to moms or single moms." Nevertheless, the Obama mom ads have become "ubiquitous, " he said.
Read the rest at the link below:
http://www.propublica.org/articl e/bogus-obama-mom-grants-l ure-students
13
From:
Sent:
To:
Subject:
FYI
Finley, Steve
Monday, May 04, 2009 9:14AM
Wittman, Donna; Wolff, Russell ; Woodward, Jennifer
FW: Schools
Apollo Group drops on regulatory downgrade
AP ONLINE
Posted: 2009-04-21 10:21:00
NEW YORK (AP) - Shares of Apollo Group Inc. tumbled Tuesday morning after an analyst
downgraded the company.
Credit Suisse analyst Kelly Flynn downgraded two other educational services ITT
Educational Services Inc. and Lincoln Educational and slashed target prices of a
slew of saying the U.S. Department of Education was more likely to institute legal or
regulatory changes that could hit the for-profit education sector.
Shares of Apollo dropped 7 or to $61.17.
Flynn lowered her price target on Phoenix-based Apollo which runs the University of
Phoenix campuses by $30 to $65 and downgraded the company to "Neutral" from
"Outperform."
While she sees 25 percent revenue growth in 2009 and 41 percent growth in earnings per
Flynn said in a note to investors that the appointment of Bob Shireman as deputy
undersecretary at the Department of Education meant that proposal s on the schools' marketing
rules for how quickly students can withdraw from the schools and disclosure of
student loan default rates were more likely.
Shireman is the founder of a non -profit that focuses on the negative implications of growing
student and he is "likely less sympathetic toward the for -profits than the Bush
administration was."
The "mere existence"of proposals for changes would weigh on the for-profit Flynn
said. The likelihood that such proposals would result in legal or regulatory changes is now
higher.
She also noted that Apollo had said in its conference call following second-quarter earnings
that it faces more Washington oversight.
Elsewhere in the shares of ITT Educational Services dropped 8.7 Lincoln
Educational Services tumbled 12 DeVry Inc. slid 6.7 percent and Corinthian Colleges
Inc. dropped 8.4 percent.
14
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15
From:
Sent:
To:
Subject:
FYI
Finley, Steve
Monday, May 04, 2009 9:14AM
Macias, Wendy
FW: Schools
Apollo Group drops on regulatory downgrade
AP ONLINE
Posted: 2009-04-21 10:21:00
NEW YORK (AP) - Shares of Apollo Group Inc. tumbled Tuesday morning after an analyst
downgraded the company.
Credit Suisse analyst Kelly Flynn downgraded two other educational services ITT
Educational Services Inc. and Lincoln Educational and slashed target prices of a
slew of saying the U.S. Department of Education was more likely to institute legal or
regulatory changes that could hit the for-profit education sector.
Shares of Apollo dropped 7 or to $61.17.
Flynn lowered her price target on Phoenix- based Apollo which runs the University of
Phoenix campuses by $30 to $65 and downgraded the company to "Neutral" from
"Outperform."
While she sees 25 percent revenue growth in 2009 and 41 percent growth in earnings per
Flynn said in a note to investors that the appointment of Bob Shireman as deputy
undersecretary at the Department of Education meant that proposals on the schools' marketing
rules for how quickly students can withdraw from the schools and disclosure of
student loan default rates were more likely.
Shireman is the founder of a non - profit that focuses on the negative implications of growing
student and he is "likely less sympathetic toward the for -profits than the Bush
administration was."
The "mere existence"of proposals for changes would weigh on the for-profit Flynn
said. The likelihood that such proposals would result in legal or regulatory changes is now
higher.
She also noted that Apollo had said in its conference call following second-quarter earnings
that it faces more Washington oversight.
Elsewhere in the shares of ITT Educational Services dropped 8.7 Lincoln
Educational Services tumbled 12 DeVry Inc. slid 6.7 percent and Corinthian Colleges
Inc. dropped 8.4 percent.
16
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17
From:
Sent:
To:
Frotman, Seth [Seth.Frotman@mail.house.gov]
Thursday, March 18, 2010 9:20AM
Dannenberg, Michael
Subject : FW: Education: Dear Coll eague: New York Times: "In Hard Ti mes, Lured Into Trade School
and Debt"
Seth Frotman
Deputy Chief of Staff and Legislative Director
Congressman Patrick J . Murphy (PA-08)
1609 Longworth House Office Building
Washington, DC 20515
(202) 225-4276
Click Here to Sign Up for Congressman Murphy's E-Newsletter
From: e-Dear Colleague
Sent: Thursday, March 18, 2010 9:20AM
To: E-DEARCOLL_ISSUES_A-F _0000@1s2.house.gov
Subject: Education: Dear Colleague: New York Times: "I n Hard Times, Lured Into Trade School and Debt"
New York Times: "In Hard Times, Lured Into Trade
School and Debt"
From: The Honorable Jared Polis
Sent By: Spiros.Protopsaltis@mail.house.gov
Date: 3/18/2010
New York Times:
"In Hard Times, Lured Into Trade School and Debt"
Dear Colleague:
We write to bring your attention to the attached article, "In Hard Times, Lured Into Trade School and
Debt," which ran on the front page of Sunday's New York Times. The article describes the rapid growth of
some large for-profit schools that get most of their revenue from federa l grants and student loans, and
suggests t hat the students receiving federa l student aid to attend t hem, and the taxpayers subsiding
them, do not always get much in return.
For example, the article quotes a man who enrolled in a Career Education Corp. culinary school charging
$41,000 for a 15-month or 21-month program, only to learn that many of those graduating were taking
low-paying jobs washing dishes and busing tables. Another student found himself with a loan for nearly
$14,000 with a $7,327 "finance charge" and a 13 percent interest rate. Data submitted to accrediting
agencies confirm that students who graduated from the school's culinary arts associate degree program
18
landed jobs that paid an average of$21,000 a year, or about $10 an hour in a state with a minimum wage
of $8.40 an hour. The article also quotes a woman who left her job in financial aid and admissions at ITT
in 2008 after five years because she was uncomfor table wit h what she considered deceptive recruiting
that masked the likelihood of graduates earning too little to repay their loans.
As t he article indicates, t he U.S. Department of Education is currently in t he process of revising its
"program integrity" regulations to more effectively protect students from high-press ure and deceptive
sales tactics for programs of little or no benefit to them, and to ensure that taxpayer dollars do not
subsidize such practices and programs. The article does an excellent job of highlighting t he urgent need
to strengthen these regulations and for a Consumer Financial Protection Agency with fu ll authority over
predatory institutional lending to students.
As we work on education issues in the 111th Congress, we look forward to making further progress on
protecting both students and taxpayers. If you have any questions or need more information, please
contact Spiros.Protopsaltis@mail.house.gov (5-2161) in Rep. Polis' office or
Li bby.Masiuk@mai l.house.gov (5-4276) in Rep. Murphy's office.
Sincer ely,
Jared Polis
Member of Congress
Patrick Murphy
Member of Congress
http://www.nytimes.com/2010/03/14/business/14schools.html?ref=todayspaper
In Hard Times, Lured Into Trade School and Debt
By PETER S. GOODMAN
One fast-growing American industry has become a conspicuous beneficiary of the recession: for-profit colleges and trade schools.
At institutions that train students for careers in areas like health care, computers and food service, enroll ments are soaring as people
anxious about weak job prospects borrow aggressively to pay tuition that can exceed $30,000 a year.
But the profi ts have come at substantial taxpayer expense while often delivering dubious benefits to students, according to academics
and advocates for greater oversight of financial aid. Critics say many schools exaggerate the value of their degree programs, selling
young people on dreams of middle-class wages while setting them up for default on untenable debts, low-wage work and a struggle to
avoid poverty. And the schools are harvesting growing federal student aid dollars, including Pell grants awarded to low-income
students.
"If these programs keep growing, you're going to wind up with more and more students who are graduating and can't find meaningful
employment," said Rafael I. Pardo, a professor at Seattle University School of Law and an expert on educational finance. "They can't
generate income needed Lo pay back Lheir loans, and they're going to end up in financial distress."
For-profit LTade schools have long drawn accusations that they overpromise and underdeliver, but the woeful economy has added to the
industry's opportunities along with the risks to students, according to education experts. They say these schools have exploited the
recession as a lucrative recruiting device while tapping a larger pool offederal student aid.
19
"They tell people, 'If you don't have a college degree, you won't be able to get a job,'" said Amanda Wallace, who worked in the financial
aid and admissions offices at the Knoxville, Tenn., branch of Irf Teclmical Institute, a chain of schools that charge roughly $40,000 for
1:\vo-year associate degrees in computers and electronics. "They tell them, 'You'll be making beaucoup dollars afterward, and you'll get
all your financial aid covered.'"
Ms. Wallace left her j ob at TTT in 2008 after five years because she was uncomfortable with what she considered deceptive recruiting,
which she said masked the likelihood that graduates would earn too little to repay their loans.
As a financial aid officer, Ms. Wallace was supposed to counsel students. But candid talk about j ob prospects and debt obligations risked
the wrath of management, she said.
"ff you said anything that went against what the recruiter said, they would threaten to fire you," Ms. Wallace said. "The representatives
would have already conned them into doing it, and you had to just keep your mouth shut."
A spokeswoman for the school's owner, ITT Educational Services, Lauren Littlefield, said the company had no comment.
The average annual tuition for for-profit schools tllis year is about $14,000, according to the College Board. The for-profit educational
industry says it is full'ill ing a vital social function, supplying job training that provides a way up the economic ladder .
"When the economy is rough and people are threatened with unemployment, they look to education as the way out, " said Harris N.
Miller, president of the Career College Association, which represents approximately 1,400 such institutions. "We're preparing people for
careers."
Concerned about aggressive marketing practices, the Obama administration is toughening rules that restrict institutions that receive
federal student aid from paying their admissions recruiters on the basis of enrollment nwnbers.
The administration is also tightening regulations to ensure that vocational schools that receive aid dollars prepare students for "gainful
employment." Under a proposal being floated by the Oeparhnent of Education, programs would be barred from loadi ng students with
more debt than justified by the likely salaries of the jobs they would pursue.
"During a recession, with increased demand for education and more anxiety about the ability to get a job, there is a heightened level of
hazard," said Robert Shireman, a deputy under secretary of education. "There is a lot ofPell grant money out there, and we need to
make sure it's being used effectively."
The administration's push has provoked fierce lobbying from the for-profit educati onal industry, which is seeking to maintain flexibil ity
in the rules.
A Lucl'ative Bus iness
The stakes are enormous: For-profit schools have long derived the bulk of their revenue from federal loans and grants, and the
percentages have been climbing sharply.
20
The Career Education Corporation, a publicly traded global giant, last year reported revenue of $1.84 billion. Roughly 80 percent came
from federal loans and grants, according to BMO Capital Markets, a research and trading firm. That was up from 63 percent in 2007.
The Apollo Group- which owns the for-profit University of Phoenix -derived 86 percent of its revenue from federal student aid last
fiscal year, according to BMO. Two years earlier, it was 69 percent.
For-profit schools have proved adept at capturing Pell grants, which are a centerpiece of the Obama administration's efforts to make
higher education more affordable. The administration increased financing for Pel! grants by $17 billion for 2009 and 2010 as part of its
$787 billion stimulus package.
Two years ago, students at for-profit trade schools received $3.2 billion in Pel! grants, according to the Department of Education, less
than went to students at two-year public institutions. By the 2011- 12 school year, the administration now estimates, students at for-
profit schools should receive more than $10 billion in Pell grants, more than their public counterparts. (Those anticipated increases may
shrink, depending on the outcome of wrangling in Congress over health care and student lending.)
Enrollment at for-profit trade schools expanded about 20 percent a year the lasl two years, more than double the pace from 2001-7,
according to the Career College Association.
Mr. Miller, the association's president, said for-profit schools were securing large numbers of Pell grants because their financial aid
offices were diligent and because the schools served many lovv-income students.
But financial aid experts say the surge of federal money reaching such institutions reflects something else: their aggressive, sometimes
deceitful recruiting practices.
Jeffrey West was working at a pet store near Philadelphia, earning about $8 an hour, when he saw advertisements for training programs
offered by WyoTech, a chain oftrade schools owned by Corinthian Colleges Inc., a publicly traded company that last year reported
revenue of $1.3 billion.
After Mr. West called the school, an admissions representative drove to his house to sell him on classes in auto body refinishing and
upholstering technology, a nine-month program that cost about $30,000.
Mr. West blanched at the tuition, he recalled, but the representative assured him the program amounted to an antidote to hard
economic times.
"They said they had a very high placement rate, somewhere around 90 percent," he said. "That was one of the key factors that caused me
to go there. They said I would be earning $50,000 lo $70,000 a year."
Some 14 months after he completed the program, Mr. West, 21, has failed to find an automotive job. He is working for $12 an hour
weatherizing foreclosed houses.
With loan payments reaching $6oo a month, he is working six and seven days a week to keep up.
21
"I've got $30,000 in student loans, and T really don't have much to show for it," he said. "It's really frustrating when you're trying to
belter yourself and you wind up back at Square One."
Corinthian says it bars its recruiters from making promises about pay.
"The majority of our students graduate," said a spokeswoman, Anna Marie Dunlap, in a written statement. "Most see a significant
earnings increase."
The increase in market opporlunities for the for-profit education industry comes as governments spend less on educalion. In states like
California, community colleges have been forced to cut classes just when demand is greatest.
"This is creating a very ripe environment for the for-profit schools to pick off more students," said Lauren Asher, president of the
Institute for College Access & Succes..<;, a nonprofit research group based in California that seeks to make higher education more
affordable. "The risks of exploitalion are higher, and the potential rewards of those practices are higher."
For-profit culinary schools have long drawn criticism for leading students to racl< up large debts. Now, they are enjoying striking
growth. Enrollment at the 17 culinary schools of the Career Education Corporation - most of them operated under the name Le Cordon
Bleu -swelled by 31 percent in the final months of last year from a year earlier.
When Andrew Newburg called the Le Cordon Bleu College of Culinary Arts in Portland, Ore., to seek information, he was feeling
pressure to start a new career. It was 2008, and his Florida mortgage business was a casualty of the housing bust. An associate degree in
culinary arts from a school in the food-obsessed Pacific Northwest seemed like a portal to a new career.
The tuition was daunting- $41,000 for a 15-month or 21-month program- but he said the admjssions recruiter portrayed it as the
entrance price to a stable life.
"The recruiter said, 'The way the economy is, with the recession, you need to have a safe way to be sure you will always have income,'"
Mr. Newburg said." 'In today's market, chefs will always have a job, because people will always have to eat.'"
According to Mr. Newburg, the recruiter promised the school would help him find a good job, most likely as a line cook, paying as much
as $38,ooo a year.
Last summer, halfway through his program and already carrying debts of about $10,000, Mr. Newburg was alarmed to see many
graduates taking jobs paying as little as $8 an hour washing dishes and busing tables, he said. He dropped out to avoid more debt.
"They have a basic money-making machine," Mr. Newburg said.
Mo1e Bills Than Paychecks
Career Education says admissions staff are barred from making promises about jobs or salaries. The school requires students to sign
disclosures stating tl1at they understand tl1at its programs afford no guarantees.
But promotional materials convey a sense of promise.
22
"Our students are given the tools needed to become the future leaders in the industry," proclaims the Le Cordon Bleu Web site. "Many
graduates have attained positions of responsibility, visibility, and entrepreneurship soon after completing their studies."
The job placement results that the school files with accrediting agencies suggest a different outcome. From July 2007 to June 2008,
students who graduated from the culinary arts associate degree progran1landedjobs that paid an average of $21,000 a year, or about
$10 an hour. Oregon's minimum wage is $8-40 an hour.
The job placement list is cited in a class-action lawsuit filed against the Portland school -previously known as Western Culinary
Institute- by graduates who allege fraud, breach of contract and unlawful trade practices. Executives at Career Education denied the
allegations while asserting it would be wrong to judge the school on tl1e basis of its graduates' first jobs.
"You go out in the industry and work your way up," said Brian R. Williams, the company's senior vice president for culinary arts.
On a recent morning at tl1e campus in Portland, hundreds of students donning chefs whites labored in demonstration kitchens stocked
with stainless steel countertops and commercial gas ranges. A chef inspected plates ofboeuf Bourgogne and risotto Milanese. Students
melted and pulled sugar into multicolored ribbons. Others used a chainsaw to sculpture blocks of ice into decorative centerpieces.
"It's employable skills; that's what we teach people here," said the school president, Jon Alberts. "We try to give them as much of an
induslry experience in the classroom as possible."
But several local chefs said the program merely simulated what students could learn in entry-level jobs.
"When they graduate and come in tl1e kitchen, I tell them, 'I'm going to treat you like you don't know anything,' "said Kennetll
Giambalvo, executive chef at Blue hour, an upscale restaurant in Portland's Pearl District. "It doesn't really give them any edge."
What the school does give many students is debt, often at double-digit interest rates -debt that even bankruptcy cannot erase without
a lengthy, low-odds legal proceeding.
When TJ Williams arrived in Portland from his home in LJtal1 to enroll at Le Cordon Bleu in 2007, he was shocked by tile terms of tile
aid package the school had arranged for him: One loan, for nearly $14,000, carried a $7,327 "tlnance charge" and a 13 percent interest
rate.
"They told me that halfway through the program, I could probably refinance to a lower rate,'' he said.
When he tried to refinance, the school turned him down, he says.
Career Education declined to discuss Mr. Williams's case, citing privacy restrictions and saying he had not signed a waiver.
Mr. Williams has been jobless since last fall and recently returned to LJtah, where he moved in with his mother.
After Graduation
The Career Education Corporation e-mailed The New York Times names and contact information for four graduates "with whom we
hope you'll touch base for important perspective." One came with a wrong nwnber. A second had graduated 15 years ago.
23
A third, Cherie Thompson, called the program "a really positive experience" but declined to discuss her debts or earnings. The fourth,
Ericsel Tan, graduated in 2003 and later earned $42,000 a year overseeing catering at a convention center near Seattle. He said his
success reflected his seven years of kitchen experience prior to culinary school.
Career Education notes that only 59 percent of the federal loans to students at the Western Culinary Institute tl1at began to come due in
2007- the latest available data- are listed in default by the Department of Education.
But default rates have traditionally reflected only tl1ose borrowers who fail to pay in the first two years payments are due.
The Department of Education has begun calculating default rates for three years. By that yardstick, Western Cu Unary's default rate
more tlum doubles, to 12.5 percent.
For-profit schools have ramped up their own lending to students to replace loans formerly extended by Sallie Mae, the student lending
giant.
These loans are risk-y: Career Education and Corinthian recently told investors they had set aside roughly half the money allocated this
year for private lending to cover anticipated bad debts.
Financial aid experts say such high rates of expected default prove that graduates will not earn enough to make their payments, yet the
loans make sense for the for-profit school industry by enabling llie flow of taxpayer funds to llieir coffers: they satisfy federal
requirements that at least 10 percent of tuition money come from students directly or from private sources.
"They're making so much money off their federal student loans and grants that they can afford to write off their own loans," said Ms.
Asher of the T nstitute for College Access & Success.
Visit thee-Dear Colleague Service to manage your subscription to the available Issue and Party Ji st(s).
24
From: Gomez, Gabriella
Sent: Wednesday, May 05, 2010 5:35PM
To:
Cc:
Adams, Kristen; Bergeron, David; Shireman, Bob
Hammond, Cynthia
Subject:
Attachments:
Re: Follow up from this morning
image001 .gif; image002.jpg; image003.gif
Thanks.
Gabriella Gomez, Assistant Secretary
Office of Legislation and Congressional Affairs
U.S. Department of Education
(202) 401-0020
From: Adams, Kristen
To: Bergeron, David; Shireman, Bob
Cc: Gomez, Gabriella; Hammond, Cynthia
Sent: Wed May OS 16:25:32 2010
Subject: FW: Follow up from this morning
Hi,
Aketa from Rep. Fudge's office wanted to make sure you received t his.
Thanks,
Kristen
From: Simmons, Aketa
Sent: Wednesday, May 05, 2010 5:13PM
To: Adams, Kristen
Subject: FW: Follow up from this morning
Good morning.
Rep. Fudge would like to share the article below with the relevant Dept of Ed staffers. Please see below and let
me know if you have any comments, concerns or have investigated the matter prior to the article's
publication.
Thanks,
Aketa Marie
htQ;>: //www. bl oomberg.com /apps/news?pid- 20601087 &sid- aA2 FIVDs2Sk
Bloomberg .com
25
Homeless Dropout s From High School lured by For-Prof it Colleges
By Daniel Golden
Apri l 30 (Bloomberg) -- Benson Roll ins wants a college degree. The unemployed high school
dropout who attends Alcoholics Anonymous and has been homeless for 10 months is being
courted by the University of Phoenix. Two of its recruiters got themselves invited to a Cleveland
shelter last October and pitched the advantages of going to the country's largest for-profit
college to 70 destitute men.
Their visit spurred the 23-year-old Rollins to fill out an online form expressing interest. Phoenix
salespeople then barraged him with phone calls and e-mai ls, urging a tour of its Cleveland
campus. "If higher education is important to you for professional growth, and to achieve your
academic goals, why wait any longer? Classes start soon and space is l imited," one Phoenix
employee e-mailed him on April 15. "I'll be happy to walk you through the entire application
process."
Rollins's experience is increasingly common. The boom in for-profit education, driven by a
pol itical consensus that al l Americans need more than a high school diploma, has intensified
efforts to recruit the homeless, Bloomberg Businessweek magazine reports in its May 3 issue.
Such disadvantaged students are desirable because they qualify for federal grants and loans,
which are largely responsible for the prosperity of for-profit col leges. Federal aid to students at
for-profit colleges jumped to $26.5 billion in 2009 from $4.6 billion in 2000. Publicly traded
higher education companies derive three-fourths of their revenue from federal funds, with
Phoenix at 86 percent, up from just 48 percent in 2001 and approaching the 90 percent limit set
by federal law.
Biweekly Stipend
The privately held Drake College of Business, which trains people to be medical and dental
assistants, relied on taxpayers for 87 percent of its revenue in 2007. Almost 5 percent of the
student body at its Newark, New Jersey, branch is homeless, says Jean Aoun, director of
admissions and student services there. Late in 2008, it began offering a $350 biweekly stipend
to students who show up for 80 percent of classes and maintain a "C" average.
"It's basically known in the community: If you're homeless, and you need some money, go to
Drake," says Carmella Hutson, a case manager at the Goodwi ll Rescue Mission in Newark, where
about 20 cl ients have enrolled at Drake in the past two years. "It would put money in my
pocket, help me buy a car," adds Jerome Nickens/ 45
1
who lived at the mission when he talked
to a Drake representative but decided not to enroll.
Formal Investigation
After Bloomberg Businessweek called the Accrediting Council for Independent Col leges & Schools
to inquire about the stipends, the counci l opened an investigation into the coll ege's recruitment
practices. The inquiry could lead to revoking Drake's accreditation, leaving it ineligible for federal
aid.
Chancellor University in Cleveland/ which counts Jack Welch as an investor and features a
weekly video for students by the former General Electric Co. chief executive/ explicitly focused
recruiting efforts on local shelters after it realized that Phoenix/ owned by Apollo Group Inc.
1
was
doi ng so. Chancell or has stopped pursuing the homeless, and Phoenix says any recruiting by its
employees in Cleveland shelters was unauthorized. Phoenix's business code prohibits recruiting
at shelters
1
and any employee violati ng the ban could face termi nation/ Apol lo says.
Phoenix wants to ensure that "only students who have a reasonable chance to succeed enroll i n
our programs/ Apollo spokesman Manny Rivera said in an e-mail.
26
Welfare Population
Other schools see nothing wrong with reaching out to the disadvantaged. "We don't exclusively
target the homeless," says Ziad Fadel, chief executive of Drake, which also sends recruiters to
welfare and employment agencies. "We are in a community that is low-income and happens to
have a lot of people on welfare."
The every-other-Friday payment encourages Drake students to stay in school and graduate, he
says. The stipend, which about three-fourths of Drake's 1,200 students receive, is not "a
gimmick to just get students in the front door," Fadel says. He adds that a sample analysis of 30
graduates placed by Drake's career services office found "some very substantial improvements
in income."
While many caseworkers for the homeless are gratified by the attention, some see only
exploitation. The companies "are preying upon people who are already vulnerable and can't
make it through a university," says Sara Cohen, a case manager at Shelter Now in Meriden,
Conn. "It's evil."
Deja-vu
The current state of for-profit education has an element of deja vu. Twenty years ago the sector
had grown wild and unruly, as fly-by-night trade schools siphoned off students from welfare and
unemployment lines, ostensibly to train them as truck drivers or hairdressers. Often these
enterprises provided little or no schooling; their aim was the federal student aid. Default rates
on student loans skyrocketed to 22 percent before Congress enacted tough regulations in 1992.
Among them were limits on default rates for individual colleges as well as a cap on the
percentage of their revenue that they could receive from the government. The schools were also
forbidden to pay recruiters based on how many students they enrolled.
The reforms injected discipline into the industry and brought down default rates. Then, a decade
later, the Bush administration relaxed the ban on incentive compensation for recruiters, opening
the door for the aggressive wooing of the homeless.
"Targeting vulnerable populations who are not likely to benefit is one example of overzealous
recruiting that can be driven by paying based on enrollment numbers," says Robert Shireman,
Deputy Under Secretary of the U.S. Education Department, which is pushing to tighten the rules.
Unleashing Potential
The Bush Administration also sought to unleash online education's potential. Phoenix now boasts
458,600 students, with more than 200,000 in its two-year online program. Enrollment in for-
profit colleges grew to 1.8 million in 2008 from 673,000 in 2000. Revenue rose to an estimated
$29.2 billion this year from $9 billion in 2000, says Jeffrey Silber, an analyst for BMO Capital
Markets in New York. Operating margins averaged 21 percent in 2009; schools typically charge
$10,000 to $20,000 a year, well above comparable programs at community colleges.
The industry is now fully mainstream. Goldman Sachs Group Inc. owns 38 percent of the for-
profit Education Management Corp. in Pittsburgh, which has 136,000 students in programs
ranging from fashion to culinary arts, and former President Bill Clinton took a position as
honorary chancellor of Laureate International Universities, owned by Baltimore-based Laureate
Education Inc. Investors are flocking to the industry, drawn by the stability of government
funding and the profit potential of online classes. But some of the unsavory practices that
spurred Congress to act are springing back to life, with a new wrinkle or two.
Homeless Circuit
In Cleveland, Chancellor and Phoenix were both hitting the homeless shelters last year. Byron
Thompson, who joined Phoenix in 2009 as a recruiter, soon made presentations at Y Haven,
Salvation Army Harbor Light and Transitional Housing, al l of which serve the city's homeless.
Thompson, 29, says the recruiting served a social purpose: "I feel the homeless are a real
27
population that can't be ignored." Borrowing by the homeless to pay tuition "is no different from
a middle-class student who has to take out a loan, " he says. He also hoped to boost his pay.
"The month I signed up two or three women from Transitional Housing was a good month," he
admits. (Phoenix recruiters in Cleveland had a quota of five students a month, according to a
former employee.)
Legal Settlement
Thompson, who left Phoenix in January, acknowledges that his bosses didn't endorse his efforts
to recruit the homeless. Apollo Group agreed last December to pay $78.5 million to settle a
federal lawsuit in California alleging that compensation for Phoenix recruiters violated restrictions
on incentive pay. The company, which admitted no wrongdoing, says it's changing its
compensation model.
While Thompson says he was "welcomed with open arms" at the shelters, some staff members
were wary. "The question in my mind about Phoenix was, 'Why are they doing this?"' says Bruce
Shagovac, a counselor at Y Haven. "There's got to be some payoff for them."
One homeless woman whom Thompson steered to Phoenix was Marisol Lugo. Lugo ran away
from her Chicago home at age 12, became a heroin addict, and lived on the streets for 22 years,
eating out of restaurant trash bins and sleeping in parks and abandoned cars. After detox, she
moved in 2008 to Transitional Housing, obtained a high school equivalency degree, and got to
know Thompson. "He gave me wonderful words of encouragement," says Lugo.
With federal grants and loans covering the $10,000-plus annual tuition, she began pursuing a
two-year business degree online at Phoenix last August. She soon ran into academic difficulties,
failing a course in critical thinking.
Retaining Information
"Sometimes, having used so much drugs, I have trouble retaining information," says Lugo, who
now has her own apartment and a maintenance job at the shelter. According to Phoenix, she left
the school in November. She says she is still registered and there is a payment dispute.
Phoenix's forays into shelters were noted by a new Cleveland rival. In 2008, investors bought
nonprofit Myers University, which was under court receivership, and renamed it Chancellor. A
year later Welch acquired a stake in it; the university named its new master's degree program in
business administration after him, and Welch helped develop the curriculum.
At a faculty function last August, Darius Navran, dean of Chancellor's School of Professional
Studies, sought out Jeffrey Perkins Jr., an adjunct professor of public administration, and asked
how Chancellor could boost its enrollment of about 400.
Nontraditional Students
"If we don't tap into that population, Phoenix will," Perkins says he told Navran, meaning the
homeless. The dean agreed.
Chancellor's small classes and low student-to-faculty ratio are suited to nontraditional students
such as the homeless, Perkins says. He e-mailed managers of Cleveland social service agencies
in September, inviting them to a lunch at Chancellor to "discuss our new plans to recruit the
economically disadvantaged and at-risk groups. Many of them are targeted for on-site
recruitment at local transitional housing, halfway houses, and other human service facilities."
Sixteen human services managers showed up for the lunch. Two days later, in a memo to
Navran, Perkins predicted that the program would produce "a minimum of at least 10 enrollees
by spring term."
'Heavy-Handed'
In the ensuing weeks, Perkins and other Chancellor officials gave presentations at a dozen social
service programs. Their pitch was "very heavy-handed," says Phillip Hines, housing coordinator
28
for the Community Women's Shelter. "It was beating the drum, 'Go to Chancellor. This is what
we offer. Financial aid, financial aid, financial aid."'
Afterward, Hines says, Chancellor hounded him with phone calls and e-mails to "get these
women rolling." Chancellor's initiative reaped only one or two students and was discontinued. It
"had all the best intentions," CEO Bob Barker said in an e- mail, "but the time and effort
generated very little interest."
In one view, the rise of for-profit colleges represents a laudable merger of public interest and
the private sector. With public colleges beset by budget cuts, for-profit colleges offer an
opportunity for people who are down and out to get ahead. Students with no assets or collateral
can tap federal grants and loans on the theory that degrees will lead to well-paying jobs that
enable borrowers to repay.
Tuition Hikes
The trouble is the cost. Education companies charge high prices that require students to take on
debt. Chancellor charges $9,750 a year-- about four times the $2,400 tab at nearby Cuyahoga
Community College. Poor students can pay Cuyahoga's tuition with federal grants and don't have
to take out loans. Student advisers from Cuyahoga make the rounds at Cleveland area shelters,
helping the homeless choose colleges and fill out applications.
And for-profit tuitions are rising fast. Drake hiked its tuition from $4,000 in 2007-2008 to
$15,700 this year, which Fadel attributes to new equipment and additional staff. Borrowers who
earned bachelor's degrees from for-profit colleges in 2007-2008 had a median debt of $32,653,
well above the $22,375 and $17,700 for graduates of four-year private nonprofit and public
colleges, respectively.
Such burdens can be difficult for homeless people who are more likely to suffer from mental
illness and substance abuse than the general population. Bad credit doesn't go away easily. In
the Cleveland shelters, you can still find people with trade school debts from 20 years ago.
Those who don't repay their student loans may forfeit their chances for public housing and are
also inel igible for federal financial aid to return to college.
Default Consequences
"If the homeless have a bad student loan, they can't find a place to live, they can't go back to
school, and in this economy there's not a lot of work," said Ardretta Jones, a case manager at
Tacoma Rescue Mission in Tacoma, Washington, "That leaves a person with no options."
Because they don't have to repay their educational loans until they leave school, some homeless
students spend beyond their means. Kim Rose, a recovering crack cocaine addict and ex-
offender in Raleigh, North Carolina, began pursuing an online bachelor's degree in business last
November at Capella Education Co.'s Capella University, based in Minneapolis. At the time she
was staying in a drug-free program with Internet access.
Big Splurge
Rose, 38, receives almost $4,000 each academic quarter in federal grants and loans for tuition
and living expenses. She splurged last Christmas, spending $700 of her financial aid on presents
for her seven-year-old son, who has lived with his grandmother. "I got him everything he
wanted," Rose said in a telephone interview. "Games, toys. He's a guitar freak, I got him a
guitar. To make up for me not being there."
In February, Rose moved into a shelter where the only computer was broken. As a result, she
has struggled to keep up, dropping an English composition course. Rose isn't typical of Capella
students, most of whom are midcareer professionals seeking graduate degrees, says university
spokeswoman Irene Silber: "We would not intentionally recruit someone who is in a life crisis,
much less one as significant as homelessness."
Given the troubled pasts of some homeless students, even a college education hardly assures a
29
well-paying job. Brenda Torchia, another recovering crack cocaine addict in Raleigh who has
served several prison terms for drug offenses, was in a shelter and looking online for work when
she saw an ad that asked if she wanted to further her education. She answered yes and was
directed to the website of a for-profit school called ECPI College of Technology based in Virginia
Beach, Virginia.
Placement Test
Torchia applied, passed a placement test, and started ECPI's medical administration program on
March 1. The 40-year- old mother of four is borrowing about half of the $23,000 tab from the
federal government, with grants and scholarships paying the rest. ECPI officials are aware of her
background and "guarantee me a job in the field," Torchia says. "My school is very, very
supportive of me. I guess God opened up their hearts to receive me for whom I am."
Torchia's history would be a red flag for health-care employers because hospitals and clinics
have drugs on site, says Susan Eget, communications director of the American Academy of
Medical Administrators. While ECPI doesn't promise jobs, President Mark Dreyfus says, medical
administration offers Torchia's best chance because not all employers check backgrounds and
she could process records in a back office where drugs aren't accessible.
In the end, Benson Rollins didn't succumb to Phoenix's hard sell. He is taking a class for his high
school equivalency degree and hopes to study law enforcement in college. For now, he would
like a job so he can pay child support for his 1-year- old daughter, whom he rarely sees. The
Phoenix recruiters, he says, failed to mention a critical point: He would have to take out a
government loan at 5 percent to 7 percent interest to pay the $10,000-plus annual tuition. "I'm
in a homeless shelter, and money is hard to come by," Rollins says. "It's not worth going to
school to end up in debt."
To contact the reporter on this story: Daniel Golden in Boston at dlgolden@bloomberg.net.
Last Updated: April 30, 2010 00:01 EDT
Related Videos
watch
Homeless Dropout Rollins Lured by For-Profit Colleges
April 30 (Bloomberg) -- Benson Rollins, a homeless, unemployed high school dropout, talks with Bloomberg's Daniel
Golden about efforts by for-profit colleges to recruit him for classes. Rollins, a recovering alcoholic, says he frequently
receives e-mails and phone calls from representatives of the institutions and attended a presentation the University of
Phoenix held at a shelter for homeless men with substance abuse problems in Cleveland last October.
From: Fingland, Jodie [mailto:Jodie.Fingland@ed.gov]
Sent: Wednesday, May OS, 2010 4:49 PM
To: Simmons, Aketa
Subject: Follow up from this morning
Aketa,
30
Just following up as you mentioned you were going to send something my way via email earlier today and I hadn't yet
received anything. If you have yet to send, please ignore this email. I just wanted to make sure I didn't overlook
something if you had already sent.
Best,
Jodie Fingland
Department of Education
Office of Legislation and Congressional Affairs
202.401.1043
31
From:
Sent:
To:
Subject:
Hamilton, Justin
Friday, September 17, 201 o 11 :14 AM
Private- Duncan, Arne; Cunningham, Peter; Kvaal, James; Kanter, Martha; Miller, Tony;
Rose, Charlie; Yuan, Georgia; Bergeron, David; Martin, Carmel; Gomez, Gabriella; Weiss,
Joanne
FYI
Wanted to flag this story for you. This article is making the rounds today.
For-Profit Schools Donate to lawmakers Opposing New Financial Aid Rules
Between 2005 and the beginning of this year, Rep. Donald M. Payne, D-N.J., received $6,000 in campaign contributions
from sources related to for-profit colleges. This year, he received more than $20,000 from the schools and their lobby
groups, according to campaign finance records.
What changed?
For one, the colleges have upped their lobbying efforts considerably in the face of proposed regulations that the
industry says could shutter many of its schools.
For another, Payne co-signed three letters to Education Secretary Arne Duncan, in which as many as 18 members of
Congress pleaded with the secretary to put the brakes on that proposed regulation.
Collectively, members who signed the letters received nearly $94,000 from the for-profit college sector between the
beginning of 2010 and late July, according to the most recent available campaign finance data reviewed by ProPublica.
Most of the donations flowed after March 22 --the date the first letter was written to Duncan.
Other co-signers who received campaign cash from the industry include Reps. Alcee Hastings, D-Fia., and Debbie
Wasserman Schultz, D-Fia.; and Jason Altmire, D-Pa. Payne and Altmire sit on the House committee that oversees
education, as do several other members who signed the letters and received donations.
Payne did not reply to our requests for comment, but longtime campaign finance watchdog Fred Wertheimer, president
of the group Democracy 21, which seeks to "eliminate the undue influence of big money in American politics," said the
money given to Payne created a troubling impression.
"Whenever a member of Congress gets a large amount of contributions relatively close to the period where they take a
specific action for an interest group, it raises appearance problems that undermine public confidence in the action that
was taken, and also undermines the argument for the position on the merits," Wertheimer said.
A spokesman for Wasserman Schultz, who signed two of the letters and received nearly $7,400 from the for-profit
industry this year, said the congresswoman signed the letters because the proposed Department of Education
regulations are "overly broad and were written without Congressional hearings."
None of the other congressional offices we contacted responded to calls or e-m ails.
The stakes are high for the for-profit schools because the proposed regulation tightens the conditions under which
educational programs can participate in federal student aid programs. Many proprietary schools draw the majority of
their revenue-- billions of dollars each year from those taxpayer-backed sources.
32
Called the "gainful employment" rule, the regulation would create a two-part test that Duncan has said is intended to
stop some career schools from "saddling students with debt they cannot afford in exchange for degrees and certificates
they cannot use."
The first part would measure how many former students are paying down the principal of their loans, while the second
establishes ratios between the debt students take on to finance their education and their earnings after leaving the
school, according to the Department of Education.
The test applies to individual programs of study rather than an entire school. Each program must satisfy at least one part
of the test for its students to remain eligible for financial aid.
For example, if a school's nursing program failed to meet the lowest thresholds for principal repayment and debt ratios,
future students could not pay for that program using federal financial aid. But if the same school's computer sciences
program was in compliance, students in that field of study could continue accessing federal aid.
Schools could be required to warn students about high debt loads if a particular program falls into a danger zone, the
Education Department says.
The regulation would apply to all schools-- including for-profit, public and private, nonprofit institutions. Based on
current numbers, the department estimates that "5 percent of all programs would no longer be eligible to offer their
students federal student aid and 55 percent of all programs would be required to warn their students about high debt-
to-earnings ratios."
Mark Kantrowitz, a financial aid expert who publishes Fastweb.com and FinAid.org, predicted the rule will have a greater
impact on for-profit schools than other institutions. "The difference is that every type of program at for-profits is
impacted, whereas at traditional colleges, it's just the vocational programs," he said.
The department's move comes after government investigations found fraud in the recruiting practices of several major
for-profit colleges, and amid worsening data on loan default rates, especially for students at for-profit schools.
Harris Miller, president of the Career College Association, which represents for-profit colleges and trade schools, said the
gainful employment rule poses a "fundamental threat to a lot of very high-quality programs that could be forced to
close."
The industry's effort to build congressional pressure against the new rules has been carefully planned. ProPublica
obtained a "whip list" that appears to divvy up responsibilities to lobby individual Democratic members among various
schools and industry groups.
The whip list is in an Excel spreadsheet written by Chris Collins, according to the document's "properties" data. The
Career College Association lists a Chris Collins as its "Grass Roots Coordinator," but Miller said he would not comment on
"specific internal documents."
The for-profit industry has not been shy about using its financial weight to lobby for what it wants. The founder of one
for-profit chain, Arthur Keiser, has become a major national donor, according to campaign finance records. Keiser is also
the current chairman of the Career College Association.
Campaign finance records show that Keiser, his wife, Belinda, and mother, Evelyn, contributed a collective $31,600 to
members of Congress who signed the letters since the beginning of this year, when the fight over the regulations had
begun to heat up.
Key figures in the industry have also paid numerous personal visits to the Education Department, according to public
documents. They include visits by John McKernan, chairman of Education Management Corp., a company that owns
33
several major for-profit schools . McKernan is the former governor of Maine and the husband of Republican Sen.
Olympia Snowe.
Records also show visits to the department by officials from DeVry Inc. and Kaplan Inc., two of the biggest players in the
industry, and their lobbyists.
Schools have also elicited tens of thousands of comments about the proposed regulation from their students, resulting
in what the Department of Education said is by far the largest ever response to a public comment period.
In one instance, the president of the University of Phoenix, William Pepicello, sent out what appeared to be a blast e-
mail to students that the Department of Education called misleading.
The e-mail claimed the gainful employment regulation would "block hundreds of thousands of Americans from getting
the college education they need and deserve to get ahead in their jobs or find even better jobs."
An Education Department official told ProPublica that the e-mail inaccurately implied that t he rule would prevent
students from getting loans, when in fact it would affect only particular degree programs at specific schools.
"Students do not lose loan eligibility," said James Kvaal, deputy undersecretary of education. "They can and many will
choose from the tens of thousands of programs that remain eligible," he said.
The University of Phoenix would not say to whom the e-mail was sent. The school's most recent financial filings say it
has 476,500 students.
Education Department officials would not comment on the industry's lobbying campaign. The agency expects the rule to
be finalized by November, and schools that fail the gainful employment test could be cut from the federal aid programs
beginning in 2012.
34
From:
Sent:
To:
Subj ect :
Hamilton, Justin
Wednesday, June 16, 2010 12:41 AM
Cunningham, Peter; Rogers, Margot; Martin, Carmel; Gomez, Gabriella; Miller, Tony; Kanter,
Martha; Weiss, Joanne; Abrevaya, Sandra; Yuan, Georgia
Neg-Reg Press
Still looking for the WaPo story, but here's where we are:
NYT: U.S. Education Dept. Delays Rules on For-Profit Colleges
WSJ/DOW JONES: US Education Dept Avoids 'Gainful Employment' In Reform Draft
AP: Proposed new rules for college recruitment
USA TODAY: Education Department takes aim at for-profit colleges
Reuters: U.S. to go after deceptive colleges, delays job rule
POLITI CO: Eyes on for-profit college oversight
BLOOMBERG: Obama Targets For-Profit College Recruiting Practices in Proposed Rules
U.S. Education Dept. Delays Rules on For-Profit Colleges
By TAMAR LEWIN
The Education Department
<http:ljtopics.nytimes.com/top/reference/timestopics/organizations/e/education department/index.html?inline=nyt-org>
said Tuesday that it had split off and delayed a decision on the most controversial part of proposed new student-aid
regulations - the treatment of for-profit college programs whose graduates do not earn enough to repay their loans.
While a package of proposed new student-aid regulations was released Tuesday, a department official said no decision had
been reached about what debt-to-income ratio would make for-profit programs ineligible for federal aid.
"This is about accountability, and protecting students," said Education Secretary Arne Duncan
<http://topics.nytimes.com/top/reference/timestopics/people/d/arne duncan/index.html?inline=nyt-per> . "We have many
areas of agreement where we can move forward. But some key issues around gainful employment are complicated, and we
want to get it right so we will be coming back with that shortly."
In the original draft of the gainful employment rules released this year, the department suggested cutting off federal aid to
programs whose graduates could not repay their student loans <http://www.nvtimes.com/info/student-loans/?inline=nyt-
classifier> in 10 years with 8 percent of the income.
Consumer advocates and many education groups say that the rules wi ll protect students and taxpayers alike from expensive
programs that eat up billions of doll ars of federal money, and leave graduates struggling in dead-end jobs.
But the Career Coll ege Association, which represents the for-profit institutions, aggressively lobbied against that proposal,
saying it would not solve any problem but would lead to the closing of important job-training programs for needy students.
For-profit colleges get the bulk of their revenues from federal aid, and their students are far more likely to default on their
loans than those at nonprofit or public colleges. With for-profit colleges booming, and getting $20 bi llion in federal aid, the
government has been taking a closer look at how that money is used. last week, Tom Harkin
<http://topics.nytimes.com/top/reference/timestopics/people/h/tom harkin/index.html?inline=nyt-per>, the Iowa
Democrat who is chairman of the Senate Committee on Health, Education, labor and Pensions, announced that he would hold
hearings on the issue.
35
"I am pleased to see the Department of Education releasing proposed regulations around for-profit higher education," he said
on Tuesday. "For-profit colleges must work for students and taxpayers, not just shareholders."
At a briefing on Tuesday, Deputy Under Secretary Robert Shireman said that the department still intended "to hold programs
accountable with some metrics that will come in a proposal later this summer" - but that to avoid delaying the whole
regulatory package, it had decided to go ahead with everything but the specific gainful employment measures.
The new regulations, to be published in the Federal Register on Friday, would require for-profit coll eges to disclose their
programs' job-placement rates and graduation rates, and provide information that would let the department calculate
graduates' debt load and income.
The new regulations also help protect students from aggressive or misleading recruiting practices and ensure that only eligible
students receive aid.
The regulations also tighten the prohibition against paying recruiters by the number of students they enroll - a practice that
has sometimes led to boi ler-room call centers that pressure those with little chance of academic success to enroll.
While incentive compensation was already illegal, the current rules all owed some exceptions that the department said had
been abused. The new rules would eliminate those exceptions.
After a 45-day comment period, the department expects to publish final rules by Nov. 1, to take effect beginning July 2011.
WSJ/DOW JONES: US Education Dept Avoids 'Gainful Employment' In Reform
Draft
NEW YORK (Dow Jones)--The U.S. Department of Education on Wednesday will propose sweepi ng reforms to a number
of issues governing higher education, including attempting to define a credit hour, penalizing schools for
misrepresent ing their qualifications or offerings and tightening rules governi ng recruiter compensat ion.
Most notable about t he recommendat ions, known as a Not ice of Proposed Rulemaking, is what 's absent, as the
Education Department chose not to t ackle a hotly debated measure that would punish schools for graduating students
with high debt-to-income ratios in an attempt to measure how well they prepare students for gainful employment in a
recognized occupation. For-profit schools have warned they may need to cut tuition or shut programs if that proposal
were pushed t hrough.
The Education Department will return to the measure later this summer, the agency said. "Some key issues around
gainful employment are complicated and we want to get it right so we will be coming back with that shortly," Education
Secretary Arne Duncan said in a statement.
The Education Department said it is still developing metrics to hold programs accountable for their ability to prepare
students for gainful employment. For now, it is recommending schools disclose graduation and job-placement rates and
their students' median debt levels.
For months, shares of schooling companies have sighed and swooned with every rumor of what would or wouldn't be
included in the draft proposal. Investors have remained anxious since the final of three discussions ended without
resolution on a handful of issues, and analysts say continued uncertainty could mean more volatility.
Even without the meatiest gainful-employment measure included in the proposal, a number of schools may face
fundamental operational changes. For example, the department recommends tightening oversight of "Ability to Benefit"
tests, exams on which many institutions rely to enroll students who don't have high school diplomas. The tests came
36
under scrutiny last year when a Government Accountability Office found proctors willing to help students cheat.
The department also recommends strengthening the metrics by which students must show academic progress so
schools can't receive federal -aid funds, from students who continue to post near-failing grades.
In addition, the Education Department proposes to eliminate 12 "safe harbors" from a ban on incentive compensation,
which an agency official referred to as "loopholes" to the original1992 rule. A number of for-profit schools have been
the subject of lawsuits alleging overzealous recruiting tactics.
The draft also proposes a new definition of a credit hour, the fundamental measure of a program's rigor. Students are
assigned part- or full-time status based on how many credits they take, and some schools have been accused of inflating
their credits in order to receive more federal funds. A major accrediting agency was recently slammed by the Education
Department's Office of Inspector General for accrediting Career Education Corp.'s (CECO) American Intercontinental
University despite having concerns about its credit-hour structure. The House Committee on Education and Labor will
hold a hearing Thursday on accreditation and credit hours.
The Education Department's draft rules will be open to public comment for 45 days, and the Education Department
plans to issue a final rule by Nov. 1. Any changes will take effect beginning July 1, 2011.
AP: Proposed new rules for college recruitment
By DONNA GORDON BLANKINSHIP
ASSOCIATED PRESS WRITER
Colleges would no longer be allowed to pay recruiters for students or engage in aggressive or misleading recruitment
under proposed new federal regulations that target the practices of for-profit colleges.
The proposed new Department of Education rules were to be announced Wednesday. They apply to all colleges but are
of particular interest to the for-profit world, where some institutions have been accused of misleading students about
the cost and value of their programs.
"This is about accountability and protecting students," said Education Secretary Arne Duncan, in a statement.
The "notice of proposed rulemaking" is set to be published in the Federal Register on Friday and will be open to public
comment until Aug. 2. Final rules are scheduled to be announced in November and would take effect in July 2011.
Under the proposed new rules, colleges would be required to do the following:
-Give prospective students their graduation and job placement rates.
-Supply data to the federal government that would allow officials to determine student debt levels and incomes after
they graduate.
- Make sure only students with valid high school diplomas are enrolled.
- Ensure students are making satisfactory academic progress.
The new rules would strengthen the federal government's ability to take action against institutions that engage in
deceptive advertising, marketing and sales practices. All loopholes in rules that already prohibit colleges from paying
recruiters for students would be closed.
37
The role of individual states in monitoring colleges would be clarified. The rules would also more clearly define the
courses eligible for financial aid and the amount of aid that is appropriate.
Studies show students at for-profit schools - the fastest growing sector of higher education - are much more likely to
default on their loans than students at other kinds of colleges.
The federal government is paying more attention to these schools as large amounts of federal aid go to these schools in
the form of student loans and grants.
Sen. Tom Harkin, D-lowa, chairman of the Senate Health, Education, Labor and Pensions Committee, has said he plans to
hold hearings starting June 24 to look at federal education spending at for-profit colleges.
The rules were not released until after the stock markets closed Tuesday, but investors have driven down the value of
for-profit colleges as concern over the rules mounted. The worry is that schools like the University of Phoenix or ITI
Technical Institutes could lose students and revenue if loans are tougher to come by.
"Investors are nervous across the board," said Corey Greendale, an analyst with First Analysis Securities Corp. in Chicago.
"Nobody knows exactly what this is going to do."
Shares of Apollo Group Inc., which owns the University of Phoenix, have sunk about 22 percent since Aprill, while
shares of ITI Educational Services are down 13 percent.
Schools most at risk of losing business are those that offer longer programs, which translate into more debt for students,
Greendale said.
Representatives from for-profit colleges and their business associations were among those who negotiated the new
rules during meetings this past winter.
One major area of contention was left out of the proposed regulations.
To qualify for financial aid, most career colleges and vocational training programs need to show they are giving students
the skills they need for "gainful employment." The definition of gainful employment will be set in another set of
proposed rules to be issued later this summer, the department said.
Harris Miller, president of the Career College Association, said he was glad to hear the federal government plans to keep
negotiating about gainful employment, but noted one other area of contention in the rules proposed this week.
The plan to eliminate all kinds of recruitment pay instead of a more subtle reform of the practice does not make sense
and will hurt students and legitimate institutions, Miller said.
Miller said he assumes his organization and the Obama administration are in agreement on the other proposed rules.
USA TODAY: Education Department takes aim at for-profit colleges
By Mary Beth Marklein
The Education Department is proposing a number of rules today designed to protect college students and taxpayers
from abusive or fraudulent practices, including aggressive recruitment tactics and all owing ineligible students to enroll
and receive aid.
Though all colleges that receive federal aid would be affected by the changes, the most controversial proposals are
38
aimed at for-profit colleges, which have come under more scrutiny as their enrollments have increased.
In an effort to rein in student debt and high default rates, for example, one proposal would require colleges to disclose
graduation and job placement rates and information about the effectiveness of their career and technical programs.
Federal data show that 44% of 2007 graduates who defaulted on loans within three years attended for-profit
institutions.
Most of the 14 key issues, outlined in a 503-page document shown to reporters Tuesday, were developed through
negotiations over the past year with the higher education community. A final version of the rules would take effect in
July 2011.
Education officials will follow up this summer with details on a proposal that would cut off federal aid to for-profit
colleges whose graduates can't earn enough to repay their loans.
The issues are complicated "and we want to get it right," Education Secretary Arne Duncan
<http://content.usatoday.com/topics/topic/People/Politicians,+Government+Officials,+Strategists/Executive/Arne+Dun
can> says. "This is about accountability, and protecting students."
Next week, a Senate education committee will examine federal spending at for-profit schools.
Advocates of stricter regulations are encouraged by a preliminary review of the proposals.
"There's a real concern that taxpayers are subsidizing programs that are overpromising and under-delivering," says
Pauline Abernathy of the California-based Institute for College Access & Success.
Harris Miller <http://content.usatoday.com/topics/topic/Harris+Miller>, president of the Career College Association,
which represents about 1,450 for-profit institutions, said the group doesn't agree with all the proposals, but "we agree
that students need to be protected at all times from schools that color outside the lines."
REUTERS: U.S. to go after deceptive colleges, delays job rule
Diane Bartz
Under proposals unveiled on Tuesday, the department partially addressed the issue by requiring for-profit schools to release
data to students on graduation and job placement rates.
But it stopped short of requiring for-profit institutions to demonstrate that they prepare students for jobs before students
would be eligible for federal grants and loans, a step advocated by Robert Shireman, a deputy undersecretary at the
Department of Education.
Education Secretary Arne Duncan said in a statement that the gainful employment issue was complicated: "we want to get it
right so we will be coming back with that shortly."
Proposals affecting all colleges and universities would tighten rules against deceptive advertising and would close loopholes
on paying recruiters in hopes of removing incentives for them to enroll unqualified people or deceive prospective students.
The institutions would be required to ensure that their students have a valid high school diploma or otherwise show that they
are ready for college.
Shireman has repeatedly called for tightened regulation of companies such as Corinthian Colleges Inc and Career Education
Corp.
39
Shares in the for-profit sector got a boost last month on word that Shireman plans to step down on July 1, although he will
remain an advisor to the department.
Jeff Silber, a stock analyst with BMO Capital Markets, said a delay in the gainful employment rule should be welcomed
cautiously.
"If this thing is being delayed, it doesn't mean that it's going away," he said. "I don't think it's bad news. (But) I wouldn't
declare victory here."
Corinthian Colleges spokesman Kent Jenkins called the announced rules and the delay on gainful employment "a step in the
right direction."
"We don't know where they will come down (on gainful employment) but the fact that they are being very careful and very
cautious speaks well for them," he said.
Efforts to reach other for-profit schools for a reaction to the proposed rules were unsuccessful.
The schools, which offer higher education programs in fields like healthcare and criminal justice, have been criticized for their
student loan practices and the quality of the education students receive.
The for-profit industry has also been criticized because students, who tend to be low-income, are most likely to end up with
outsized -- and sometimes unpayable-- debt.
Fifty-three percent ended up owing more than $30,500, compared with 12 percent for students who attended a public four-
year college, according to a study by the College Board.
U.S. Senator Tom Harkin, an Iowa Democrat, said he was pleased with the announced rules.
"The federal government must ensure that the more than $20 billion in student aid that these schools receive is being well
spent and students are being well informed and well served," he said. " For-profit colleges must work for students and
taxpayers, not just shareholders."
The draft regulations will be put out for public comment on Friday. There will be a 45-day comment period. The goal is to issue
a final rule by November 1, which would go into effect on July 1, 2011.
POLITICO: Eyes on for-profit college oversight
The Obama administration will propose tightening oversight of for-profit colleges on Wednesday to thwart misleading
recruiting and reign in federal funding.
The new rules will be released for public comment after a year of negotiations between the Education Department and higher
education community. While the regulations encompass all higher education institutions, for-profit universities like Kaplan,
DeVry and University of Phoenix are likely to bear the brunt of the changes.
"This is about accountability, and protecting students," said Education Secretary Arne Duncan, who aims to finalize the rules
by November, in a statement. The rules will go after aggressive recruiting practices. It will grant the department new powers
to take action against deceptive advertising, marketing and sales. It also will end the practice of schools compensating
admissions recruiters based on securing student enrollment.
The proposed regulations will ensure only eligible students- those that have a high school diploma or pass an equivalence
test- receive federal funds. And they will clarify what courses are el igible for federal aid and how much taxpayer money they
can obtain.
40
But the department only partially addresses the much-debated "gainful employment" proposal that would cut off federal
funding to programs whose graduates don't earn enough to pay off their student loans. The new rules order institutions to
provide their prospective students graduation and job placement rates, as well as hand over data on student debt and
incomes after graduation. But the department won't unveil the metrics to hold them accountable until later this summer.
"Given controversy, we want to make sure we get it right," a department official told reporters.
Fighting the proposal is already the top cause of Students for Academic Choice, a grassroots-sounding group backed by the
Career College Association, a lobbying group for 1,400 for-profit schools. More than 32,000 people signed a petition saying it
would "treat career college students as separate and inherently unequal," as well as limit vocational and technical programs
for more than 300,000 students who want to go into fields like health care. <.b.ll.I2.J.Lstudentsforacademicchoice.org/>
Enrollment in for-profit universities is on the rise, jumping from 673,000 students nationwide in 2000 to 1.8 million in 2008.
And federal aid to students at for-profit colleges soared to $26.5 billion in 2009 from $4.6 billion in 2000.
While these schools offer people an educational alternative, they often come with a mountain of debt, observers say. A recent
College Board study concluded that students who attend for-profit colleges graduate on average with bigger student loans
than those who attended private nonprofit or public schools. More than half of bachelor's degree recipients left school at
least $30,500 in debt <http:ljwww.collegeboard.com/press/releases/211932.html>.
Harris Miller, president of the Career College Association, has repeatedly rejected the idea that for-profit schools leave
students will unmanageable debt. He said the default rate on loans for students at for-profit institutions is about the same as
students who attend community colleges and other nonprofits. "Let's try to turn this into a fact-based conversation," he said.
Meanwhile Congress is also jumping into the conversation. Beginning next week Sen. Tom Harkin (D-I owa) will hold a series of
hearings to examine federal education spending at these i nstitutions.
Read more: http:ljwww.politico.com/news/stories/0610/38598.html#ixzzOqzFnXDyJ
BLOOMBERG: Obama Targets For-Profit College Recruiting Practices in Proposed
Rules
By John Hechinger- Jun 16, 2010
The Obama administration proposed banning for-profit colleges from tying recruiters' pay to the number of people they
enroll, saying high-pressure sales tactics induced students to take out government loans they can' t afford.
The rules would prohibit paying sales incentives at Apollo Group
<http ://preview .bloomberg.com/apps/quote ?T =en10/guote. wm&ticker=APOL: US> Inc., ITT Educational Services
<http://preview.bloomberg.com/apps/quote ?T =en10/guote. wm&ticker=ESI:US> Inc., Career Education Corp
<http://preview.bloomberg.com/apps/quote?T=en10/guote.wm&ticker=CECO:US>. and other for-profit colleges, according
to a copy of the proposal by the U.S. Department of Education to be made public today. At for-profit colleges, recruiters
contact potential students, often after they express interest over the Internet.
U.S. Secretary of Education Arne Duncan
<http://search.bloomberg.com/search?site=wnews&client=wnews&proxystylesheet=en10 wnews&output=xml no dtd&ie=
UTF-8&oe=UTF-8&filter=p&getfields=wnnis&partialfields=-wnnis: NOA VSYN D&sort=date: D :S:d1&1r=-
lang ja&q=Arne%20Duncan> is seeking to protect taxpayers from loan defaults and to stop students from taking on debt for
programs that don't lead to higher incomes. For-profit colleges can receive up to 90 percent of their revenue from federal
grants and loans. Federal aid to for-profit colleges jumped to $26.5 billion last year from $4.6 billion in 2000, according to the
Education Department.
"This is about accountability and protecting students," Duncan said in a statement.
41
The Obama admini st ration delayed the release of a proposed rule that would disqualify for-profit colleges from receiving
federal aid if thei r graduates spend more than 8 percent of their starting salaries repaying student loans.
The Education Department is still analyzing the proposal and expects to release the rule, known as gainful employment,
between now and August, the agency said in a statement.
Industry Opposition
For-profit colleges lobbied against the gainful-employment rule, which could disqualify programs enrolling 300,000 students,
according to an April study commissioned by the Washington-based Career College Association, which represents more than
1,400 for-profit colleges.
Education stocks last week rallied on analysts' reports citing the potential delay of the gainful employment rule. Apollo, based
in Phoenix, rose 70 cents, or 1.5 percent, to close at $48.30 in Nasdaq Stock Market composite trading yesterday. Career
Education, based in Hoffman Estates, Illinois, rose 71 cents, or 2.7 percent, to $26.91. ITT, based in Carmel, Indiana, rose
$1.39, or 1.5 percent, to $97.18 in New York Stock Exchange Composite trading.
Colleges would no longer be allowed to tie recruiters' pay to enrollment under any circumstances, according to the new rules.
The current regulations prohibit the practice while allowing exceptions, or "safe harbors."
' Unscrupulous Actors'
" Unscrupulous actors routinely rely on these safe harbors" to get around the law, the Education Department said. While the
proposed rules apply to all colleges, they are designed to target abuses among for-profits, the department said.
The Education Department' s description of recruiting violations among for-profits amounts to "a lot of hyperbole," Harris
Miller
<http://search.bloomberg.com/search?site=wnews&client=wnews&proxystylesheet=en10 wnews&output=xml no dtd&ie=
UTF-8&oe=UTF-8&filter=p&getfields=wnnis&partialfields=- wnnis:NOAVSYND&sort=date:D:S:d1&1r=-
lang ja&q=Harris%20Miller>, the Career College Association's president, said in an interview. Colleges should be allowed to
continue taking enrollment into account among other factors in compensating recruiters, Miller said.
The new rule on recruiter pay could have a broad impact on the industry, Matt Snowling
<http://search.bloomberg.com/search?site=wnews&client=wnews&proxystylesheet=en10 wnews&output=xml no dtd&ie=
UTF-8&oe=UTF-8&filter=p&getfields=wnnis&partialfields=- wnnis:NOAVSYND&sort=date:D:S:d1&1r=-
lang ja&g=Matt%20Snowling> , an analyst with FBR Capital Markets in Arl ington, Virginia, said in a phone interview.
"The incentive compensation rule is probably a bigger threat to the industry than gainful employment," Snowling said. "By
limiting the schools ability to market themselves, it takes away some of their ability to grow."
Apollo Settlements
Apollo's University of Phoenix last December agreed to pay $67.5 million to the U.S. and $11 million in legal fees to plaintiffs
to settle a whistleblower suit arising from allegations from former employees that that company improperly paid recruiters
based on enrollment numbers. Apollo admitted no wrongdoing. The company, without admitting fault, paid $9.8 million in
2004 to the Department of Education to settle similar claims.
Apollo started reviewing recruiter compensation 18 months ago, with a focus on "enhancing student satisfaction and student
experience," spokeswoman Sara Jones said in an e-mail.
"We anticipate that our new compensation will be in compliance with the forthcoming regulations by the U.S. Department of
Education but cannot confirm until the rules are finalized, " Jones said.
Today's proposed rules also would require colleges to disclose information about employment prospects to students and
42
strengthen the Education Department's authority to take action against institutions engaging in "deceptive, marketing and
sales practices," the department said in a statement. The proposed rules, being issued for public comment, could be made
final November 1 and take effect in July 2011.
43
From:
Sent:
To:
Subj ect :
Hamilton, Justin
Wednesday, June 16, 2010 12:41 AM
Cunningham, Peter; Rogers, Margot; Martin, Carmel; Gomez, Gabriella; Miller, Tony; Kanter,
Martha; Weiss, Joanne; Abrevaya, Sandra; Yuan, Georgia
Neg-Reg Press
Still looking for the WaPo story, but here's where we are:
NYT: U.S. Education Dept. Delays Rules on For-Profit Colleges
WSJ/DOW JONES: US Education Dept Avoids 'Gainful Employment' In Reform Draft
AP: Proposed new rules for college recruitment
USA TODAY: Education Department takes aim at for-profit colleges
Reuters: U.S. to go after deceptive colleges, delays job rule
POLITI CO: Eyes on for-profit college oversight
BLOOMBERG: Obama Targets For-Profit College Recruiting Practices in Proposed Rules
U.S. Education Dept. Delays Rules on For-Profit Colleges
By TAMAR LEWIN
The Education Department
<http:ljtopics.nytimes.com/top/reference/timestopics/organizations/e/education department/index.html?inline=nyt-org>
said Tuesday that it had split off and delayed a decision on the most controversial part of proposed new student-aid
regulations - the treatment of for-profit college programs whose graduates do not earn enough to repay their loans.
While a package of proposed new student-aid regulations was released Tuesday, a department official said no decision had
been reached about what debt-to-income ratio would make for-profit programs ineligible for federal aid.
"This is about accountability, and protecting students," said Education Secretary Arne Duncan
<http://topics.nytimes.com/top/reference/timestopics/people/d/arne duncan/index.html?inline=nyt-per> . "We have many
areas of agreement where we can move forward. But some key issues around gainful employment are complicated, and we
want to get it right so we will be coming back with that shortly."
In the original draft of the gainful employment rules released this year, the department suggested cutting off federal aid to
programs whose graduates could not repay their student loans <http://www.nvtimes.com/info/student-loans/?inline=nyt-
classifier> in 10 years with 8 percent of the income.
Consumer advocates and many education groups say that the rules wi ll protect students and taxpayers alike from expensive
programs that eat up billions of doll ars of federal money, and leave graduates struggling in dead-end jobs.
But the Career Coll ege Association, which represents the for-profit institutions, aggressively lobbied against that proposal,
saying it would not solve any problem but would lead to the closing of important job-training programs for needy students.
For-profit colleges get the bulk of their revenues from federal aid, and their students are far more likely to default on their
loans than those at nonprofit or public colleges. With for-profit colleges booming, and getting $20 bi llion in federal aid, the
government has been taking a closer look at how that money is used. last week, Tom Harkin
<http://topics.nytimes.com/top/reference/timestopics/people/h/tom harkin/index.html?inline=nyt-per>, the Iowa
Democrat who is chairman of the Senate Committee on Health, Education, labor and Pensions, announced that he would hold
hearings on the issue.
44
"I am pleased to see the Department of Education releasing proposed regulations around for-profit higher education," he said
on Tuesday. "For-profit colleges must work for students and taxpayers, not just shareholders."
At a briefing on Tuesday, Deputy Under Secretary Robert Shireman said that the department still intended "to hold programs
accountable with some metrics that will come in a proposal later this summer" - but that to avoid delaying the whole
regulatory package, it had decided to go ahead with everything but the specific gainful employment measures.
The new regulations, to be published in the Federal Register on Friday, would require for-profit coll eges to disclose their
programs' job-placement rates and graduation rates, and provide information that would let the department calculate
graduates' debt load and income.
The new regulations also help protect students from aggressive or misleading recruiting practices and ensure that only eligible
students receive aid.
The regulations also tighten the prohibition against paying recruiters by the number of students they enroll - a practice that
has sometimes led to boi ler-room call centers that pressure those with little chance of academic success to enroll.
While incentive compensation was already illegal, the current rules all owed some exceptions that the department said had
been abused. The new rules would eliminate those exceptions.
After a 45-day comment period, the department expects to publish final rules by Nov. 1, to take effect beginning July 2011.
WSJ/DOW JONES: US Education Dept Avoids 'Gainful Employment' In Reform
Draft
NEW YORK (Dow Jones)--The U.S. Department of Education on Wednesday will propose sweepi ng reforms to a number
of issues governing higher education, including attempting to define a credit hour, penalizing schools for
misrepresent ing their qualifications or offerings and tightening rules governi ng recruiter compensat ion.
Most notable about t he recommendat ions, known as a Not ice of Proposed Rulemaking, is what 's absent, as the
Education Department chose not to t ackle a hotly debated measure that would punish schools for graduating students
with high debt-to-income ratios in an attempt to measure how well they prepare students for gainful employment in a
recognized occupation. For-profit schools have warned they may need to cut tuition or shut programs if that proposal
were pushed t hrough.
The Education Department will return to the measure later this summer, the agency said. "Some key issues around
gainful employment are complicated and we want to get it right so we will be coming back with that shortly," Education
Secretary Arne Duncan said in a statement.
The Education Department said it is still developing metrics to hold programs accountable for their ability to prepare
students for gainful employment. For now, it is recommending schools disclose graduation and job-placement rates and
their students' median debt levels.
For months, shares of schooling companies have sighed and swooned with every rumor of what would or wouldn't be
included in the draft proposal. Investors have remained anxious since the final of three discussions ended without
resolution on a handful of issues, and analysts say continued uncertainty could mean more volatility.
Even without the meatiest gainful-employment measure included in the proposal, a number of schools may face
fundamental operational changes. For example, the department recommends tightening oversight of "Ability to Benefit"
tests, exams on which many institutions rely to enroll students who don't have high school diplomas. The tests came
45
under scrutiny last year when a Government Accountability Office found proctors willing to help students cheat.
The department also recommends strengthening the metrics by which students must show academic progress so
schools can't receive federal -aid funds, from students who continue to post near-failing grades.
In addition, the Education Department proposes to eliminate 12 "safe harbors" from a ban on incentive compensation,
which an agency official referred to as "loopholes" to the original1992 rule. A number of for-profit schools have been
the subject of lawsuits alleging overzealous recruiting tactics.
The draft also proposes a new definition of a credit hour, the fundamental measure of a program's rigor. Students are
assigned part- or full-time status based on how many credits they take, and some schools have been accused of inflating
their credits in order to receive more federal funds. A major accrediting agency was recently slammed by the Education
Department's Office of Inspector General for accrediting Career Education Corp.'s (CECO) American Intercontinental
University despite having concerns about its credit-hour structure. The House Committee on Education and Labor will
hold a hearing Thursday on accreditation and credit hours.
The Education Department's draft rules will be open to public comment for 45 days, and the Education Department
plans to issue a final rule by Nov. 1. Any changes will take effect beginning July 1, 2011.
AP: Proposed new rules for college recruitment
By DONNA GORDON BLANKINSHIP
ASSOCIATED PRESS WRITER
Colleges would no longer be allowed to pay recruiters for students or engage in aggressive or misleading recruitment
under proposed new federal regulations that target the practices of for-profit colleges.
The proposed new Department of Education rules were to be announced Wednesday. They apply to all colleges but are
of particular interest to the for-profit world, where some institutions have been accused of misleading students about
the cost and value of their programs.
"This is about accountability and protecting students," said Education Secretary Arne Duncan, in a statement.
The "notice of proposed rulemaking" is set to be published in the Federal Register on Friday and will be open to public
comment until Aug. 2. Final rules are scheduled to be announced in November and would take effect in July 2011.
Under the proposed new rules, colleges would be required to do the following:
-Give prospective students their graduation and job placement rates.
-Supply data to the federal government that would allow officials to determine student debt levels and incomes after
they graduate.
- Make sure only students with valid high school diplomas are enrolled.
- Ensure students are making satisfactory academic progress.
The new rules would strengthen the federal government's ability to take action against institutions that engage in
deceptive advertising, marketing and sales practices. All loopholes in rules that already prohibit colleges from paying
recruiters for students would be closed.
46
The role of individual states in monitoring colleges would be clarified. The rules would also more clearly define the
courses eligible for financial aid and the amount of aid that is appropriate.
Studies show students at for-profit schools - the fastest growing sector of higher education - are much more likely to
default on their loans than students at other kinds of colleges.
The federal government is paying more attention to these schools as large amounts of federal aid go to these schools in
the form of student loans and grants.
Sen. Tom Harkin, D-lowa, chairman of the Senate Health, Education, Labor and Pensions Committee, has said he plans to
hold hearings starting June 24 to look at federal education spending at for-profit colleges.
The rules were not released until after the stock markets closed Tuesday, but investors have driven down the value of
for-profit colleges as concern over the rules mounted. The worry is that schools like the University of Phoenix or ITI
Technical Institutes could lose students and revenue if loans are tougher to come by.
"Investors are nervous across the board," said Corey Greendale, an analyst with First Analysis Securities Corp. in Chicago.
"Nobody knows exactly what this is going to do."
Shares of Apollo Group Inc., which owns the University of Phoenix, have sunk about 22 percent since Aprill, while
shares of ITI Educational Services are down 13 percent.
Schools most at risk of losing business are those that offer longer programs, which translate into more debt for students,
Greendale said.
Representatives from for-profit colleges and their business associations were among those who negotiated the new
rules during meetings this past winter.
One major area of contention was left out of the proposed regulations.
To qualify for financial aid, most career colleges and vocational training programs need to show they are giving students
the skills they need for "gainful employment." The definition of gainful employment will be set in another set of
proposed rules to be issued later this summer, the department said.
Harris Miller, president of the Career College Association, said he was glad to hear the federal government plans to keep
negotiating about gainful employment, but noted one other area of contention in the rules proposed this week.
The plan to eliminate all kinds of recruitment pay instead of a more subtle reform of the practice does not make sense
and will hurt students and legitimate institutions, Miller said.
Miller said he assumes his organization and the Obama administration are in agreement on the other proposed rules.
USA TODAY: Education Department takes aim at for-profit colleges
By Mary Beth Marklein
The Education Department is proposing a number of rules today designed to protect college students and taxpayers
from abusive or fraudulent practices, including aggressive recruitment tactics and all owing ineligible students to enroll
and receive aid.
Though all colleges that receive federal aid would be affected by the changes, the most controversial proposals are
47
aimed at for-profit colleges, which have come under more scrutiny as their enrollments have increased.
In an effort to rein in student debt and high default rates, for example, one proposal would require colleges to disclose
graduation and job placement rates and information about the effectiveness of their career and technical programs.
Federal data show that 44% of 2007 graduates who defaulted on loans within three years attended for-profit
institutions.
Most of the 14 key issues, outlined in a 503-page document shown to reporters Tuesday, were developed through
negotiations over the past year with the higher education community. A final version of the rules would take effect in
July 2011.
Education officials will follow up this summer with details on a proposal that would cut off federal aid to for-profit
colleges whose graduates can't earn enough to repay their loans.
The issues are complicated "and we want to get it right," Education Secretary Arne Duncan
<http://content.usatoday.com/topics/topic/People/Politicians,+Government+Officials,+Strategists/Executive/Arne+Dun
can> says. "This is about accountability, and protecting students."
Next week, a Senate education committee will examine federal spending at for-profit schools.
Advocates of stricter regulations are encouraged by a preliminary review of the proposals.
"There's a real concern that taxpayers are subsidizing programs that are overpromising and under-delivering," says
Pauline Abernathy of the California-based Institute for College Access & Success.
Harris Miller <http://content.usatoday.com/topics/topic/Harris+Miller>, president of the Career College Association,
which represents about 1,450 for-profit institutions, said the group doesn't agree with all the proposals, but "we agree
that students need to be protected at all times from schools that color outside the lines."
REUTERS: U.S. to go after deceptive colleges, delays job rule
Diane Bartz
Under proposals unveiled on Tuesday, the department partially addressed the issue by requiring for-profit schools to release
data to students on graduation and job placement rates.
But it stopped short of requiring for-profit institutions to demonstrate that they prepare students for jobs before students
would be eligible for federal grants and loans, a step advocated by Robert Shireman, a deputy undersecretary at the
Department of Education.
Education Secretary Arne Duncan said in a statement that the gainful employment issue was complicated: "we want to get it
right so we will be coming back with that shortly."
Proposals affecting all colleges and universities would tighten rules against deceptive advertising and would close loopholes
on paying recruiters in hopes of removing incentives for them to enroll unqualified people or deceive prospective students.
The institutions would be required to ensure that their students have a valid high school diploma or otherwise show that they
are ready for college.
Shireman has repeatedly called for tightened regulation of companies such as Corinthian Colleges Inc and Career Education
Corp.
48
Shares in the for-profit sector got a boost last month on word that Shireman plans to step down on July 1, although he will
remain an advisor to the department.
Jeff Silber, a stock analyst with BMO Capital Markets, said a delay in the gainful employment rule should be welcomed
cautiously.
"If this thing is being delayed, it doesn't mean that it's going away," he said. "I don't think it's bad news. (But) I wouldn't
declare victory here."
Corinthian Colleges spokesman Kent Jenkins called the announced rules and the delay on gainful employment "a step in the
right direction."
"We don't know where they will come down (on gainful employment) but the fact that they are being very careful and very
cautious speaks well for them," he said.
Efforts to reach other for-profit schools for a reaction to the proposed rules were unsuccessful.
The schools, which offer higher education programs in fields like healthcare and criminal justice, have been criticized for their
student loan practices and the quality of the education students receive.
The for-profit industry has also been criticized because students, who tend to be low-income, are most likely to end up with
outsized -- and sometimes unpayable-- debt.
Fifty-three percent ended up owing more than $30,500, compared with 12 percent for students who attended a public four-
year college, according to a study by the College Board.
U.S. Senator Tom Harkin, an Iowa Democrat, said he was pleased with the announced rules.
"The federal government must ensure that the more than $20 billion in student aid that these schools receive is being well
spent and students are being well informed and well served," he said. " For-profit colleges must work for students and
taxpayers, not just shareholders."
The draft regulations will be put out for public comment on Friday. There will be a 45-day comment period. The goal is to issue
a final rule by November 1, which would go into effect on July 1, 2011.
POLITICO: Eyes on for-profit college oversight
The Obama administration will propose tightening oversight of for-profit colleges on Wednesday to thwart misleading
recruiting and reign in federal funding.
The new rules will be released for public comment after a year of negotiations between the Education Department and higher
education community. While the regulations encompass all higher education institutions, for-profit universities like Kaplan,
DeVry and University of Phoenix are likely to bear the brunt of the changes.
"This is about accountability, and protecting students," said Education Secretary Arne Duncan, who aims to finalize the rules
by November, in a statement. The rules will go after aggressive recruiting practices. It will grant the department new powers
to take action against deceptive advertising, marketing and sales. It also will end the practice of schools compensating
admissions recruiters based on securing student enrollment.
The proposed regulations will ensure only eligible students- those that have a high school diploma or pass an equivalence
test- receive federal funds. And they will clarify what courses are el igible for federal aid and how much taxpayer money they
can obtain.
49
But the department only partially addresses the much-debated "gainful employment" proposal that would cut off federal
funding to programs whose graduates don't earn enough to pay off their student loans. The new rules order institutions to
provide their prospective students graduation and job placement rates, as well as hand over data on student debt and
incomes after graduation. But the department won't unveil the metrics to hold them accountable until later this summer.
"Given controversy, we want to make sure we get it right," a department official told reporters.
Fighting the proposal is already the top cause of Students for Academic Choice, a grassroots-sounding group backed by the
Career College Association, a lobbying group for 1,400 for-profit schools. More than 32,000 people signed a petition saying it
would "treat career college students as separate and inherently unequal," as well as limit vocational and technical programs
for more than 300,000 students who want to go into fields like health care. <.b.ll.I2.J.Lstudentsforacademicchoice.org/>
Enrollment in for-profit universities is on the rise, jumping from 673,000 students nationwide in 2000 to 1.8 million in 2008.
And federal aid to students at for-profit colleges soared to $26.5 billion in 2009 from $4.6 billion in 2000.
While these schools offer people an educational alternative, they often come with a mountain of debt, observers say. A recent
College Board study concluded that students who attend for-profit colleges graduate on average with bigger student loans
than those who attended private nonprofit or public schools. More than half of bachelor's degree recipients left school at
least $30,500 in debt <http:ljwww.collegeboard.com/press/releases/211932.html>.
Harris Miller, president of the Career College Association, has repeatedly rejected the idea that for-profit schools leave
students will unmanageable debt. He said the default rate on loans for students at for-profit institutions is about the same as
students who attend community colleges and other nonprofits. "Let's try to turn this into a fact-based conversation," he said.
Meanwhile Congress is also jumping into the conversation. Beginning next week Sen. Tom Harkin (D-I owa) will hold a series of
hearings to examine federal education spending at these i nstitutions.
Read more: http:ljwww.politico.com/news/stories/0610/38598.html#ixzzOqzFnXDyJ
BLOOMBERG: Obama Targets For-Profit College Recruiting Practices in Proposed
Rules
By John Hechinger- Jun 16, 2010
The Obama administration proposed banning for-profit colleges from tying recruiters' pay to the number of people they
enroll, saying high-pressure sales tactics induced students to take out government loans they can' t afford.
The rules would prohibit paying sales incentives at Apollo Group
<http ://preview .bloomberg.com/apps/quote ?T =en10/guote. wm&ticker=APOL: US> Inc., ITT Educational Services
<http://preview.bloomberg.com/apps/quote ?T =en10/guote. wm&ticker=ESI:US> Inc., Career Education Corp
<http://preview.bloomberg.com/apps/quote?T=en10/guote.wm&ticker=CECO:US>. and other for-profit colleges, according
to a copy of the proposal by the U.S. Department of Education to be made public today. At for-profit colleges, recruiters
contact potential students, often after they express interest over the Internet.
U.S. Secretary of Education Arne Duncan
<http://search.bloomberg.com/search?site=wnews&client=wnews&proxystylesheet=en10 wnews&output=xml no dtd&ie=
UTF-8&oe=UTF-8&filter=p&getfields=wnnis&partialfields=-wnnis: NOA VSYN D&sort=date: D :S:d1&1r=-
lang ja&q=Arne%20Duncan> is seeking to protect taxpayers from loan defaults and to stop students from taking on debt for
programs that don't lead to higher incomes. For-profit colleges can receive up to 90 percent of their revenue from federal
grants and loans. Federal aid to for-profit colleges jumped to $26.5 billion last year from $4.6 billion in 2000, according to the
Education Department.
"This is about accountability and protecting students," Duncan said in a statement.
50
The Obama admini st ration delayed the release of a proposed rule that would disqualify for-profit colleges from receiving
federal aid if thei r graduates spend more than 8 percent of their starting salaries repaying student loans.
The Education Department is still analyzing the proposal and expects to release the rule, known as gainful employment,
between now and August, the agency said in a statement.
Industry Opposition
For-profit colleges lobbied against the gainful-employment rule, which could disqualify programs enrolling 300,000 students,
according to an April study commissioned by the Washington-based Career College Association, which represents more than
1,400 for-profit colleges.
Education stocks last week rallied on analysts' reports citing the potential delay of the gainful employment rule. Apollo, based
in Phoenix, rose 70 cents, or 1.5 percent, to close at $48.30 in Nasdaq Stock Market composite trading yesterday. Career
Education, based in Hoffman Estates, Illinois, rose 71 cents, or 2.7 percent, to $26.91. ITT, based in Carmel, Indiana, rose
$1.39, or 1.5 percent, to $97.18 in New York Stock Exchange Composite trading.
Colleges would no longer be allowed to tie recruiters' pay to enrollment under any circumstances, according to the new rules.
The current regulations prohibit the practice while allowing exceptions, or "safe harbors."
' Unscrupulous Actors'
" Unscrupulous actors routinely rely on these safe harbors" to get around the law, the Education Department said. While the
proposed rules apply to all colleges, they are designed to target abuses among for-profits, the department said.
The Education Department' s description of recruiting violations among for-profits amounts to "a lot of hyperbole," Harris
Miller
<http://search.bloomberg.com/search?site=wnews&client=wnews&proxystylesheet=en10 wnews&output=xml no dtd&ie=
UTF-8&oe=UTF-8&filter=p&getfields=wnnis&partialfields=- wnnis:NOAVSYND&sort=date:D:S:d1&1r=-
lang ja&q=Harris%20Miller>, the Career College Association's president, said in an interview. Colleges should be allowed to
continue taking enrollment into account among other factors in compensating recruiters, Miller said.
The new rule on recruiter pay could have a broad impact on the industry, Matt Snowling
<http://search.bloomberg.com/search?site=wnews&client=wnews&proxystylesheet=en10 wnews&output=xml no dtd&ie=
UTF-8&oe=UTF-8&filter=p&getfields=wnnis&partialfields=- wnnis:NOAVSYND&sort=date:D:S:d1&1r=-
lang ja&g=Matt%20Snowling> , an analyst with FBR Capital Markets in Arl ington, Virginia, said in a phone interview.
"The incentive compensation rule is probably a bigger threat to the industry than gainful employment," Snowling said. "By
limiting the schools ability to market themselves, it takes away some of their ability to grow."
Apollo Settlements
Apollo's University of Phoenix last December agreed to pay $67.5 million to the U.S. and $11 million in legal fees to plaintiffs
to settle a whistleblower suit arising from allegations from former employees that that company improperly paid recruiters
based on enrollment numbers. Apollo admitted no wrongdoing. The company, without admitting fault, paid $9.8 million in
2004 to the Department of Education to settle similar claims.
Apollo started reviewing recruiter compensation 18 months ago, with a focus on "enhancing student satisfaction and student
experience," spokeswoman Sara Jones said in an e-mail.
"We anticipate that our new compensation will be in compliance with the forthcoming regulations by the U.S. Department of
Education but cannot confirm until the rules are finalized, " Jones said.
Today's proposed rules also would require colleges to disclose information about employment prospects to students and
51
strengthen the Education Department's authority to take action against institutions engaging in "deceptive, marketing and
sales practices," the department said in a statement. The proposed rules, being issued for public comment, could be made
final November 1 and take effect in July 2011.
52
From:
Sent:
To:
Cc:
Subject:
Hamilton, Justin
Monday, November 02, 2009 11 :24 AM
Babyak, Stephanie; Shireman, Bob; Smith, Zakiya
Glickman, Jane; Abrevaya, Sandra
Re: Bloomberg story on U of P and Apollo
Good story. Jane and Steph, thanks for all your work to help put this together.
On 10/30/09 9:15AM, "Babyak, Stephanie" <Stephanie.Babyak@ed.gov> wrote:
Apollo Weakness for Phoenix Revenues Spurring Short Sellers
Share <javascript:togSharelinks{'shr _ v');> Business Exchange <javascript:shareBusinessExchange{);>
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20%0D%0A%0D%0A%20http%3A//www.bloomberg.com/apps/news%3Fpid%3Demail en%26sid%3Da7cFhPKPB1mA> I
By Daniel Golden
Print <http://www .bloomberg.com/apps/news ?pid=20601103&sid=a 7 cFhPKPB 1m A> I A
<http://www.bloomberg.com/apps/news?pid=20601103&sid=a7cFhPKPB1mA> A
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Oct. 30 (Bloomberg) --The University of Phoenix, the largest for-profit college in the U.S., may
have set off on a collision course with the federal government and investors in 2001. That/s
when its founder/ John Sperling
<http://search.bloomberg.com/search?q=John+Sperling&site=wnews&client=wnews&proxystylesheet=wnews&output=
xml no dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1>, urged executives at his 80th
birthday party to boost enrollment fivefold to half a million students, a goal it has almost
accom pi ished.
Now, PhoeniX
1
S parent, Apollo Group Inc <http://www.bloomberg.com/apps/quote?ticker=APOL%3AUS> .,
is facing challenges to its growth. The Securities and Exchange Commission is investigating how
Apollo books revenue, the company said Oct. 27. Apollo recorded a charge of $80.5 million to
cover costs it expects to pay to settle a lawsuit alleging that it violated federal student
recruitment rules. Profit in the quarter ended Aug. 31 fell 60 percent largely because of that
charge.
Apollo shares <http://www.bloomberg.com/apps/quote?ticker=APOL%3AUS>, which had more than
doubled since 2006, may have difficulty rebounding from an 18 percent decline the day after the
SEC probe was disclosed. Phoenix may also face scrutiny as the U.S. Education Department
examines for-profit universities that rely heavily on taxpayer-supported financial aid. In fiscal
2009, Phoenix derived 86 percent of its $3.77 billion in revenue from federal grants and loans,
up from 48 percent in 2001, and approaching a federal limit of 90 percent.
53
"The outlook for Apollo next year has definitely become a lot tougher," said Robert Wetenhall
<http://search.bloomberg.com/search?q=Robert+Wetenhall&site=wnews&client=wnews&proxystylesheet=wnews&out
put=xml no dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:dl>, an analyst for RBC Capital
Markets in New York, who lowered his rating <http://www. bloomberg.com/apps/quote?ticker=APOL%3AUS>
on Apollo shares on Oct. 28 to "underperform. II
Axia's Growth
Phoenix's enrollment has almost doubled to 443,000 from 227,800 in fiscal 2004. About 90
percent of that growth has come from a two-year online college called Axia
<http:Uwww.phoenix.edu/colleges divisions/axia/how axia college works.html>, created in 2004. While
Phoenix originally focused on bachelor's degree and graduate degree programs for managers
whose employers paid their tuition, Axia attracts students with lower income and less academic
preparation, the majority of whom depend on federal financial aid.
Apollo's revenue was $1.1 billion during the three months ended Aug. 31, five times the amount
during the same period in 2001. Net income rose almost threefold to $91.5 million.
The company's shares fell $1.91, or 3.2 percent, to $58.15 on Oct. 29 in New York Stock
Exchange composite trading. Before the close on Oct. 27, the stock had fallen 4.8 percent this
year, compared with an 18 percent rise in the Standard & Poor's 500 Index.
Investors have bet against Apollo, with 10 percent of its shares sold short as of Oct. 15,
compared with 3.5 percent for the New York Stock Exchange as a whole. Apollo's short interest
has risen to 13.4 million shares from 6.6 million a year ago.
Obama Administration
Phoenix now has to deal with the Obama administration, which is tightening review of for-profits
and has close ties to community colleges that compete with Axia. Driven in part by the shift to
Axia, Phoenix's growing reliance on taxpayer funds is drawing government attention. The
average annual tuition is $10,350, $500 less than what federal aid will pay for a low- income
freshman under age 24. By comparison, annual tuition at public community colleges
<http ://professionals. col legeboard.com/profdownload/trends-2009-comm unity-colleges-one-page. pdf> thiS year
averages $2,544, according to the College Board, the New York-based nonprofit organization
that owns the SAT college admissions test.
"It makes sense to examine institutions that rely heavily on federal aid," Robert Shireman
<http://search.bloomberg.com/search?q=Robert+Shireman&site=wnews&client=wnews&proxystylesheet=wnews&out
put=xml no dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:dl>, Deputy Undersecretary of
Education, said in an interview without singling out any university. "Certainly, one of the data
points we look at for triggering possible program reviews is a large growth in the use of federal
financial aid.
11
Uncover Problems
Such a program review would be designed to uncover problems with financial management or
signing up students who are unqualified or aren't fully aware they're taking out loans, and may
result in fines, suspensions or terminations from eligibility for financial aid, Shireman said.
Students are reliant on aid because of the recession and rising college costs, said Sara Jones, an
54
Apollo spokeswoman. Phoenix expanded into online two-year degrees to continue its shift from a
niche institution for degree completion into a comprehensive university, not to obtain more
financial aid dollars, she said. The 90 percent limit on federal revenue, enacted in 1992,
penalizes schools for having low-income students, said Gregory Cappelli
<http://search. bloom berg. com /search? q=Gregory+Cappelli &site=wnews&cl ient=wnews&proxystylesheet=wnews&outp
ut=xml no dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:dl>, Apollo Co-Chief Executive
Officer.
"We want to help people/ Cappelli said in a Sept. 9 interview at the company's Phoenix
headquarters. "They need to be able to read and write and compete at the college level. Know
what? We don't want your money otherwise."
The company believes the revenue recognition policies being investigated by the SEC are
appropriate, Brian Schwartz, Apollo's chief financial officer and treasurer, said in an Oct. 27
conference ca II.
Few Graduate
While Phoenix has succeeded in drawing students, most don't graduate, leaving them without
degrees and often burdened by loans. Only 8.9 percent of Phoenix students without prior college
experience complete a degree in six years, including 5 percent of those who attend classes
online, according to the National Center for Education Statistics
<http://nces.ed.gov/fastfacts/display.asp?id=40>, in Washington. The national graduation rate is 56.1
percent for four-year schools and 30.9 percent for two-year schools.
Besides leaving school prematurely, many students aren't able to pay their bills, with U.S.
taxpayers picking up the balance. Of Phoenix students who should have begun repaying loans in
2007, 9.3 percent have defaulted, up from a 7.2 percent rate a year earlier and more than the
national average of 6. 7 percent, according to the Education Department.
The university works closely with lenders and delinquent students to stave off defaults, said
Robert Collins, Apollo's vice president for financial aid.
'Replacement Curve'
Phoenix's dropout rate means the school needs to recruit 250,000 new students a year--
equivalent to six University of Michigans <http://vpcomm.umich.edu/aboutum/home/factfigs.php>-- to
maintain current enrollments, said former Apollo manager Mark Defusco
<http:// search .bloom berg. com/ search ?q= Mark+De Fusco&site=wnews&cl ient=wnews&proxystylesheet=wnews&output
=xml no dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:dl> , now an education investment
banker at Berkery, Noyes & Co. in New York.
"The replacement curve is astronomical," Defusco said. "You have to feed the beast."
Phoenix's growth is hardly uncontrolled, said Jones, the Apollo spokeswoman. The university has
"more than 200 campuses and learning centers" which means it can add 1,000 students a day
by enrolling five at each one, she said. Phoenix gained 102,000 new students in the quarter
ended Aug. 31, according to Charles B. Edelstein
<http:// search. bloom berg. com/search? q=Charles+B. +Edelstein&site=wnews&cl ient=wnews&proxystylesheet=wnews&
output=xml no dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:dl>, Apollo Co-CEO.
The question of whether recruiters sign up unqualified students is the focus of the lawsuit that
55
Phoenix said it expects to settle for $80.5 million. The 2003 suit brought by two former
employees in federal court in California alleges that Phoenix violated a 1992 ban on paying
recruiters on the basis of enrollment numbers. The company has denied wrongdoing.
'Dumb as Doornail'
In a deposition in the lawsuit, Jennifer Kahn, a recruiter who left Phoenix in 2006, said she
complained to her boss about a prospect who couldn't handle college.
"I had a student, let's refer to him as dumb as a doornail," Kahn said. "And my manager told
me, 'Enroll him. It's not our call to say who has a right to an education.' As a consequence, he
started, he went to the first night, he knew he was in deep doo-doo, and dropped. He never
should have been there."
Tom Corbett, a former director of online enrollment at Phoenix who provided an affidavit in the
lawsuit, said in an interview that the school's recruiters were like brokers peddling subprime
mortgages.
"The University of Phoenix's management culture is fueled by greed, the same as the housing
scenario," Corbett said. "There was no emphasis on the student's actual values, goals,
background, experiences."
Compensation Methods
Timothy Hatch
<http://search.bloomberg.com/search?g=Timothy+Hatch&site=wnews&client=wnews&proxystylesheet=wnews&output
=xml no dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:dl>, an outside counsel for
Phoenix and a partner in the Los Angeles office of Gibson, Dunn & Crutcher, said the school
enrolled the student mentioned by Kahn because he had completed an associate's degree at
another for-profit college.
Phoenix's compensation methods are legal because teamwork and student retention figure into
its salary adjustments along with enrollment expectations, he said. The criticisms by Corbett and
other former employees don't reflect the views of Phoenix recruiters and managers in general,
he said.
The Education Department may tighten 2002 rules that let colleges pay recruiters partly on the
basis of enrollment, according to Shireman, the deputy undersecretary.
The department announced on Sept. 9 that it may prohibit misrepresentations of information
provided to students and prospective students. The move was prompted partly by reports the
department received about Axia recruiters, according to a federal official familiar with the
matter.
Prospective Students
In tape-recorded telephone calls heard by Bloomberg News, Axia recruiters told Wall Street
researchers posing as potential applicants that its credits could be transferred to Harvard
University and Columbia University. Those schools don't grant transfer credit for online
undergraduate courses, the universities' spokesmen said in e-mails.
Cappelli said he isn't aware of the alleged misrepresentations.
56
"There's not a mandate or a directive from anyone in the management team to fool or hurt
people," he said. "Traditional colleges make errors, too."
Phoenix has a pilot program to improve student readiness for college, Cappelli said during a
conference call <http://www.bloomberg.com/apps/quote?ticker=APOL%3AUS> with analysts on Oct. 27.
Lower retention rates and extra remedial instruction and other support services for Axia students
have damped Apollo profits, he said in September.
'Concerted Effort'
"We are making a concerted effort to get back our focus on bachelor's and master's degrees,"
said Cappelli, a former Credit Suisse research analyst who joined Apollo in 2007. "The return to
the student is better if they stay in school and complete their bachelor's degree. The return to us
is better, too. Not all of our growth is coming from Axia anymore."
The company supports a proposal in Congress that would allow colleges to exceed the 90
percent ceiling on the portion of revenues from financial aid until 2012, and not to count
increases in student loan limits as federal revenue.
The proposal, which passed the House last month as part of a broader education bill, isn't
included in a Senate version, said Mark Kantrowitz
<http:Usearch.bloomberg.com/search?q=Mark+Kantrowitz&site=wnews&client=wnews&proxystylesheet=wnews&outp
ut=xml no dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:dl>, publisher of the FinAid.org
<http://www.FinAid.org> and FastWeb.com <http://www.FastWeb.com> financial-aid Web sites based in
Cranberry Township, Pennsylvania.
Phoenix officials said the 8. 9 percent graduation rate measured by the government counts only
first-time students. Including transfer students, 27 percent of Axia students graduate, according
to the university's 2008 Academic Annual Report
<http://www.phoenix.edu/about us/publications/academic-annual-report.html> . Of those pursuing bachelor's
degrees, Phoenix said 38 percent graduate.
No Placement
Phoenix doesn't help graduates land jobs, nor does it track where they find employment, Jones,
the Apollo spokeswoman, said. She said most Phoenix students already have jobs.
Simon Saffery, 30, a Hawaii resident, transferred to Phoenix's online program as a junior in
2006 and graduated last year with a 3. 9 average out of 4.0 in computer science. He said he has
applied for 25 entry-level information technology jobs without receiving a single interview.
Almost half of the openings he sought were at Apollo itself, Saffery said. He is unemployed,
owes $45,000 in student loans and may declare bankruptcy, Saffery said.
Jones declined to comment on individual students, citing privacy considerations. According to a
2008 survey by Phoenix, graduates of its associate and bachelor's degree programs earned
average increases in personal income of 19 percent and 28 percent, respectively.
Founder's Dream
Sperling, who has an economic history Ph.D. from Cambridge University in England, founded
Phoenix in 1976. His mission was to give working professionals a convenient way to get back to
57
school and boost their academic credentials without having to quit their jobs, according to his
2000 autobiography, "Rebel With a Cause. ' <http://www.amazon.com/Rebei -Cause-Entrepreneur-
University-Profit/dp/0471326046/ref=sr 1 l?ie=UTF8&s=books&gid=1256860913&sr=l-1>' Students, who
learned i n teams and took five- week courses in business, nursing and other fields, tended to be
managers in their mid-30s whose employers reimbursed them for tuition.
Richard Chait, a professor of higher education at Harvard in Cambridge, Massachusetts, who has
studied Sperling's university, said the school "saves money everywhere" by hiring part-time
faculty, leasing real estate, and centralizing administration.
"The genius of the University of Phoenix is that it spends $1 mi ll ion to develop one course that it
gives a thousand times," Chait said in an interview in his office. "Community colleges spend
almost nothing developing a thousand courses that they wil l use once."
Expanding Eastward
In the 1990s, Phoenix expanded eastward, opening facilities in Michigan, Maryland and
Pennsylvania. Today, according to its Web site <http://www.phoenix.edu/campus-locations.html>, the
university has campuses in 39 states, the District of Columbia, Puerto Rico, and two Canadian
provinces. From 1995 to 2000, Apollo's stock
<http://www.bloomberg.com/apps/guote?ticker=APOL%3AUS> rose more than 10-fold, making it one of the
30 top-performing stocks in the Russell 3000 Index.
When enrollment was about 20,000, Sperling told executives Phoenix would have 100,000
students by 2000, Bob Barker, a former Phoenix executive vice president, said in an interview.
At his 80th birthday party in 2001, Sperl ing raised his sights to 500,000, DeFusco said.
Apoll o never formally adopted Sperl ing's vision, said Jones, the spokeswoman. She said Sperl ing
was unavailable for interviews.
As fast as Phoenix was growing, it was drawing from a limited customer base of mid-career
managers, former Apollo president Brian Mueller
<http ://search. bloom berg. com/search? q=Brian+ M uel ler&site=wnews&client=wnews&proxystylesheet=wnews&output
=xml no dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:dl> , CEO of for-profit Grand
Canyon Education Inc. <http://www.bloomberg.com/apps/guote?ticker=LOPE%3AUS> in Phoenix, said in
an interview. Students had to be at least 23 years old and have two years of work experience
and as many as 60 credits from other colleges.
Rapid Growth
By 2004, the university had eliminated its credit and age requirements, Jones said.
DeFusco, who worked at Apoll o from 1994 to 2003 in academic affairs and then opening
campuses for Phoenix, said Axia's tuition was set just under the federal limit for financial aid so
government grants and loans could cover most, if not all, of the cost.
The college's tuition-pricing "was a financial-aid play," DeFusco said.
Apollo spokeswoman Jones said that was not the case.
Unl ike students who came to Phoenix to complete degrees, the company said that three out of
five Axia attendees haven't gone to college before.
58
"It's no longer the mid-career manager, it's somebody working a minimum-wage job somewhere
and looking to get out of that dead end," said Laura Palmer Noone
<http://search.bloomberg.com/search?q=Laura+Palmer+Noone&site=wnews&client=wnews&proxystylesheet=wnews&
output=xml no dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:dl>, a former Phoenix
president who is now CEO of Piccolo International University, an online school based in
Scottsdale, Arizona.
Career Aspirations
Sabrina Bogan, 39, a criminal-justice major, said in an interview that Axia has improved her
writing. The Richmond, Virginia, mother of three, who has a high school equivalency degree and
used to work as an assistant manager at a convenience store, said she has written essays on the
death penalty and energy conservation.
"The person that I was before I started taking those classes could not have done that/' Bogan
said. She said she hopes to land a job in a lawyer's office after she finishes her associate's
degree next year.
Not all Axia students benefit. Laura Holder, 29, has a diploma from Prairie Grove High School in
Prairie Grove, Arkansas, where she took special-education classes, she said. According to her
mother, Beatrice McCormack, Holder has an IQ of 65 to 70, within a range the Washington-
based American Association on Intellectual and Developmental Disabilities
<http://www.aamr.org/content lOO.cfm?naviD=21> defines as intellectually disabled.
Axia Recruiter
Holder, who lives in an apartment with her husband, said she learned about Phoenix on the
Internet and contacted the school in hopes that a college degree would help her find work as a
preschool teacher. The Axia recruiter, she said, asked if she had graduated from high school, not
whether she was in special education.
"They said once I go through the classes, I would get a job in teaching," Holder said.
Holder enrolled atAxia in October 2006 and realized the classes were too hard for her, she said.
She left school amid a payment dispute without completing a course. A collection agency dunned
her for a tuition balance of $1J10.
Jones, the Phoenix spokeswoman, said the school is aware of a handful of instances in which
intellectually disabled students enrolled and soon demonstrated that they didn't have the ability
to succeed. In those cases, she said, Phoenix worked to help the students withdraw without
financial obligation.
Community Colleges
Axia may soon face more competition for students. The Obama administration has proposed
allocating $12 billion to publicly run community colleges, which also give two-year degrees.
While Sally Stroup
<http://search.bloomberg.com/search?q=Sally+Stroup&site=wnews&client=wnews&proxystylesheet=wnews&output=x
ml no dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:dl>, a former Apollo lobbyist,
oversaw post-secondary education in the George w. Bush
<http://search.bloomberg.com/search?q=George+W.+Bush&site=wnews&client=wnews&proxystylesheet=wnews&outp
59
ut=xml no dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:dl> administration, former
community-college leader Martha Kanter plays a si mi lar role now.
"Some i n the administration, if they were advising students who had a choice of going to a
community college or a for-profit college, would say, 'Pick the community college,"' said Scott
Fleming, a Washington lobbyist who represents Apollo.
The Education Department isn't out to "shut down or maim" for-profits, Cappelli said.
"If Obama means what he says, that he wants everyone to have one year of col lege, how do you
accompl ish that without for-profit higher ed?" he said.
To contact the reporter on this story: Dan Golden
<http://search.bloomberg.com/search ?g=Dan+Golden&site=wnews&client=wnews&proxystylesheet=wnews&output=x
ml no dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:dl> in Boston at
dlgolden@bloomberg.net <mailto:dlgolden@bloomberg.net>.
Last Updated: October 30, 2009 00:00 EDT
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Please copy my job-share partner Jane Glickman aane.qlickman@ed.gov) on all emails. Thank
you.
60
From:
Sent:
To:
Subject:
JEE HANG LEE Uhlee@acct.org]
Friday, October 30, 2009 9:21 AM
Laitinen, Amy
FW: Apollo Weakness for Phoenix Revenues Spurring Short Sellers
I don't know if you have this, but bob is quoted. I love the line about "close ties to community colleges"
From: Nassirian, Barmak [mailto:NassirianB@aacrao.org)
Sent: Friday, October 30, 2009 9:14AM
To: List - DGR Monday Group
Subject: Apollo Weakness for Phoenix Revenues Spurring Short Sellers
APOL (BN) : Apollo Weakness for Phoenix Revenues Spurring Short Sellers
By Daniel Golden
Oct . 30 (Bl oomberg) -- The University of Phoenix, the largest for-prof it college in
the U. S ., may have set off on a collision course with the federal government and
investors in 2001 . That ' s when its founder , John Sperling, urged executi ves at his 80th
birthday par ty to boost enrollment fivefold to hal f a million students , a goal it has
almost accompl ished.
Now, Phoenix' s parent , Apol lo Group Inc ., is facing chall enges to its growth . The
Securities and Exchange Commission is investigating how Apol lo books revenue, the company
said Oct .
27 . Apollo recorded a charge of $80 . 5 million to cover costs it expects to pay to settl e
a lawsuit a l leging that it violated federal student recruitment rules . Profit in the
quarter ended Aug . 31 fell 60 percent largely because of that charge .
Apollo shares , which had more than doubled since 2006, may have difficulty
rebounding from an 18 percent decline the day after the SEC probe was disclosed. Phoenix
may a l so face scrutiny as the U. S . Education Department examines for-profit universities
that rel y heavil y on taxpayer-supported financial aid. In fiscal 2009 , Phoenix derived 86
percent of its $3 . 77 bi l lion in revenue from federal grants and loans , up from 48 percent
in 2001 , and approachi ng a federal l imit of 90 percent .
" The outlook for Apol lo next year has definitel y become a l ot tougher," sai d Robert
Wetenhal l , an analyst for RBC Capital Markets in New York, who l owered his rating on
Apol lo shares on Oct . 28 to " underperform."
Axia ' s Growth
Phoenix' s enrol lment has a l most doubled to 443 , 000 from 227 , 800 in fiscal 2004 .
About 90 percent of that growth has come from a two-year online coll ege called Axia ,
created in 2004 .
Whi l e Phoenix original ly focused on bachelor' s degree and graduate degree programs for
managers whose employers paid their tuition, Axia attracts students with l ower income and
less academic preparation, the majority of whom depend on federal financial aid.
Apoll o ' s revenue was $1 . 1 bil lion during the three months ended Aug . 31, five times
the amount during the same period in 2001 . Net income rose almost threefold to $91.5
million .
The company' s shares fell $1 . 91 , or 3 . 2 percent , to $58 . 15 on Oct . 29 in New York
Stock Exchange composite trading . Before the close on Oct . 27 , the stock had fal len 4 . 8
percent this year , compared with an 18 percent rise in the Standard & Poor ' s 500 Index.
Investors have bet against Apol lo, with 10 percent of its shares sold short as of
Oct . 15, compared with 3 . 5 percent for the New York Stock Exchange as a whole . Apoll o ' s
short interest has risen to 13 . 4 mil lion shares from 6.6 million a year ago .
Obama Administration
61
Phoenix now has to deal with the Obama administration, which is tightening review of
for-profits and has close ties to community colleges that compete with Axia . Driven in
part by the shift to Axia , Phoenix' s growing reliance on taxpayer funds is drawing
government attention . The average annual tuition is $10, 350, $500 less than what federal
aid will pay for a low-income freshman under age 24. By comparison, annual tuition at
public community colleges this year averages $2 , 544 , according to the College Board, the
New York-based nonprofit organization that owns the SAT college admissions test .
"It makes sense to examine institutions that rely heavily on federal aid," Robert
Shireman, Deputy Undersecretary of Education, said in an interview without singling out
any university. "Certainly, one of the data points we look at for triggering possible
program reviews is a large growth in the use of federal financial aid. "
Uncover Problems
Such a program review would be designed to uncover problems with financial
management or signing up students who are unqualified or aren't fully aware they' re
taking out loans, and may result in fines , suspensions or terminations from eligibility
for financial aid, Shireman said.
Students are reliant on aid because of the recession and rising college costs, said
Sara Jones, an Apollo spokeswoman.
Phoenix expanded into online two-year degrees to continue its shift from a niche
institution for degree completion into a comprehensive university, not to obtain more
financial aid dollars , she said. The 90 percent limit on federal revenue, enacted in
1992, penalizes schools for having low-income students , said Gregory Cappelli, Apollo Co-
Chief Executive Officer .
"We want to help people, " Cappelli said in a Sept . 9 interview at the company' s
Phoenix headquarters. "They need to be able to read and write and compete at the college
level. Know what? We don't want your money otherwise . "
The company believes the revenue recognition policies being investigated by the SEC
are appropriate, Brian Schwartz, Apollo's chief financial officer and treasurer, said in
an Oct.
27 conference call.
Few Graduate
While Phoenix has succeeded in drawing students, most don' t graduate, leaving them
without degrees and often burdened by loans . Only 8 . 9 percent of Phoenix students without
prior college experience complete a degree in six years, including 5 percent of those who
attend classes online, according to the National Center for Education Statistics, in
Washington . The national graduation rate is 56 . 1 percent for four-year schools and 30.9
percent for two-year schools .
Besides leaving school prematurely, many students aren't able to pay their bills,
with U. S . taxpayers picking up the balance. Of Phoenix students who should have begun
repaying loans in 2007 , 9.3 percent have defaulted, up from a 7 . 2 percent rate a year
earlier and more than the national average of 6 . 7 percent , according to the Education
Department.
The university works closely with lenders and delinquent students to stave off
defaults , said Robert Collins, Apollo's vice president for financial aid.
'Replacement Curve'
Phoenix's dropout rate means the school needs to recruit 250,000 new students a year
equivalent to six University of Michigans -- to maintain current enrollments, said
former Apollo manager Mark DeFusco, now an education investment banker at Berkery, Noyes
& Co . in New York .
"The replacement curve is astronomical ," DeFusco said.
"You have to feed the beast . "
Phoenix's growth is hardly uncontrolled, said Jones, the Apollo spokeswoman . The
university has "more than 200 campuses and learning centers " which means it can add 1 , 000
students a day by enrolling five at each one, she said . Phoenix gained 102,000 new
students in the quarter ended Aug . 31, according to Charles B. Edelstein, Apollo Co-CEO.
62
The question of whether recruiters sign up unqualified students is the focus of the
lawsuit that Phoenix said it expects to settle for $80 . 5 million . The 2003 suit brought
by two former employees in federal court in California alleges that Phoenix violated a
1992 ban on paying recruiters on the basis of enrollment numbers . The company has denied
wrongdoing.
'Dumb as Doornail'
In a deposition in the lawsuit, Jennifer Kahn, a recruiter who left Phoenix in 2006,
said she complained to her boss about a prospect who couldn't handle college .
"I had a student , let's refer to him as dumb as a doornail , " Kahn said . "And my
manager told me, 'Enroll him.
It' s not our call to say who has a right to an education .' As a consequence , he started,
he went to the first night, he knew he was in deep doo-doo, and dropped. He never should
have been there . "
Tom Corbett , a former director of online enrollment at Phoenix who provided an
affidavit in the lawsuit, said in an interview that the school's recruiters were like
brokers peddling subprime mortgages .
"The University of Phoenix's management culture is fueled by greed, the same as the
housing scenario," Corbett said.
"There was no emphasis on the student ' s actual values , goals, background, experiences ."
Compensation Methods
Timothy Hatch, an outside counsel for Phoenix and a partner in the Los Angeles
office of Gibson, Dunn & Crutcher , said the school enrolled the student mentioned by Kahn
because he had completed an associate's degree at another for-profit college .
Phoenix' s compensation methods are legal because teamwork and student retention
figure into its salary adjustments along with enrollment expectations, he said. The
criticisms by Corbett and other former employees don't reflect the views of Phoenix
recruiters and managers in general, he said .
The Education Department may tighten 2002 rules that let colleges pay recruiters
partly on the basis of enrollment , according to Shireman, the deputy undersecretary.
The department announced on Sept. 9 that it may prohibit misrepresentations of
information provided to students and prospective students . The move was prompted partly
by reports the department received about Axia recruiters, according to a federal official
familiar with the matter .
Prospective Students
In tape-recorded telephone calls heard by Bloomberg News , Axia recruiters told Wall
Street researchers posing as potential applicants that its credits could be transferred
to Harvard University and Columbia University. Those schools don' t grant transfer credit
for online undergraduate courses , the universities' spokesmen said in e-mails .
Cappelli said he isn't aware of the alleged misrepresentations.
"There' s not a mandate or a directive from anyone in the management team to fool or
hurt people," he said. "Traditional colleges make errors, too . "
Phoenix has a pilot program to improve student readiness for college, Cappelli said
during a conference call with analysts on Oct . 27 . Lower retention rates and extra
remedial instruction and other support services for Axia students have damped Apollo
profits , he said in September .
'Concerted Effort '
"We are making a concerted effort to get back our focus on bachelor' s and master's
degrees ," said Cappelli , a former Credit Suisse research analyst who joined Apollo in
2007 . "The return to the student is better if they stay in school and complete their
bachelor' s degree . The return to us is better , too . Not all of our growth is coming from
Axia anymore ."
The company supports a proposal in Congress that would allow colleges to exceed the
90 percent ceiling on the portion of revenues from financial aid until 2012 , and not to
count increases in student loan limits as federal revenue.
63
The proposal , which passed the House last month as part of a broader education bill ,
isn' t included in a Senate version, said Mark Kantrowitz , publ isher of the FinAid . org and
FastWeb . com financial-aid Web sites based in Cranberry Township , Pennsylvania .
Phoenix officials said the 8 . 9 percent graduation rate measured by the government
counts only first-time students . Including transfer students , 27 percent of Axia students
graduate, according to the university' s 2008 Academic Annual Report . Of those pursuing
bachelor's degrees , Phoenix said 38 percent graduate.
No Placement
Phoenix doesn' t help graduates land jobs , nor does it track where they find
employment , Jones, the Apollo spokeswoman, said. She said most Phoenix students already
have jobs .
Simon Saffery, 30, a Hawaii resident , transferred to Phoenix' s online program as a
junior in 2006 and graduated last year with a 3 . 9 average out of 4 . 0 in computer science .
He said he has applied for 25 entry-level information technology jobs without receiving a
single interview. Almost half of the openings he sought were at Apollo itself, Saffery
said . He is unemployed, owes $45 , 000 in student loans and may declare bankruptcy, Saffery
said.
Jones declined to comment on individual students , citing privacy considerations .
According to a 2008 survey by Phoenix, graduates of its associate and bachelor' s degree
programs earned average increases in personal income of 19 percent and 28 percent,
respectively .
Founder ' s Dream
Sperling, who has an economic history Ph . D. from Cambridge University in England,
founded Phoenix in 1976. His mission was to give working professionals a convenient way
to get back to school and boost their academic credentials without having to quit their
jobs, according to his 2000 autobiography, "Rebel With a Cause.' ' Students , who learned
in teams and took five- week courses in business , nursing and other fields, tended to be
managers in their mid-30s whose employers reimbursed them for tuition .
Richard Chait , a professor of higher education at Harvard in Cambridge,
Massachusetts , who has studied Sperling' s university, said the school "saves money
everywhere" by hiring part-time faculty, leasing real estate, and centralizing
administration.
"The genius of the University of Phoenix is that it spends $1 million to develop one
course that it gives a thousand times ," Chait said in an interview in his office .
"Community colleges spend almost nothing developing a thousand courses that they will use
once . "
Expanding Eastward
In the 1990s , Phoenix expanded eastward, opening facilities in Michigan, Maryland
and Pennsylvania . Today, according to its Web site, the university has campuses in 39
states, the District of Columbia , Puerto Rico , and two Canadian provinces . From 1995 to
2000 , Apollo's stock rose more than 10-fold, making it one of the 30 top-performing
stocks in the Russell 3000 Index .
When enrollment was about 20,000, Sperling told executives Phoenix would have
100,000 students by 2000 , Bob Barker, a former Phoenix executive vice president, said in
an interview.
At his 80th birthday party in 2001, Sperling raised his sights to 500, 000 , DeFusco said.
Apollo never formally adopted Sperling' s vision, said Jones , the spokeswoman. She
said Sperling was unavailable for interviews .
As fast as Phoenix was growing, it was drawing from a limited customer base of mid-
career managers , former Apollo president Brian Mueller, CEO of for-profit Grand Canyon
Education Inc. in Phoenix, said in an interview. Students had to be at least 23 years old
and have two years of work experience and as many as 60 cred.its from other col leges .
Rapid Growth
By 2004 , the university had eliminated its credit and age requirements, Jones said.
64
DeFusco, who worked at Apol lo from 1994 to 2003 i n academic affai rs and then opening
c ampuses fo r Phoenix, said Axi a ' s tuition was set just under the federal l imit for
fi nancial a i d so government grants and l oans could cover most , i f not a l l , of the cost .
The coll ege' s tuition-p ricing "was a financial -aid play, " DeFusco said .
Apoll o spokeswoman Jones said that was not the case .
Unl ike students who came to Phoenix to complete degrees , the company said that three
out of five Axia attendees haven' t gone to col lege before .
"It ' s no longer the mid-career manager , i t ' s somebody working a minimum-wage job
somewhere and looking to get out of that dead end, " said Laura Palmer Noone , a former
Phoeni x p resident who is now CEO o f Pi ccol o International Universi ty, an onl ine school
based in Scottsdal e , Ari zona .
Career Aspi r ations
Sabri na Bogan, 39, a criminal -justi ce major , said in an i ntervi ew that Axia has
improved her writi ng . The Richmond, Vi rginia, mother of three, who has a high school
equi valency degree and used to work as an ass i s t ant manager at a conveni ence store, said
she has written essays on the death penalty and energy conservation.
"The person that I was before I started taking those c l asses coul d not have done
that ," Bogan said. She sai d she hopes to l and a job in a l awyer' s offi ce after she
f i ni shes her associate' s degree next year .
Not al l Axi a students benefit . Laura Holder , 29 , has a d i p l oma from Prairie Grove
Hi gh School in Prairie Grove, Arkansas , where she took s peci a l -educati on classes , she
said. According to her mother , Beatrice McCormack, Hol der has an IQ of 65 to 70 , withi n a
range the Washington-based Ameri can Association on I ntel lectual and Developmental
Disabiliti es defines as intell ectual ly disabled.
Axia Recruiter
Holder , who l i ves in an apartment wi th her husband, said she l earned about Phoenix on
the Internet and contacted the school in hopes that a coll ege degree would hel p her fi nd
work as a preschool teacher . The Axi a recrui ter, she sai d , as ked i f she had graduated
from high school, not whether she was in speci a l educati on .
"They said once I go through the classes , I woul d get a job in teaching, " Holder
said .
Holder enr ol led at Axi a in October 2006 and real ized the classes were too hard for
her, she sai d . She l eft school ami d a payment di spute wi thout completi ng a course . A
coll ecti on agency dunned her for a tuiti on bal ance of $1 , 710 .
Jones , the Phoenix s pokeswoman, said the school is aware of a handful of instances in
which intell ectual ly disabled students enrol led and soon demonstrated that they didn' t
have the abi l i ty to succeed. In those cases , she sai d , Phoenix worked to hel p the
students withdraw without f i nancial obl i gati on .
Communi t y Coll eges
Axia may soon face more competition for students . The Obama admini strati on has
p roposed allocating $12 billion to publ i c l y run community coll eges , which also give two-
year degrees . While Sal l y Stroup, a former Apoll o lobbyi st, oversaw post-secondary
education in the George W. Bush administration, former community-col lege l eader Martha
Kanter plays a simi l ar rol e now.
" Some in the administration, if they were advisi ng students who had a choi ce of going
to a communi ty col lege or a for- p rofit col lege, woul d say, ' Pi ck the communi ty col lege,'"
said Scott Flemi ng, a Washington l obbyist who represents Apoll o .
The Education Department i sn' t out to " shut down or maim" for-profits , Cappell i said.
"If Obama means what he says , that he wants everyone to have one year of college,
how do you accompl ish that without for- profit hi gher ed?" he sai d .
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From:
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JORDAN HARRIS, HSBC, TSY & CAP MKTS Oharrishsbc@bloomberg.net]
Tuesday, December 15, 2009 10:13 AM
Smith, Zakiya
(BN) Marine Can't Recall His Course Lessons at For-Profit
Read this article and thought it might interest you. - Jordan
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Marine Recall His Course Lessons at For-Profit College
2009-12-15 05:01:00.14 GMT
By Daniel Golden
Dec. 15 (Bloomberg) -- Marine Corps Corporal James Long knows enrolled at Ashford
one of at least a dozen for - profit colleges making money off active-duty military
with subsidies from American taxpayers. He just can't remember what course taking.
The 22-year-old from suffered a brain injury that impaired his ability
to concentrate when artillery shells hit his Humvee in Iraq in he said. Long signed up
for the online a unit of Bridgepoint Education Inc., after its recruiter gave a
sales pitch this year at a barracks for wounded Marines at Camp Lejeune in North Carolina.
Under base rules, the barracks are off- limits to college said Robert
director of lifelong learning at Lejeune.
For- profit online colleges are taking over higher education of the U.S. lured
by a Defense Department pledge of free schooling up to $4,500 a year for active members of
the armed services, costing taxpayers more than $3 billion since 2000. The schools account
for 29 percent of college enrollments and 40 percent of the half-billion-dollar annual tab in
federal tuition assistance for active-duty displacing public and private nonprofit
according to Defense Department and military data.
The shift is leading to educational shortcuts and over- zealous marketing, said Greg von
Lehmen, chief academic officer of the University of Maryland University College in Adelphi,
the adult-education branch of the state system and one of the earliest and biggest providers
of military education.
Faster, Easier
"In these schools, the rule is faster and easier," von Lehmen said. "They're
characterized by increasingly compressed course lengths and low academic expectations. One
has to ask: Is the Department of Defense getting what it is seeking?"
Some online schools offer free laptops or fast degrees. At Apollo Group Inc.'s
University of Phoenix, the biggest for- profit college, active-duty military personnel can
earn an associate's degree, which typically takes two years of study, in five weeks.
Taxpayers picked up $474 million for college tuition for 400,000 active-duty personnel
in the year ended Sept . 30, 2008, more than triple the spending a decade earlier, Defense
67
Department statistics show. Any college degree provides a boost toward military promotionJ
said James PappasJ vice president for outreach at the University of Oklahoma. Credentials
from onlineJ for-profit schools are less helpful in getting civilian jobsJ especially in a
tight labor marketJ Barmak NassirianJ associate executive director of the American
Association of Collegiate Registrars and Admissions Officers in WashingtonJ said in an e-
mail.
Disappointed Grads
((IJm afraid that the ease with which these outfits hand out diplomas is matched only by
the disappointment of their graduates when they find out how little their degrees are
actually worthJ Nassirian said.
Mike ShieldsJ a retired Marine Corps colonel and human resources director for U.S. field
operations at Schindler Elevator Corp.J rejects about 50 military candidates each year for
the companyJs management development program because their graduate degrees come from online
for-profitsJ he said in an interview. Schindler Elevator is the North American operating
entity of Schindler Holding AG in HergiswilJ SwitzerlandJ the worldJs second-largest elevator
maker.
uwe donJt even consider themJ Shields said. ({For the caliber of individuals and
credentials weJre looking forJ we need what we feel is a more broadened and in-depth
educational experience. He does hire service members with online degrees for jobs on non-
leadership tracksJ he said.
Several online for-profit schools have become a concern on military bases because of
practices that exploit soldiers and the federal subsidies they are promisedJ said Songer at
Camp Lejeune.
Marine cPreyJ
"Some of these schools prey on MarinesJ Songer said.
({Day and nightJ they call youJ they e-mail you. These servicemen get caught in that. Nobody
in their families ever went to college. They donJt know about college.
Most online for-profitsJ such as American Public Education Inc.Js American Military
UniversityJ udo a very good job taking care of studentsJ Songer said.
Executives at for-profit colleges said they pay more attention to customer service than
traditional schools doJ and their online format suits military students who move frequently.
urtJs about flexibility and optionsJ said Rick CooperJ vice president of military and
corporate programs at Columbia Southern University in Orange BeachJ Alabama. uvou can enroll
any day of the weekJ any week of the year.
Columbia Southern grants transfer credits to soldiers for courses in which they earned
grades as low as D. Grantham University in Kansas CityJ MissouriJ has handed out free laptop
computers and American Military in Charles TownJ West VirginiaJ gives free textbooks as
recruitment inducements.
Less Demanding
Online schools such as American Military University have relocated their headquarters to
obtain certification from regional boards with less demanding standardsJ according to
interviews with for -profit college officials and accrediting agencies. Or theyJre approved by
less established organizationsJ leaving students hard-pressed to transfer credits to other
colleges or find jobs at major corporations.
Holders of masterJs degrees in business administration from for -profits Phoenix and
American Intercontinental University earn less than graduates with the same degrees from
Oklahoma or MarylandJs University CollegeJ according to Payscale.comJ a provider of employee
compensation data.
Salary Comparisons
68
Recent MBA graduates from University College and Oklahoma have median annual incomes of
$78J600 and $68J400J respectivelyJ compared with $60J200 from Phoenix and $54J600 from
American IntercontinentalJ the data show. Recent bachelorJs graduates from University College
earn a higher median salary ($55J200) than their counterparts at Phoenix ($50J500) and
American Intercontinental ($43J100). OklahomaJ at $41J100J trails Maryland and the two for-
profit schools.
Travis DaunJ a 33-year -old former Navy lieutenant commander who trained as a nuclear
engineer on a submarineJ left the service in August after receiving an online MBA from
American IntercontinentalJ a unit of Career Education Corp.J based in Hoffman EstatesJ
Illinois.
"I was disappointed in the rigor and challenge of the coursesJ" Daun said in an
interviewJ adding that each course lasted five weeksJ with at most two hours a week of class
time.
"I donJt think I had a 4.0 effortJ yet I had a 4.0 grade-point average."
Daun is unemployed. His college roommateJ who also became a nuclear engineer in the Navy
and earned an MBA from the University of MarylandJs University CollegeJ did find workJ Daun
said. "His MBA from Maryland definitely helped him a lot more than my AIU degree is helping
meJ" he said.
HeadhunterJs Perspective
Daun is working with Lucas GroupJ an executive search firm that specializes in placing
former military personnel.
"Does his masterJs from American Intercontinental open a lot of doors for him? NoJ it
doesnJtJ'' said Lee CohenJ an IrvineJ California-based managing partner at Lucas.
American Intercontinental provides a high-quality education for adult studentsJ said
Jeff LeshayJ a spokesman for Career Education. Leshay said the company doesnJt track where
graduates find jobs.
While deployed in IraqJ Christopher Brotherton earned a bachelorJs degree in homeland
security from American Military in 2007. When the staff sergeant retired from the Army in
JuneJ his degreeJ which included courses in geography and historyJ helped him find a job
teaching social studies in a middle school in ArdmoreJ Oklahoma.
"The stateJ when they saw my transcript from AMUJ they had no problems with any of it,"
BrothertonJ 42J said. "It was a respected school to them."
Brian KilgoreJs quest for a college degree was set back in 2007. Then a petty officer
first class in the NavyJ Kilgore needed two more courses to earn an associateJs degree from
Grantham when the online for-profit college eliminated the software engineering program he
was takingJ he said in an interview. Kilgore switched to computer science and soon left
schoolJ still four classes short of that degree. "I was upsetJ" said KilgoreJ 38J who
recently retired from the military and works in aviation maintenance. rcGoshJ I was almost
there." The program was eliminated due to lack of interestJ Grantham said.
When service members do earn degrees from online for - profitsJ human resources
executives at Fortune 500 firms are often reluctant to hi r e themJ said Cohen, citing three
where he has placed candidates. ((There are some firms that are heavily credential-orientedJ"
he said. ((McKinsey & Co. is one of them.
They might balk. Amazon might balk. Shell Oil is another one."
McKinseyJ Amazon.com and Shell declined to comment.
Career Disadvantage
Bradford RandJ chief executive of Techexpo Top Secret in New YorkJ which runs job fairs
for defense contractors recruiting recent veteransJ said a degree from an online for - profit
is a disadvantage. "You have two people of the same caliberJ one has a degree from a real
69
collegeJ one has a degree from a computerJ IJm going to favor the one from the live collegeJ"
Rand said. "ItJs more verifiableJ more credible."
The Defense Department plans to subject online programs to review by the American
Council on Education in WashingtonJ which already monitors face-to-face classes on military
basesJ defense officials said. The new online standardsJ which the department began to
develop in 2004J have taken longer than expected and are a year away from being implementedJ
Tommy ThomasJ deputy undersecretary of defense for military community and family policyJ said
in an e-mail.
Maximum Reimbursement
Of the dozen colleges with the biggest active-duty enrollmentJ five are for-profits that
conduct most or all of their courses online. Three - - American Military UniversityJ ApolloJs
PhoenixJ and closely held Grantham -- charge $250 a creditJ or $750 a courseJ which allows
them to receive the maximum reimbursed by U.S. taxpayers without service members having to
pay any out-of-pocket tuition. Publicly funded community colleges offer classes on military
bases for as little as $50 a creditJ according to their Web sites.
American Public Education has risen 72 percent since the company went public in November
2007. It closed yesterday at
$34.41 in Nasdaq composite tradingJ up 3 percent from the previous day. Apollo shares closed
at $62.06 in Nasdaq tradingJ falling 19 percent this yearJ as of yesterday.
The expansion of online for-profit colleges into the military comes as the companies face
U.S. government inquiries into their tactics in recruiting and educating civilians. The Obama
administration is tightening scrutiny of for-profitsJ from the content of their pitches to
prospective students to their increasing reliance on federal financial aidJ Robert ShiremanJ
deputy undersecretary of the U.S. Education DepartmentJ said in an interview.
SEC Probe
In additionJ the Securities and Exchange CommissionJs Enforcement Division has begun an
informal probe into how Apollo Group books revenue. Apollo intends to cooperate fully with
the inquiryJ the company said.
By expanding its military businessJ Phoenix has been able to enroll more civilian
students who are supported by grants and loans from the Education DepartmentJ without
violating federal law that dictates how much revenue the school can receive from the
government. Phoenix derived 86 percent of its $3.77 billion in revenue in fiscal 2009 from
the Education DepartmentJ according to its annual 10-K filingJ up f rom 48 percent in 2001 and
approaching the limit of 90 percent set by a 1992 law known as the 90/10 rule.
Tuition payments to for-profit schools by the military donJt count toward the 90 percent
ceiling. One way that Phoenix plans to stay below the legal threshold is building its
military businessJ Gregory CappelliJ co-chief executive of ApolloJ which is based in PhoenixJ
said in a June 29 conference call with investors.
Military Market
When the law was enactedJ for-profits hadnJt yet moved into the military marketJ so the
legislationJs sponsors werenJt focused on Defense Department tuition assistanceJ Sarah
FlanaganJ who helped draft the law as the SenateJs specialist in federal student aidJ said in
an interview. The law was intended to ensure that for-profit colleges offered an education
good enough that some students were willing to pay for itJ said FlanaganJ now vice president
of the National Association of Independent Colleges and Universities in Washington.
"Counting Defense Department funding for servicemenJs education as part of the money
thatJs supposed to come out of consumersJ pockets violates the purpose of the original
legislationJ" Flanagan said.
Apollo spokeswoman Sara Jones said in an e-mail that Phoenix began serving military
students long before the advent of "the misguided 90/10 rule."
70
Phoenix Recruitment
Phoenix ranks among the top five colleges serving military including about
in the Army and in the according to the two services. While Phoenix offers
campus-based graduate programs in education and management at Air Force bases in the
most of its active-duty students take classes school officials said. Phoenix has 452
recruiters in its military up from 91 in said Scott its executive
enrollment counselor at Camp the largest Marine Corps base on the East Coast.
Military enrollment at exclusively online for - profits is soaring. American Military has
active-duty up from 632 in it said. It has the most Air Force and
Marine Corps students of any college. Closely held Columbia Southern has service
up from 649 in it said. Closely held TUI in has more than
doubled active- duty enrollment to in the first quarter of from
in it said.
While six public and private non- profit colleges hold face- to-face classes on Camp
none has the highest active- duty enrollment there. That distinction belongs to
American with up from 11 in 1999. enrollment there has
risen to 296 from 15 over the same period.
Slumping Enrollment
Active -duty enrollment at public and nonprofit schools has slumped. The University of
once the leading provider of graduate degrees to service has lost half of
its military enrollment in a said the vice president for outreach.
<<A decade from you may not find traditional national public and private universities
in military Pappas said. one of the real dangers.
Faculty members at online for - profit usually part - timers with practical
experience in their have less control over curriculum than in conventional
said Benjamin who has taught at the University of Phoenix and the College of William
& Mary in Virginia.
Professors assign reading and writing and discussion topics prescribed by the school.
Students have to log on at a specific time. At their they complete weekly
coursework and respond to classmates on discussion boards.
Trimming Requirements
While many colleges adopt what are known as "military- friendly the online
for - profits go further than most. They accelerate course and degrees for service
trimming requirements and granting abundant transfer credits.
At members of the armed forces can earn an degree by taking one
five-week online "Written Communication. They can make up for the other 19 courses
required for an degree with credits for classes taken military
experience including basic and passing grades on tests that gauge knowledge of a
subject area.
Civilians seeking the same degree must take at least six Phoenix courses and can use
credits from outside sources for no more than 14. two-year students must take
10 or half of the required from the school that awards their so it
can vouch for their Nassirian said.
Fast Track
Only a handful of active-duty students choose one- course called the
Associate of Arts Degree Through Credit said Mike the
director of military programs.
At Columbia students can finish courses in three weeks and gain credit for as
many as three classes taken at other colleges in which they received grades as low as
according to its catalog. All exams are open-book.
71
((It would be quite unorthodox for traditional institutions to grant transfer credit to
coursework completed below a grade of CJ" Nassirian said. Columbia SouthernJs academic
quality is comparable to a state or nonprofit universityJ Cooper said. The University of
AlabamaJ in TuscaloosaJ also accepts DJs for transfer coursesJ according to its Web site.
On Oct. 16J several Marines waited their turn on benches outside American MilitaryJs
office in the education center at Camp Lejeune. InsideJ AMU education coordinator Brian
Miller made his pitch to Jyher Lazarre and Hyunwoo Kim. LazarreJ 19J of OrlandoJ FloridaJ and
KimJ 20J of LeoniaJ New JerseyJ joined the Marines in 2008 and are roommates at LejeuneJ they
said.
Cutting Time
Of 20 courses needed for a two-year degreeJ they could satisfy eight through basic
training and other military experienceJ Miller said. They could test out of seven moreJ
leaving them to take five classes.
((I can cut the time of this degree literally in halfJ"
Miller told them. aitJs going to make you competitive toward promotion as well."
((If we can cut it downJ thatJs really goodJ" Kim said.
Conflicts with accrediting associations that certify academic quality have dogged
several online for -profits.
American MilitaryJ founded in Virginia in 1991 by a former Marine Corps officerJ applied in
1998 for accreditation by the Commission on Colleges of the DecaturJ Georgia-based Southern
Association of Colleges and Schools. The southern association is one of six regional bodies
that approve public and nonprofit institutions and represent the gold standard in
accreditation.
Early Step
In June 1999J the commission denied American Military a candidacy visitJ an early step in
the accreditation processJ said Ann ChardJ commission vice president. The university didnJt
meet the requirements of having full-time professors and a libraryJ instead relying on part-
time faculty and a lending library networkJ said James HerhuskyJ a trustee.
American Military then shifted its headquarters to West Virginia to seek regional
accreditation by the Higher Learning Commission of the North Central AssociationJ according
to the minutes of a July 2002 meeting of the Virginia Council of Higher EducationJ based in
Richmond. In 2006J North Central approved American MilitaryJ which offers degrees in fields
including homeland securityJ counter-terrorism studies and weapons-of- mass-destruction
preparedness.
(More AccommodatingJ
((At the timeJ North Central was the only region we knew that was accrediting totally
online institutionsJ" Herhusky said. awe found their criteria to be less prescriptive and
more accommodating."
American Military now has 160 full-time professors and an online libraryJ Herhusky said.
The school has almost quadrupled active-duty enrollment since 2005J when it hired James
SweizerJ former head of education for the Air ForceJ to run its military programs.
ai came to AMU with the philosophy of relationship marketingJ" Sweizer said in an
interview. avou cater to the needs of key influencers. ''
Sweizer said heJs seen ((dramatic improvement" in how American Military manages courses
and faculty.
Probationary Period
American IntercontinentalJ which ranked 20th in tuition assistance from the Marine Corps
in fiscal 2009J also didnJt meet the standards of the Southern Association of Colleges and
Schools. It was placed on probation from 2005 to 2007 for academic and administrative
72
shortcomingsJ including an inadequate number of full-time professorsJ according to
accreditation records. The school addressed the associationJs concernsJ and the improvements
it made during those two years have strengthened the universityJ Career Education spokesman
Leshay said in an e-mail.
American Intercontinental moved its headquarters this year from Atlanta to Chicago and
was accredited by North Central.
American Intercontinental relocated because its online campus is based thereJ Career
Education spokesman Leshay said.
Two other for-profits in the military marketJ Grantham and Columbia SouthernJ have a
status known as national accreditation. Newer than the regional groupsJ the seven national
bodies mostly approve for-profit collegesJ including vocational and distance-education
programs. Only 14 percent of colleges accept credits transferred from nationally accredited
institutionsJ according to a 2006 study by the University Continuing Education Association in
Washington.
Expanding Market
Three policy changes in the past decade opened the military market to for-profit
colleges. The Defense DepartmentJ which had paid tuition assistance mainly to regionally
accredited schoolsJ began in 1999 to reimburse nationally accredited colleges as well. It
increased funding in 2002 from 75 percent to 1ee percent of tuition up to the $250-per-credit
ceiling. In 2006 and 2007J the Army cut 233 counselors who used to guide soldiers through
college choicesJ replacing them with interactive Web sites that offer informationJ said Army
spokesman Wayne V. Hall.
These moves coincided with the rise of Internet courses.
For-profits were ahead of most traditional colleges in online educationJ which helps service
members deployed worldwide keep up their studies. In fiscal 2008J the first year that the
Defense Department collected such dataJ 64 percent of active- duty students took distance-
education classes.
War Zones
Soldiers even take online classes in war zones. While in AfghanistanJ Army sergeant
Patrick Peake earned a bachelorJs degree in criminal justice from American MilitaryJ
enrolling in as many as four online courses at a time.
Cavalry scouts "set up a wireless connection at the mud- brick building we were atJ
PeakeJ 29J said in an interview.
After studying counter-terrorism at AMUJ Peake saidJ he told friends in Army intelligence
about terrorist groups in the region. "This dumb grunt helped them out a littleJ he said.
Unlike most traditional schoolsJ for-profits vie to offer inducements to students.
American Military gives textbooks for free to undergraduatesJ who may resell them to the
schoolJs vendor after use for $30 to $50 per bookJ Miller said. Columbia Southern is
considering a similar buyback programJ according to Cooper.
GranthamJ the seventh-biggest recipient of undergraduate tuition money from the Army in
fiscal 2008J gave new laptop computers made by Dell Inc.J from March to July to active-duty
students who had completed at least four courses with grades of C or better. The free laptops
were part of a pilot research project on student retentionJ said Tim ArringtonJ Grantham
director of military programs.
Laptop Largesse
Michael LambertJ executive director of the Distance Education Training CouncilJ which
accredits GranthamJ advised the school to stop the laptop largesseJ he said.
"The concern isJ schools will outdo each other and weJll have an arms raceJ he said.
"Free laptopsJ free KindlesJ free iPodsJ all coming out of taxpayersJ pockets.
Servicemembers Opportunity CollegesJ a Defense Department Washington-based contractor
that develops policies for 1J8ee colleges involved in military educationJ is also considering
73
guidelines to limit laptop giveaways and other inducements. ((I donJt think itJs out of handJ
but the potential is thereJ said Kathy SneadJ the groupJs director.
Former Marines
Career Blazers Learning CenterJ a New York-based vocational schoolJ gave away laptops
loaded with instructional software to Marines about to be deployed to combat zonesJ owner
Paul Viboch said. It also hired former Marines as recruiters and paid referral fees to
students for signing up other service members.
Entire units enrolledJ and Career Blazers received $4.5 million in tuition assistance from
the Marine Corps in 2006J the most of any post-secondary provider.
Career Blazers charged $4500 -- the maximum that the military reimburses in a year -- for
self-paced lessons on how to perform basic computer applications or balance checkbooks.
Much of the material was available for less expense at workshops or community college classes
on basesJ education specialists said.
((The military overpaid for laptopsJ said Johanna RoseJ an education technician at Camp
Lejeune.
Relocated to MartinsburgJ West VirginiaJ and renamed Martinsburg InstituteJ Career
Blazers stopped giving away laptops three months ago. Its tuition assistance from the Marine
Corps slipped to $616J000 in fiscal 2009J as education officials on some Marine bases
discouraged service members from enrollingJ Viboch said. ((I was too successfulJ too quicklyJ
he said.
cunderhandedJ Techniques
Unauthorized marketing pitches by for-profit recruiters have become widespread on
military bases.
((Some of these schools are a little underhandedJ said Pat JeffressJ branch manager of
lifelong learning at Camp PendletonJ a Marine Corps base in CaliforniaJ said. They try to
backdoor me. They come onto the base when they donJt have permission and they set up shop.
One recruiter for Ashford University recently ignored the anti-solicitation rule at Camp
LejeuneJ said SongerJ the baseJs lifelong learning director. BridgepointJ based in San DiegoJ
has climbed 67 percent since the company went public on April 14.
Bridgepoint closed yesterday at 17.58J up 7.6 percent from the previous day.
Songer said he told the recruiterJ whose husband is in the militaryJ that she could only
meet students at the baseJs education center. InsteadJ she pitched the online for-profit in
the recreation room of a barracks for wounded Marines. About 30 Marines showed upJ said Brad
DrakeJ a corporal who attends Ashford.
cAttractiveJ Recruiter
It helped she was really attractiveJ said DrakeJ 23J who suffered a traumatic brain
injury in Afghanistan when a rocket hit his truck. ((That got everyoneJs attention.
The recruiter spoke at the barracks with the approval of the unitJs commanding officerJ
Bridgepoint spokeswoman Shari Rodriguez said in an e-mail. ((We keep our studentsJ needs at
the forefront of all we do.
Unit commanders are often unfamiliar with educational rulesJ Songer said. He told the
recruiterJ ((Cif you cross that line againJ youJll never be allowed on this baseJ he said.
AshfordJs Enrollment
Ashford ranked sixth in Marine Corps enrollment in the year ended Sept. 30J 2009J with
1J018 students. At Camp LejeuneJ Ashford had 119 active-duty studentsJ up from 25 in the
previous yearJ and six in fiscal 2007. About eight to 10 wounded Marines signed up for
Ashford after the recruiterJs presentationJ among them Corporal LongJ the brain-injured
soldierJ who also walks with a cane.
74
Long is pursuing a bachelorJs degree in organizational management through Ashford. In
his first classJ students could retake the final test until they passedJ he said.
"I took it 10 timesJ he said. "I kept getting the same answers wrong.
LongJ who aspires to be an occupational or physical therapistJ said he wonders if he can
graduate. He is married and says he needs to provide for his family.
"I got my doubts /J he said. "My familyJ s more important than my doubts. That keeps me
going.
For Related News and Information:
Stories about Apollo Group Earnings: APOL US <Equity> TCNI ERN <GO> Stories about education:
NI EDU <GO> U.S. colleges and universities: USUV <GO> Education organizations: EDOR <GO>
Stories about the Department of Education: EDN <GO>
--Editors: Jonathan KaufmanJ Robin D. Schatz
To contact the reporter on this story:
Dan Golden in Boston at +1-617-21-4610 or dlgolden@bloomberg.net.
To contact the editor responsible for this story:
Jonathan Kaufman at +1-617-210-4638 or
jkaufman17@bloomberg.net
75
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From: Tsuneishi, David
Kanter, Martha
Wednesday, September 22, 2010 8:58 PM
Ferguson, Keith
Fw: NLE E Path 9-22-201 0
image001 .jpg
Sent: Wed Sep 22 15:59:31 2010
Subject: NLE E Path 9-22-2010
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Department /Secretary News
Associat ed Press Sept ember 21, 2010
http://www.google.com/host ednews/ap/article/ALeqMShWsExwCP3P04zBE4UnzlgEII KAEAD91CLTV84
DREAM Act dies with rejection of defense bill By SUZANNE GAMBOA (AP) - 10 hours ago
WASHINGTON - The chance for hundreds of thousands of young people to legall y remain in the U.S. evaporated
Tuesday when Republicans blocked a defense spending bill in the Senate.
Democrats failed to get a single Republican to help them reach the 60 votes needed to move forward on the defense bi ll
and attach the DREAM Act as an amendment. The vote was 56-43. Arkansas Democratic Sens. Blanche Lincol n and Mark
Pryor voted with Republi cans. Majority Leader Harry Reid also voted to block the bill in a procedural move that allows
the defense bill to be revived later.
The DREAM Act allows young people to become legal U.S. residents after spending two years in coll ege or the military. It
applies to those who were under 16 when they arrived in the U.S., have been in the country at least five years and have
a diploma from a U.S. high school or the equivalent.
Several young people who would have benefited from the legislation watched the vote from the gallery, some wearing
graduation caps and gowns. Many sat stone-faced when the vote tally was read. A young woman dressed in a gold cap
and gown wiped away tears.
Most of the young immigrants knew victory was unlikely, but in the hours before the vote they walked the hallways of a
Senate office building trying to drum up support.
"I was kind of speechless. It's something that hurt, but we are not stopping. They only gave us a chance and more time
to get even bigger," said Diana Banderas, who graduated from high school in May and plans to go to community coll ege
after earning the money she needs to attend.
76
Republicans accused Democrats of playing politics with the defense bill and the DREAM Act. South Carolina Republican
Sen. Lindsey Graham, who has supported legislation legalizing illegal immigrants in the past, said Democrats were trying
to galvanize Hispanics and energize their voters by trying to tack the DREAM Act onto the defense bill.
The bill also included a measure to repeal the military's "don't ask, don't tell" policy on gays.
"I don't think anyone in the country will hold it against us for voting against their way of doing business," Graham said.
Reid, D-Nev., said Republicans were "putting partisan politics ahead of the best interests of the men and women who
courageously defend our nation" by blocking the bill, which would have authorized $726 billion in defense spending,
including a pay raise for troops.
Sen. Dick Durbin, the majority whip, said repealing the "don't ask, don't tell" policy and passing the DREAM Act were a
matter of justice and fairness.
"We do not in this country hold the crimes and misdeeds of parents against their children," Durbin, D-111., said in
reference to the DREAM Act. He has been trying to pass the legislation for about a decade.
Earlier Tuesday, Education Secretary Arne Duncan said he sent a letter to Reid and Senate Republican leader Mitch
McConnell, R-Ky., backing the DREAM Act.
"America is the only country they know ... they deserve every opportunity to go further in life. Our country needs the
benefits of their skills, their talent and their passion," Duncan said.
See related September 21, 2010 College "An Attainable Dream," Says New Spanish-Language Video
The Washington Post Tuesday, September 21, 2010; 9:46PM
http://www. washington post. com/wp-dyn/ content/ a rticle/2010/09 /21/ AR20 1009 2103413 _pf. htm I
Teacher bonuses not linked to better student performance, study finds By Nick Anderson
Washington Post Staff Writer
Offering teachers incentives of up to $15,000 to improve student test scores produced no discernible difference in
academic performance, according to a study (Teacher Pay for
Performance Experimental Evidence from the Project on Incentives in Teaching) released Tuesday, a result likely to
reshape the debate about merit pay programs sprouting in D.C. schools and many others nationwide.
The study, which the authors and other experts described as the first scientifically rigorous review of merit pay in the
United States, measured the effect of financial incentives on teachers in Nashville public schools and found that better
pay alone was not enough to inspire gains.
Advocates of performance pay did not immediately challenge the methodology of the study. But they said its
conclusions were narrow and failed to evaluate the full package of professional development and other measures that
President Obama and philanthropists such as Bill Gates say are crucial to improving America's public schools.
"Pay reform is often thought to be a magic bullet," said Matthew Springer, a Vanderbilt University education professor
who led the study. "That doesn't appear to be the case here. We need to develop more thoughtful and comprehensive
ways of thinking about.
Obama has encouraged the movement, through $4.35 billion in federal Race to the Top grants and other federal
programs, despite the skepticism of some teachers unions and lawmakers within his party. D.C. Schools Chancellor
Michelle A. Rhee became a hero in reform circles in part because of her insistence on a teachers' contract that allows
performance bonuses. Some Prince George's County teachers also are earning bonuses.
Central to such changes is the idea that teachers should be rewarded when their students achieve outsize gains on
standardized tests. That is a major shift from the tradition of determining pay by seniority and credentials such as
master's or doctoral degrees.
The study was conducted by the National Center on Performance Incentives at Vanderbilt. The center, which takes no
advocacy position on the issue, was created at the university's highly regarded Peabody College of Education and Human
Development in 2006 with a $10 million federal research grant.
U.S. A. Today September 21, 2010
http://www.usatoday.com/news/education/2010-09-21-merit-pay N.htm
Merit pay study: Teacher bonuses don't raise student test scores By Christopher Connell, The Hechinger Report
77
NASHVILLE- Offering middle-school math teachers bonuses up to $15,000 did not produce gains in student test scores,
Vanderbilt University researchers reported Tuesday in what they said was the first scientifically rigorous test of merit
pay.
The results (pdf) could amount to a cautionary flag about paying teachers for the performance of their students, a
reform strategy the Obama administration and many states and school districts have favored despite lukewarm support
or outright opposition from teachers' unions.
The U.S. Department of Education has put a great deal of effort into prodding school districts and states to try merit-pay
systems as part of its Race to the Top competition, although teachers' unions have often objected on the grounds that
they don't have fair and reliable ways to measure performance. In most school districts, teacher pay is based on years of
experience and educational attainment levels.
The report's authors, of the National Center on Performance Incentives (NCPI) at Vanderbilt University's Peabody
College of Education, stress that theirs is just one approach. The Nashville teachers who hit the mark based on their
students' test scores received a bump in their paychecks but no additional mentoring or professional development.
Neither their principals nor fellow teachers knew who participated in the experiment or who received bonuses.
Matthew G. Springer, director of the federally funded NCPI, said pay-for-performance is not "the magic bullet that so
often the policy world is looking for."
At least in this experiment, Springer said, "it doesn't work."
The Associated Press Tuesday, September 21, 2010; 5:22 PM
http://www. was hi ngtonpost. com/wp-dyn/ content/ article/2010 /09/21/ AR20 1009 2103389. html
21 communities to plan 'Promise Neighborhoods' By CHRISTINE ARMARIO
--Organizers in distressed communities from Los Angeles to Washington, D.C., will soon begin plans to create what the
Department of Education envisions as "Promise Neighborhoods," where children and families receive support services
that boost a student's chance of being successful in school.
Twenty-one applicants for the program to transform communities and student outcomes were named on Tuesday. They
will receive planning grants of up to $500,000.
"Communities across the country recognize that education is the one true path out of poverty," Education Secretary
Arne Duncan said. "These Promise Neighborhoods applicants are committed to putting schools at the center of their
work to provide comprehensive services for young children and students."
The program is modeled after the Harlem Children's Zone, which provides comprehensive support for families from
pregnancy through birth, education through college and career.
Pittsburg Post-Gazette Wednesday, September 22, 2010
http://www.post-gazette.com/pg/10265/1089292-66.stm
Steelers' Ward sworn into Asian-American council By Daniel Malloy, Pittsburgh Post-Gazette
.WASHINGTON-- Steelers wide receiver Hines Ward has had plenty of speaking engagements in his time, but he said his
appearance Tuesday before a packed auditorium in the U.S. Capitol was the toughest.
Ward said he was nervous and humbled in brief remarks after being sworn in as a member of President Barack Obama's
Advisory Commission on Asian Americans and Pacific Islanders.
Born in Seoul, South Korea, to a Korean mother and African-American father, Ward said he endured taunts as a child and
was often resentful of his mixed heritage. But he credited his mother because she "instilled in me a great attitude and
appreciation for who I am."
The commission advises Obama, Education Secretary Arne Duncan and Commerce Secretary Gary Locke on ways to
improve quality of life for Asian Americans and Pacific Islanders.
The principal goal of the group, said chairwoman Daphne Kwok, is to "be the eyes and ears of the community, feeding
information up to the government and translating it back down from the government to the community."
Kwok said the five primary areas the commission will focus on are sustainable communities, educational opportunities,
economic growth, healthy communities and civil rights.
78
Among the 16 members of the commission inducted Tuesday, Ward is the only professional athlete. Other advisers
include businesspeople, academics and community activists.
State (SC) State (SC) Wednesday, Sep. 22, 2010
http://www.thestate.com/2010/09/22/1476574/forest-lake-elementary-to-be-featured.html
Forest Lake Elementary to be featured on ' Today' By CAROLYN CLICK - cclick@thestate.com
A crew from NBC' s "Today" Show wandered the halls of Forest Lake Elementary Technology Magnet School
on Tuesday as the morning program prepared to showcase the school as part of its "Education Nation" segments
that will air next week.
Forest Lake is the only South Carolina school that will be featured in the morning program, which will focus on
improving education in America. Among the guests will be Education Secretary Arne Duncan.
"We are having quite a day," said Cannon, who was named S.C. Elementary School Principal of the Year for
2010. She said Lester Holt, co-anchor of the weekend edition of"Today" and weekend anchor for "NBC
Nightly News" and his crew spent the day "interviewing students and teachers, filming in classes and looking at
a typical day."
CBS News Sept. 21, 2010
http:/ /www.cbsnews.com/stories/2010/09/21/eveningnews/main6888884.shtml
Report Cards for Teachers Test Nerves in L.A. Observation, Test Scores, School Performance? Ben Tracy Investigates the
Best Method for Ranking Teachers
(CBS) The following report is part of CBS News' new series on education: Reading, Writing and Reform.
A group of teaches demonstrating in Los Angeles feel picked on, singled out and accused of not being good enough,
reports CBS News correspondent Ben Tracy.
"When did we become the bad guys?" asked Connie Ordway, a Los Angeles elementary teacher. "When did we become
the ones that we diss, that we hate, that we witch hunt?"
Ordway teaches fifth grade. She and her colleagues are furious with the Los Angeles Times.
The paper created a searchable database, using school district data, ranking teachers from best to worst. Ordway was
branded a "least effective" teacher.
Ordway's feelings were hurt when she first saw the rankings.
"You want to be seen as an effective teacher," said Connie.
The so-called value-added analysis is a controversial approach to grading teachers. It takes each student's standardized
test score from one year and compares it to the next. If the score goes dup, the teacher is considered effective. If it goes
down, the teacher's ranking goes down.
Yet critics say test scores don't tell the whole story.
"Typically, you're just measuring the progress in English and in math- not of any of the other subjects, and not in any of
the other kinds of things that we might hope teachers will impart to kids," said Daniel Willingham, professor of
psychology at the University of Virginia.
Most teachers are evaluated right now by standing in front of the class and teaching. The principal sits at the back and
watches, and then fills out a form. One study found 99 percent of teachers are rated "good" or "great" even in schools
were most students are failing, according to the New Teacher Project.
"If you really want to have a meaningful evaluation with a teacher," said Arne Duncan, U.S. secretary of education, "part
of what you need to look at is how much are their students learning each year. I think that's basically common sense."
Duncan says Washington D.C.'s revamped teacher evaluations could become a national model.
Half is based on student test scores, 40 percent classroom observation, five percent, the school's overall performance
and five percent for the teacher's contribution to the school community.
We do know teachers matter. When under-performing students were assigned to an "effective" teacher three years in a
row, 90 percent of them passed their standardized test. But when students had an "ineffective" teacher for three years,
only 42 percent passed.
79
\The Greening of the Department of Education: Secretary Duncan's Remarks at the Sustainability Summit September
21,2010
http://www.ed.gov/news/speeches/greening-department-education-secretary-duncans-remarks-sustainability-summit
Thank you for your leadership on this vital issue and for being part of our summit on sustainability. This event is a big
deal for our team at the Department of Education.
Since I became the Secretary of Education in 2009, our goal has been to both save educators' jobs and to drive a strong
reform agenda. We've provided emergency funding to avoid an education catastrophe-enough to support almost
325,000 education jobs that would have been eliminated over the past two years. The last thing our country needs is
teachers on the unemployment lines and not in the classroom. We have been supporting states and districts in their
courageous efforts to reform their schools.
Through the Race to the Top and other programs, we've unleashed an avalanche of pent-up reform activity across the
states and literally thousands of districts. Later today, I will announce the winners of 21 planning grants for the Promise
Neighborhoods program. These nonprofits, schools, and universities will be putting education at the center of their
efforts to rebuild their distressed communities. They will offer a comprehensive set of services-health screenings,
parenting classes, and early learning opportunities. These projects have the potential to address some vitally important
issues such as providing environmentally safe schools and creating sustainable urban developments. But they all
recognize that a great education is the one of the best antipoverty programs.
Education Daily September 22, 2010
OCR reviews include 6 related to students with disabilities by Mark W Sherman
OCR is investigating the performance of at least 21 districts and one SEA, according to a spokesman.
OCR enforces students' rights under Section 504 and Title ll of the ADA, among other laws. It has no authority
under the IDEA.
The investigations, called "compliance reviews," include six of interest to special educators: two related to the
disproportionate or "discriminatory" identification of students from certain racial and ethnic groups; two related
to ensuring equal access to transportation services for students with disabilities; and two related to serving
students with certain health conditions and impairments, such as food allergies and diabetes, Jim Bradshaw said
in an e-mail to Education DaHy.
Compliance reviews deal with systemic issues, rather than complaints by individual students. But they can be
prompted by individual complaints if the complaint suggests the presence of a larger problem, if there are
muJtiple complaints about the same agency, or if an individual withdraws a complaint that raised systemic
issues, according to OCR's Case Processing Manual.
The school districts and SEA being reviewed for
Discriminatory identification and evaluation of black and Hispanic students for special education services are:
Schenectady (N.Y.) City School District , Iowa City (Iowa) Community School District
Ensuring equal access to transportation services for students with disabilities:O, Chicago Public Schools
Discriminatory transportation services that shorten the school day for students with disabilities, Alabama
Education Department
Ensuring access to appropriate services for students with medical and health conditions and impairments such
as food allergies and diabetes:
Fox C-6 School District in Arnold, Mo.
Memphis (Tenn.) City Schools
Ensuring access to equal educational opportunities for ELLs:
Los Angeles Unified School District , Hazleton (Pa.) Area School District, De Queen (Ark.) School District,
Boston Public Schools, New London (Conn.) Public Schools
Effective communication with limited-English-proficient parents:
Tulsa (Okla.) Public Schools, Dearborn (Mich.) Public Schools
Discriminatory discipline of black male and Native American students:
80
Christina School District in Wilmington, Del., o Rochester (Minn.) Public Schools, o Salamanca (N.Y.) City
Central School District, San Juan School District in Blanding, Utah.
Winston-Salem/Forsyth County (N.C.) Schools
Ensuring access to comparable educational services and opportunities for minority students:
Wayne County (N.C.) Public Schools
Ensuring equal access to college-prep curriculum for black and Hispanic students:
Arlington (Texas) Independent School District
Addressing sexual harassment and sexual violence:
West Contra Costa Unified School District in Richmond, Calif.
Ensuring equal access to interscholastic and intercollegiate athletic opportunities for female students:
Hingham (Mass.) Public Schools
Education Daily September 22, 2010
National search to.fi.nd pernument /eaderfor ED's Title I office begins by Kim Riley
An acting director has been named to oversee the Office of Student Achievement and School Accountability
Programs in the Education Department's Office ofElementaty and Secondary Education , which administers
more than $15 billion annually in Title I and Title lll formula grants to improve achievement in schools serving
low-income children and ELLs.
Patricia McKee, SASA's acting deputy director, will take the helm the week of Sept. 27 when the current
director, Zollie Stevenson Jr., retires. McKee, who most recently served as the group leader for monitoring
within SASA, could not be reached for comment at press time.
Paul (Sandy) Brown will take over McKee's spot; he handles the allocations for Title I, Title ill, homeless, and
neglected and delinquent programs for SASA.
Thelma Melendez de Santa Ana, assistant secretary of OESE, told staff yesterday about the leadership changes,
according to Stevenson.
Media Advisories
September 23, 2010
Deputy Education Secretary to Participate in Blouin Creative Leadership Summit
U.S. Deputy Secretary of Education Tony Miller will participate in a panel discussion-Education: Technology,
Creativity and the Democracy of .Knowledge-during the Blouin Creative Leadership Summit Thursday, Sept.
23, at the Metropolitan Club in New York City.
Higher Education
The Washington Post Tuesday, September 21, 2010; 6:19PM
http://www. washingtonpost.com/wp-dyn/ content/article/2010/09/21/ AR20 10092104918. html
Republicans stall immigration Dream Act By Shankar Vedantam
Republican lawmakers on Tuesday stalled a Senate measure to allow children of undocumented immigrants to get on a
path to citizenship, and accused the Obama administration of seeking amnesty for illegal immigrants through
administrative changes within the Department of Homeland Security.
81
The so-called Dream Act to grant permanent residency to immigrants who were brought to the United States as children
and who have completed some time in college or in the armed forces has been a sought-after goal for Democrats, who
attached the measure to an important defense spending bill. Republicans used a procedural vote to block the bill.
Immigration advocates accused Republicans of sacrificing the well -being of thousands of young people to cater to
nativist sentiment.
Brent Wilkes, national executive director of the League of United Latin American Citizens, said the vote showed that the
Republican party had "once again proven that when Latinos need support, they support a different constituency even
when the constituency they are supporting does not have a dog in the fight. If my kids are legal and they are going to
college, why would I want to stick it to my neighbor's kids?"
Senate Democrats vowed to reintroduce the Dream Act, but odds of the measure becoming law this year are slim to
non-existent.
In a day of fast-moving action, Republicans released a draft of a memo they said was composed by Department of
Homeland Security staff to explore ways to create a more lenient immigration system, with expedited approvals for visas
and family reunification, and measures to head off deportations of undocumented immigrants.
"Done right, a combination of benefit and enforcement-related measures could provide the Administration with a clear-
cut political win," the draft memo, dated Feb. 26, 2010, read. The draft, released by Republican senators to the media,
did not list an an author. A Republican congressional staff member who asked for anonymity because he was not
authorized to speak about the matter said the final memo was sent to DHS Secretary Janet Napolitano.
"We would need to give the legislative process enough time to play out to deflect against charges of usurping
Congressional authority," the 10-page memo said. Referring to the hopes for passing comprehensive immigration reform
{CIR}, it added, "announcement of such measures would have to wait until it was evident that no legislative action on
CIR was possible by the current Congress. This is likely to mean the best time for administrative action will be late
summer or fall-- when the midterm election season is in full swing."
The Chronicle of Higher Education September 22, 2010
http:// chronicle. com/ article/Research-Universities-Open-New /1245 7 4/
Research Universities Open New Campaign for Federal Money, Wary of Politics
By Paul Basken
Washington
Leaders of the nation's research universities embarked on a yearlong campaign for greater federal financial support on
Wednesday with a recognition that their effort could easily fall victim to the hostile political environment in Washington.
One day after several university presidents visited the White House to hear Vice President Joseph R. Biden Jr. extol their
institutions' scientific accomplishments, a group of them gathered in the more austere setting of a downtown
conference room to plot a strategy for ensuring their future health.
The setting was the inaugural meeting of the Committee on Research Universities, a panel of 22 university and
corporate leaders formed by the government's National Research Council to make recommendations for preserving the
long-term quality of university research in the United States.
Members of the panel began by asking Robert M. Berdahl, president of the Association of American Universities, and M.
Peter McPherson, president of the Association of Public and Land-Grant Universities, for advice on how to approach
their job over the coming year, which will culminate in a report.
In response, they heard a familiar litany of problems, including declining levels of state-government support, growing
competition from overseas, difficulties in quantifying the long-term value of research, and the overall challenge of
modernizing centuries-old academic traditions.
82
The Chronicle September 22, 2010
http:/ /chronicle.com/article/College-Employees-Give/124572/
College Employees Give Millions to Federal Campaigns, Especially to Democrats
By Kevin Kiley
Employees of colleges and other educational entities have donated a total of about $13.5-million to candidates for
federal offices this election cycle, with most of that money going to Democrats, says a report released on Wednesday by
the Center for Responsive Politics.
The center, a Washington-based research group that compiles and analyzes federal campaign contributions, explored
the donations made by employees of educational institutions through July 31. While nonprofit colleges cannot
contribute directly to political campaigns, administrators, faculty members, and other employees are allowed to make
individual contributions.
The University of California, which employs more than 180,000 faculty and staff members, topped the list of colleges
whose employees contributed the most. They gave a total of $483,981 to various campaigns, 86 percent of which went
to Democrats.
The list of the top-10 college contributors, based on employee donations, includes other large and selective universities,
including Harvard University in second place, Stanford University in third, and the University of Texas in sixth. Some for-
profit education companies and groups also ranked in the top 10, including the Apollo Group, which owns the University
of Phoenix and ranked fourth, and the Association of Private-Sector Colleges and Universities, formerly the Career
College Association, which represents for-profit colleges and ranked fifth.
Inside Higher Ed September 22, 2010
http://www.insidehighered.com/news/2010/09/22/legacy
Legacy of Bias by Scott Jaschik
When college officials talk about the extra help they provide to applicants who are alumni children (and it's rare to get
them to talk about the topic outside of alumni circles), they tend to say a few things: that the preferences are modest,
just an extra "tip" for some well -qualified applicants; that alumni children likely would have had a much greater chance
than others of being admitted even without the preference; and that such modest boosts are a small price to pay for the
spirit of community and philanthropy created by multigenerational ties to a college.
What if the alumni preferences are significant? What if significant numbers of these alumni children wouldn' t have
gotten in anyway? And what if -- contrary to conventional wisdom -- alumni preferences have no impact on alumni
giving? Those what-ifs are all true, according to a book being published and released today by the Century Foundation
(and distributed by the Brookings Institution Press). The book is a collection of research articles by scholars, journalists
and lawyers arguing that much of what colleges have said over the years about alumni admissions preferences isn't true
--and that they amount to the book's title: Affirmative Action for the Rich.
Richard D. Kahlenberg, editor of the volume and an advocate for class-based as opposed to race-based affirmative
action, believes that the time is ripe for American society to re-examine and eliminate alumni preferences. Why now?
He noted, and chapters of the book document, that the highly competitive nature of elite college admissions has
focused scrutiny on why applicants are or are not admitted. Further, the elimination of affirmative action in several
states (a shift Kahlenberg expects to spread), he says, makes it "hard to justify alumni preferences when you have gotten
rid of help for minorities." Finally, he noted, "we are going through a populist moment in this country, where there is
anger at illegitimate preferences or unfair advantages for wealthy people, and it seems to me that this issue is one that's
plainly unfair and Americans get that."
Early Childhood. Elementary and Secondary Education
Education Daily September 22, 2010
Experts herald potential of education technology for TQ Professional development needed to incmporate
content by Wangui Njuguna
83
Social networking, tablet computers, mobile devices, wikis and whiteboards are just a few technological
advances available to educators for instructional purposes, but education experts caution that harnessing the
technology will require teacher training and movement beyond cursory uses of emerging tools.
Speaking at a panel on the use of technology in the classroom last week hosted by the Alliance for Excellent
Education , Michael Horn, author of Disrupting Class: How Disruptive Innovation Will Change the Way the
World Learns, said technology can facilitate customization of instruction to meet the needs of individual
students.
But he said "we have a monolithic school system" and teachers tend to use computers and other technologies to
perpetuate instructional practices they already use.
Horn recommended instead that educators take the view that technology, particular online courses, removes the
barrier of time and extends learning beyond the school walls and "seat-time."
Panelists explained the benefits of social networks such as the Center for Teaching Quality's TeacherSolutions
2030 teams that facilitate collaboration among educators, including ways to integrate technology and pedagogy.
Education Week Published Online: September 17, 2010 Published in Print: September 22, 2010, as Rhee
Reflective In Aftershock of D.C. Primary Updated: September 21, 2010
http://www.edweek.org/ew/articles/201 0/09/ 17/04rhee ep.h30.html
Rhee Reflects on Her Stormy Tenure in D.C. Schools chancellor mulls successes, mistakes during tumultuous
tenure. By Dakarai I. Aarons
Washington
Just months into her 2007 appointment as the chancellor of the District of Columbia schools, Michelle A. Rhee
had already become perhaps the best-known-and most polarizing-school district leader in America for her
push to close poorly achieving, dilapidated schools, overhaul a teacher contract to include performance pay, and
fire underperforming central-office workers.
Now, in the wake of last week's Democratic primary election that saw the defeat of her boss, Mayor Adrian M.
Fenty, Ms. Rhee' s 3Y2-year tenure leading one of the nation' s most-watched district improvement efforts could
soon come to a close.
In an interview in her office here the day after the primary, the chancellor wouldn' t say if she would work for
Mr. Fenty' s likely successor, a man she campaigned against. But, looking back on her tenure so far, she said
some ofthe most significant changes in Washington ' s public schools lie in the kinds of measures that don' t
make conflict-driven headlines.
"I don' t think it was really thought of as a possibility even four years ago that you' d be able to walk into a lot of
our elementary schools and your child would be able to learn Chinese or French or Spanish, or be in an
[International Baccalaureate] program, and now those things are proliferating throughout the district," she said.
Mr. Fenty made improving Washington' s low-performing schools his administration ' s top priority, taking
control of the 45,000-student district less than six months after he assumed office, and tapped Ms. Rhee--then
the head of the New Teacher Project-as his surprise choice for chancellor.
Under Ms. Rhee, who had no previous experience running a school system, test scores have improved, an
enrollment decline has slowed, and a long-dysfunctional bureaucracy has instituted modern, data-driven
processes. The changes are key to her bid to refashion the system as a portfolio of schools that can compete
with, or surpass, the dozens of charter and private schools across the city.
Education Week Published Online: September 17, 2010 Published in Print: September 22, 2010, as Federal Aid
Adds Twist to Election Updated: September 20, 2010 Includes correction(s): September 20, 2010
http://www.edweek.org/ew/articles/2010/09/22/04politics ep.h30.html
Federal K-12 Funding Muddies Electoral Waters Government's Proper Role Weighed Against Benefits. By
Sean Cavanagh
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The massive flow of federal funding into schools has created a new and unfamiliar political dynamic in state
elections this fall , with many candidates voicing concerns about the government involvement while
acknowledging its role in savingjobs, propping up budgets, and supporting innovations in education.
State elected officials have a long history of opposing federal programs that they fear will encroach on their
authority to set school policy.
But while some conservative candidates have railed against federal stimulus funding, arguing that it will heap
future obligations on states, other contenders for governor and schools superintendent back that assistance,
essentially agreeing with the Obama administration' s position that it will boost employment and school quality.
A number of state candidates explain that while they might normally oppose the federal spending that has gone
to states this year and last, these are not normal times.
"Given the situation, it's a tough thing to say ' no' to," John Barge, a Republican candidate for Georgia schools
superintendent, said on the topic of federal aid. While Mr. Barge is concerned about "the amount of federal
involvement in education," he said it was "proper for the federal government to support the states," including
his own.
The November elections-in which 37 governors' seats, legislative races in 46 states, and seven state
superintendent spots are up for grabs-are playing out amid an unprecedented flow of federal aid to states and
schools.
Last year, Congress approved the $787 billion economic-stimulus program, officially known as the American
Recovery and Reinvestment Act, which provided some $100 billion in education funding to states. That pool of
money included the $4.35 billion "Race to the Top" fund, a competition which is providing 11 states and the
District of Columbia with grants to craft new approaches to improving schools and create common academic
assessments.
Just last month, Congress approved a $26 billion Education Jobs Fund for states, which the Obama
administration predicts will save 160,000 school jobs nationwide.
Education Week Published Online: September 21, 2010 Published in Print: September 22, 2010, as Expert
Panels Tackle Enrichment Strategies for STEM Education
http://www.edweek.org/ew/articles/2010/09/22/04stem.h30.html
Expert Panels Tackle Ways to Improve STEM Education Business leaders also launch group to push agenda.
By Erik W. Robelen
Washington
Citing concerns about the nation' s long-term ability to prosper, two major reports issued separately last week
put forward ideas to improve STEM education, but with decidedly different areas of emphasis.
One, (Prepare and Inspire: K-12 Education in Science. Technology, Engineering. and Math (STEM) tor
America 's Future (pdf) ) from the President's Council of Advisors on Science and Technology, looks broadly at
the need to improve STEM education for all K-12 students, with a focus on new federal actions to better prepare
and inspire them in science, technology, engineering, and mathematics. The recommendations include
establishing a national STEM Master Teacher Corps that recognizes and rewards strong supporting the
creation of 1,000 new STEM-focused schools over the next decade; and launching a coordinated initiative to
support a wide range of STEM-based after-school and extended-day activities.
The other, (Preparing the Next Generation of STEM Innovators) from the National Science Board, raises an
alarm about what it sees as the failure of the U.S. education system to identify and nurture the next generation
of high-achieving "STEM innovators," and proposes steps for both the federal government and the nation as a
whole to reverse the situation. Those include casting "a wide net" to seize, early in the academic pipeline, on all
types of talent and to reach far more poor and minority students.
Education Week Published Online: September 20, 2010Published in Print: September 22, 2010, as Time and
Stability Seen as Key Ingredients for School-Based Mentoring
85
http://www.edweek.org/ew/articles/2010/09/22/04mentor.h30.html
Time and Stability Seen as Key to Effective Ment01ing By Sarah D. Sparks
Conflicting studies on school-based mentoring programs for students tend to agree on at least one thing: The
most critical element of effective mentoring-a stable relationship of at least a year-has also proved to be
among the most difficult to align with school-based programs.
A new analysis of three recent "gold standard" evaluations of school mentoring programs has found the practice
can improve a student's attendance at and connection to school, but the sporadic and short-lived mentoring that
is often associated with school-based programs, as opposed to community-based ones, could harm students.
David L. DuBois, a University of Illinois at Chicago researcher and a co-author of the study published in the
latest issue of the Society for Research in Child Development' s Social Policy Report, has found previously that
children in mentoring relationships for less than six months actually got worse in some respects compared with
students who had not been mentored.
" You could actually see studies where the youth in the treated group end up showing more negative change to
things like self-esteem, propensity to get involved in risky behavior" than the control group, Mr. DuBois said in
a panel on the studies earlier this month. "So obviously, it' s a handle-with-care intervention."
Education Week on September 21, 2010 8:21AM I
htt:p://blogs.edweek.org/edweek/inside-school-research/2010/09/students who receive books sho.html
Study Links Book Giveaways to Literacy Gains By Sarah D. Sparks
Students in poverty who receive regular shipments of books and other reading materials show positive effects
on reading performance on standardized and other reading tests, as well as motivation towards and attitudes
about reading, according to a new analysis (Children's Access to Print Materials and Education related
Outcomes: Finding from a Meta-Analytic Review) by Learning Point Associates, an affiliate of the American
Institutes for Research. Yet how and whether book programs actually improve student reading remains up for
grabs.
In what might be the most exhaustive research analysis to date of school and community book-distribution
programs, Jim Lindsay, Learning Point senior research associate, pared down roughly 11 ,000 research studies to
27 of the most rigorous. Of those studies, 68 percent dealt with students in preschool and kindergarten, with
another 15 percent in elementary grades. As previous research has shown, children in poverty often enter school
less ready than their wealthier classmates, and the gap often grows throughout school.
The review, contracted by the Washington-based book distribution group Reading Is Fundamental, found
students who participated in book distribution programs by and large were significantly more motivated to read,
and also had better attitudes toward reading, such as enjoyment, and tended to read more frequently. The
students also had higher emerging literacy skills, like phonemic awareness, and for students old enough to be
tested in reading, higher performance in those tests. Finally, students on average had slightly better basic
language skills, such as the ability to express themselves verbally and understand spoken language.
Education Week Published in Print: September 22, 2010, as NAEP Scores Traveling on Same Trajectory as
Those on State Tests
http://www.edweek.org/ew/articles/2010/09/22/04assess.h30.html
State Tests and NAEP Gains Seen on Same Trajectory Study Indicates Students May be Making Real Progress.
By Catherine Gewertz
State tests of student achievement echo state-level trends on the National Assessment of Educational Progress-
considered the nation' s gold standard of academic testing-more closely than has been generally recognized,
according to a new study.
86
In a report( State Test Score Trends Through 2008-09, Part 1: Rising Scores on State Tests and NAEP (Report)
) issued last week, the Center on Education Policy found "more agreement than is commonly acknowledged,
between trends on test scores in 23 states and those on NAEP.
Sixty-seven percent of the states studied showed progress on both state tests and the national assessment in 4th
grade reading between 2005 and 2009, with 76 percent showing progress in 8th grade reading, 79 percent in 4th
grade mathematics, and 90 percent in 8th grade math, the report says.
Education Week Published in Print: September 16, 2010, as K-12 Policy Shifts Loom in Republican Surge
Updated: September 20, 2010
http://www.edweek.org/ew/articles/2010/09/16/04turnover ep.h30.html
K-12 Policy Shifts Loom in GOP Surge Aiming to take Congress, many in GOP stress concern over federal
education role. By Alyson Klein
The conservative wave sweeping toward the 2010 midterm elections could put in power a group of
congressional Republicans who are largely disenchanted with a recent expansion of the federal role in K-12
policy and leery of offering incentives for states in areas such as adoption of common standards and
assessments.
A slew of victories in November bringing GOP control to one or both houses of Congress would also almost
certainly spell the end of federal financial help for schools facing layoffs and other cuts. Republican lawmakers
nearly universally voted against Democratic bills to give states and districts emergency cash to weather the
continuing economic crisis.
Still, any Republican majority would likely include influential members who see eye to eye with U.S. Secretary
of Education Arne Duncan on certain priorities, such as encouraging the spread of charter schools and
rewarding effective teachers with extra pay.
Lawmakers on both sides of the political divide also say the current version of the Elementary and Secondary
Education Act, the No Child Left Behind Act, needs a major shakeup. But it might be harder to reauthorize the
nearly 9-year-old law if the GOP takes over one or both chambers, longtime Capitol Hill aides from both parties
say.
Eureka Alert Public release date: 22-Sep-2010
http://www.eurekalert.org/pub releases/2010-09/sp-pbi092210.php
Contact: Jim Gilden
media.inquiries@sagepub.com
SAGE Publications
Positive behavioral interventions programs found to improve student behavior and learning
Los Angeles, CA (September 22, 2010) Adopting the evidence-based procedures of School-Wide Positive Behavioral
Interventions and Supports (SWPBIS) helped 21 elementary schools reduce student suspensions, office discipline
referrals and improve student academic achievement, according to a study published in the July 2010 issue ("Examining
the Effects of Schoolwide Positive Behavioral Interventions and Supports on Student Outcomes
Results From a Randomized Controlled Effectiveness Trial in Elementary Schools," abstract) of the Journal of Positive
Behavior Interventions. SWPBIS is a rapidly expanding approach to improving educational environments that is
estimated to be used in more than 9,000 schools nation-wide
Researchers at the Johns Hopkins Center for the Prevention of Youth Violence (Catherine P. Bradshaw, Mary M.
Mitchell, and Philip J. Leaf) randomly assigned Maryland elementary schools to either receive training in SWPBIS (21
schools) or not (16 comparison schools) and followed the schools over a five-year period.
Eureka Alert Public release date: 22-Sep-2010
http://www.eurekalert.org/pub releases/2010-09/uoi--idn092210.php
87
Contact: Jennifer Brown
jennifer-l-brown@uiowa.edu
319-356-7124
University of Iowa - Health Science
IVF does not negatively affect academic achievement
Children conceived by in vitro fertilization (IVF) perform at least as well as their peers on academic tests at all ages from
grade 3 to 12, according to a new University of Iowa study.
In fact, the study, "(Achievement test performance in children conceived by IVF," abstract) published in the October
issue of the journal Human Reproduction, found that children who were conceived by IVF actually scored better than
age- and gender-matched peers on the Iowa Test of Basic Skills and the Iowa Test for Educational Development
(ITBS/ED).
"Our findings are reassuring for clinicians and patients as they suggest that being conceived through IVF does not have
any detrimental effects on a child's intelligence or cognitive development," said lead study author Bradley Van Voorhis,
M.D., Ul professor of obstetrics and gynecology and director of the Center for Advanced Reproductive Care at Ul
Hospitals and Clinics.
Michigan State University News Published: Sept. 22, 2010
http:/ /news.msu.edu/story/8329
Building language skills more critical for boys than girls, study finds
Contact: Andy Henion, University Relations, Office: (517) 355-3294, Cell: (517) 281-6949, Andy.Henion@ur.msu.edu;
Claire Vallotton, Human Development and Family Studies, Office: (517) 884-0521, vallotto@msu.edu
EAST LANSING, Mich.- Developing language skills appears to be more important for boys than girls in helping them to
develop self-control and, ultimately, succeed in school, according to a study led by a Michigan State University
researcher.
Thus, more emphasis should be placed on encouraging boy toddlers to "use their words"- instead of unruly behavior-
to solve problems, said Claire Vallotton, MSU assistant professor of child development.
"It shouldn't be chalked off as boys being boys," Vallotton said. ''They need extra attention from child-care providers and
teachers to help them build language skills and to use those skills to regulate their emotions and behavior."
The study, (Use your words: The role of language in the development of toddlers' self-regulation, abstract)co-authored
by Catherine Ayoub from Harvard Medical School, is the first to suggest language skills have a bigger impact on boys'
self-regulation than on girls'. The findings will appear in an upcoming issue of the journal Early Childhood Research
Quarterly.
Special Education
Education Daily September 22, 2010
Close ties with special educators curb missteps over behavior by Carol MacDonald
Dealing with the behavior problems of any child on the bus can be challenging, but when the child has a
disability, finding a remedy may not be the only concern. What happens on the bus could put your district in
violation of the IDEA if the behavior affects the student's ability to access education.
That happened recently in a Maryland district where misconduct by a teenager with autism escalated to the
point that he was suspended from the bus and missed four days of school. His mother filed a complaint saying
the district had violated the IDEA. When the state's education department investigated, it found no
documentation that the IEP team ever considered the issue or discussed strategies like positive behavioral
interventions to deal with the student's worsening conduct on the bus. Prince George's County Pub. Schs. , 52
JDELR 273 (SEA MD 2009).
Transportation is generally a related service, not part of the instruction day. But the Maryland case shows that
transportation often deserves a second look for its impact on learning.
Heading off problems
88
Both Jan Tomsky, an attorney at Fagen Friedman & Fulfrost LLP in Oakland, Calif., and Michelle Laubin, an
attorney at Berchem, Moses & Devlin in Milford, Conn., believe close communication between special
educators and the transp01tation director is necessary. Too often, the first time the district hears about something
that happened on the bus is when a parent reports it, Tomsky said. "We don't want it to get to that point, " she
said.
"It's amazing," she said. Transportation services can be "a hot bed of potential problems," and many special
educators don't communicate with transporters. They forget about the significant length of time a child might be
on the bus and that drivers are often the only set of eyes to provide key information about what happens.
9)cwfd g 61..U'li6lii
Reference Librarian
National Library ofEducation
U. S. Department of Education
400 Maryland Ave. SW
Washington, DC 20202-5 721
David. Tsuneishi@ed.gov
89
From: Kanter, Martha
Sent:
To:
Friday, August 27, 201 0 11 :55 AM
Kvaal, James
Subject : Fw: Shanker Slog Weekly Digest, August 23-27, 2010
Sent using BlackBerry
From: Vicki Thomas, Albert Shanker Institute <vthomas@ashankerinst.org>
Sent: Fri Aug 27 09:50:12 2010
Subject: Shanker Blog Weekly Digest, August 23-27, 2010
SHANKER SLOG
WEEKLY DIGEST, August 23-27, 2010
Follow us on Twitter: http://twi tter. com/shankerblog
POSTS IN TIDS ISSUE:
* Accountability For Us, No Way: We're The Washington Post
* The Cost of Success in Educatin
* Selling the State
ACCOUNTABILITY FOR US, NOWAY; WE'RE THE WASHINGTON POST
Posted August 25, 2010
In his August 4th testimony before the Senate' s Committee on Health, Education, Labor and Pensions,
Government Accountability Office (GAO) official Gregory D. Kutz offered an earful of scandalous stories
about how for-profit, post-secondary institutions use misrepresentation, fraud, and general ly unethical practices
to tap the federal loan and grant-making trough. One of these companies, so says the Washington Post itself, is
Kaplan Inc, a profit-making college that contributes a whopping amount to the paper' s bottom line (67 percent
of the Washington Post Company' s $92 million in second quarter earnings, according to the Washington
Examiner; 62 percent according to the Post' s Ombudsman Andrew Alexander).
One might assume that the Post 's deep financial involvement in Kaplan Inc. would prompt its editorial board to
recuse itself from comment on new proposed federal regulations designed to correct the problems. Instead of
offering "point-counterpoint" op-eds on this issue, this bastion of j ournalistic integrity has launched a veritable
campaign in support of its corporate education interests, and offered up its op-ed page to education business
allies. It is a sad and disappointing chapter in the history of this once-great institution. Read More
THE COST OF SUCCESS IN EDUCATION
Posted August 26, 201 0
Many are skeptical of the current push to improve our education system by means of test-based "accountabili ty"
-hiring, fi ring, and paying teachers and administrators, as well as closing and retaining schools, based largely
on test scores. They say it won' t work. l share their skepticism, because I think it will .
90
There is a simple logic to this approach: when you control the supply of teachers, leaders, and schools based on
their ability to increase test scores, then this attribute will become increasingly common among these
inctividuals and institutions. It is called " selecting on the dependent variable," and it is, given the talent of the
people overseeing this process and the money behind it, a decent bet to work in the long run.
Now, we all know the arguments about the limitations of test scores. We all know they' re largely true. Some
people take them too far, others are too casual in their disregard. The question is not whether test scores provide
a comprehensive measure of learning or subject mastery (of course they don' t). The better question is the extent
to which teachers (and schools) who increase test scores a great deal are imparting and/or reinforcing the skills
and traits that students will need after their K-12 education, relative to teachers who produce smaller gains. And
this question remains largely unanswered.
This is dangerous, because ifthere is an unreliable relationship between teaching essential skills and the
boosting of test scores, then success is no longer success. And by selecting teachers and schools based on those
scores, we will have deliberately engineered our public education system to fail in s p i t e ~ ~ success.
It may be only then that we truly realize what we have done. Read More
SELLING THE STATE
Posted August 26, 201 0
In a recent post, we discussed the explosive growth in privatization of public services, including one town that
recently privatized everything and everybody. Along similar lines, this week, the Wall Street Journal published
a story about desperate state and local governments, squeezed by declining revenues, selling or leasing public
property to private interests. The reporter notes:
Cities and states across the nation are selling and leasing everything from airports to zoos-a fire sale that could
help plug budget holes now but worsen their financial woes over the long run.
The notion that we should cede public services to the private sector has assumed the status of quasi-religious
dogma in recent years. There was a brief time during the earlier, more dire days of the current recession during
which many began to question this market fundamentalism. Such dissent continues in some circles today. But
you wouldn' t know it looking at actual policy.
Things may even be getting worse. Cash-strapped governments have stepped up efforts in a new area:
privatization of public assets. Read More
91
From:
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Subject:
Kanter, Martha
Tuesday, August 24, 201 o 8:30 AM
Kvaal, James
News: A New Leaf at Phoenix? - Inside Higher Ed
http://www.insidehighered.com/news/2010/08/24/phoenix
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Kanter, Martha
Friday, August 13, 2010 8:52AM
Ochoa, Eduardo
Fw: FYI -- Inside Higher ED --Article on ED's enforcement against problem schools
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To: Rose, Charlie; Miceli, Julie; Taggart, Bill; Kanter, Martha; Kvaal, James
Sent: Fri Aug 13 07:22:02 2010
Subject: Fw: FYI -- Inside Higher ED -- Article on ED's enforcement against problem schools
From: Siegel, Brian
To: Yuan, Georgia; Burton, Vanessa; Finley, Steve; Jenkins, Harold; Marinucci, Fred; Morelli, Denise; Sann, Ronald;
Scaniffe, Dawn; Varnovitsky, Natasha; Wanner, Sarah; Wolff, Russell; Woodward, Jennifer
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Subject: FYI -- I nside Higher ED -- Article on ED's enforcement against problem schools
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News
Did the Department Drop the Ball?
August 13, 2010
WASHINGTON -- The Government Accountability Office' s "secret shopper" investigation of recruiting
practi ces at for-profit colleges was a mixed blessing for the U.S. Department ofEducation.
93
At one level, the findings presented at last week' s Senate Health, Education, Labor and Pensions Committee
hearing were a vindication. Videotaped evidence pointed to fraud at four colleges, and questionable or
deceptive practices at all 15 campuses investigated.
But, at the same time, GAO's discoveries have put the Education Department on the defensive, trying to explain
why it hasn't done more to prevent recruiters from making deceptive statements to potential students. There are
already rules on misrepresentation and incentive compensation of college employees for securing enrollments--
which the department is expected to tighten in its final regulations, to be published by Nov. l --and while weak
rules may be part of the problem, they' re not the whole story.
Could the department have conducted its own secret shopper investigat1ons and cracked down on aggressive
recruiting practices before Congress and GAO got involved? Has the department failed to use all the tools in its
existing enforcement toolbox as frequently and as well as it could have?
To most observers, the answer to both questions is yes. While the department has not publicly acknowledged
that it didn't do enough before now, the steps it is taking to ramp up enforcement of the current rules suggest
that it does feel pressure to do more.
At last week's hearing, Sen. Carte Goodwin (D-W.Va.), the interim replacement for the late Sen. Robert Byrd,
asked Gregory D. Kutz, GAO' s managing director of forensic audits and special investigations, whether the
problems found on campuses indicated a lack of sufficient regulations, or of enforcement of existing regulations
by the department.
"Probably both," Kutz said. "Given what we saw, it certainly appeared a little bit like the wild, wild west out
there, if you will. So that would indicate that there is not a lot of regulatory infrastructure in place overseeing or
enforcing."
The problems, several observers say, are a mix of policing, enforcement and the rules themselves. The
department has been introspective and active in revising its rules on misrepresentation and incentive
compensation, but has yet to say or do much to acknowledge publicly its shortfalls in the other two areas.
Terry W. Hartle, senior vice president of government and public affairs at the American Council on Education,
says that while "good enforcement is the best regulation, and the Department of Education does have wide
authority, including emergency power to shut down a school very quickly," it hasn' t used that power effectively
for at least the last decade.
"Unfortunately, the department's track record in terms of enforcing its regulations can only be described as
abysmal," says Barmak Nassirian, associate executive director of the American Association of Collegiate
Registrars and Admissions Officers. "They get a failing grade-- quite frankly, it's the same as the SEC's grade
on protecting investors from [Bernard] Madoff." An admitted foe of for-profit higher education, Nassirian
encourages more investigation and enforcement, as well as tighter regulations.
A Republican aide on the Senate education committee says that "the department's enforcement role has
historically been very light." The growth of the for-profit sector and the Title IV program hasn' t led the
department to ramp up its efforts, and as a result, the staffer says, " it really hasn' t been doing a good job looking
at anyone-- for-profits, nonprofits --and trying to find the kinds of things GAO found."
"It' s their job to do it," he adds. "It's not the accreditors' job, it's not really the state agencies' job to enforce
federal laws, it's really the Department of Education' s job to figure it out."
94
But not everyone agrees. Michael B. Goldstein, co-leader of the higher education practice at the Washington
law firm Dow Lohnes, whose clients include for-profit colleges, says the department is already doing enough to
enforce its regulations. "The idea is not that you catch everyone, it's that you've got a sufficiently robust
enforcement effort that they understand they have to follow rules," he says, "and I think they do."
The Career College Associat1on and some of the for-profit colleges visited by GAO investigators have
announced their own secret shopper programs, but it' s unclear how transparent or public the findings of those
programs will be. An Education Department-run secret shopper program could prove to be a useful deterrent for
individual "rogue" recruiters and whole companies.
"It's not just the individual enforcement actions that prevent fraud and abuse but rather the knowledge that any
given student you' re talking to might be a secret shopper," says Mark Kantrowitz, publisher ofFinaid.org.
"Knowing that the student you' re with could be an undercover investigator from the Department of Education
would likely clean up behavior."
The Office of Federal Student Aid is in the process of developing its own secret shopper program to investigate
admissions and financial aid practices. But to get the program up and runnjng, the department says, it needs
additional funding and staff. The office is also in the midst of hiring 64 new oversight employees to help ratchet
up the number of on-site program reviews it performs each year.
While not quite acknowledging that its monitoring of for-profit institutions has failed to keep pace with the
explosive enrollment and financial growth in the sector, FSA confirmed that it is considering creating a
financial oversight team that would focus only on for-profit institutions.
The department has been "very anemically funded" when it comes to operating expenses, Nassirian says. "They
haven' t been dealt a very good hand and whatever hand they' ve been dealt they haven' t played very well. "
Harris N. Miller, president of the Career College Association, says he sees "a need for increased enforcement by
all three arms of the triad" -- the federal government, state governments and accreditors -- "as we have no
problem with the department being more proactive in enforcement."
Though CCA supports some of the department's proposed regulations, "a myriad of laws and regulations are on
the books already that deal with the issues that the GAO highlighted in its investigation," Miller says. "We' re a
little frustrated, frankly, in all the new regulations, and the department framing these issues like there' s nothing
they can do short of regulating more. We believe the department has the authority to do more than just listen to
complaints. They have a policing role here."
One reason policing hasn't been aggressive, says Nassirian, is because of the melding of democracy and
bureaucracy at the Education Department, with political appointees, including the secretary, leading an agency
of career ci vii servants.
"We've had cycles of some of the very people that the department should have been investigating invited in to
run the place," he says, referring to several former for-profit executives who joined the department during the
George W. Bush administration. "Civil servants understand that showing excessive zeal on behalf of the
taxpayers and the students will not be a smart long-term career move. Being aggressive under one
administration might work, but under the next it will get you pushed out."
The department' s Office oflnspector General examines passively, performing audits and investigations only
after it receives a complaint or other indication of wrongdoing at an institution. Since 2005, OIG has issued 37
reports on postsecondary institutions and accreditors, 21 of which involved for-profit colleges.
95
But the Obama administration has in recent months begun introducing new consumer protection functions.
Among them:
An internal complaint database to track institutions that are under scrutiny and a partnership with the Federal
Trade Commission to share complaints across agencies.
A partnership with the Securities and Exchange Commission to share compliance problems found at publicly
traded for-profit higher ed companies.
Working with the inspector general, FSA in July began reviewing institutions to target consumer issues involving
distance learning and misrepresentation.
A consumer protection position that will report to FSA's new chief customer experience officer.
"Public policy in areas like this isn' t fixed and permanent, you can' t build it and leave it standing like some
Greek temple," says Hartle. " Over time, you need to do renovations. " Some of those renovations, he adds, need
to be to the regulations, but others need to be to the department's enforcement mechanisms.
The department's Office ofFederal Student Aid has the emergency authority to end an institution' s Title IV
program participation when it identifies statutory or significant regulatory noncompliance. FSA can deny
recertification to participate in Title IV during the review the office performs on each Title IV-eligible
institution every six years.
In less extreme instances, FSA has the power to place growth restrictions on the number of campuses or amount
of Title IV aid a program can receive. FSA also has the power to fine institutions up to $27,500 for each
instance of regulatory noncompliance. Institutions can also be put under close monitoring by the department.
During the 2009 fiscal year, 75 of the 116 institutions that lost Title IV eligibility were for-profit colleges,
generally because they lost accreditation, merged with another institution, voluntarily withdrew from the Title
IV program, or closed.
Kantrowitz says the department needs to be more visible and more severe in enforcing noncompliance issues
that aren' t severe enough to require an institution to shut down. "There' s a need for intermediate sanctions that
are severe enough to make colleges reconsider their behavior," he says. "Fines need to be more than just the
cost of doing business."
When the department's means for punishing institutions is just closer monitoring in the future or a small fine,
the cost-benefit analysis may keep some colleges in active noncompliance, Kantrowitz says. "Give them a profit
motive to do stricter enforcement, stricter training of their staff." He suggested that larger fines or strict limits
on the amount of Title IV funds an institution could get-- as well as publicized closures, when necessary--
could do a lot to change behavior. "Having high-profile consequences for this kind ofbehavior will encourage
some colleges to toe the line."
The Republican staffer agrees, to a point. "For legitimate, clear-cut cases of bad acts, there' s a real question to
be asked whether the penalties are tough enough based on the damage this can cause to a student over the
totality of the student's life," he says. " At the same time, you can' t take out the machine gun to catch a bug."
Goldstein says the penalties for institutions found to be violating Title IV regulations are sufficient. "Certainly
with regard to the publicly traded companies, the penalties of getting tagged are severe-- there' s no penalty
worse than what the market place could assess," he says. "A fine of $8 million is not so draconian to the
University of Phoenix, but a 2 percent drop in their stock is a whole lot of money."
-Jennifer Epstein
96
From:
Sent:
To:
Subject :
Attachments:
Sent using BlackBerry
From: Yuan, Georgia
Kanter, Martha
Friday, August 13, 2010 8:52AM
Kvaal, James
Fw: FYI -- Inside Higher ED --Article on ED's enforcement against problem schools
image001 .png; image002.png; image003.png
To: Rose, Charlie; Miceli, Julie; Taggart, Bill; Kanter, Martha; Kvaal, James
Sent: Fri Aug 13 07:22:02 2010
Subject: Fw: FYI -- Inside Higher ED -- Article on ED's enforcement against problem schools
From: Siegel, Brian
To: Yuan, Georgia; Burton, Vanessa; Finley, Steve; Jenkins, Harold; Marinucci, Fred; Morelli, Denise; Sann, Ronald;
Scaniffe, Dawn; Varnovitsky, Natasha; Wanner, Sarah; Wolff, Russell; Woodward, Jennifer
Sent: Fri Aug 13 07:11:09 2010
Subject: FYI -- I nside Higher ED -- Article on ED's enforcement against problem schools
Search News
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News
Did the Department Drop the Ball?
August 13, 2010
WASHINGTON -- The Government Accountability Office' s "secret shopper" investigation of recruiting
practi ces at for-profit colleges was a mixed blessing for the U.S. Department ofEducation.
97
At one level, the findings presented at last week' s Senate Health, Education, Labor and Pensions Committee
hearing were a vindication. Videotaped evidence pointed to fraud at four colleges, and questionable or
deceptive practices at all 15 campuses investigated.
But, at the same time, GAO's discoveries have put the Education Department on the defensive, trying to explain
why it hasn't done more to prevent recruiters from making deceptive statements to potential students. There are
already rules on misrepresentation and incentive compensation of college employees for securing enrollments--
which the department is expected to tighten in its final regulations, to be published by Nov. l --and while weak
rules may be part of the problem, they' re not the whole story.
Could the department have conducted its own secret shopper investigat1ons and cracked down on aggressive
recruiting practices before Congress and GAO got involved? Has the department failed to use all the tools in its
existing enforcement toolbox as frequently and as well as it could have?
To most observers, the answer to both questions is yes. While the department has not publicly acknowledged
that it didn't do enough before now, the steps it is taking to ramp up enforcement of the current rules suggest
that it does feel pressure to do more.
At last week's hearing, Sen. Carte Goodwin (D-W.Va.), the interim replacement for the late Sen. Robert Byrd,
asked Gregory D. Kutz, GAO' s managing director of forensic audits and special investigations, whether the
problems found on campuses indicated a lack of sufficient regulations, or of enforcement of existing regulations
by the department.
"Probably both," Kutz said. "Given what we saw, it certainly appeared a little bit like the wild, wild west out
there, if you will. So that would indicate that there is not a lot of regulatory infrastructure in place overseeing or
enforcing."
The problems, several observers say, are a mix of policing, enforcement and the rules themselves. The
department has been introspective and active in revising its rules on misrepresentation and incentive
compensation, but has yet to say or do much to acknowledge publicly its shortfalls in the other two areas.
Terry W. Hartle, senior vice president of government and public affairs at the American Council on Education,
says that while "good enforcement is the best regulation, and the Department of Education does have wide
authority, including emergency power to shut down a school very quickly," it hasn' t used that power effectively
for at least the last decade.
"Unfortunately, the department's track record in terms of enforcing its regulations can only be described as
abysmal," says Barmak Nassirian, associate executive director of the American Association of Collegiate
Registrars and Admissions Officers. "They get a failing grade-- quite frankly, it's the same as the SEC's grade
on protecting investors from [Bernard] Madoff." An admitted foe of for-profit higher education, Nassirian
encourages more investigation and enforcement, as well as tighter regulations.
A Republican aide on the Senate education committee says that "the department's enforcement role has
historically been very light." The growth of the for-profit sector and the Title IV program hasn' t led the
department to ramp up its efforts, and as a result, the staffer says, " it really hasn' t been doing a good job looking
at anyone-- for-profits, nonprofits --and trying to find the kinds of things GAO found."
"It' s their job to do it," he adds. "It's not the accreditors' job, it's not really the state agencies' job to enforce
federal laws, it's really the Department of Education' s job to figure it out."
98
But not everyone agrees. Michael B. Goldstein, co-leader of the higher education practice at the Washington
law firm Dow Lohnes, whose clients include for-profit colleges, says the department is already doing enough to
enforce its regulations. "The idea is not that you catch everyone, it's that you've got a sufficiently robust
enforcement effort that they understand they have to follow rules," he says, "and I think they do."
The Career College Associat1on and some of the for-profit colleges visited by GAO investigators have
announced their own secret shopper programs, but it' s unclear how transparent or public the findings of those
programs will be. An Education Department-run secret shopper program could prove to be a useful deterrent for
individual "rogue" recruiters and whole companies.
"It's not just the individual enforcement actions that prevent fraud and abuse but rather the knowledge that any
given student you' re talking to might be a secret shopper," says Mark Kantrowitz, publisher ofFinaid.org.
"Knowing that the student you' re with could be an undercover investigator from the Department of Education
would likely clean up behavior."
The Office of Federal Student Aid is in the process of developing its own secret shopper program to investigate
admissions and financial aid practices. But to get the program up and runnjng, the department says, it needs
additional funding and staff. The office is also in the midst of hiring 64 new oversight employees to help ratchet
up the number of on-site program reviews it performs each year.
While not quite acknowledging that its monitoring of for-profit institutions has failed to keep pace with the
explosive enrollment and financial growth in the sector, FSA confirmed that it is considering creating a
financial oversight team that would focus only on for-profit institutions.
The department has been "very anemically funded" when it comes to operating expenses, Nassirian says. "They
haven' t been dealt a very good hand and whatever hand they' ve been dealt they haven' t played very well. "
Harris N. Miller, president of the Career College Association, says he sees "a need for increased enforcement by
all three arms of the triad" -- the federal government, state governments and accreditors -- "as we have no
problem with the department being more proactive in enforcement."
Though CCA supports some of the department's proposed regulations, "a myriad of laws and regulations are on
the books already that deal with the issues that the GAO highlighted in its investigation," Miller says. "We' re a
little frustrated, frankly, in all the new regulations, and the department framing these issues like there' s nothing
they can do short of regulating more. We believe the department has the authority to do more than just listen to
complaints. They have a policing role here."
One reason policing hasn't been aggressive, says Nassirian, is because of the melding of democracy and
bureaucracy at the Education Department, with political appointees, including the secretary, leading an agency
of career ci vii servants.
"We've had cycles of some of the very people that the department should have been investigating invited in to
run the place," he says, referring to several former for-profit executives who joined the department during the
George W. Bush administration. "Civil servants understand that showing excessive zeal on behalf of the
taxpayers and the students will not be a smart long-term career move. Being aggressive under one
administration might work, but under the next it will get you pushed out."
The department' s Office oflnspector General examines passively, performing audits and investigations only
after it receives a complaint or other indication of wrongdoing at an institution. Since 2005, OIG has issued 37
reports on postsecondary institutions and accreditors, 21 of which involved for-profit colleges.
99
But the Obama administration has in recent months begun introducing new consumer protection functions.
Among them:
An internal complaint database to track institutions that are under scrutiny and a partnership with the Federal
Trade Commission to share complaints across agencies.
A partnership with the Securities and Exchange Commission to share compliance problems found at publicly
traded for-profit higher ed companies.
Working with the inspector general, FSA in July began reviewing institutions to target consumer issues involving
distance learning and misrepresentation.
A consumer protection position that will report to FSA's new chief customer experience officer.
"Public policy in areas like this isn' t fixed and permanent, you can' t build it and leave it standing like some
Greek temple," says Hartle. " Over time, you need to do renovations. " Some of those renovations, he adds, need
to be to the regulations, but others need to be to the department's enforcement mechanisms.
The department's Office ofFederal Student Aid has the emergency authority to end an institution' s Title IV
program participation when it identifies statutory or significant regulatory noncompliance. FSA can deny
recertification to participate in Title IV during the review the office performs on each Title IV-eligible
institution every six years.
In less extreme instances, FSA has the power to place growth restrictions on the number of campuses or amount
of Title IV aid a program can receive. FSA also has the power to fine institutions up to $27,500 for each
instance of regulatory noncompliance. Institutions can also be put under close monitoring by the department.
During the 2009 fiscal year, 75 of the 116 institutions that lost Title IV eligibility were for-profit colleges,
generally because they lost accreditation, merged with another institution, voluntarily withdrew from the Title
IV program, or closed.
Kantrowitz says the department needs to be more visible and more severe in enforcing noncompliance issues
that aren' t severe enough to require an institution to shut down. "There' s a need for intermediate sanctions that
are severe enough to make colleges reconsider their behavior," he says. "Fines need to be more than just the
cost of doing business."
When the department's means for punishing institutions is just closer monitoring in the future or a small fine,
the cost-benefit analysis may keep some colleges in active noncompliance, Kantrowitz says. "Give them a profit
motive to do stricter enforcement, stricter training of their staff." He suggested that larger fines or strict limits
on the amount of Title IV funds an institution could get-- as well as publicized closures, when necessary--
could do a lot to change behavior. "Having high-profile consequences for this kind ofbehavior will encourage
some colleges to toe the line."
The Republican staffer agrees, to a point. "For legitimate, clear-cut cases of bad acts, there' s a real question to
be asked whether the penalties are tough enough based on the damage this can cause to a student over the
totality of the student's life," he says. " At the same time, you can' t take out the machine gun to catch a bug."
Goldstein says the penalties for institutions found to be violating Title IV regulations are sufficient. "Certainly
with regard to the publicly traded companies, the penalties of getting tagged are severe-- there' s no penalty
worse than what the market place could assess," he says. "A fine of $8 million is not so draconian to the
University of Phoenix, but a 2 percent drop in their stock is a whole lot of money."
-Jennifer Epstein
100
From: Kanter, Martha
Sent: Thursday, July 15, 2010 7:39AM
To: Gomez, Gabriella; Weiss, Joanne; Miller, Tony; Cunningham, Peter; Martin, Carmel; Rose,
Charlie; Yuan, Georgia; Kvaal, James
Subject : FYI -Another article on Harkin and the for-profits
INSIDE HIGHER EDUCATION
Does the Messenger Matter?
July 2010
WASHINGTON - Sen. Tom Harkin (D- Iowa) began what many foes of for-profit higher education
consider long-overdue Congressional scrutiny of the sector here late last month with a
hearing questioning the business student value proposition and role of federal funding
at for - profit colleges.
But some of the l oudest shouting surrounding inquiry as chairman of the Senate
Labor and Pensions Committee is not about any of those substantive issues.
about decision to include Steven Eisman - - an investor who has bet that
higher education stocks will tumble in the coming months -- on the panel of witnesses at the
hearing and in the senator's attempts to line up support for a stringent examination of for -
profit higher education.
In a Harkin said he has relied on Eisman because cche is a well respected analyst
with a track record of making but observations about American
industries."
Either directly or Eisman and other short sellers - - people who make investments
betting that a certain stock price will fall -- have been l obbying Congress and U.S.
Department of Education officials for seeking out greater regulation while not
necessarily being being transparent about their financial interests. Some are also said to be
behind news stories and whist l eblower lawsuits against the sector with the idea that bad
publicity -- and tougher federal regulation -- will drive down higher education stock prices
and help short sellers rake in profits.
In at least one reported last week by a woman working for an investment
firm sought out signatures of homeless shelter workers for a letter to Education Secretary
Arne Duncan that decried for-profit alleged recruiting of homeless students. The
signatories said t hey didn't know that the woman worked for an investment firm and most said
they had no firsthand knowledge of recruiting in homeless shelters. The woman has not
revealed who she was working though Eisman denies she worked for him.
In response to an inquiry from Inside Higher Ed about short involvement in getting
policy makers to scrutinize the Harkin said in a statement Wednesday that cc[g]iven
the tremendous profit margins of for-profit financed largely with taxpayer
many investors are interested in for profit colleges." He did not address allegations that
short sellers have been l obbying Congress and the Education Department without disclosing
their financial interests in greater regulation.
Some supporters of greater scrutiny of for - profit higher education see questions about who
delivers critiques of the sector as a distraction. If the information short sellers are
providing is verif iable and supports the thesis that the sector is taking advantage of
students and that is what that matters.
The Role of Short Sellers
101
In late MayJ Eisman told a group of investors that for-profit higher education was aas
socially destructive and morally bankrupt as the subprime mortgage industryJ" making it an
ideal candidate to short.
Investors were listening -- stock prices fell and shorts of the industry rose -- and so were
Harkin and his staff. Two weeks laterJ Harkin announced the June hearing and plans for
several more in the coming months. When the witness list was released a few days before the
hearingJ Eisman was on itJ along with the Education DepartmentJs inspector general; a former
prosecutor; a student who believed she was wronged by the for-profit college she attended;
and an executive from one of the largest publicly traded higher education companies.
Eisman is profiled by Michael Lewis in The Big ShortJ a book about short sellersJ success in
betting against the mortgage market just as it began to implode. The book was released last
year and has been reported to have reached the desks of many members of Congress and
staffers. Prominent Senate Democrats including Majority Leader Harry ReidJ of Nevada; Dick
DurbinJ of Illinois; and Christopher DoddJ of ConnecticutJ have talked up the book.
SoJ tooJ has HarkinJ in explaining why heJs willing to listen closely to what Eisman says he
sees happening in for-profit higher education. Though Eisman stands to make financial gains
because of the HELP committeeJs attention to the sectorJ athe test for any committee ought to
be whether hearing testimony might advance the public interest regardless of whether it might
also be consistent with or even advance a witness's private interestJ" Harkin said. "By that
testJ we are comfortable with Mr. Eisman's testimony."
HarkinJs first question to Eisman at the hearing wasJ aDo you have a financial stake in the
success or failure of for-profit education companies?" EismanJs answer was yesJ but neither
Harkin nor anyone else on the committee followed up to ask which companies he was shorting at
the time or had shorted in the past. In an op-ed first published Tuesday in the Los Angeles
TimesJ Harkin identified Eisman simply as a ''Wall Street money manager." Though published
after ProPublica's story critical of short sellers' role in the for -profit debateJ the op- ed
did not mention the increasingly questioned role of short sellers in the debate.
Tom MatzzieJ leader of Accountable AmericaJ a group that says it ((works to stop the
outrageous policies of right-wing and special interests in WashingtonJ" arguedJ in a column
published soon after the hearing endedJ that the ((hearing plays into EismanJs strategy of
creating a giant circus about higher education companies." He added: ((The bigger the circusJ
the lower the stock price and the more money Eisman makes. The U.S. Senate shouldn't have a
leading role in a Wall Street investorJs cgamblingJ - - especially a short - seller."
In a column published before the hearing in The HillJ Lanny DavisJ who served as White House
counsel during the Clinton administrationJ called for afull disclosure and transparency by
short-seller critics" of for-profit higher education.
Citizens for Responsibility and Ethics in WashingtonJ a nonpartisan government watchdog group
founded and led by former Democratic staffersJ has also voiced alarm. "So many of those
advocating for regulation seem to have a financial interestJ" said Melanie SloanJ the groupJs
executive director. ((It shakes your faith that the problems theyJre identifying are real."
The critiques coming from MatzzieJ Davis and CREW have not dug into the substantive claims
that Eisman and other short sellers -- along with many othersJ from nonprofit higher
education groups and the U.S. Department of Education - - have made against the sector.
InsteadJ they create a distraction that advocates for for-profit colleges are happy to fuel.
(Barmak NassirianJ associate executive director of the American Association of Collegiate
Registrars and Admissions OfficerJ called it a "red herring.")
102
Harris MillerJ president of the Career College AssociationJ has attacked Eisman and other
short sellers early and often. EismanJ he said in a statement just after HarkinJs office
released the list of panelists for the hearingJ was ua Wall Street short seller born with a
silver spoon in his mouthJ who got his first big paycheck the old-fashioned wayJ through his
parents.
The day before the hearingJ Miller held an hour-long press conference at the National Press
Club. uwhen among the stakeholders are a population of working adults and lower-income
studentsJ many pursuing higher education for the first time in order to achieve better lives
for themselves and their families and benefiting our countryJs economyJ particular care
should be given to the line between vigilance and vitriolJu he said. ((For whatever reasonJ
Mr. Eisman not only crossed itJ he ignored it altogether.
In a conversation with Inside Higher Ed just after the hearing and again in a conference call
for reporters that afternoonJ Miller continued to focus the lion's share of his response to
the hearing on short sellers and their assault on institutions that largely serve low-income
adult students.
Since thenJ Miller has continued to rail against short sellers. ((They have a strange role in
that thereJs no downside to them just making stuff upJ he said this week. ((They have no
concern about whether they have credibility in Washington. I have a reputation to defendJ
someone from the Department of EducationJ they have a reputation to defend. But someone whoJs
a short seller is only thinking about the profit from what Washington does and is
intentionally misleading.
Support for Harkin
Miguel P. Asensio is New York-based short seller. He is also president of a nonprofit group
called Alliance for Economic Stability - formed in December 2009 - that has chosen as one of
its few advocacy issues the regulation of for-profit higher education. Since AprilJ the group
has sent five letters to members of Congress and Education Department officialsJ calling for
greater regulation of the sector. Its positions are undoubtedly influenced by AsensioJs
investment research.
In an interview this weekJ he defended HarkinJs reliance on EismanJs research and testimony.
uwho else is Harkin supposed to have on the panel? UnfortunatelyJ no one has the resources
other than those people who have the profit incentive to expose the fraud. Those are the
short sellers.
Asensio said that while financial interests lay behind EismanJs testimonyJ so too did they
for another panelist at the hearingJ Sharon Thomas ParrottJ senior vice president of
government and regulatory affairs and chief compliance officer at DeVryJ Inc. uHereJs someone
who is profiting from the fraud and the regulatory deficiencyJ he said. MeanwhileJ short
sellers are hoping to profit by identifying that deficiency and betting that policy makers
will ultimately enact regulations that eliminate the deficiency.
Pauline AbernathyJ vice president of the Institute for College Access and SuccessJ made the
same argument about the financial interests of Eisman and Thomas Parrott in an interview the
day before the hearing. uEismanJs being transparent in his financial interestsJ she said.
((People can evaluate what he has to say and at least take in the facts.
A longtime critic of for-profit higher educationJ Nassirian said the involvement of short
sellers is only problematic if they are not transparent about their financial interests. uso
long as the producers of any research or any policy recommendations clearly indicate what
they are and what their interests might beJ he saidJ short sellers have a place in the
debate.
103
WhatJs significantJ thenJ is not who discovers and draws attention to instances of wasteJ
fraud and abuseJ but that those issues have been identified and are getting attentionJ
Nassirian said. The whistleblowerJs financial interests donJt change the fact that the
whistle has been blown. "I couldnJt care less what their motivations may beJ" he said. "I
judge them on the basis of what they sayJ the veracity of the case they make."
- Jennifer Epstein
104
From:
Sent:
To:
Subject:
Kanter, Martha
Wednesday, July 07. 2010 11 :21 AM
Weiss, Joanne; Kvaal , James; Yuan, Georgia; Rose, Charlie; Miller, Tony; Cunningham,
Peter; Gomez, Gabriella; Martin, Carmel
FYI : Justice Dept. Weighs In for Whistle-Blowers in Cases Against Kaplan- Administration-
The Chronicle of Higher Education
http://chronicle.com/article/Justice-Dept-Weighs-ln-for/66150/?sid=at&utm source=at&utm medium=en
105
From: Kanter, Martha
Sent:
To:
Subject:
Friday, May
Shireman, Bob; ) @who.eop.gov
FYI : "Socially Destructive an orally Bankrupt"
From: Rose, Charlie
Sent: Thursday, May 27, 2010 10:27 AM
To: Miller, Tony; Cunningham, Peter; Kanter, Martha; Martin, Carmel; Rogers, Margot; Gomez, Gabriella
Cc: Yuan, Georgia
Subject: Fw: "Socially Destructive and Morally Bankrupt"
Charlie
Sent using BlackBerry
From: Yuan, Georgia
To: Rose, Charlie
Sent: Thu May 27 09:17:13 2010
Subject: Fw: "Socially Destructive and Morally Bankrupt"
From: Woodward, Jennifer
To: Yuan, Georgia; Jenkins, Harold; Marinucci, Fred; Siegel, Brian; Wolff, Russell; Sann, Ronald; Finley, Steve; Wanner,
Sarah; Morelli, Denise
Sent: Thu May 27 09:13:10 2010
Subject: "Socially Destructive and Morally Bankrupt"
Included below the article that Brian sent earlier this morning is the text of the speech by Steven Eisman mentioned in the
article.
http://www. insidehighered. com/news/201 0/05/27/gt#228602
High-Profile Trader's Harsh Critique of For-Profit Colleges
Steven Eisman, the Wall Street trader who was mythologized in Michael Lewis's The Big Short as that rare person who
saw the subprime mortgage crisis coming and made a killing as a result, thinks he has seen the next big explosive and
exploitative financial industry --for-profit higher education -- and he's making sure as many people as possible know it. In
a speech Wednesday at the Ira Sohn Investment Research Conference, an exclusive gathering at which financial analysts
who rarely share their insights publicly are encouraged to dish their "best investment ideas," Eisman started off with a
broadside against Wall Street's college companies.
"Until recently, I thought that there would never again be an opportunity to be involved with an industry as socially
destructive and morally bankrupt as the subprime mortgage industry," said Eisman, of FrontPoint Financial Services Fund.
"I was wrong. The For-Profit Education Industry has proven equal to the task." Eisman's speech lays out his analysis of
the sector's enormous profitability and its questionable quality, then argues that the colleges' business model is about to
be radically transformed by the Obama administration's plan to hold the institutions accountable for the student-debt-to-
income ratio of their graduates. "Under gainful employment, most of the companies still have high operating margins
relative to other industries," Eisman said. "They are just less profitable and significantly overvalued. Downside risk could
be as high as 50 percent. And let me add that I hope that gainful employment is just the beginning. Hopefully, the DOE
will be looking into ways of improving accreditation and of ways to tighten rules on defaults." Stocks of the companies
appeared to fall briefly in the last hour of trading Wednesday, after news of Eisman's speech made the rounds.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
106
IRA SOHN CONFERENCE
Presentation by Steve Eisman
SUBPRIME GOES TO COLLEGE
May 26,2010
Good Afternoon. I would like to thank the Ira Sohn Foundation for the honor of speaking before this
audience. My name is Steven Eisman and I am the portfolio manager ofthe FrontPoint Financial Services
Fund. Until recently, I thought that there would never again be an opportunity to be involved with an
industry as socially destructive and morally bankrupt as the subprime mortgage industry. I was wrong. The
For-Profit Education Industry has proven equal to the task.
The title of my presentation is "Subprime goes to College". The for-profit industry has grown at an extreme
and unusual rate, driven by easy access to government sponsored debt in the form of Title IV student loans,
where the credit is guaranteed by the government. Thus, the government, the students and the taxpayer bear
all the risk and the for-profit industry reaps all the rewards. This is similar to the subprime mortgage sector in
that the subprime originators bore far less risk than the investors in their mortgage paper.
In the past 10 years, the for-profit education industry has grown 5-10 times the historical rate of traditional
post secondary education. As of 2009, the industry had almost 10% of the enrolled students but claimed
nearly 25% of the $89 billion of Federal Title IV student loans and grant disbursements. At the current pace of
growth, for- profit schools will draw 40% of all Title IV aid in 10 years.
How has this been allowed to happen?
The simple answer is that they've hired every lobbyist in Washington D.C. There has been a revolving door
between the people who work or lobby for this industry and the halls of government. One example is Sally
Stroup. She was the head lobbyist for the Apollo Group- the largest for-profit company in 2001-2002. But
from 2002-2006 she became Assistant Secretary of Post-Secondary Education for the DOE under President
Bush. In other words, she was directly in charge of regulating the industry she had previously lobbied for.
From 1987 through 2000, the amount of total Title IV dollars received by students of for-profit schools
fluctuated between $2 and $4 billion per annum. But then when the Bush administration took over the reigns
of government, the DOE gutted many of the rules that governed the conduct of this industry. Once the
floodgates were opened, the industry embarked on 10 years of unrestricted massive growth.
[Federal dollars flowing to the industry exploded to over $21 billion, a 450% increase.]
At many major-for profit institutions, federal Title IV loan and grant dollars now comprise close to 90% of total
revenues, up significantly vs. 2001. And this growth has driven even more spectacular company profitability
and wealth creation for industry executives. For example, ITT Educational Services (ESI), one of the larger
companies in the industry, has a roughly 40% operating margin vs. the 7%-12% margins of other companies
that receive major government contracts. ESI is more profitable on a margin basis than even Apple.
This growth is purely a function of government largesse, as Title IV has accounted for more than 100% of
revenue growth. Here is one of the more upsetting statistics. In fiscal 2009, Apollo, the largest company in
the industry, grew total revenues by $833 million. Of that amount, $1.1 billion came from Title IV federally-
funded student loans and grants. More than 100% of the revenue growth came from the federal
government. But of this incremental $1.1 billion in federal loan and grant dollars, the company only spent an
incremental $99 million on faculty compensation and instructional costs- that's 9 cents on every dollar
received from the government going towards actual education. The rest went to marketing and paying the
executives.
But leaving politics aside for a moment, the other major reason why the industry has taken an ever increasing
share of government dollars is that it has turned the typical education model on its head. And here is where
the subprime analogy becomes very clear.
There is a traditional relationship between matching means and cost in education. Typically, families of lesser
financial means seek lower cost institutions in order to maximize the available Title IV loans and grants-
107
thereby getting the most out of every dollar and minimizing debt burdens. Families with greater financial
resources often seek higher cost institutions because they can afford it more easily.
The for-profit model seeks to recruit those with the greatest financial need and put them in high cost
institutions. This formula maximizes the amount of Title IV loans and grants that these students receive.
With billboards lining the poorest neighborhoods in America and recruiters trolling casinos and homeless
shelters (and I mean that literally), the for-profits have become increasingly adept at pitching the dream of a
better life and higher earnings to the most vulnerable of society.
But if the industry in fact educated its students and got them good jobs that enabled them to receive higher
incomes and to pay off their student loans, everything I've just said would be irrelevant.
So the key question to ask is- what do these students get for their education? In many cases, NOT much, not
much at all.
Here is one of the many examples of an education promised and never delivered. This article details a
Corinthian Colleges-owned Everest College campus in California whose students paid $16,000 for an 8-month
course in medical assisting. Upon nearing completion, the students learned that not only would their credits
not transfer to any community or four-year college, but also that their degree is not recognized by the
American Association for Medical Assistants. Hospitals refuse to even interview graduates.
But let's leave aside the anecdotal evidence of this poor quality of education. After all the industry constantly
argues that there will always be a few bad apples. So let's put aside the anecdotes and just look at the
statistics. If the industry provided the right services, drop out rates and default rates should be low.
Let's first look at drop out rates. Companies don't fully disclose graduation rates, but using both DOE data,
company-provided information and admittedly some of our own assumptions regarding the level of transfer
students, we calculate drop out rates of most schools are 50%+ per year. As seen on this table, the annual
drop out rates of Apollo, ESI and COCO are 50%-100%
How good could the product be if drop out rates are so stratospheric? These statistics are quite alarming,
especially given the enormous amounts of debt most for-profit students must borrow to attend school.
As a result of these high levels of debt, default rates at for profit schools have always been significantly higher
than community colleges or the more expensive private institutions.
We have every expectation that the industry's default rates are about to explode. Because of the growth in
the industry and the increasing search for more students, we are now back to late 1980s levels of lending to
for profit students on a per student basis. Back then defaults were off the charts and fraud was
commonplace.
Default rates are already starting to skyrocket. It's just like subprime- which grew at any cost and kept
weakening its underwriting standards to grow.
By the way, the default rates the industry reports are artificially low. There are ways the industry can and
does manipulate the data to make their default rates look better.
But don't take my word for it. The industry is quite clear what it thinks the default rates truly are. ESI and
COCO supplement Title IV loans with their own private loans. And they provision 50%-60% up front for those
loans. Believe me, when a student defaults on his or her private loans, they are defaulting on their Title IV
loans too.
[Let me just pause here for a second to discuss manipulation of statistics. There are two key statistics. No
school can get more than 90% of its revenue from the government and 2 year cohort default rates cannot
exceed 25% for 3 consecutive years. Failure to comply with either of these rules and you lose Title IV
eligibility. Lose Title IV eligibility and you're company's a zero.
Isn't it amazing that Apollo's percentage of revenue from Title IV is 89% and not over 90%. How lucky can they
be? We believe (and many recent lawsuits support) that schools actively manipulate the receipt,
disbursement and especially the return of Title IV dollars to their students to remain under the 90/10
threshold.]
108
The bottom line is that as long as the government continues to flood the for profit education industry with
loan dollars AND the risk for these loans is borne solely by the students and the government, THEN the
industry has every incentive to grow at all costs, compensate employees based on enrollment, influence key
regulatory bodies and manipulate reported statistics- ALL TO MAINTAIN ACCESS TO THE GOVERNMENrS
MONEY.
In a sense, these companies are marketing machines masquerading as universities. And when the Bush
administration eliminated almost all the restrictions on how the industry is allowed to market, the machine
went into overdrive. [Let me quote a bit from a former employee of BPI.
"Ashford is a for profit school and makes a majority of its money on federal loans students take out. They conveniently price tuition at the exact amount that a
student can qualify for in federal loan money. There is no regard to whether a student really belongs in school, the goal is to enroll as many as possible. They also
go after Gl bill money and currently have separate teams set up to specifically target military students. If a person has money available for school Ashford finds a
way to go alter them. Ashford is just the middle man, profiting off this money, like milking a cow and working the system within the limits of what's technically legal,
and paying huge salaries while the student suffers with debt that can't even be forgiven by bankruptcy. We mention tuition prices as little as possible .. this may
cause the student to change their mind.
While if is illegal to pay commissions for student enrollment, Ashford does salary adjustments, basically the same thing. We are given a matrix that shows the
number of students we are expected to enroll. We also have to meet our quotas and these are high quotas.
Because we are under so much pressure. we are forced to do anything necessary to get people to fill out an application- our jobs depend on it.
If's a boiler room- selling education to people who really don't want it. "
This former employee then gives an example of soliciting a sick old lady to sign up for Ashford to meet his quota.
''The level of deception is disgusting- and wrong. When someone who can barely afford to live and feed kids as it is, and doesn't even have the time or education
to be able to enroll, they drop out. Then what? Add $20,000 of debt to their problems- what are they gonna do now. They are officially screwed. We know most
of these people will drop out, but again, we have quotas and we have no choice. " ]
How do such schools stay in business? The answer is to control the accreditation process. The scandal here is
exactly akin to the rating agency role in subprime securitizations.
There are two kinds of accreditation -- national and regional. Accreditation bodies are non-governmentat
non-profit peer-reviewing groups. Schools must earn and maintain proper accreditation to remain eligible for
Title IV programs. In many instances, the for-profit institutions sit on the boards ofthe accrediting body. The
inmates run the asylum.
Historically, most for profit schools are nationally accredited but national accreditation holds less value than
regional accreditation. The latest trend of for profit institutions is to acquire the dearly coveted Regional
Accreditation through the outright purchase of small, financially distressed non-profit institutions and then
put that school on-line. In March 2005, BPI acquired the regionally accredited Franciscan University of the
Prairies and renamed it Ashford University. [Remember Ashford. The former employee I quoted worked at
Ashford.] On the date of purchase, Franciscan (now Ashford) had 312 students. BPI took that school online
and at the end of 2009 it had 54,000 students.
SOLUTIONS
While the conduct of the industry is egregious and similar to the subprime mortgage sector in just so many
ways, for the investment case against the industry to work requires the government to do something
whereas in subprime all you had to do was wait for credit quality to deteriorate.
So what is the government going to do? It has already announced that it is exploring ways to fix the
accreditation process. It will probably eliminate the 12 safe harbor rules on sales practices implemented by
the Bush Administration. And I hope that it is looking at everything and anything to deal with this industry.
Most importantly, the DOE has proposed a rule known as Gainful Employment. In a few weeks the DOE will
publish the rule. There is some controversy as to what the proposed rule will entai l but I hope that the DOE
will not backtrack on gainful employment. Once the rule is published in the federal registrar, the industry has
until November to try to get the DOE to back down.
The idea behind the gainful employment rule is to limit student debt to a certain level. Specifically, the
suggested rule is that the debt service-to-income-ratio not exceed 8%. The industry has gotten hysterical over
this rule because it knows that to comply, it will probably have to reduce tuition.
[Before I turn to the impact of the rule, let me discuss what happened last week. There was a news report out
that Bob Shireman, the Under Secretary of Education in charge of this process was leaving. This caused a
massive rally in the stocks under the thesis that this signaled that the DOE was backing down from gainful
employment. This conclusion is absurd. First, of all, inside D.C. it has been well known for a while that
109
Shireman always intended to go home to California after a period of time. Second, to draw a conclusion about
the DOE changing its policy because Shireman is leaving presupposes that one government official, one man,
drives the entire agenda of the U.S. government.]
I cannot emphasize enough that gainful employment changes the business model. To date that model has
been constant growth in the number of students coupled with occasional increases in tuition. Gainful
employment will cause enrollment levels to grow less quickly. And the days of raising tuition would be over; in
many cases, tuition will go down.
To illustrate the impact of gainful employment, I've chosen 5 companies, Apollo, ESI, COCO, EDMC and the
Washington Post. Yes, the Washington Post, whose earnings are all driven by this industry.
Assuming gainful employment goes through, the first year it would impact would obviously be 2011.
However, because the analysis is so sensitive to tuition levels per school, it's best to have as much information
as possible. So for analytical purposes, we are going to show the impact on actual results in fiscal 2009 and
this year's estimates under the assumption that gainful employment was already in effect.
We employ 2 scenarios. Scenario 1 is static. It takes actual results and then reduces tuition costs to get down
to the 8% level. Scenario 2 is dynamic. It assumes the same thing as scenario 1 but then assumes the
companies can reduce costs by 5%-15%.
Results for each company depend largely on the mix of students, the duration of each degree and the price of
tuition at each institution
For each company, I show the results under the two scenarios and the corresponding P/Es. Needless to say,
the P/E multiples look quite a bit different under either scenario.
Apollo -In fiscal 2009, the company earned $4.22. The consensus estimate for fiscal 2010 is $5.07. Under
scenario 1, fiscal 2009 and the fiscal 2010 estimate get cut by 69% and 57%, respectively. Under scenario 2, it
gets cut 50% and 41%, respectively.
ESI- In fiscal2009, the company earned $7.91. The consensus estimate for fiscal2010 is $11.05. Under
scenario 1, fiscal 2009 turns slightly negative and the fiscal 2010 estimate gets cut by 74%. Under scenario 2,
fiscal 2009 declines by 75% and the 2010 estimate gets cut by 53%.
COCO -In fiscal 2009, the company earned $0.81. The consensus estimate for fiscal2010 is $1.67. Under
scenario 1, fiscal 2009 turns negative and the fiscal 2010 estimate gets cut by 94%. Under scenario 2, fiscal
2009 declines by 79% and the 2010 estimate gets cut by 38%.
EDMC --In fiscal 2009, the company earned $0.87. The consensus estimate for fiscal2010 is $1.51. Under
scenario 1, fiscal 2009 and the fiscal 2010 estimate turns massively negative. Under scenario 2, fiscal 2009 and
the fiscal 2010 estimate are also massively negative, just less massively than scenario 1. The principal reason
why the numbers are so bad for EDMC is that they have a lot of debt and that debt has to be serviced and
cannot be cut.
Washington Post- The Post's disclosure of Kaplan metrics is slight. Thus, analyzing the impact from gainful
employment is much more difficult and we have confined our analysis solely to fiscal 2009. In fiscal2009,
WPO earned $9.78. Under scenario 1, a loss of $33.25 per share occurs. Under scenario 2, there is still a loss
of $6.19. The principal reason why the numbers are so bad for the Post is that more than 100% of its EBIDTA
comes from this industry through its Kaplan division.
[Let me just add one caveat to our analysis. Implementation of gainful employment could result in a cut in
marketing budgets. Given the high drop out rates of this industry any such cuts could turn a growth industry
into a shrinking industry. The numbers that I just showed do not assume that the industry shrinks but grows
at a slower pace.]
Under gainful employment, most of the companies still have high operating margins relative to other
industries. They are just less profitable and significantly overvalued. Downside risk could be as high as 50%.
And let me add that I hope that gainful employment is just the beginning. Hopefully, the DOE will be looking
into ways of improving accreditation and of ways to tighten rules on defaults.
110
Let me end by driving the subprime analogy to its ultimate conclusion. By late 2004, it was clear to me and my
partners that the mortgage industry had lost its mind and a society-wide calamity was going to occur. It was
like watching a train wreck with no ability to stop it. Who could you complain to? -- The rating agencies? -
they were part of the machine. Alan Greenspan?- he was busy making speeches that every American should
take out an ARM mortgage loan. The OCC? -- its chairman, John Dugan, was busy suing state attorney
generals, preventing them from even investigating the subprime mortgage industry.
Are we going to do this all over again? We just loaded up one generation of Americans with mortgage debt
they can't afford to pay back. Are we going to load up a new generation with student loan debt they can
never afford to pay back. The industry is now 25% of Title IV money on its way to 40%. If its growth is stopped
now and it is policed, the problem can be stopped. It is my hope that this Administration sees the nature of
the problem and begins to act now. If the gainful employment rule goes through as is, then this is only the
beginning of the policing of this industry.
But if nothing is done, then we are on the cusp of a new social disaster. If present trends continue, over the
next ten years almost $500 billion of Title IV loans will have been funneled to this industry. We estimate total
defaults of $275 billion, and because of fees associated with defaults, for profit students will owe $330 billion
on defaulted loans over the next 10 years.
[Bracketed Sections might be deleted during speech.]
++++++++++++++++++++++++++++++++++++++++++++++++++
http:/ I deal book. bl ogs. nytimes. com/20 1 0/05/26/li ve-from -the-ira -sohn-20 1 0-conference/? src=busln
Hedge Funds
Live From the Ira Sohn 2010 Conference
May 26, 2010, 3:28pm
8:29 p.m.J Updated Unli ke previous years, thi s year's Ira Sohn Investment Research Conference didn' t have
any blockbuster revelations - certainly nothing on the order ofDavid Einhorn's bet against Lehman Brothers
or William A. Ackman's assault on MBIA, the bond insurer.
But several themes emerged from the conference, one of the most heralded in the investing world, where top-
name executives deliver 15-minute presentations of their top trading ideas. (Or in Mr. Ackman's case thi s year,
a little closer to 30 minutes.)
Chief among them was the idea that the credit ratings agencies have yet to face an overhaul that addresses their
weaknesses. (For the full rundown, check out my Twitter coverage of the conference.)
Mr. Einhorn, the head of Greenlight Capital reiterated his short bet against the Moody's Corporation. He
argued- as did others like Mr. Ackman of Pershing Square Capital Management and Seth Klarman of
Baupost the Group- that the credit ratings agencies remain beholden to the banks whose products they are
supposed to analyze independently.
Nearly every fund manager who spoke at the conference expressed a bearish position on Western economies,
arguing that they are simply too over-leveraged and unable to address their liabilities to stay on top. A few
executives, including Daniel Arbess of Perella Weinberg Partners, expressed instead a deep interest in China.
"We like shaking hands with China," Mr. Arbess said.
Gold also proved popular with the likes of Mr. Arbess and Mr. Einhorn, who said he had acquired shares in
African Barrick Gold, a spinoff of gold miner Barrick Gold.
A memorable bearish bet came from Steve Eisman, the FrontPoint Financial Services Fund founder who
gained fame with Michael Lewis's book "The Big Short." Mr. Eisman devoted much of his presentation to a
highly critical analysis of for-profit education companies, showing his hand
with the very title of his PowerPoint deck: "For Profit Education: Subprime Goes to College."
Original post: DeaiBook is on hand for the Ira W. Sohn Investment Research Conference, the famous annual
meeting of high-profile investors where some of the biggest trades of the year are discussed. (It's where David
Einhorn ofGreenlight Capital delivered his polemic against Lehman Brothers, for example.)
Below is DealBook' s li ve twittering of the goings on at the conference, being held in Mi dtown Manhattan.
111
From:
Sent:
To:
Subject:
Bloomberg
Kanter, Martha
Friday, May 07, 2010 12:06 AM
Rogers, Margot; Miller, Tony; Cunningham, Peter; Rose, Charlie; Yuan, Georgia; Martin,
Carmel ; Gomez, Gabriella
From Inside Higher Education today from Bloomberg yesterday
For-Profit N.J. College Halts Recruiting of Homeless (Update1) May 3:16 PM EDT By
Daniel Golden and John Hechinger
May 5 (Bloomberg) -- Drake College of a for - profit higher education company based
in New suspended its recruiting of students from homeless shelters while accreditors
scrutinize the practice.
Closely held which trains medical and dental relied on taxpayers for 87
percent of revenue in 2007 through federal financial aid programs. Almost 5 percent of the
student body at its New branch is said Jean director of
admissions and student services. In Drake began offering a $350 biweekly stipend to
students who showed up for 80 percent of classes and received "Cs" for their Bloomberg
Businessweek reported last week.
President Barack administration is proposing tougher regulation of for -profit
colleges because of concern that recruiters are signing up unqualified students and leaving
them with taxpayer-funded student loans they may be unable to repay. which defended
its policy of recruiting the homeless as reaching out to the raised tuition to
this year from in 2007-2008. Shelter workers told Bloomberg they feared the
school was preying on the homeless to get access to financial aid leaving them to
default on student loans.
Adverse Publicity
"We do not believe that recruiting at shelters is either unethical or immoral so
long as the recruitment of students from shelters is above which it has Ziad
said in an e-mail today. The school is halting the practice "for
the time being" because of "adverse publicity" and a regulatory he said.
we would accept a qualified applicant who lives at a homeless shelter who
is referred to he said.
After Bloomberg called the Washington- based Accrediting Council for Independent Colleges &
Schools to inquire about the the organization opened an investigation into
recruiting practices. The inquiry could lead to the revocation of
leaving it ineligible for federal aid.
Drake notified the council of any change in its Anthony the
director of external said in an interview. The formal inquiry is examining
whether the stipends amount to improper inducements for students who otherwise
he said.
"We expect our members to enroll students with integrity and to be above board and
he said. "There should be nothing controversial about the way our members enroll students."
Financial Assistance
with students and locations in Elizabeth and said it provides a valuable
service in a low- income community and that both the homeless and welfare recipients benefit
from further education by improving their job prospects.
The college plans to change the way it handles its $350 biweekly checks for newly enrolled
Fadel said in an interview today. About three-quarters of students receive the
which the school calls "financial assistance."
112
Rather than outright payments, the money will instead be awarded in the form of a no- interest
loan from the college that will be forgiven if students graduate on time or maintain a B
average, he said. Otherwise, starting one year after graduation, students would repay the
loans over 20 years, with those receiving the maximum amount owing about $23 a month, he
said. The loans will encourage students to stay in school, increasing the chance they will
repay taxpayer -funded loans, Fadel said.
Federal aid to for-profit colleges has jumped to $26.5 billion in 2009 from $4.6 billion in
2000, according to the Education Department. The Star-Ledger of Newark, New Jersey today
reported that Drake would suspend recruiting in homeless shelters.
Apollo Group Inc.,s University of Phoenix, the largest U.S. for-profit college by enrollment,
and Chancellor University, which counts former General Electric Co. Chief Executive Officer
Jack Welch as an investor, have also recruited the homeless. Chancellor has said it had
stopped doing so, and Phoenix has said the efforts were unauthorized.
--Editors: Robin D. Schatz, Bruce Rule
John Hechinger in Boston at +1 - 617- 210-4614 or jhechinger@bloomberg.net.
To contact the reporters on this story: Daniel Golden in Boston at dlgolden@bloomberg.net; To
contact the editor responsible for this story: Jonathan Kaufman at Jkaufman17@bloomberg. net.
113
From:
Sent:
To:
Kanter, Martha
Sunday, December 20, 2009 9:54 PM
Ralph Wolff
Subject: Fwd: my post on the yesterday's action by IG
I thought you should be aware of this if you aren't already. rm thawing out in the meantime!!!
Martha Kanter
Under Secretary
U.S. Department ofEducation
"The future belongs to those who believe in the beauty of their dreams!"
--Eleanor Roosevelt
Begin forwarded message:
FYI Below is Bloomberg news' take, including the market reaction. I've also been
meaning to share Kevin Carey's recent piece on accreditation, which use as a case
study the tragic story of it taking decades for accreditors to shut down Southeastern
University in DC earlier this year (at which time it had only six full-time faculty members
for over 30 academic programs). http://www.aei.org/doclib/Accreditation%20-
%20Kevin%20Carey. pdf
Career Education Falls Most Since 2006
After U.S. Finds 'Issue'
Molly Peterson Molly Peterson Fri Dec 18, 7:58am ET
Dec. 18 (Bloomberg)-- Career Education Corp. lost t11e most since 2006 in New York trading yesterday after
investigators for the U.S. Education Department said accrediting one of its universities wasnt in the "best interest of
students."
A regional certifying board gave full accreditation to Career Education' s American InterContinental University after
finding "issues' concerning t11e school' s ' assignment of credit hours; Wanda Scott, an assistant inspector general at
the Education Department, wrote in a letter posted yesterday on the government s Web site. Career Education' s
shares led declines among for-profit school with its 19 percent plunge.
"We continue to wony t11at regulatory changes, more oversight and rising student loan default rates cottld eventually
hurt for-profit education sector enrollment/margin prospects significantly,' Kelly Flynn, an analyst at Credit Suisse
Group AG, wrote in a note sent to clients yesterday. Scott' s letter suggests the inspector general is " looking to
pressure accreditors to apply more rigorous quality control standards."
Career Education, based in Hoffman Estates, Illinois, lost $5.47 to $22.88 yesterday in Nasdaq Stock Market
composite trading, falljng for the first time in 10 days.
The inspector general' s letter concerned accreditation by the Higher Learning Commission of the Nort11 Central
Association of Colleges and Schools, one of eight regional accrediting organizations in the U.S.
Industry Slumps
The cotmnission, among the first agencies to certify online for-profit colleges, also accredits universities mn by
Apollo Group Inc. , American Public Education Inc., Capella Education Co., De Vry Inc. and Gnmd Canyon
Education Inc., all of which fell in trading yesterday. The commission evaluates more than 1,000 schools in 19
states.
Apollo slumped 5.1 percent yesterday to $57.38. A m e r i c ~ m Public Education fell2.1 percent to $33.53. Capella
retreated 2.1 percent to $74.87. De VI)' lost 3.9 percent to $56.67. Grand Canyon decreased 4.2 percent to $18.72.
114
Other for-profit schools also declined. Corinthian Colleges Inc. retreated 5.5 percent to $13.13. liT Educational
Services Inc. lost 5.5 percent to $90.53. Stmyer Education Inc. decreased 2.5 percent to $213.61.
The letter from the Education Department' s Office of the Inspector Geneml redacted t11e full explanation of the
questions about American lnterCont]nental University, which has campuses in four states and London as well as
online classes, according to its Web site.
'Unfounded' Allegation
The commission' s May decision to accredit American InterContinental University was "entirely appropriate and
fully supported by the facts," the university said yesterday in a statement. The inspector general' s suggestion that t11e
commission "failed to act diligently in accrediting Aru is unfounded. "
Higher Learning Commission President Sylvia Manning said the inspector general "seriously mischaracterized" the
commission' s action.
The organization is in compliance with federal mles, and the inspector general' s "argwnent U1at we' re not is as weak
as it gets," Manning said in ane-mailed statement. "We remain confident that a thorough and comprehensive
examination of all of the facts will demonstrate Umt HLC acted properly and in accordance witl1 the standards of our
industry."
The commission' s decision to fully accredit American InterContinental University "is not in the best interest of
students and calls into questlon whetl1er t11e accrediting decisions made by HLC should be relied upon by the
Department of Education when assisting students to obtain quality education" tllfough federal financial aid
programs, Scott said in the letter.
On Probation
American InterContinental had previously been certified by the Decatur. Georgia-based SoutJ1ern Association of
Colleges and Schools.
That agency had placed the school on probation from 2005 to 2007 for academic and administrative shortcomings,
including an inadequate number of full-time professors. according to accreditation records.
American InterContinental resolved the association' s concerns, and the improvements it made during those two
years have strengthened the university. Career Education spokesman Jeff Leshay said in an e-mail ci ted Dec. 15 in a
Bloomberg News report on for-profit online colleges that are taking over higher education for the U.S. military. The
companies are lured by a Defense Department pledge offree schooling up to $4,500 a year for active members of
the armed seJVices.
American InterContinental moved its headquarters tlus year from Atlanta to the Clucago area and was accredited by
the Higher Learning Comnussion. The college relocated because its online operations are based there, Leshay said.
To contact the reporter on tlus story: Molly Peterson in Waslungton at mpeterson9@bloomberg.net.
Subject: my post on the yesterday's action by IG
A little different than IHE's take on it:
http://higheredwatch.newamerica.net/blogposts/2009/a shot across the bow from the ed depts ig-
2541
FOR IMMEDIATE RELEASE
December 16, 2009
Cummings Urges Hearing On For-Profit College Malfeasance Investigation of colleges
needed following expose on University of Phoenix admissions allegedly lying to prospective
students.
(Washington, DC) -Congressman Elijah E. Cummings (MD-7) authored a letter to Chairman
Edolphus Towns of the House Committee on Oversight and Government Reform and
Chairman George Miller, of the House Committee on Education and Labor, requesting that
they hold hearings on the conduct of for-profit educational institutions in the United States.
The request followed an expose published recently in ProPublica. The article indicated that
the University of Phoenix has set aside $80 million to settle a whistleblower lawsuit
115
alleging improprieties by recruiters and recruiting managers to draw students to the for-
profit institution.
It was alleged that University of Phoenix admissions representatives lied to prospective
students on multiple issues, particularly regarding potential financial aid, transferring
University of Phoenix credits, and course availability. They also allegedly failed to
acknowledge that students' stated interests were not offered as courses of study.
"The pattern of behavior reported is disheartening at best, and infuriating at worst," said
Cummings. "At a time when our economy has afforded no luxuries to America's working
classes, to find that for-profit institutions allegedly drew students in with disingenuous
claims and sometimes outright fabrication, subjected them to onerous loans, and left them
often unusable "credits", is inexcusable."
Cummings urges both Chairmen to, "review the articles and consider conducting hearings ..
. to shine a light on the for-profit education industry and provide the American people with
a clear picture of the true costs of education."
116
From:
Sent:
To:
Kanter, Martha
Sunday, December 20, 2009 9:50 PM
Shireman, Bob
Subject: Re: my post on the yesterday's action by IG
Hope you took off!!! We have a snow day tomorrow. Hopefully we'll get healthcare passed at 1 am tonight!!
Safe travels and Merry Christmas, Bob!
Martha Kanter
Under Secretary
U.S. Department ofEducation
"The future belongs to those who believe in the beauty of their dreams!"
--Eleanor Roosevelt
On Dec 20, 2009, at 5:59PM, "Shireman, Bob" <Bob.Shireman@ed.gov> wrote:
Congrats on the snowman!
Here's more news. We are stuck on the tarmac at DCA. ..
From: Pauline Abernathy <pabernathy@ticas.org>
To: Steve Burd Bob; dloonin@nclc.org <dloonin@nclc.org>;
K'K@j !@who.eop.gov who.eop.gov>; Lauren Asher <LAsher@ticas.org>;
Luke Klipp < lklipp@ticas.org>; RtiR&> l @help.senate.gov @1 l @help.senate.gov>;
nassirianb aacrao.or <nassirianb@aacrao.org>; Little, Bethany (HELP Committee)
h I . n . v>
Sent: Sat Dec 19 18:53:14 2009
Subject: RE: my post on the yesterday's action by IG
FYI Below is Bloomberg news' take, including the market reaction. I've also been
meaning to share Kevin Carey's recent piece on accreditation, which use as a case
study the tragic story of it taking decades for accreditors to shut down Southeastern
University in DC earlier this year (at which time it had only six full-time faculty members
for over 30 academic programs). http://www.aei.org/doclib/Accreditation%20-
%20Kevin%20Carey. pdf
Career Education Falls Most Since 2006
After U.S. Finds 'Issue'
Peterson Molly Peterson Fri Dec 18, 7:58am ET
Dec. 18 (Bloomberg)- Career Education Corp. lost t11e most since 2006 in New York trading yesterday after
investigators for the U.S. Education Department said accrediting one of its universities wasn' t in the "best interest of
students."
A regional certifying board gave fulJ accreditation to Career Education' s American InterContinental University after
finding "issues" concerning t11e school's "assignment of credit hours," Wanda Scot1, an assistant inspector general at
ilie Education Department, wrote in a letter posted yesterday on the govenunent' s Web site. Career Education' s
shares led declines among for-profit school with its 19 percent plunge.
"We continue to worry t11at regulatory changes, more oversight and rising student loan default rates could eventually
hurt for-profit education sector enrollment/margin prospects significantly," Kelly Flynn, an analyst at Credit Suisse
117
Group AG. wrote in a note sent to clients yesterday. Scott's letter suggests the inspector general is "looking to
pressure accreditors to apply more rigorous quality control standards."
Career Education, based in Hoffman Estates, Illinois, lost $5.47 to $22.88 yesterday in Nasdaq Stock Market
composite trading, falling for the first time in lO days.
The inspector generaJ's letter concerned accreditation by the Higher Learning Commission of the North Central
Association of Co!Jeges and Schools, one of eight regional accrediting organizations in the U.S.
Industry Slumps
The conunission, among the first agencies to certify online for-profit colleges, also accredits universities ntn by
Apollo Group Inc., American Public Education Inc., Capella Education Co., DeVty Inc. and Grand Canyon
Education Inc. , all of which fell in trading yesterday. The commission evaluates more tlmn 1,000 schools in 19
states.
Apollo slumped 5.1 percent yesterday to $57.38. American Public Education feU 2.1 percent to $33.53. Capella
retreated 2.1 percent to $74.87. DeVty lost 3.9 percent to $56.67. Grand Canyon decreased 4.2 percent to $18.72.
Other for-profit schools also declined. Corinthian Colleges Inc. retreated 5.5 percent to $13.13. ITT Educational
Services Inc. lost 5.5 percent to $90.53. Strayer Education Inc. decreased 2.5 percent to $213.61.
The letter from the Education Department's Office of the Inspector Generdl redacted the full explanation of the
questions about American InterContinental University, which has campuses in four states and London as well as
online classes, according to its Web site.
' Unfounded' Allegation
The commission' s May decision to accredit American InterContinental University was "entirely appropriate and
fully supported by the facts," the university said yesterday in a statement. The inspector general's suggestion that the
coll1ll1ission "failed to act diligently in accrediting AIU is unfotmded."
Higher Leaming Coll1ll1ission President Sylvia Manning said the inspector generdl "seriously mischardcterized" the
commission' s action.
The organization is in compliance with federal mles, and the inspector general's "argument tl1at we' re not is as weak
as it gets," Mruming said inane-mailed statement. "We remain confident that a thorough and comprehensive
exrunination of all of the facts will demonstrate tl1at HLC acted properly and in accordance witll the standards of our
industry."
The commission' s decision to fully accredit American InterContinental University "is not in the best interest of
students and calls into question whether the accrediting decisions made by HLC should be relied upon by the
Department of Education when assisting students to obtain quality education" through federdl financial aid
programs, Scott said in the letter.
On Probation
American InterContinental had previously been certified by the Decatur. Georgia-based Southern Association of
Colleges and Schools.
That agency had placed the school on probation from 2005 to 2007 for academic and administrative shortcomings,
including an inadequate number of full-tin1e professors, according to accreditation records.
American rnterContinental resolved the association' s concerns. and the improvements it made during those two
years have strengthened the university, Career Education spokesman JeffLeshay said in an e-mail cited Dec. 15 in a
Bloomberg News report on for-profit online colleges that are taking over higher education for the U.S. military. The
companies are lured by a Defense Department pledge offree schooling up to $4,500 a year for active members of
ti1e armed services.
American InterContinental moved its headquarters tllis year from Atlanta to the Cllicago area and was accredited by
ti1e Higher Leaming Cmmuission. The college relocated because its online operations are based there, Leshay said.
To contact the reporter on tllis story: Molly Peterson in Washington at mpeterson9@.bloomberg.net .
From: Steve Burd [mailto:Burd@newamerica.net]
Sent: Friday, December 18, 2009 11:19 AM
To: Pauline dloonin@nclc.org;!
6
X
8
) l @who.eop.gov; Lauren
Asher; Luke hel .senate.gov; nassirianb@aacrao.org; Little, Bethany (HELP
Committee)
Subject: my post on the yesterday's action by IG
A little different than I HE's take on it:
http://higheredwatch.newamerica.neUblogposts/2009/a shot across the bow from the ed depts ig-
25412
118
From: Pauline Abernathy [mailto:pabernathy@ticas.org]
Sent: Friday, December 18, 2009 12:33 PM
To: bob.shireman ed. ov Steve Burd; dloonin@nclc.org; fiX8J l @who.eop.gov; Lauren Asher;
Luke Klipp hel .senate. ov; nassirianb@aacrao.org; Little, Bethany (HELP Committee)
Subject: Cummings Urges Hearings On For-Profit Colleges
Wasn't sure if you saw this. Cummings is a senior member of the House's equivalent of
the Senate Permanent Subcmte on Investigations, which can hold hearings on any
federal program or issue. Towns chairs the full cmte.
FOR IMMEDIATE RELEASE
December 16, 2009
Cummings Urges Hearing On For-Profit College Malfeasance Investigation of colleges
needed following expose on University of Phoenix admissions allegedly lying to prospective
students.
(Washington, DC)- Congressman Elijah E. Cummings (MD-7) authored a letter to Chairman
Edo'lphus Towns of the House Committee on Oversight and Government Reform and
Chairman George Miller, of the House Committee on Education and Labor, requesting that
they hold hearings on the conduct of for-profit educational institutions in the United States.
The request followed an expose published recently in Pro Publica. The article indicated that
the University of Phoenix has set aside $80 million to settle a whistleblower lawsuit
alleging improprieties by recruiters and recruiting managers to draw students to the for-
profit institution.
It was alleged that University of Phoenix admissions representatives lied to prospective
students on multiple issues, particularly regarding potential financial aid, transferring
University of Phoenix credits, and course availability. They also allegedly failed to
acknowledge that students' stated interests were not offered as courses of study.
"The pattern of behavior reported is disheartening at best, and infuriating at worst/' said
Cummings. "At a time when our economy has afforded no luxuries to America's working
classes, to find that for-profit institutions allegedly drew students in with disingenuous
claims and sometimes outright fabrication, subjected them to onerous loans, and left them
often unusable "credits", is inexcusable."
Cummings urges both Chairmen to, "review the articles and consider conducting hearings ..
. to shine a light on the for-profit education industry and provide the American people with
a dear picture of the true costs of education."
119
Pauline Abernathy
Vice President
The Institute for College Access & Success
510.883.7303 www.ticas.org
120
From:
Sent:
To:
Subject:
Attachments:
Kantrowitz, Mark [Mark.Kantrowitz@Monster.com]
Tuesday, August 17, 2010 11 :42 AM
Kvaal, James; Madzelan, Dan
AP encouraging families to consider Loan Repayment Rates for evaluating colleges
image001 .jpg
The Associated Press is already pointing families at the loan repayment rates to help them evaluate colleges. See the
highlighted paragraph below.
Mark
URL: http://www.google.com/hostednews/ap/article/AleqM5jlsf9RVs4hv0NHnTUVZiz OGGUsQD9HKREM81
http://topics . ocregister.com/article/03Xi26I37b3Qz
Pub Date: 8/16/10
Is that for-profit certificate worth the debt?
By CANDICE CHOI (AP) - 13 hours ago
NEW YORK - One sign a degree from a for-profit school may not be worth
pursuing? You won't be able to repay your student loans after
graduating.
New data from the Department of Education reveals low repayment rates
among recent graduates of for-profit which usually offer
certificate programs or degrees in fields such as criminal justice or
health care. The numbers were released as part of the Obama
administration's proposed rule to cut off federal aid to schools that
don't achieve certain repayment rates.
The Washington Post which owns the Kaplan school chain;
Corinthian Colleges Inc.; ITT Educational Services Inc.; and Strayer
Education Inc. had repayment rates below 35 percent.
Recent undercover tests by the Government Accountability Office also
found some schools used deceptive recruiting tactics and encouraged
applicants to falsify financial aid forms.
The findings are troubling because students at these schools tend to
be low-income and in search of better-paying jobs; the vast majority
have household incomes of less then Most work full time while
attending school.
Here how to size up whether it's worth taking on debt to attend one of
these schools.
Be Wary of the Hard Sell
For- profit schools know that most of their prospective students will
be able to tap into federal financial aid and pay tuition. As
the marketing efforts can get aggressive.
"Be very suspicious of high pressure sales tactics and an
unwillingness to share basic info about said Lauren
121
president of The Institute for College Access & Success.
Case in point: my search on Everest University Online's website
yielded no answers on tuition costs. Yet after filling out an online
application form for more program my phone rang within
minutes.
An eager representative ignored my question about and
insisted that we had to work through a few questions first. I had to
firmly repeat the questions several times before a second
representative gave me an answer: $404 per credit. It takes 96
or to complete the paralegal program I inquired
about.
A representative of Corinthian which operates the
did not immediately respond to inquiries about why tuition costs are
not listed on the site.
Comparison Shop
Prospective students often learn about for-profit schools through a TV
ad. After calling a school to inquire about they often sign
up without shopping around for better said Mark
publisher of FinAid.org.
That's because these schools tend to do a lot of handholding through
the application process. For the vast majority of students at
for-profit schools have completed the form for federal financial
compared to less than half of students at community
according to FinAid . org.
So if someone makes an impulse decision to become a signing up
for classes would be very easy.
"It's a very short Kantrowitz said.
Community colleges aren't nearly as solicitous. They're also not as
expensive. The majority of students at community colleges have no
student loans upon graduation. Of those that the average debt is
By nearly all graduates of for -profit schools
have student loans; the average debt is
What's almost a quarter of graduates of for - profit schools owed
at least in student according to The Project on Student
Debt.
Check Public Information
The release of national rankings for the quality of traditional
four -year schools is an annual event. But there's no similar resource
for those looking to attend a for - profit school.
"In this the burden is really on consumers to sift through
inadequate Asher said.
there are ways to do some homework on a particular school.
122
To start, the Education Department's list of student repayment rates
can be found at http://tinyurl.com/28fjo3j. Click on the link for
"Cumulative Four-Year Repayment Rate by Institution." The rates may
give you an idea of the quality of the school's program. Remember that
the repayment rates are for the entire school; rates may differ
significantly for particular programs within the school .
If you're applying for a certificate or degree in a particular field,
find out the licensing requirements in your state. Contact the state
agency in charge of licensing and ask whether the school and program
you're considering are accredited.
You can also look up for-profit schools on the Better Business
Bureau's website at http://www.bbb.org. Companies are assigned grades
based on the number of customer complaints and they work to resolve
them.
Finally, try talking to employers or professionals in the field you're
pursuing. Ask about their criteria for hiring, and check whether the
school you're considering addresses those skills in their marketing
materials .
Mark Kantrowitz
Publisher of Fastweb.com and FinAid.org
PO Box2056, Cranberry Township, PA 16066-1056
1-724-538-4500 11-724-538-4502 fax 1 mkant@fastweb.com
Fastweb I FinAid 1 College Gold I EduPASS 1 Monster
NOTICE:
This message, and any attachments, contain(s) information that may be confidential or protected by privilege from
disclosure and is intended only for the individual or entity named above. No one else may disclose, copy, distribute or
use the contents of this message for any purpose. Its unauthorized use, dissemination or duplication is strictly prohibited
and may be unlawful. If you receive this message in error or you otherwise are not an authorized recipient, please
immediately delete the message and any attachments and notify the sender.
123
From:
Sent:
To:
Subject:
Kantrowitz, Mark [Mark.Kantrowitz@Monster.com]
Tuesday, May 04, 201 o 4:09 PM
Shireman, Bob
Bloomberg on For-Profit Lobbying
This Bloomberg article is about a good a summary of all the lobbying activity that's been
going on as I've seen.
Mark
http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=ae0jvdgHVNeM
Obama Plans New Rules as For-Profit Colleges Mobilize (Updatel)
By John Daniel Golden and John Lauerman Enlarge Image/Details
May 4 (Bloomberg) -- The Obama Administration is gearing up to produce tougher regulations
that may reduce the amount of federal financial aid flowing to for-profit cutting
the companies' annual revenue growth by as much as a third.
In the $29 billion industry and its supporters including Republican Senators have
enlisted top Washington lobbyists and are courting black and Hispanic legislators to fight
the proposed rules scheduled to be released as early as this month. The companies draw
students from low- income and minority communities.
Federal aid to for-profit colleges has become an issue as it has jumped to $26.5 billion in
2009 from $4.6 billion in according to the Education prompting concern that
these students are taking on too much debt. Twelve higher- education stocks fell an average
of 7.4 percent for the week ended April according to Bloomberg following an April
28 speech by an Education Department official critical of for- profit colleges. In the same
the Standard & Poor's 500 Index dropped 1.7 percent.
"There's an attempt to manage" for-profit colleges by the Obama Robert
an analyst with BMO Capital Markets in New said in a telephone interview.
The education companies'
influence in Washington has "radically from the years of the Bush
he said.
Tougher Rules
The tougher which are expected to be released for public comment in the next several
would require ITT Educational Services Career Education Corp. and Apollo Group
Inc.'s University of Phoenix to show that their graduates earn enough money to pay off their
student loans. If for -profit colleges can't meet the they could lose federal
financial which typically makes up three-quarters of their revenue.
The proposed rules may disqualify for - profits from receiving federal financial aid if their
graduates must spend more than 8 percent of their starting salaries on repaying student
loans. The regulations may slow or even halt tuition increases at Education Management
Lincoln Educational Universal Technical and Career Education
because many graduates take low-paying jobs in criminal cooking and medical office
Trace an analyst at Signal Hill Capital Group in San said in an
interview.
124
Pricing Power
Education companies have increased revenue by as much as 15 percent and enrollment by 8 to 10
percent on an annual while raising tuition about 4 to 6 percent a Urdan said.
The new rules may slow their revenue growth by one third by limiting their ability to raise
tuition.
"The days of 4 to 6 percent annual tuition price increases are
Urdan said. "The new proposed rules will bring some school's power to increase prices down to
zero."
Apollo fell $2.27 or 3.9 percent to $56.06 at 12:45 p.m. in New York Stock Exchange
composite trading. ITT fell $3.97 or 3.8 percent to $100.25. Career Education fell $1.03 or
3.4 percent to $29.21.
The Education Department plans to issue the regulations without Congressional
unlike student - loan legislation which passed in March.
'Controversial' Proposal
"Congress has not held a single hearing on these new enforcement Alexa
spokeswoman for John the ranking Republican on the House education said in
an e-mail. "No research has been offered by the department to justify the controversial
proposal."
U.S. Senator Lamar who chairs the Senate Republican is trying to
persuade U.S. Education Secretary Arne Duncan to reconsider the said a
Republican aide on the education committee. If that doesn't who is on the
education and appropriation would try to kill the regulations by cutting off
the aide said.
Enrollment in for -profit colleges increased to 1.8 million in 2008 from in 2000.
Industry revenue will rise to $29.2 billion this year from $9 billion in said Jeffrey
an analyst for BMO Capital Markets in New York. The industry has grown in part by
marketing to low- income including the who qualify for federal grants and
loans.
Regulations' Impact
The new regulations would shut students out of classes and eliminate
educational according to a study commissioned by the Washington-based Career
College which represents more than for-pr ofit colleges.
The proposal would reduce opportunities for women and racial minorities who want to go to
the group said . For-profit colleges have proposed alternative regulations that would
require companies to disclose more information about students' debt and job prospects.
The Career College Association has retained the Podesta a Washington lobbying firm
headed by Anthony whose was President Bill Clinton's chief of
according to federal filings. Clinton will be a keynote speaker at the association's annual
meeting in June. Podesta's Paul former executive director of the Congressional
Black is also lobbying on the association's records show.
Phoenix Scholarships
The University of the largest for - profit college in the U.S. by awarded
25 full-tuition scholarships worth $1.25 million in the fiscal year ended August 31 to the
125
Congressional Black Caucus Foundation, which selects the recipients, Apollo spokeswoman Sara
Jones said in an e-mail. More minority students earn degrees from Phoenix than from any other
U.S. university, she said.
In March, several members of the Congressional Black Caucus sent a letter to Duncan, saying
the regulations would reduce educational opportunity.
Regulators need more tools to oversee publicly traded education companies rece1v1ng
increasing amounts of federal money, Robert Shireman, deputy undersecretary of the education
department, said in a speech on April 28.
"I don't think we have the firepower that we need," he said, according to a transcript of his
remarks.
The speech was "highly negative" and was "drawing inappropriate and unwarranted parallels
between developments in higher education and the causes of the recent financial crisis,"
Harris Miller, president of the Career College Association wrote in an April 29 letter to
Duncan.
To contact the reporters on this story: John Hechinger in Boston at jhechinger@bloomberg.net
; Daniel Golden in Boston at dlgolden@bloomberg.net ; John Lauerman in Boston at
jlauerman@bloomberg.net .
Last Updated: May 4, 2010 12:52 EDT
Mark Kantrowitz
Publisher of FinAid.org and FastWeb.com
Author, FastWeb College Gold
FinAid Page LLC
PO Box 2056
Cranberry Township, PA 16066-1056
Tel: 1-724-538-4500
Fax: 1-724-538-4502
Email: mkant@finaid .org, mkant@fastweb.com www.fastweb.com www.finaid.org www.collegegold.com
NOTICE:
This message, and any attachments, contain(s) information that may be confidential or
protected by privilege from disclosure and is intended only for the individual or entity
named above. No one else may disclose, copy, distribute or use the contents of this message
for any purpose. Its unauthorized use, dissemination or duplication is strictly prohibited
and may be unlawful . If you receive this message in error or you otherwise are not an
authorized recipient, please immediately delete the message and any attachments and notify
the sender.
126
From:
Sent:
To:
Subject:
Attachments:
Kvaal, James
Monday, September 13, 2010 5:11 PM
Gomez, Gabriella; Rodriguez, Roberto J.; Jawando, William 0.
the Root
image001.jpg
The federal government's new rules on "gainful employment" would
make many students ineligible for financial aid at career-oriented
schools.
Halting Pell Grants at For-Profit Schools Will Hurt Minorities
The federal government's new rules on "gainful employment" would make many students ineligible for financial aid at career-oriented schools.
harry.alford
The federal government's new rul es on "gainful employment" would make many students ineligible for financial aid at career-oriented school s.
<p> The federal government's new rules on "gainful employment" would make many students ineligible for financial aid at career-oriented schools.</p>
09/12/2010 23:08
The Department of Education has proposed new rul es for students attending career-oriented school s that coul d disproportionall y harm minority
students. The rules, which would go into effect in November, could cut off support for those students who need the most financial assistance in
getting their education. The new rules would make ineligible for-profit school s that do not meet certai n graduation rates or level s of student debt.
While the for-profit college industry-- as with any sector-- has bad actors, the Department of Education's blanket fix is shaping up to do more harm
than good. Student debt is a national problem. one that must be addressed. but imposing regulations on schools that are effecti vely educating students
is unnecessary. Instead, the Department ofEducation should be encouraged to isolatebad actors-- without imposing harmful regulations on schools
that are working to train students for careers where they can succeed.
According to the Department ofEducati on's website, Pell Grants "provide need-based grants to low-income undergraduate students to promote
access to postsecondary education." The description goes on to clai m, "students may use their grants at any one of approximatel y 5,400 participating
post-secondary institutions."
There is nothing in the descripti on of eligibi li ty that di nerentiates between traditional colleges and universities, or traditionally black colleges and
universiti es, or career-oriented colleges and uni versities. Any of those 5,400 institutions that are dul y accredited can offer Pell Grants to students to
pursue their educational goals.
127
There are 89 historically black four-year colleges and universities (I-ll3CUs). Not counting those schools, only about a third ofthe student population
at traditional not-for-profit schools are minorities. However, at career-oriented schools, the minority population is greater than 50 percent.
With that as background, we must examine the Department ofEducation's headlong rush to effectively remove career-oriented colleges from the
quiver of educational arrows available to minority students. The new "Gainful Employment Rule" uses a formula that would disproportionately harm
low-income students because their student load-to-income ratio or their rate of repaying loans would not meet the federal bureaucrats' threshold.
If st udents in a program don't meet the "gainful employment" test, then schools may not offer Pell Grants to students enrolled in that program--
effectively sending them out onto the streets to join a growing army of minority unemployed. Many might say, "Good. If career-oriented colleges
aren't a good investment for students or the government, then something should be done."
However. because minority students as a group tend to need more student aid to meet their college expenses, they arc far more likel y to fall short of
the "gainful employment" guidelines. This rule is aimed at career-oriented school s, but if the same test were run on students at traditionally not-for-
profit black colleges and universities, 93 percent vvould fail the "gainful employment" test because of unacceptable repayment rates.
According to figures from the Bureau ofLabor Statistics, black unemployment in August was 16.3 percent, compared with 9.6 percent tor the general
population. Worse yet, the unemployment rate for black males was 17.3 percent, and the unemployment rate for black teens ages 16 to 19 was 45.4
percent.
We should be looking for every conceivable pathway to get black teens otTthe unemployment line and into a classroom. Obviously, not every
teenager is a candidate for post-secondary education. But for those who are, the Department of Education is throwing up roadblocks at the worst
possible time.
Career colleges are a s uccess story when it comes to minority students. At private not-for-profit colleges, 17 percent of graduates are minorities. At
public not-for-profit institutions, the ratio is barely higher at one in five. However. at career col leges and univers ities, 39 percent of all grads are
minority students.
It is well-established that the strongest predictor of employment status is the level of education a prospective worker has attained. Job seekers with
college degrees have a far higher chance of landing a job than those with only high school diplomas.
As America's traditional businesses remain very wary of adding staff: people with skills in tecfmology. health care and altemative energy (all of
which can be gained while earning a degree at a career-oriented school) are finding their chances of finding work far greater than someone with a
bachelor's degree in liberal arts.
The Department ofEducation should be leading the way in developing tools to get more students into college. Instead, they are singling out one
vitally important segment of the post-secondary landscape and put1ing up "no trespassing" signs, keeping out the students who would beneli t the
most.
Harry C. Alford is president and CEO of the National Black Chamber ojComme1ce.
Editor's Note: Our parent company, The Washington Post Company and its Kaplan divi sion have also taken a position opposing the Department of
Education's planned revi sion of the tlnancial aid eligibility requirements. However, neither is affliliated with the National Black Chamber of
Commerce.
Like The Root on Facebook. Follow us on Twitter.
128
From:
Sent:
To:
Subject:
Attachments:
Kvaal, James
Monday, September 13,2010 5:10PM
Hamilton, Justin
more Wash Post
image001.jpg
The federal government's new rules on "gainful employment" would
make many students ineligible for financial aid at career-oriented
schools.
Halting Pell Grants at For-Profit Schools Will Hurt Minorities
The federal government's new rules on "gainful employment" would make many students ineligible for financial aid at career-oriented schools.
harry.alford
The federal government's new rules on "gainful employment" would make many students ineligible for financial aid at career-oriented schools.
<p> The federal government's new rules on "gainful employment" would make many students ineligible for financial aid at career-oriented schools.</p>
09/12/2010 23:08
The Department of Education has proposed new rules for students attending career-oriented school s that coul d disproportionall y harm minority
students. The rules, which would go into effect in November, could cut off support for those students who need the most financial assistance in
getting their education. The new mlcs would make ineligible for-profit schools that do not meet certain graduation rates or levels of student debt.
While the for-profit college industry-- as with any sector-- has bad actors, the Department of Education's blanket fix is shaping up to do more harm
than good. Student debt is a national problem. one that must be addressed_ but imposing regulations on schools that are effecti vely educating students
is unnecessary. Instead, the Department ofEducation should be encouraged to isolatebad actors-- without imposing harmful regulations on schools
that are working to train students for careers where they can succeed.
According to the Department ofEducation's website, PelJ Grants "provide need-based grants to low-i ncome undergraduate students to promote
access to postsecondary education." The description goes on to claim, "students may use their grants at any one of approximatel y 5,400 participating
post-secondary institutions."
129
There is nothing in the description of eligibility that differentiates between traditional colleges and universities, or traditionally black colleges and
universities, or career-oriented colleges and universities. Any of those 5,400 institutions that are duly accredited can oiTer Pell Grants to students to
pursue their educational goals.
There are 89 historically black four-year colleges and universities (HBCUs). Not counti11g those schools, only about a third ofthe student population
at traditional not-for-profit school s are minorities . . However. at career-oriented schools, the minority population is greater than 50 percent.
With that as background, we must examine the Department ofEducation's headlong rush to effectively remove career-oriented colleges [rom the
quiver of educational arrows available to minority students. The new "Gainful Employment Rule" uses a formula that would disproportionately harm
low-income students because their student load-to-income ratio or their rate of repaying loans would not meet the federal bureaucrats' threshold.
If students in a program don't meet the "gainful employment" test, then schools may not offer Pcll Grants to students enrolled in that program --
effectively sending them out onto the streets to join a growing army of minority unemployed. Many might say, "Good. If career-oriented colleges
aren't a good investment for students or the government, then something should be done."
However, because mi11ority students as a group tend to need more student aid to meet their college expenses. they are far more likel y to fall short of
the "gainful employment" guidelines. This rule is aimed at career-oriented schools, but if the same test were run on students at traditionally not-for-
profit black colleges and universities, 93 percent would fail the "gainful employment" test because of unacceptable repayment rates.
According to figures from the Bureau of Labor Statistics, black unemployment in August was 16.3 percent, compared with 9.6 percent for the general
population. Worse yet, the unemployment rate for black males was 17.3 percent, and the unemployment rate for black teens ages J6to 19 was 45.4
percent.
We should be looking for every conceivable pathway to get black teens off the unemployment line and into a classroom. Obviously, not every
teenager is a candidate for post-secondary education. But for those who are. the Department of Education is throwing up roadblocks at the worst
possible time.
Career colleges are a success story when it comes to minority students. At private not-for-profit colleges, 17 percent of graduates are minorities. At
public not-for-profit institutions, the ratio is barely lligher at one in five. However, at career colleges and universities, 39 percent of all grads are
minority students.
1t is well-established that the strongest predictor of employment status is the level of education a prospective worker has attained. Job seekers with
college degrees have a far higher chance of landing a job than those with only high school diplomas.
As America's traditional businesses remain very wary of adding staff, people with skills in technology, health care and alternative energy (all of
which can be gained while earning a degree at a career-oriented school ) are rinding their chances of finding work far greater than someone with a
bachelor's degree in liberal arts.
The Department of Education should be leading the vvay in developing tool s to get more students into college. Instead, they are singling out one
vitally important segment of the post-secondary landscape and putting up "no trespassing" signs, keeping out the students who would benefit the
most.
Harry C. Alford is president and CEO of the National Black Chamber of Commerce.
Editor's Note: Our parent company, The Washington Post Company and its Kaplan division have also taken a position opposing the Department of
Education's planned revision of the financial aid eligibility requirements. However, neither is afflilialed with the National Black Chamber of
Commerce.
Like The Root on Facebook. Follow us on Twitter.
130
From:
Sent:
To:
Subject:
Kvaal, James
Friday, September 10, 2010 6:53PM
Gordon, Robert M.
What the Washington Post Has Not Disclosed ...
What the Washington Post Has Not Disclosed ...
Author(s):
Stephen Burd
Published: September 8, 2010
Issues:
For-Profit Colleges
In recent weeks, The Washington Post has come under much-deserved criticism for using both its news and editorial
~ t o lobby against regulations the Obama administration has proposed that would strengthen the government's
oversight over for-profit colleges.
In defending themselves, Post executives and editors say that the newspaper has been fully upfront about its ties to
Kaplan Inc., one of the largest publicly-traded chains offor-profit colleges in the country. Kaplan, in fact, accounts for
about 60 percent of the newspaper company's total revenue. As a result, any crackdown on the proprietary school sector
could be a significant blow to the newspaper's bottom line (which would explain why Donald Graham, the Post's chairman
and CEO, has been making the rounds on Capitol Hill-- a fact first reported by Inside Higher Ed.)
This line of defense recently received the backing from, of all people, the newspaper's ethical cop-- the ombudsman
Andrew Alexander. In a column last month entitled "From Kaplan to Buffet. Post gets it right on transparency," Alexander
defended the Post, saying that the newspaper "has consistently disclosed the Kaplan connection."
"I've often criticized The Post for insufficient transparency on everything from news sources to refusing to share its ethics
policies with readers," he wrote. "But on its commitment to disclose self-interest, praise is deserved."
With all due respect, we at Higher Ed Watch have to disagree. The Washington Post has not, in fact, been completely
transparent about its ties to the for-profit higher education industry. The newspaper has time and again failed to disclose
the substantial stake it has in Corinthian Colleges, a giant for-profit higher education company that doesn't exactly have a
stellar reputation, even among those in the industry. By all indications, Corinthian, which serves nearly 70,000 students at
more than 100 colleges in the United States and Canada, appears to be one of the companies most in jeopardy if the
administration moves forward with its proposed "Gainful Employment" regulations because of the substantial amount of
debt its students take on.
According to data from Bloomberg, the Post owns approximately seven million shares of Corinthian Colleges' stock, giving
it about an eight percent ownership stake in the company. The newspaper purchased the stock in early 2008, saying that
the for-profit college company represented "an attractive business opportunity."
The Post's stock purchase came less than six months after the California Attorney General reached a $6.5-million
settlement with Corinthian over a lawsuit he had filed accusing the company of engaging in false advertising and unlawful
business practices. The lawsuit charged Corinthian with misleading prospective students about its schools' job placement
131
rates and the starting salaries of their graduates; running 11 sub-standard programs. and falsifying records provided to the
government. Corinthian did not admit to any wrongdoing.
Since then, various media reports (including an article I wrote for the Washington Monthly last year) have accused the
company of continuing to engage in misleading recruiting tactics. The Government Accountability Office added fuel to the
fire when it revealed last month that it had conducted an undercover investigation in which it found "fraudulent, deceptive,
or otherwise questionable marketing practices" at every one of the 15 for-profit schools it visited, including two of
Corinthian's Everest College campuses (in Arizona and Texas).
This is bad enough. But Corinthian has also been accused of putting the low-income and working class students at its
schools in harm's way, by loading them up with federal and high-cost private student loan debt that many of them are
unlikely to ever be able to repay. The following data appears to bear these concerns out:
Default Rates
Corinthian recently revealed to investors that it expects "a majority" of its schools to have three-year default rates above
30 percent for borrowers who went into repayment in fiscal year 2009. In other words, the company projects that about a
third of the schools' former student who entered repayment on their federal student loans in the 2009 fiscal year
{beginning in Oct. 2008) will go into default within three years. These high rates are all the more remarkable considering
the aggressive effort that Corinthian has been making to try to "manage" its default rates. The company has been upfront
about how it has been trying to push high-risk borrowers to get deferments or forbearances on their loans. or to take
advantage of the Income Based Repayment program, so that they can't default during the three-year window when
defaults will be counted against the schools by the Education Department.
Repayment Rates
The Education Department released data this summer showing that only 26 percent of students who left Corinthian
schools in the last four years had paid down any principal on their federal student loans as of September 2009. In other
words, about three quarters of students who left these institutions during this period of time had not paid enough to reduce
their total loan debt by even a dollar. Under the administration's "Gainful Employment" proposal, for-profit college
programs with repayment rates under 35 percent could be in serious danger of having their eligibility for federal student
aid revoked.
Of all of Corinthian's former students, those who attended the company's Everest College campuses had the most trouble
handling their debt. According to the Department, 33 of the company's 86 Everest locations had repayment rates of less
than 20 percent and five had rates below 10 percent. The Everest Institute in Detroit, for example, had a rate of just 7
percent.
Private Loan Default Rates
Corinthian Colleges has told investors that it expects nearly 60 percent of the $150 million in sub-prime private loans it is
making to students this year will go into default. For the company, losses on these "institutional loans" are more than
offset by the federal financial aid dollars these students bring in. But for the students, defaulting on these high-cost loans
could lead to a spiral of debt that could literally ruin their lives.
To be fair to the Washington Post, the editorial it ran last month opposing the Obama administration's proposed Gainful
Employment rules noted that its parent company owned " Kaplan University and other for-profit schools of higher
education that, according to company officials, could be harmed by the proposed regulations." [Emphasis added]
132
But the editors didn't specifically mention Corinthian. Given the for-profit higher education company's track record, can
you blame them?
133
From:
Sent:
To:
Subject:
Kvaal, James
Wednesday, September 08, 2010 3:33PM
Hamilton, Justin; Kanter, Martha; Ochoa, Eduardo; Bergeron, David; Yuan, Georgia
Nyt story
For-Profit Colleges Step Up Lobbying Against New Rules
By TAMAR LEWIN
Published: September 2010
For-profit colleges have increased their lobbying against proposed Education Department rules
to cut off federal financial aid to programs whose students take on too much debt for
training that provides little likelihood of leading to a well -paying job.
In addition to making personal visits to Capitol executives at the colleges have
provided employees with "personalized" letters to send to Washington and urged students to
speak out against the proposals.
So the department has received about letters on the proposed "gainful employment"
in the comment period that ends Thursday.
Last John the founder of the nation's largest for-profit the
University of e-mailed every member of seeking help opposing the
and attached a sample letter to be sent to Education Secretary Arne
asking him to withdraw them.
Donald the chairman and chief executive of The Washington Post which gets
most of its revenue from its Kaplan education visited Senator Tom Democrat
of whose Labor and Pensions Committee is holding hearings on the
for-profit education industry.
Under the proposed announced July for-profit education programs would
qualify for federal student aid only if enough former students were repaying their student
or if graduates generally earned enough to repay their debts.
Many for - profit colleges have urged professors and administrators to send in
criticisms of the proposals.
The Education Management the second- largest for-profit hired DCI
a public relations to contact its employees for information that would be used to
create a personalized which would then be delivered back to the employee for
along with a addressed envelope.
"EDMC believes it is that during this public -comment period on the proposed
Federal Gainful Employment that our faculty and staff have the opportunity to
voice their if they choose to do said Jacquelyn a spokeswoman for the
company.
EDMC also has a Web the Higher Education Action guiding students or employees
to oppose the offering "pre-crafted" letters. a unit of said last
month in an e-mail soliciting more comments that more than people had used the site in
134
the previous week. It is unclear how many comments were generated by for-profit colleges'
campaigns.
Some of the letters show little familiarity with the proposed regulations. For example, a
Education Department official said, students at a particular school sent in dozens of hand-
written letters asking for continued aid to for-profit colleges, but never mentioning the
regulations. He said he called a letter-writer to ask whether the letter was intended as a
comment on the regulations, and was told, "This is what the school asked us to write." He
would not identify the school.
The department said the new regulations would protect students from programs that saddled
them with heavy debts and gave them credentials that proved to be of little value in finding
a good job.
Last month, the Government Accountability Office said an investigation found fraud or
deceptive practices at all 15 of the for-profit locations it visited.
Students at for-profit colleges, about 10 percent of those enrolled in higher education, are
far more likely to default on their loans.
Sent using BlackBerry
135
From:
Sent:
To:
Subject:
Attachments:
Can you help
From: Kanter, Martha
Kvaal, James
Thursday, August 19, 201 o 10:58 AM
Arsenault, Leigh
FW: ABC undercover
image001 .gif; image002.jpg; image003.png; image004.png
Sent: Thursday, August 19, 2010 10:44 AM
To: Kvaal, James
Subject: Re: ABC undercover
Can you work with Justin on talking points for Arne and you for tomorrow (ABC, Missouri data, etc.)?
Sent using BlackBerry
From: Kvaal, James
To: Kanter, Martha; Taggart, Bill; Ochoa, Eduardo; Bergeron, David; Madzelan, Dan; Gomez, Gabriella; Finley, Steve;
Yuan, Georgia
Cc: Hamilton, Justin
Sent: Thu Aug 19 09:35:53 2010
Subject: ABC undercover
This story is expected to run tonight
ABC News Investigates For-Profit Education: Recruiters at the University of Phoenix
ABC News Gets Answers for Student Who Claims She Was Duped by Online School
By CHRIS CUOMO, GERRY WAGSCHAL and LAUREN PEARLE
Aug. 19, 2010
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Ads for online schools are all over the Internet, plastered on billboards in subway cars and on television. The University
of Phoenix, with nearly 500,000 students, is the biggest for-profit college. But some former students said they were
duped into paying big bucks and going deeply in debt by slick and misleading recruiters.
136
Melissa Dalmier, a 30-year-old single mother of three from Noble, Ill., enrolled in the associate's degree in education
program at the University of Phoenix to reach her dream of becoming an elementary school teacher.
(ABC News)
"I don't want anyone else to be sucked in," said Melissa Dalmier, 30, of Noble, Ill.
The mother of three had big dreams to be an elementary school teacher, so when she saw ads for the University of
Phoenix pop-up on her computer, she e-m ailed them for more information. A few minutes later, Dalmier said she got a
call from one of the school's recruiters, who she said told her that enrolling in the associate's degree in education
program at the University of Phoenix would put her on the fast-track to reaching her dream.
"[The recruiter said] they had an agreement with Illinois State Board of Education and that as soon as I finished their
program I'd be ready to start working," she recalled.
Within 15 minutes, Dalmier was enrolled. Since she didn't have enough money to pay for tuition, she said the recruiter
helped her get federal student aid. In total, she took out about $8,000 in federally-guaranteed student loans.
But just a few months after Dalmier started, she said she learned the horrible truth: the degree program she was
enrolled in would not qualify her to become a public school teacher upon graduation in Illinois.
"It was an outright lie. A bold faced lie," she said.
Watch more ofthe undercover investigation tonight on "World News" at 6:30p.m. ET and later on "Nightline" at
11:35 p.m. ET
It's not the first time that the controversial school, which obtains almost 90 percent of its revenues from students paying
tuition from federal aid, has come under fire for its recruiting methods.
The University of Phoenix was one of 15 for-profit schools whose aggressive recruiting practices were the subject of
hearings held by Sen. Tom Harkin, D-lowa. The Government Accountability Office sent investigators to for-profit schools
across the country and found that all of them were misleading potential students.
In 2004, the University of Phoenix paid nearly $10 million to the Department of Education to settle allegations that it had
violated rules about its recruiting practices. The school did not admit any wrongdoing.
137
"I think maybe the whole orchard is contaminated," Harkin said. "There's a systemic problem with the system itself that
needs to be addressed."
ABC News wanted to know firsthand whether what Dalmier said happened to her, would happen to us, so we sent one
of our producers undercover to meet with a University of Phoenix recruiter.
Our producer told the recruiter, who was working out of an office in Houston, Texas, that he aspired to be a teacher and
planned to live in either Texas or New York. The recruiter told him to enroll in the Bachelor's of Science in Education
program, and with that degree and some student teaching, he would be set.
Producer: I just want to understand clearly. I can go to University of Phoenix, do my bachelor's degree, and 100 percent
for sure I can go back to either Texas, or New York and I can sit for those exams and once I finish those exams ... ! can
teach.
Recruiter: Then you can become a teacher. Yes. That is true. What's your e-mail address?
Despite her assurances, the recruiter's claim was not true. Even with successful completion of the required certification
testing, a degree from the University of Phoenix does not guarantee a teaching certificate in either of those states.
When we confronted Dr. William Pepicello, president of the University of Phoenix, about the recruiter's false promise,
he said it was "indefensible."
"It's wrong. Can we do better? Absolutely. Do we train our people to give that kind of misadvice? Absolutely not. And we
can do better, we will do better, you know, we already have some initiatives that we talked about that we're putting i n
place because at the end of the day, we have to get it right."
But this was not the first time that the university's recruiting practices have come under scrutiny. In December 2009,
after two former employees came forward and accused the university of violating federal financial aid regulations with
its recruiting practices, without admitting wrongdoing the school agreed to pay $67.5 million to resolve the accusations.
The two whistleblowers received $19 million in the settlement.
When asked if the 2009 settlement was a sign that "we got caught," Pepicello disagreed.
"No, I wouldn't say it's proofthat we got caught. I mean, it's certainly proof that we weren't doing as well as we could.
We could do better," he said.
The recruiter also told our undercover producer he could take out as much as $35,000 in federal financial aid to pay for
school. She also said that there might even be some money left over after tuition was paid.
Recruiter: I tell students to take out the max and whatever you don't need or you don't use then use it [for whatever].
But it's easier to take out more than you need and send back the excess versus you didn't take out enough.
Producer: What are the kinds of things though? I mean in terms of like that I could use it for? I mean, what if I
just ... because you're going to have to have money to walk around.
Recruiter: They don't care. Right. They don't. They just tell you use it for educational purposes.
Producer: And they don't ... They don't what?
Recruiter: No one follows up. No one says, What happened to this money? You received a check for $562, where did you
spend it?
138
Producer: It's your business.
The university president said that there was no excuse for a recruiter to push someone to borrow to the max.
'It's absolutely indefensible. It is not the way that I intend to run this university," Pepicello said.
For-Profit Universities Contributing to Financial Crisis?
Experts say recruiters who are misleading students may only be the tip of the iceberg. Students who have attended for-
profit schools are defaulting on their loans at an alarming rate, which experts say may be contributing to the next big
financial crisis.
At the University of Phoenix's headquarters, the loan repayment rate was 44 percent, according to data from 2009
provided by the Department of Education; students at their Nellis Air Force location had a repayment rate of 36 percent.
At the headquarters of Brown Mackie College, another for-profit school, the repayment rate was 27 percent. Harris
Miller, who heads the for-profit industry's lobby group, told Chris Cuomo that default rates at for profit schools are
comparable to other schools which service similar student populations.
Recruiters from for-profit schools obtained $24 billion in student loan and grant money for the 2008-2009 school year,
according to Government Accountability Office and Senate reports.
"These schools are marketing machines masquerading as universities," said Steve Eisman, a renowned hedge fund
investor who predicted the last big mortgage crisis. "I thought there would never again be an opportunity to be involved
in the short side as an industry as social destructive and morally bankrupt as the sub-prime mortgage
industry ... Unfortunately, I was wrong."
Though for-profits get the lion's share of their tuition from financial aid, the default rates on loans for students who
attended for profit schools are alarming. About 50 percent of the students at for-profits drop out, according to Eisman,
so schools need to keep adding new students, and have to try to recruit just about anyone -- even those most vulnerable
in society, he says.
Benson Rawlins was considered homeless last year when he met two recruiters from the University of Phoenix, who
gave three seminars at Y -Haven, a shelter for transitional men in Cleveland, Ohio, or in effect, a homeless shelter.
Rawlins doesn't have aGED, but said the recruiters had no qualms trying to sell him an expensive associate's degree.
"It seems like it is just too much all about money," he said, "Instead of helping someone get an education."
The university told ABC News it does not tolerate recruitment at facilities like Y -Haven.
"We can assure you that anyone who participated in the recruitment of residents from homeless facilities in Cleveland
no longer works for the University," said Alex Clark, a spokesperson for the University of Phoenix. "Any such activity is
strictly forbidden by our Code of Business Conduct and Ethics, and employees who violate this policy face disciplinary
action up to and including termination."
Harris Miller said even t hough the schools serve an important role by providing higher educat ion to students who
wouldn't ordinarily get one, many schools' recruiting practices need to be changed.
Miller claimed that universities began to change even before the GAO's report on their misleading practices, including
changing how recruiters are compensated (so they do not receive bonuses or prizes for recruiting students), offering
139
"test drive" programs to help people figure out if higher education is for them and focusing more on consumer
protection.
When asked why for-profit universities don't return money back to those who have been misled by their solicitations,
Miller said: "There are other countries in the world like Canada which have a different system and it's something we're
going to look at."
But Miller admitted that the industry has no plan in place to pay back those who are carrying a debt from for-profit
schools.
Whatever the industry's plans for future, Dalmier said it won't help heal what happened.
"If they tell you something, investigate it before you enroll in their program. You really need to find out the truth and
how to further your passion or your dream," she said. "That way, you don't end up like me."
After ABC News' interview with Pepicello, the University of Phoenix offered Dalmier a scholarship for a bachelor's degree
of her choosing. Dalmier said she is considering their proposal.
Pepicello also said he plans to change the school's recruiting practices, especially the current model of compensation,
and will be offering students a "test drive."
Click HERE to read a letter to ABC News from William Pepicello.
140
Oltic& of the Prcsid('Ot
l>:;, Et .. .-A S<!tlt
A1 Mll4ll
A11gust 18, 2010
Tb!lnk Wll iillowJpg 1tti$ oppott\JI'liTy to mare our dice<tly with Good
Motnl ng Amculca's vicvters. and en, following 11\V reoeot inteNiew vti th Ch rl!
Cuomo.
As I told Mr. Cuomo, of Phoenix has strong student protectioo mea&ure$ in
plaee, and v;e do not tolerate pracooe\S by .. ny employee. We nave and
unambigvo\1$ politie$ in place to ensure prospective students artuble to make a fully-
informed doe.cision bout th.e Uni wmily and their ability to suecd here, indudins the
of tncurdng d.C!bt to pay foro education.
It $i!ddens and disappoints me tQ note that sometimt?s, (Jfe nol to
bv 6ut 1 \1/M'I.to that vJe take te at tlon to addrm a11y
such vlolatio'l'l, up t<l and Including termlnll:t ion of the -employees; invalve<l. Let me be
dear; even onevio11!tionoFowstudentprot.ectionpolities1Jooe too manv, and as
of this Univers;lty ram comMttt.ed to cnwrlns It does DOt ha Pllen. In fac;t, we
havo already undertal<en a nvmPJer of Important n11:w measure$ towsed on
prote<tion, including:
frllt)nclaliiter.acy tools tl'lf.!! ln:ID lmdm0nd the facts about flnaAtia laid
<I nO ttqv, need to borrow, wllith has already te.sult<MI in an
approxir'natl! lo the students wh<l takeout the
ma.xtmu.m too n
A frl!e thnte-we.ek program caUQ!I unive:rsity Orlsnt \!tion, Which helps nuclents
with or no tolleee unde nil whatit t" kes t o In a
challenging academic environment lilte 0\11'$, lbefore taking on butcft}n of

A q.Jg(WI 5fU!ll2!lit2rills &'ttm to trac;k and record tenS. ofthousands,of ,rmone
eve ry day. between prospective st\ldeni.!S COUI\Selors, for .any evidence of
f alse or misleading information; and
A flrm cQmmitment to c.ompletety te!limlnate as a compon-ent
of "tbe and comperuauoo of our t!nrollment advisors.
Our main f,ocus i:s and will always be students, and e11surms theirsucress by
equtp.plng t he.n with the tools they need to c:ompete and thrive In a changing global
eoonotny. Weare proud otovrirad< record in students, and .even more
proud of the thoiJSands of work in& leiltMr!S whCt have improved therr lives and advaneed
1heir GreEns arter graduating from our Vnive!'$i\V res ults f rom
Afidemlc
141
Ouring tneir enrollme-nt,l!nif,l:ldljty of P(!oenix: stud:ents experlence greatP.r
annUAl Silll\N irl<tQatei than tb11 nationll I avengt: for i!U worl<Ns: in 2008, our
bachelor'.s. program .s.tudents experienced an pertt!l'lt sataJV lnc(ease,
our master'$ prog!Cim st .. Jdel'lts sa\V an twerage lncrea.se of 9.7%;
University of Phoc.-nlx studel\ts ruporl higher thal'l peers
tbe ni!l.;i9n ln each of the ten cotesorles by the Nat lonal Swvcy of
Student Engagemellt
We are a leader iQ "non'tt'lltftt iooal'" roJlCJ!I! studeo1s, il 6(0U1)
comprises of all college ac:.cordlnc to the U.S, [)_,partmertt or
ilr\d
Aubout$12,000perye.ar. VniveyiiYgf Phoenix tl!i\iOO ii!Jd f:ePs are in
ranm nationllv. and our an(! material co.stsare towecrthan
ave-rage.
We are committed to at t he forefront of Innovation In higher and,
ooupled with the measures we anundetlaklnelo enhanoc studcm pcoledlon, WI! are
oonfident U lliver.sltv <Jf Pho.,l\lx will yield e" en gtoeater outcomes tor our studems.
Sincerely,

WiRiamJ, Pepice41o, Pre.sident
University of Phoenix
142
From:
Sent:
To:
Subject:
Attachments:
Sure
From: Kanter, Martha
Kvaal, James
Thursday, August 19, 2010 10:57 AM
Kanter, Martha
RE: ABC undercover
image001 .gif; image002.jpg; image003.png; image004.png
Sent: Thursday, August 19, 2010 10:44 AM
To: Kvaal, James
Subject: Re: ABC undercover
Sent using BlackBerry
From: Kvaal, James
To: Kanter, Martha; Taggart, Bill; Ochoa, Eduardo; Bergeron, David; Madzelan, Dan; Gomez, Gabriella; Finley, Steve;
Yuan, Georgia
Cc: Hamilton, Justin
Sent: Thu Aug 19 09:35:53 2010
Subject: ABC undercover
This story is expected to run tonight
ABC News Investigates For-Profit Education: Recruiters at the University of Phoenix
ABC News Gets Answers for Student Who Claims She Was Duped by Online School
By CHRIS CUOMO, GERRY WAGSCHAL and LAUREN PEARLE
Aug. 19,2010
FarkTechnoratiGoogleliveMy SpaceNewsvineRedditDeliciousMixx
Yahoo
Post a Comment
Ads for online schools are all over the Internet, plastered on billboards in subway cars and on television. The University
of Phoenix, with nearly 500,000 students, is the biggest for-profit college. But some former students said they were
duped into paying big bucks and going deeply in debt by slick and misleading recruiters.
143
Melissa Dalmier, a 30-year-old single mother of three from Noble, Ill., enrolled in the associate's degree in education
program at the University of Phoenix to reach her dream of becoming an elementary school teacher.
(ABC News)
"I don't want anyone else to be sucked in," said Melissa Dalmier, 30, of Noble, Ill.
The mother of three had big dreams to be an elementary school teacher, so when she saw ads for the University of
Phoenix pop-up on her computer, she e-m ailed them for more information. A few minutes later, Dalmier said she got a
call from one of the school's recruiters, who she said told her that enrolling in the associate's degree in education
program at the University of Phoenix would put her on the fast-track to reaching her dream.
"[The recruiter said] they had an agreement with Illinois State Board of Education and that as soon as I finished their
program I'd be ready to start working," she recalled.
Within 15 minutes, Dalmier was enrolled. Since she didn't have enough money to pay for tuition, she said the recruiter
helped her get federal student aid. In total, she took out about $8,000 in federally-guaranteed student loans.
But just a few months after Dalmier started, she said she learned the horrible truth: the degree program she was
enrolled in would not qualify her to become a public school teacher upon graduation in Illinois.
"It was an outright lie. A bold faced lie," she said.
Watch more ofthe undercover investigation tonight on "World News" at 6:30p.m. ET and later on "Nightline" at
11:35 p.m. ET
It's not the first time that the controversial school, which obtains almost 90 percent of its revenues from students paying
tuition from federal aid, has come under fire for its recruiting methods.
The University of Phoenix was one of 15 for-profit schools whose aggressive recruiting practices were the subject of
hearings held by Sen. Tom Harkin, D-lowa. The Government Accountability Office sent investigators to for-profit schools
across the country and found that all of them were misleading potential students.
In 2004, the University of Phoenix paid nearly $10 million to the Department of Education to settle allegations that it had
violated rules about its recruiting practices. The school did not admit any wrongdoing.
144
"I think maybe the whole orchard is contaminated," Harkin said. "There's a systemic problem with the system itself that
needs to be addressed."
ABC News wanted to know firsthand whether what Dalmier said happened to her, would happen to us, so we sent one
of our producers undercover to meet with a University of Phoenix recruiter.
Our producer told the recruiter, who was working out of an office in Houston, Texas, that he aspired to be a teacher and
planned to live in either Texas or New York. The recruiter told him to enroll in the Bachelor's of Science in Education
program, and with that degree and some student teaching, he would be set.
Producer: I just want to understand clearly. I can go to University of Phoenix, do my bachelor's degree, and 100 percent
for sure I can go back to either Texas, or New York and I can sit for those exams and once I finish those exams ... ! can
teach.
Recruiter: Then you can become a teacher. Yes. That is true. What's your e-mail address?
Despite her assurances, the recruiter's claim was not true. Even with successful completion of the required certification
testing, a degree from the University of Phoenix does not guarantee a teaching certificate in either of those states.
When we confronted Dr. William Pepicello, president of the University of Phoenix, about the recruiter's false promise,
he said it was "indefensible."
"It's wrong. Can we do better? Absolutely. Do we train our people to give that kind of misadvice? Absolutely not. And we
can do better, we will do better, you know, we already have some initiatives that we talked about that we're putting i n
place because at the end of the day, we have to get it right."
But this was not the first time that the university's recruiting practices have come under scrutiny. In December 2009,
after two former employees came forward and accused the university of violating federal financial aid regulations with
its recruiting practices, without admitting wrongdoing the school agreed to pay $67.5 million to resolve the accusations.
The two whistleblowers received $19 million in the settlement.
When asked if the 2009 settlement was a sign that "we got caught," Pepicello disagreed.
"No, I wouldn't say it's proofthat we got caught. I mean, it's certainly proof that we weren't doing as well as we could.
We could do better," he said.
The recruiter also told our undercover producer he could take out as much as $35,000 in federal financial aid to pay for
school. She also said that there might even be some money left over after tuition was paid.
Recruiter: I tell students to take out the max and whatever you don't need or you don't use then use it [for whatever].
But it's easier to take out more than you need and send back the excess versus you didn't take out enough.
Producer: What are the kinds of things though? I mean in terms of like that I could use it for? I mean, what if I
just ... because you're going to have to have money to walk around.
Recruiter: They don't care. Right. They don't. They just tell you use it for educational purposes.
Producer: And they don't ... They don't what?
Recruiter: No one follows up. No one says, What happened to this money? You received a check for $562, where did you
spend it?
145
Producer: It's your business.
The university president said that there was no excuse for a recruiter to push someone to borrow to the max.
'It's absolutely indefensible. It is not the way that I intend to run this university," Pepicello said.
For-Profit Universities Contributing to Financial Crisis?
Experts say recruiters who are misleading students may only be the tip of the iceberg. Students who have attended for-
profit schools are defaulting on their loans at an alarming rate, which experts say may be contributing to the next big
financial crisis.
At the University of Phoenix's headquarters, the loan repayment rate was 44 percent, according to data from 2009
provided by the Department of Education; students at their Nellis Air Force location had a repayment rate of 36 percent.
At the headquarters of Brown Mackie College, another for-profit school, the repayment rate was 27 percent. Harris
Miller, who heads the for-profit industry's lobby group, told Chris Cuomo that default rates at for profit schools are
comparable to other schools which service similar student populations.
Recruiters from for-profit schools obtained $24 billion in student loan and grant money for the 2008-2009 school year,
according to Government Accountability Office and Senate reports.
"These schools are marketing machines masquerading as universities," said Steve Eisman, a renowned hedge fund
investor who predicted the last big mortgage crisis. "I thought there would never again be an opportunity to be involved
in the short side as an industry as social destructive and morally bankrupt as the sub-prime mortgage
industry ... Unfortunately, I was wrong."
Though for-profits get the lion's share of their tuition from financial aid, the default rates on loans for students who
attended for profit schools are alarming. About 50 percent of the students at for-profits drop out, according to Eisman,
so schools need to keep adding new students, and have to try to recruit just about anyone -- even those most vulnerable
in society, he says.
Benson Rawlins was considered homeless last year when he met two recruiters from the University of Phoenix, who
gave three seminars at Y -Haven, a shelter for transitional men in Cleveland, Ohio, or in effect, a homeless shelter.
Rawlins doesn't have aGED, but said the recruiters had no qualms trying to sell him an expensive associate's degree.
"It seems like it is just too much all about money," he said, "Instead of helping someone get an education."
The university told ABC News it does not tolerate recruitment at facilities like Y -Haven.
"We can assure you that anyone who participated in the recruitment of residents from homeless facilities in Cleveland
no longer works for the University," said Alex Clark, a spokesperson for the University of Phoenix. "Any such activity is
strictly forbidden by our Code of Business Conduct and Ethics, and employees who violate this policy face disciplinary
action up to and including termination."
Harris Miller said even t hough the schools serve an important role by providing higher educat ion to students who
wouldn't ordinarily get one, many schools' recruiting practices need to be changed.
Miller claimed that universities began to change even before the GAO's report on their misleading practices, including
changing how recruiters are compensated (so they do not receive bonuses or prizes for recruiting students), offering
146
"test drive" programs to help people figure out if higher education is for them and focusing more on consumer
protection.
When asked why for-profit universities don't return money back to those who have been misled by their solicitations,
Miller said: "There are other countries in the world like Canada which have a different system and it's something we're
going to look at."
But Miller admitted that the industry has no plan in place to pay back those who are carrying a debt from for-profit
schools.
Whatever the industry's plans for future, Dalmier said it won't help heal what happened.
"If they tell you something, investigate it before you enroll in their program. You really need to find out the truth and
how to further your passion or your dream," she said. "That way, you don't end up like me."
After ABC News' interview with Pepicello, the University of Phoenix offered Dalmier a scholarship for a bachelor's degree
of her choosing. Dalmier said she is considering their proposal.
Pepicello also said he plans to change the school's recruiting practices, especially the current model of compensation,
and will be offering students a "test drive."
Click HERE to read a letter to ABC News from William Pepicello.
147
Oltic& of the Prcsid('Ot
l>:;, Et .. .-A S<!tlt
A1 Mll4ll
A11gust 18, 2010
Tb!lnk Wll iillowJpg 1tti$ oppott\JI'liTy to mare our dice<tly with Good
Motnl ng Amculca's vicvters. and en, following 11\V reoeot inteNiew vti th Ch rl!
Cuomo.
As I told Mr. Cuomo, of Phoenix has strong student protectioo mea&ure$ in
plaee, and v;e do not tolerate pracooe\S by .. ny employee. We nave and
unambigvo\1$ politie$ in place to ensure prospective students artuble to make a fully-
informed doe.cision bout th.e Uni wmily and their ability to suecd here, indudins the
of tncurdng d.C!bt to pay foro education.
It $i!ddens and disappoints me tQ note that sometimt?s, (Jfe nol to
bv 6ut 1 \1/M'I.to that vJe take te at tlon to addrm a11y
such vlolatio'l'l, up t<l and Including termlnll:t ion of the -employees; invalve<l. Let me be
dear; even onevio11!tionoFowstudentprot.ectionpolities1Jooe too manv, and as
of this Univers;lty ram comMttt.ed to cnwrlns It does DOt ha Pllen. In fac;t, we
havo already undertal<en a nvmPJer of Important n11:w measure$ towsed on
prote<tion, including:
frllt)nclaliiter.acy tools tl'lf.!! ln:ID lmdm0nd the facts about flnaAtia laid
<I nO ttqv, need to borrow, wllith has already te.sult<MI in an
approxir'natl! lo the students wh<l takeout the
ma.xtmu.m too n
A frl!e thnte-we.ek program caUQ!I unive:rsity Orlsnt \!tion, Which helps nuclents
with or no tolleee unde nil whatit t" kes t o In a
challenging academic environment lilte 0\11'$, lbefore taking on butcft}n of

A q.Jg(WI 5fU!ll2!lit2rills &'ttm to trac;k and record tenS. ofthousands,of ,rmone
eve ry day. between prospective st\ldeni.!S COUI\Selors, for .any evidence of
f alse or misleading information; and
A flrm cQmmitment to c.ompletety te!limlnate as a compon-ent
of "tbe and comperuauoo of our t!nrollment advisors.
Our main f,ocus i:s and will always be students, and e11surms theirsucress by
equtp.plng t he.n with the tools they need to c:ompete and thrive In a changing global
eoonotny. Weare proud otovrirad< record in students, and .even more
proud of the thoiJSands of work in& leiltMr!S whCt have improved therr lives and advaneed
1heir GreEns arter graduating from our Vnive!'$i\V res ults f rom
Afidemlc
148
Ouring tneir enrollme-nt,l!nif,l:ldljty of P(!oenix: stud:ents experlence greatP.r
annUAl Silll\N irl<tQatei than tb11 nationll I avengt: for i!U worl<Ns: in 2008, our
bachelor'.s. program .s.tudents experienced an pertt!l'lt sataJV lnc(ease,
our master'$ prog!Cim st .. Jdel'lts sa\V an twerage lncrea.se of 9.7%;
University of Phoc.-nlx studel\ts ruporl higher thal'l peers
tbe ni!l.;i9n ln each of the ten cotesorles by the Nat lonal Swvcy of
Student Engagemellt
We are a leader iQ "non'tt'lltftt iooal'" roJlCJ!I! studeo1s, il 6(0U1)
comprises of all college ac:.cordlnc to the U.S, [)_,partmertt or
ilr\d
Aubout$12,000perye.ar. VniveyiiYgf Phoenix tl!i\iOO ii!Jd f:ePs are in
ranm nationllv. and our an(! material co.stsare towecrthan
ave-rage.
We are committed to at t he forefront of Innovation In higher and,
ooupled with the measures we anundetlaklnelo enhanoc studcm pcoledlon, WI! are
oonfident U lliver.sltv <Jf Pho.,l\lx will yield e" en gtoeater outcomes tor our studems.
Sincerely,

WiRiamJ, Pepice41o, Pre.sident
University of Phoenix
149
From: Kvaal, James
Sent: Thursday, August 19, 201 o 10:36 AM
To: Kanter, Martha; Taggart, Bill; Ochoa, Eduardo; Bergeron, David; Madzelan, Dan; Gomez,
Gabriella; Finley, Steve; Yuan, Georgia
Cc: Hamilton, Justin
Subject: ABC undercover
Attachments: image001 .gif; image002.jpg; image003.png; image004.png
This story is expected to run tonight
ABC News Investigates For-Profit Education: Recruiters at the University of Phoenix
ABC News Gets Answers for Student Who Claims She Was Duped by Online School
By CHRIS CUOMO, GERRY WAGSCHAL and LAUREN PEARLE
Aug. 19, 2010
Post a Comment
Ads for online schools are all over the Internet, plastered on billboards in subway cars and on television. The University
of Phoenix, with nearly 500,000 students, is the biggest for-profit college. But some former students said they were
duped into paying big bucks and going deeply in debt by slick and misleading recruiters.
Melissa Dalmier, a 30-year-old single mother of three from Noble, Ill., enrolled in the associate's degree in education
program at the University of Phoenix to reach her dream of becoming an elementary school teacher.
(ABC News)
"I don't want anyone else to be sucked in," said Melissa Dalmier, 30, of Noble, Ill.
The mother of three had big dreams to be an elementary school teacher, so when she saw ads for the University of
Phoenix pop-up on her computer, she e-m ailed them for more information. A few minutes later, Dalmier said she got a
call from one of the school's recruiters, who she said told her that enrolling in the associate's degree in education
program at the University of Phoenix would put her on the fast-track to reaching her dream.
150
"[The recruiter said) they had an agreement with Illinois State Board of Education and that as soon as I finished their
program I'd be ready to start working," she recalled.
Within 15 minutes, Dalmier was enrolled. Since she didn't have enough money to pay for tuition, she said the recruiter
helped her get federal student aid. In total, she took out about $8,000 in federally-guaranteed student loans.
But just a few months after Dalmier started, she said she learned the horrible truth: the degree program she was
enrolled in would not qualify her to become a public school teacher upon graduation in Illinois.
"It was an outright lie. A bold faced lie," she said.
Watch more ofthe undercover investigation tonight on "World News" at 6:30p.m. ET and later on "Nightline" at
11:35 p.m. ET
It's not the first time that the controversial school, which obtains almost 90 percent of its revenues from students paying
tuition from federal aid, has come under fire for its recruiting methods.
The University of Phoenix was one of 15 for-profit schools whose aggressive recruiting practices were the subject of
hearings held by Sen. Tom Harkin, D-lowa. The Government Accountability Office sent investigators to for-profit schools
across the country and found that all of them were misleading potential students.
In 2004, the University of Phoenix paid nearly $10 million to the Department of Education to settle allegations that it had
violated rules about its recruiting practices. The school did not admit any wrongdoing.
"I think maybe the whole orchard is contaminated," Harkin said. "There's a systemic problem with the system itself that
needs to be addressed."
ABC News wanted to know firsthand whether what Dalmier said happened to her, would happen to us, so we sent one
of our producers undercover to meet with a University of Phoenix recruiter.
Our producer told the recruiter, who was working out of an office in Houston, Texas, that he aspired to be a teacher and
planned to live in either Texas or New York. The recruiter told him to enroll in the Bachelor's of Science in Education
program, and with that degree and some student teaching, he would be set.
Producer: I just want to understand clearly. I can go to University of Phoenix, do my bachelor's degree, and 100 percent
for sure I can go back to either Texas, or New York and I can sit for those exams and once I finish those exams ... ! can
teach.
Recruiter: Then you can become a teacher. Yes. That is true. What's your e-mail address?
Despite her assurances, the recruiter's claim was not true. Even with successful completion of the required certification
testing, a degree from the University of Phoenix does not guarantee a teaching certificate in either of those states.
When we confronted Dr. William Pepicello, president of the University of Phoenix, about the recruiter's false promise,
he said it was "indefensible."
"It' s wrong. Can we do better? Absolutely. Do we train our people to give that kind of misadvice? Absolutely not. And we
can do better, we will do better, you know, we already have some initiatives that we talked about that we're putting in
place because at the end of the day, we have to get it right. "
151
But this was not the first time that the university's recruiting practices have come under scrutiny. In December 2009,
after two former employees came forward and accused the university of violating federal financial aid regulations with
its recruiting practices, without admitting wrongdoing the school agreed to pay $67.5 million to resolve the accusations.
The two whistleblowers received $19 million in the settlement.
When asked if the 2009 settlement was a sign that "we got caught," Pepicello disagreed.
"No, I wouldn't say it's proof that we got caught. I mean, it's certainly proof that we weren't doing as well as we could.
We could do better," he said.
The recruiter also told our undercover producer he could take out as much as $35,000 in federal financial aid to pay for
school. She also said that there might even be some money left over after tuition was paid.
Recruiter: I tell students to take out the max and whatever you don't need or you don't use then use it [for whatever].
But it's easier to take out more than you need and send back the excess versus you didn't take out enough.
Producer: What are the kinds of things though? I mean in terms of like that I could use it for? I mean, what if I
just ... because you're going to have to have money to walk around.
Recruiter: They don't care. Right. They don't. They just tell you use it for educational purposes.
Producer: And they don't ... They don't what?
Recruiter: No one follows up. No one says, What happened to this money? You received a check for $562, where did you
spend it?
Producer: It's your business.
The university president said that there was no excuse for a recruiter to push someone to borrow to the max.
'It's absolutely indefensible. It is not the way that I intend to run this university," Pepicello said.
For-Profit Universities Contributing to Financial Crisis?
Experts say recruiters who are misleading students may only be the tip of the iceberg. Students who have attended for-
profit schools are defaulting on their loans at an alarming rate, which experts say may be contributing to the next big
financial crisis.
At the University of Phoenix's headquarters, the loan repayment rate was 44 percent, according to data from 2009
provided by the Department of Education; students at their Nellis Air Force location had a repayment rate of 36 percent.
At the headquarters of Brown Mackie College, another for-profit school, the repayment rate was 27 percent. Harris
Miller, who heads the for-profit industry's lobby group, told Chris Cuomo that default rates at for profit schools are
comparable to other schools which service similar student populations.
Recruiters from for-profit schools obtained $24 billion in student loan and grant money for the 2008-2009 school year,
according to Government Accountability Office and Senate reports.
"These schools are marketing machines masquerading as universities," said Steve Eisman, a renowned hedge fund
investor who predicted the last big mortgage crisis. "I thought there would never again be an opportunity to be involved
in the short side as an industry as social destructive and morally bankrupt as the sub-prime mortgage
industry ... Unfortunately, I was wrong."
152
Though for-profits get the lion's share of their tuition from financial aid, the default rates on loans for students who
attended for profit schools are alarming. About 50 percent of the students at for-profits drop out, according to Eisman,
so schools need to keep adding new students, and have to try to recruit just about anyone --even those most vulnerable
in society, he says.
Benson Rawlins was considered homeless last year when he met two recruiters from the University of Phoenix, who
gave three seminars at Y -Haven, a shelter for transitional men in Cleveland, Ohio, or in effect, a homeless shelter.
Rawlins doesn't have aGED, but said the recruiters had no qualms trying to sell him an expensive associate's degree.
"It seems like it is just too much all about money, " he said, "Instead of helping someone get an education."
The university told ABC News it does not tolerate recruitment at facilities like Y-Haven.
"We can assure you that anyone who participated in the recruitment of residents from homeless facilities in Cleveland
no longer works for the University," said Alex Clark, a spokesperson for the University of Phoenix. "Any such activity is
strictly forbidden by our Code of Business Conduct and Ethics, and employees who violate this policy face disciplinary
action up to and including termination."
Harris Miller said even though the schools serve an important role by providing higher education to students who
wouldn't ordinarily get one, many schools' recruiting practices need to be changed.
Miller claimed that universities began to change even before the GAO's report on their misleading practices, including
changing how recruiters are compensated {so they do not receive bonuses or prizes for recruiting students), offering
"test drive" programs to help people figure out if higher education is for them and focusing more on consumer
protection.
When asked why for-profit universities don't return money back to those who have been misled by their solicitations,
Miller said: "There are other countries in the world like Canada which have a different system and it's something we're
going to look at."
But Miller admitted that the industry has no plan in place to pay back those who are carrying a debt from for-profit
schools.
Whatever the industry's plans for future, Dalmier said it won't help heal what happened.
"If they tell you something, investigate it before you enroll in their program. You really need to find out the truth and
how to further your passion or your dream," she said. "That way, you don't end up like me."
After ABC News' interview with Pepicello, the University of Phoenix offered Dalmier a scholarship for a bachelor's degree
of her choosing. Dalmier said she is considering their proposal.
Pepicello also said he plans to change the school's recruiting practices, especially the current model of compensation,
and will be offering students a "test drive."
Click HERE to read a letter to ABC News from William Pepicello.
153
Oltic& of the Prcsid('Ot
l>:;, Et .. .-A S<!tlt
A1 Mll4ll
A11gust 18, 2010
Tb!lnk Wll iillowJpg 1tti$ oppott\JI'liTy to mare our dice<tly with Good
Motnl ng Amculca's vicvters. and en, following 11\V reoeot inteNiew vti th Ch rl!
Cuomo.
As I told Mr. Cuomo, of Phoenix has strong student protectioo mea&ure$ in
plaee, and v;e do not tolerate pracooe\S by .. ny employee. We nave and
unambigvo\1$ politie$ in place to ensure prospective students artuble to make a fully-
informed doe.cision bout th.e Uni wmily and their ability to suecd here, indudins the
of tncurdng d.C!bt to pay foro education.
It $i!ddens and disappoints me tQ note that sometimt?s, (Jfe nol to
bv 6ut 1 \1/M'I.to that vJe take te at tlon to addrm a11y
such vlolatio'l'l, up t<l and Including termlnll:t ion of the -employees; invalve<l. Let me be
dear; even onevio11!tionoFowstudentprot.ectionpolities1Jooe too manv, and as
of this Univers;lty ram comMttt.ed to cnwrlns It does DOt ha Pllen. In fac;t, we
havo already undertal<en a nvmPJer of Important n11:w measure$ towsed on
prote<tion, including:
frllt)nclaliiter.acy tools tl'lf.!! ln:ID lmdm0nd the facts about flnaAtia laid
<I nO ttqv, need to borrow, wllith has already te.sult<MI in an
approxir'natl! lo the students wh<l takeout the
ma.xtmu.m too n
A frl!e thnte-we.ek program caUQ!I unive:rsity Orlsnt \!tion, Which helps nuclents
with or no tolleee unde nil whatit t" kes t o In a
challenging academic environment lilte 0\11'$, lbefore taking on butcft}n of

A q.Jg(WI 5fU!ll2!lit2rills &'ttm to trac;k and record tenS. ofthousands,of ,rmone
eve ry day. between prospective st\ldeni.!S COUI\Selors, for .any evidence of
f alse or misleading information; and
A flrm cQmmitment to c.ompletety te!limlnate as a compon-ent
of "tbe and comperuauoo of our t!nrollment advisors.
Our main f,ocus i:s and will always be students, and e11surms theirsucress by
equtp.plng t he.n with the tools they need to c:ompete and thrive In a changing global
eoonotny. Weare proud otovrirad< record in students, and .even more
proud of the thoiJSands of work in& leiltMr!S whCt have improved therr lives and advaneed
1heir GreEns arter graduating from our Vnive!'$i\V res ults f rom
Afidemlc
154
Ouring tneir enrollme-nt,l!nif,l:ldljty of P(!oenix: stud:ents experlence greatP.r
annUAl Silll\N irl<tQatei than tb11 nationll I avengt: for i!U worl<Ns: in 2008, our
bachelor'.s. program .s.tudents experienced an pertt!l'lt sataJV lnc(ease,
our master'$ prog!Cim st .. Jdel'lts sa\V an twerage lncrea.se of 9.7%;
University of Phoc.-nlx studel\ts ruporl higher thal'l peers
tbe ni!l.;i9n ln each of the ten cotesorles by the Nat lonal Swvcy of
Student Engagemellt
We are a leader iQ "non'tt'lltftt iooal'" roJlCJ!I! studeo1s, il 6(0U1)
comprises of all college ac:.cordlnc to the U.S, [)_,partmertt or
ilr\d
Aubout$12,000perye.ar. VniveyiiYgf Phoenix tl!i\iOO ii!Jd f:ePs are in
ranm nationllv. and our an(! material co.stsare towecrthan
ave-rage.
We are committed to at t he forefront of Innovation In higher and,
ooupled with the measures we anundetlaklnelo enhanoc studcm pcoledlon, WI! are
oonfident U lliver.sltv <Jf Pho.,l\lx will yield e" en gtoeater outcomes tor our studems.
Sincerely,

WiRiamJ, Pepice41o, Pre.sident
University of Phoenix
155
From:
Sent:
To:
Subject:
Attachments:
Kvaal, James
Friday, August 13, 2010 3:59 PM
Kanter, Martha; Miller, Tony; Weiss, Joanne; Hamilton, Justin; Gomez, Gabriella; Ochoa,
Eduardo; Taggart, Bill
Education's Duncan Cracks Down on For-Profit Colleges
image001 .gif
Bloomberg
Print Back to story
Education's Duncan Cracks Down on For-Profit
Colleges
By John Lauerman and John Hechinger- Aug 13, 2010
Education Secretary Arne Duncan will step up oversight of federal student financial-aid programs after an
undercover government invest1gation found deceptive marketing practices at 15 for-profit colleges.
Duncan vowed to expand the Education Department's enforcement staff, conduct undercover investigat1ons and
increase the number of program reviews, according to a letter to Iowa Democratic Senator Tom Harkin that was
obtained by Bloomberg News.
Apollo Group Inc., ITT Educational Services Inc. , and Career Education Corp. have fallen in U.S. markets as
Harkin has held hearings on sales practices at for-profit coll eges and their rel1 ance on federal student grants and
loans. The Education Department will hj re more than 60 additional investigators and increase the number of
program reviews by 50 percent after the investigation by the Government Accountability Office, Duncan said in
the letter, which was confirmed by the Education Department.
"The uneth1cal and potentially illegal practices uncovered by GAO are unacceptable," Duncan said. "We have a
responsibility to ensure that students can make informed choices about investing in postsecondary education,
and that taxpayers' investments in the federal student aid programs are helpi ng students."
Apollo Group, based in Phoenix, fell $1.37, or 3.4 percent, to $39.10 at 12:20 p.m. in Nasdaq StockMarket
composite trading. Career Education fell 73 cents, or 3.7 percent, to $18.86. ITT Educational fell $4.08, or 5.9
percent, to $65.22 in New York Stock Exchange composite trading. An index of 12 educat1on stocks has
dropped 27 percent in the past six months.
The Education Department's Inspector General will review the GAO' s findings and potentially refer individuals
for criminal prosecution, Duncan' s letter said. The department is also considering enforcement action against
schools that could result either in the return of federal money or the loss of a college' s elig1bility for federal
financial aid, accordi ng to the letter.
--Editors: Brad Skill man
To contact the reporter on this story: John Lauerman in Boston at jlauerman@bloomberg.net.
156
2010 BLOOMBERG L.P. ALL RIGHTS RESERVED.
157
From:
Sent:
To:
Subject:
Attachments:
FYI
Kvaal, James
Friday, August 06, 2010 2:56PM
Gomez, Gabriella; Kanter, Martha; Ochoa, Eduardo; Bergeron, David; Yuan, Georgia
Harkin at work
image001 .gif
From Apollo Group's (University of Phoenix) 8K filed today:
Item 8.01 Other Events.
Today, Apollo Group, Inc. (the "Company") announced that it has received a request for information from the
U.S. Senate Committee on Health, Education, Labor and Pensions relating to the Committee's ongoing
hearings relating to for-profit colleges receiving Title IV student financial aid. The request seeks information to
more accurately understand how the Company uses Federal resources, including how it recruits and enrolls
students, sets program price or tuition, determines financial aid including private or institutional loans, tracks
attendance, handles withdrawal of students and return of Title IV dollars and manages compliance with the
requirement that no more than 90% of revenues come from Title IV dollars. The request also seeks an
understanding of the number of students who complete or graduate from programs offered by the Company,
how many of those students find new work in their educational area, the debt levels of students enrolling and
completing programs and how the Company tracks and manages the number of students who risk default
within the cohort default rate window.
In furtherance of this, the Committee has requested that the Company provide information about a broad
spectrum of the Company's business, including detailed information relating to financial results, management,
operations, personnel , recruiting, enrollment, graduation, student withdrawals, receipt of Title IV funds,
institutional accreditation, regulatory compliance and other matters. The Company intends to cooperate with
the Committee and to work with the Committee to provide the requested information in a manner that does not
compromise the Company's sensitive proprietary operating and other information.
The Committee has requested that the Company produce a portion of the specified information by August 26,
2010 and the remainder of the information by September 16, 2010.
158
From: Kvaal, James
Sent: Tuesday, August 03, 201 o 3:42 PM
To:
Subject:
Dannenberg, Michael ; Martin, Phil; Arsenault, Leigh
FW: Bloomberg on GAO
-----Original Message- - - - -
From: Jane
Sent: August 2010 2:11 PM
To: James; Justin; David; Dan; Tara
Subject: Bloomberg on GAO
For- Profit Colleges Fall on Concern About Recruiting Tactics
By Nikolaj Gammeltoft
Aug . 3 (Bloomberg) -- For-profit education stocks declined in the U.S. after a Government
Accountability Office probe of the industry found recruiters lied to entice students and
encouraged them to commit fraud to qualify for aid.
Education Management Corp. and Bridgepoint Education Inc. helped send an index of 12
education companies to a 2.9 percent loss at 10:52 a.m. New York time. Recruiters at 15
unidentified colleges studied by the investigational misled potential
students about the duration and quality of their according to a report
obtained by Bloomberg News that will be released publicly tomorrow.
The shares retreated in six of the last seven losing 4.7 percent since July on
concern the government will reduce student aid for some programs. Apollo Group owner of
the biggest f or- profit university in the has l ost half its value since Jan.
data compiled by Bloomberg show.
"The main bear case is that fraudul ent l y recruiting said Robert a
trader at Kern Suslow Securities Inc. in New York. "Whenever going in front of
Congress you have a huge overhang for your stock."
The 30- page report examined colleges in
Texas and D.C. Both privately held and publicly traded education companies were
included.
Share Movers
Education Management dropped 5. 3 percent to $14.92. Bridgepoint Education fell 5.4 percent to
$17.92. DeVry Inc. lost 1.9 percent to $53.44. Corinthian Colleges Inc. declined 3.7 percent
to $8.91. Apollo Group retreated 3.6 percent to $45.43.
Career Education Corp. decreased 2.7 percent to $24.19. Capella Education Co. fell 2.3
percent to $91.38. ITT Educational Services Inc. slumped 2.8 percent to $80. 34. The
Washington Post which operates Kaplan Higher declined 1.9 percent to $425.62.
The Senate Labor and Pensions which commissioned the
will hold a hearing tomorrow to examine how for - profit colleges attract students. GAO
investigators posed as prospective recruits to investigate practices in the education
159
industry> which received at least $4 billion in U.S. grants and $20 billion in Department of
Education loans last year> the report said.
awhile the GAO findings are serious> we note that no public companies are cited for the most
egregious ones (i.e.> fraud)>" New York-based BMO Capital Markets analysts Jeffrey Silber and
Paul Condra wrote in a note today. awhile no specific schools were named> based on the data
provided> we believe two are owned by Apollo> two by Corinthian Colleges> and one by
Washington Post. These schools were not accused of fraud> but rather misleading marketing."
To contact the reporter on this story: Nikolaj Gammeltoft in New York at
ngammeltoft@bloomberg.net
160
From:
Sent:
To:
Subject:
Kvaal, James
Tuesday, August 03, 201 o 3:42 PM
Kanter, Martha; Yuan, Georgia
FW: Bloomberg on GAO
For-Profit Colleges Fall on Concern About Recruiting Tactics
By Nikolaj Gammeltoft
Aug. 3 (Bloomberg) -- For-profit education stocks declined in the U.S. after a Government
Accountability Office probe of the industry found recruiters lied to entice students and
encouraged them to commit fraud to qualify for aid.
Education Management Corp. and Bridgepoint Education Inc. helped send an index of 12
education companies to a 2.9 percent loss at 10:52 a.m. New York time. Recruiters at 15
unidentified colleges studied by the investigational misled potential
students about the duration and quality of their according to a report
obtained by Bloomberg News that will be released publicly tomorrow.
The shares retreated in six of the last seven losing 4.7 percent since July on
concern the government will reduce student aid for some programs. Apollo Group owner of
the biggest for-profit university in the has lost half its value since Jan.
data compiled by Bloomberg show.
"The main bear case is that fraudulently recruiting said Robert a
trader at Kern Suslow Securities Inc. in New York. "Whenever going in front of
Congress you have a huge overhang for your stock.
The 30-page report examined colleges in
Texas and D.C. Both privately held and publicly traded education companies were
included.
Share Movers
Education Management dropped 5.3 percent to $14.92. Bridgepoint Education fell 5.4 percent to
$17.92. DeVry Inc. lost 1.9 percent to $53.44. Corinthian Colleges Inc. declined 3.7 percent
to $8.91. Apollo Group retreated 3.6 percent to $45.43.
Career Education Corp. decreased 2.7 percent to $24.19. Capella Education Co. fell 2.3
percent to $91.38. ITT Educational Services Inc. slumped 2.8 percent to $80.34. The
Washington Post which operates Kaplan Higher declined 1.9 percent to $425.62.
The Senate Labor and Pensions which commissioned the
will hold a hearing tomorrow to examine how for - profit colleges attract students. GAO
investigators posed as prospective recruits to investigate practices in the education
which received at least $4 billion in U.S. grants and $20 billion in Department of
Education loans last the report said.
"While the GAO findings are we note that no public companies are cited for the most
egregious ones New York-based BMO Capital Markets analysts Jeffrey Silber and
Paul Condra wrote in a note today. "While no specific schools were based on the data
we believe two are owned by two by Corinthian and one by
Washington Post. These schools were not accused of but rather misleading marketing.
161
To contact the reporter on this story: Nikolaj Gammeltoft in New York at
ngammeltoft@bloomberg.net
162
From:
Sent:
To:
Subject:
Kvaal, James
Tuesday, July 20, 201 o 6:07 PM
Gomez, Gabriella
RE: Education Stocks
Attachments: image011 .png; image012.png; image013.png; image014.png; image015.png; image016.png;
image017.png; image018.png; image019.png; image020.png; image021.png; image022.gif;
image023.png; image024.png; image025.png
thanks
From: Gomez, Gabriella
Sent: Tuesday, July 20, 2010 5:49 PM
To: Kvaal, James
Subject: FW: Education Stocks
Have you seen this one?
From: Peller, Julie [mailto:julie.peller@mail.house.gov]
Sent: Tuesday, July 20, 2010 5:45 PM
To: Gomez, Gabriella
Subject: FW: Education Stocks
Julie Radocchia Peller
Committee on Education and Labor
***Please note the change in email address to julie.peller@mail.house.gov. Thank you.***
From: Teddy Downey [mailto:tdowney@wrgdc.com]
Sent: Tuesday, July 20, 2010 4:43 PM
To: Peller, Julie; Appel, Jeff; Pajcic, Helen
Subject: FW: Education Stocks
The most detail I've seen on the "rumor"
From: BofAML-Sara Gubins [mailto:feedback@mlresearch.ml.com]
Subject: Business, Education & Professional Services :Gainful employment speculation lifts ed stocks- United States-
13pp
Industry Overview
163
Gainful employment speculation lifts ed stocks
Link t o full report including important disclosures*
http://research 1.ml.com/ C/?q=PmV7LigHlEfltljEpgrEYA &r=karwma
Stocks up on expectations around gainf ul employment
BankofAmerica ..
Merrill Lynch
Postsecondary education stocks rallied 6.2% on Monday on speculation around gainful employment (GE) draft regulation
and related short covering. We believe the draft could be out as soon as this week. While still highly uncertain, we look at
possible outcomes and the potential impact.
Key elements will be critical, but some easing seems likely
It is our understanding that the Department of Education (DOE) may propose two options for calculating GE. The DOE
has not published anything and so plans/definitions are not yet clear. We caution that there could be significant variances
vs. what is proposed. Option 1: 8% debt service to income ratio requirement. Programs below 8% would be fine,
programs between 8-12% placed on probation (no details on this) , & >12% would be ineligible for Federal funds. The
income would be based on actual salaries (IRS/Social Security data -we question how obtainable this data is) as
opposed to the BLS average salary data that had been previously proposed. This would hurt ratios as many salaries are
below the Bureau of Labor Statistics (BLS) data. Option 2: 30% debt service t o discreti onary income ratio. Rather
than total income, this metric would use discretionary income (e.g., adjusted gross income minus a poverty level). Timing
of implementation isn't known & it is unclear if prior debt is included.
Potential i mpact would vary across the group
If the above options are correct, the 8% debt service ratio would impact many schools. Using actual salaries, rather than
BLS average data, would make the 8% debt service ratio harder to meet. We estimate an average 13% revenue cut
would be required by our coverage universe, assuming schools cut tuition to meet the 8% metric. At a 12% debt service to
income level , the impact would be greatly diminished. The 30% discretionary income ratio would be easier to meet,
particularly for bachelors programs and above, which makes us wonder if this option would have constraints around its
use. Under the 8% rule, on our estimates EDMC and ESI would be most negatively impacted, but a number of others
would be hurt as well, including CECO, coco, DV, CPLA, and APOL. However, the 30% rule would lead to the impact
on CPLA, DV, and APOL becoming minimal. The 30% rule would also lessen the impact on EDMC and ESI significantly.
Others, such as STRA and LOPE are in good shape under both scenarios. Please see p. 2 for key assumptions and
estimated revenue & EPS impacts.
DeVry a top pick; also recommend STRA, CPLA, LOPE
If the 30% debt service to discretionary income ratio is correct & depending on the definition of probation, this would be an
incremental positive and we could see education stocks rally further. However, given the importance of details in these
proposals, we continue to highlight stocks with less regulatory exposure such as Strayer and Grand Canyon. We also
like DeVry and Capella. These stocks carry more GE exposure & would be helped by changes to the rule. Beyond GE,
the sector faces further Senate hearings (expected 8/4) and potential legislation (unlikely near-term, but a heightened risk
longer-term).
To repl y to Sara Gubins directl y, click here or call +1 646 855 1961
Read the research report, available through the link above, for complete information including important disclosures and analyst certification(s). The
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166
From:
Sent:
To:
Subject:
Attachments:
Kvaal, James
Sunday, July 11 , 2010 3:18PM
Pauline Abernathy
oddity
image001 .png; image002.png
- rtJl!Hl .
71 . I I I I IJ
L 1 r ~ ~ updated: Fri ., Jul. 9, 2010. 10:47 AM
ESPN -- as usual -- overplays this show
By PHIL MUSHNICK
Last Updated: 10:47 AM, July 9, 2010
Posted: 3:16AM, July 9, 2010
So, what'd you expect from ESPN? A classy, dignified pregame to last night's "Decision" by LeBron James?
The preface was everything ESPN does to everything, and that ain't good.
"We're all on the edge of our seats," SportsCenter anchor Linda Cohn said at 8:05p.m.
If so, perhaps that came from slumping in our seats, a weary response to too much of too much. By the time
James got around to it, the whole thing seemed less suspensful than Geraldo Rivera prying open AI Capone's
vault.
At 8:07, nearly an hour and a half before James named the name, SportsCenter co-host Ryan Burr asked, "But
now, in the final hour, where things can really start to change, what is coming out of LeBron's camp, now?"
How's that? Things can really start to change in the last hour? How does he know that? Based on past
"Decisions?" This one was unprecedented, and for the sake of sports, modesty and dignity, we should hope it
stays unprecedented; we should hope nothing this ugly happens again.
As always with TV, the going-to-the-Heat telecast carried the whiff of a fix, of "Follow the money."
Jim Gray, the "chosen" independent interviewer who took James' declaration, did a nice job of keeping
it low-key while stretching it, but, according to broadcasting sources, Gray was chosen because of his
"special sales relationship" with the online college, the University of Phoenix, one of the telecast's
primary sponsors. Gray's Monday Night Football pregame show Westwood One Radio is sponsored by
the University of Phoenix.
And James' first day-after exclusive interview has been scheduled to be this morning with ABC's "Good
Morning America." That's ABC, owned by Disney, which also owns ESPN.
The one who seemed to bring the most subdued, dignified feel to the night was James, who spoke like a pro, a
team guy, a modest guy, a good guy. He came out much better than those who advise him had advised.
One day -- soon, hopefully -- James will take a hard look at the last few weeks and encourage the next free
agent superstars to do it differently, to do it more gracefully, to do it better.
And, until ESPN changes its style and direction to replace hype and self-promotion with its original , long-gone
good sense of sport-- to avoid doing it on and with ESPN.
NEW YORK POST is a registered trademark of NYP Holdings, Inc.
NYPOST.COM , NYPOSTONLINE.COM , and NEWYORKPOST.COM are trademarks of NYP Holdings, Inc.
Copyright 2010 NYP Holdings, Inc. All rights reserved. Privacy I Terms of Use
167
From:
Sent:
To:
Subject:
Attachments:
Loeb, Emily M. @who.eop.gov)
Monday, August 02, 201 o 4:18 PM
Kvaal, James; Jawando, William 0.; Rodriguez, Roberto J. ; Gomez, Gabriella; Singiser, Dana
E. ; Perez, Alejandro; Rouse, Cecilia E.
Gainful Employment- Politico Op-Ed
image001.png
For-profit school students need loans
By: Ronnie Shows and Bob Barr
August 2, 2010 04:36AM EDT
When we served together in Congress, though we were both conservative members of
our respective political parties from the Deep South, we were often on opposite sides of
major issues. However, a few years out of Congress, and outside the Beltway, helps
former Capitol Hill adversaries realize they see eye to eye on a host of important, even
controversial , issues.
One area we agree on is the need to improve our education system. After all , no amount
of tax cuts or government services have nearly the potential for improving our country as a
well-educated citizenry.
So both of us are monitoring a new proposal by the Obama administration aimed at
reducing the debt burden taken on by students who use federal student loans to be able to
attend proprietary, or for-profit, colleges. The proposal reflects the administration's
position that proprietary colleges offer degrees but little hope of employment, and when
these loans go into default, the U.S. taxpayer is left holding the bag. This is a decidedly
one-sided perspective.
While the Education Department's proposal - known as Gainful Employment- may be
laudable, we have concerns about its underlying assertions, implementation and likely
results.
First, many good schools that offer students real opportunities are unl ikely to survive
under the new rules. The way the proposed regulations are written, some substandard
schools are likely to be closed- and this should be applauded. But a large number of
good programs - that provide real career benefits for students who really need them -
could also be eliminated.
We also take issue with some opponents of for-profit colleges, who often look down their
noses at these institutions. Yes, the for-profit schools advertise on daytime television. Yes,
they exist to make a profit. And no, most of their students are not kids who get summer
internships on Capitol Hill; students well-served by traditional, four-year liberal arts
colleges. Student loans will, and should, be preserved for this population.
Generally, however, students who attend schools like the University of Phoenix and DeVry
University are working-class; many are minorities and women. Often, these students are
the first in their family to attend college. They face life obstacles that students at traditional
four -year colleges do not.
168
Because of these realities, we need to accept the fact that students at for-profit colleges
may have greater problems meeting financial obligations incurred during their school
years. As a group, they are likely to have a higher default rate than their fellow students at
Ivy League colleges or state-run universities.
President Barack Obama has lofty education goals: that the United States should have the
highest percentage of college graduates in the world by 2020 and that an additional 5
million Americans have degrees and certificates in the next decade. With state universities
and community colleges around the nation facing serious budget shortfalls, the for-profit
sector will have to - and can - play a vital role in helping to meet these ambitious goals.
Therefore, it is clear to both of us that the Obama administration needs to find common-
sense ways to differentiate between for-profit colleges that offer students good course
work and degrees that will help them find employment and schools that fail in meeting
those goals at unacceptable rates. The bad schools should rightly be eliminated, while
those providing valuable programs should be helped, not hurt.
This will not be the easiest of tasks. But, heck, if a Libertarian and a Blue Dog Democrat
can find ways to agree on controversial issues like education policy, surely the White
House and the Education Department can put their heads together and fix the flawed
Gainful Employment proposal.
Ronnie Shows served in the House as a Blue Dog Democrat from Mississippi from 1999
to 2003. Bob Barr, now a Libertarian, represented Georgia as a Republican from 1993 to
2003.
From: Kvaal, James [mailto:James.Kvaal@ed.gov]
Sent: Friday, July 30, 2010 5:46 PM
To: Kvaal, James; Jawando, William 0.; Rodriguez, Roberto J.; Gomez, Gabriella; Singiser, Dana E.; Loeb, Emily M.;
Perez, Alejandro; Rouse, Cecilia E.
Subject: RE: Gainful Employment -traction in minority community
More on this.
Search News
Browse Archives
News
In Whose Interest?
169
July 30, 2010
WASHINGTON- Just a few hours after the U.S. Department of Education released the full text of its
proposed regulations to define "gainful employment" last Friday, two groups that rarely weigh in on
education issues circulated news releases expressing concern that the rule would limit minority
students' access to postsecondary education.
In its statement, MANA: A National Latina Organization said that the proposed regulations would
"adversely affect Hispanic students' ability to borrow money and will limit Hispanic students' access to
higher education. " The National Black Chamber of Commerce said the rules would "disproportionately
harm low-income and minority populations by discriminating against students who must borrow the
needed tuition to attend college."
On Monday, the day when the regulations were published in the Federal Register in a notice of
proposed rule-making, two more groups that represent minority groups but usually don't wade into
higher education policy debates-- the National Organization of Black Elected Legislative Women and
the National Hispanic Caucus of State Legislators-- made similar statements.
To proponents of the gainful employment regulations, minority advocacy groups and the for-profit
colleges seem unlikely bedfellows. Advocates of the rules argue that they would not deny students
access to higher education or to federal financial aid, but would instead redirect students to better
programs, whether at nonprofit or for-profit institutions.
Maintaining the regulatory status quo on for-profit colleges, they say, would continue to leave
students-- many of them minority and low-income students-- buried in debt and with meaningless
credentials. While there are many aspects of the regulations that are debatable, they would not bar
any student from receiving federal aid to pursue postsecondary education. Rather, they would restrict
programs that purport to prepare students for jobs and that fail to lead students to jobs that pay well
enough for them to repay their loans-- based on repayment rates and two debt service-to-income
ratios -- from accepting federal financial aid dollars.
"In some instances individuals may very much benefit from these schools," said Arnold Mitchem,
president of the Council for Opportunity in Education, which works to help !ow-income and first-
generation college students gain access to higher education. "Even so, there are a lot of sharks in the
water and that's what these regulations are addressing." He doubts that the groups independently
became concerned about these issues-- and he' s right.
Though the statements may not have all been written by the same person, the views expressed in
them can in large part be traced to one prominent Washington lobbying firm, the Podesta Group. A
Podesta staffer confirmed that the firm has performed "outreach" to black and Hispanic groups
concerned about civil rights issues, including those that became interested in for-profit higher
education in recent weeks.
"It's not a policy discussion for them, it's something they can really see the impact of-- the millions of
students in thousands of programs that could lose their financial aid," the aide said. (Some of the
same groups wrote letters to the Education Department this spring while the rules were being
drafted.)
According to lobbying disclosure forms, the Career College Association, the trade organization that
represents most of for-profit higher education, paid Podesta Group $50.000 in the first guarter of 2010
and $80.000 in the second quarter to lobby Congress and the Obama administration. In the first half
170
of the year, Podesta Group reported $210,000 in lobbying fees from Career Education Corporation,
the company that runs American InterContinental University, Sanford-Brown Institutes and Le Cordon
Bleu North America, among other institutions.
Harris N. Miller, CCA' s president, confirmed that the groups that have spoken out on gainful
employment "were approached by our schools and by other people who deal with minority
organizations," informed of the issues at play, and asked to speak out against the proposals.
"These organizations realize on balance that the net contribution to the country and in particular to
low-income and minority students is positive," Miller said. "The regulations the department has
proposed would disproportionately affect lower-income working adults-- many of whom are minorities
-- who are not served by traditional higher education."
To Barmak Nassirian, associate executive director of the American Association of Collegiate
Registrars and Admissions Officers, the involvement of CCA, for-profit colleges and lobbyists in
getting groups with minority affiliations "is not at all surprising."
The notice of proposed rule-making, he said, "is a fairly complicated thing and takes some t ime to
weed through." That groups that haven't closely monitored the negotiated rule-making process that
contributed to the drafting of the regulations could comment on it within a few hours of release
suggested to him that someone else was pulling strings behind the scenes. "It's pure astroturf," he
said, using a term that's come to symbolize lobbyist-stimulated "grassroots" campaigns
Alma Morales Rioja, president and CEO of MANA, said she tries "to be very, very careful and very
introspective" before taking official policy positions, and that she has been "paying a lot of attention"
to the growing scrutiny of for-profit colleges. "I am really suspect of any school that is not accredited,
that is not certified," she said. "I see all these fly-by-night operations and would have nothing to do
with them. We're trying to allow the additional opportunity that comes with career education."
Nonetheless, her group' s July 23 press release appears to be the first instance in which MANA has
expressed an opinion. When asked if she had discussed gainful employment with anyone advocating
for CCA, Rioja avoided answering the question.
Pauline Abernathy, vice president of the Institute for College Access and Success, said that holding
vocational programs accountable for preparing students for gainful employment "is one of the best
ways to increase access to quality, affordable education and training." Further, she noted that three
prominent civil rights groups that do weigh in with regularity on higher education issues-- the NAACP,
Rainbow Push Coal ition and National Council of La Raza -- "have all called for a strong definition of
gainful employment to prevent unscrupulous career education programs from exploiting students of
color."
She added: "Publicly traded for-profit colleges are legally obl igated to make profitability for
shareholders their overriding objective and their claims should be evaluated with that in mind."
As the federal government's investment in student aid has grown, said Mitchem, of the Council for
Opportunity in Education, "there' s been a lot of business buzz that this is a new frontier, and people
are thinking, ' How can I put something together so I can take advantage of this for my own financial
interests?' " But those financial gains, he said, come on the backs of "a population who are vulnerable
and uninformed who are looking for opportunities, who are looking for success. "
171
The National Black Chamber of Commerce and the National Hispanic Caucus of State Legislators
were both unresponsive to multiple phone calls and e-mail messages. The headquarters of National
Organization of Black Elected Legislative Women directed inquiries to its president, Sharon Weston
Broome, a Louisiana state senator, who did not respond to an interview request.
The National Hispanic Caucus of State Legislators' ties to the for-profit sector are most obvious.
Catherine A. Caponi, vice president of government relations at Education Management Corporation,
is listed as an "associate business member" on the group's Business Board of Advisors. So far this
year, Education Management has spent at least $160,000 on Washington lobbying by Gray Loeffler,
Jolly/Rissler and Heather Podesta and Associates, which is run by the wife of Podesta Group's
chairman.
Lobbying efforts are a "battle for the minds and souls of certain people in Washington," Miller said, "to
show them that we offer students that path to the American dream."
Mitchem is more cynical. "The more oars you can put in the water, the easier it is to get to your goal ,"
he said. "But it doesn't mean it's going to happen."
- Jennifer Epstein
Blog Roll
Copyright 2010 Inside Higher Ed
From: Kvaal, James
Sent: Wednesday, July 28, 2010 7:56PM
To: 'Jawando, William 0.'; Rodriguez, Roberto J.; Gomez, Gabriella; Singiser, Dana E.; Loeb, Emily M.; Perez, Alejandro;
Rouse, Cecilia E.
Subject: RE: Gainful Employment -traction in minority community
Here are some TPs. How can we help?
From: Jawanda, William 0. [mailtolm)l81 lg)who.eop.gov]
Sent: Monday, July 26, 2010 3:50PM
To: Rodriguez, Roberto J.; Gomez, Gabriella; Singiser, Dana E.; Loeb, Emily M.; Perez, Alejandro; Rouse, Cecilia E.
Cc: Kvaal, James
Subject: RE: Gainful Employment -traction in minority community
Same here. On the Af-Am side, the National Alliance of Black Chambers of Commerce (different from group below) will
likely be more complimentary especially once we get better information out there. Do we have some TPs?
WJ
From: Rodriguez, Roberto J.
Sent: Monday, July 26, 2010 3:33PM
To: 'Gabriella.Gomez@ed.gov'; Jawanda, William 0.; Singiser, Dana E.; Loeb, Emily M.; Perez, Alejandro; Rouse, Cecilia
E.
Cc: 'James.Kvaal@ed.gov'
Subject: Re: Gainful Employment- traction in minority community
Looping in Ceci, as we were just discussing this in the hall.
172
From: Gomez, Gabriella <Gabriella.Gomez@ed.gov>
To: Rodriguez, Roberto J.; Jawanda, William 0.; Singiser, Dana E.; Loeb, Emily M.; Perez, Alejandro
Cc: Kvaal, James <James.Kvaal@ed.gov>
Sent: Man Jul 26 15:17:26 2010
Subject: Gainful Employment- traction in minority community
Thanks
From: Kvaal, James
Sent: Monday, July 26, 2010 2:55 PM
To: Kanter, Martha; Ochoa, Eduardo; Bergeron, David; Hamilton, Justin; Gomez, Gabriella
Subject: RE: National Black Chamber of Commerce
Actually this is part of a coordinated effort-
NOBEL/Women:
http://www.earthtimes.org/articles/press/access-african-american-students.1398112.html
Hispanic state legislators:
http://www.prnewswire.com/news-releases/hispanic-state-legislators-concerned-over-potential-reduced-hispanic-
opportu nity-for-higher -education-99 23 297 4. htm I
MANA:
http://www. prnewswire. com/ news-releases/ mana-expresses-concern-over-i mpact -of -us-department -of -educations-
gainful-employment-rule-on-minority-students-99138204.html
From: Kvaal, James
Sent: Monday, July 26, 2010 2:49 PM
To: Kanter, Martha; Ochoa, Eduardo; Bergeron, David; Hamilton, Justin; Gomez, Gabriella
Subject: National Black Chamber of Commerce
COMPANY NEWS
Department of Ed Rule will Limit Access for Black Students
Fri , Jul 23 16:45 PM EDT
Department of Ed Rule will Limit Access for
Black Students
PR Newswire
WASHINGTON, July 23
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Gainful Employment limits options for students
WASHINGTON, July 231PRNewswire-USNewswirel -- In response to the Department of Education
issuing a "Gainful Employment" rule today that would make certain career college programs ineligible
for Title IV financial aid and effectively eliminate the opportunity for lower-income students to attend
career colleges, Harry Alford, president of the National Black Chamber of Commerce issued the
following statement.
"Gainful Employment will disproportionately harm low-income and minority populations by
discriminating against students who must borrow the needed tuition to attend college. Without
financial aid, access to higher education will be limited for thousands of students. At present, Black
students make up 18% of enrollees in for-profit colleges and universities- many of them would find it
impossible to pursue higher education without this financial aid. Many of these private sector schools
are the solution to our education challenges, not the problem."
About NBCC
The NBCC reaches 100,000 Black owned businesses. There are 1.9 million Black owned businesses
in the United States. Black businesses account for over $187 billion in annual sales. African
Americans have over $800 billion in expendable income each year according to the US Bureau of
Census. The National Black Chamber of Commerce is dedicated to economically empowering and
sustaining African American communities through entrepreneurship and capitalistic activity within the
United States and via interaction with the Black Diaspora.
For more information, please call NBCC at (202) 466-6888 or visit www.nationalbcc.org/
SOURCE National Black Chamber of Commerce
174
From:
Sent:
To:
Subject:
Louis Soares [lsoares@americanprogress.org]
Friday, March 05, 2010 8:58AM
Yuan, Georgia
FYI Bloomberg article interesting and hair-raising on for-profit buying non-profit universities
http://www.bloomberg.com/apps/news?pid=washinqtonstorv&sid=aYqphCvYXAal
Your Taxes Support For-Profits as They Buy Colleges (Update3)
By Daniel Golden
March 4 (Bloomberg)-- ITT Educational Services Inc. paid $20.8 million for debt-ridden Daniel Webster
College in June. In return, the company obtained an academic credential that may generate a taxpayer-funded
bonanza worth as much as $1 billion.
ITT Educational, the U.S.' s third-biggest higher education company with a market value of$3.8 billion, may
increase it by 26 percent, or $1 billion, within five years because of the purchase of 1,200-student Daniel
Webster in Nashua, New Hampshire, according to Michael Clifford, an investor in Del Mar, California, who
has participated in the acquisitions of four nonprofit colleges. At least 75 percent of new revenue would come
from access to the more than $100 billion a year in financial aid the U.S. hands out to college students, he said.
Key to tapping that money is Webster' s regional accreditation, which is the same gold standard of academic
quality enjoyed by Harvard University and helps students transfer course credits from one college to another.
Daniel Webster' s accreditation was its " most attractive" feature to ITT Educational, said Michael Goldstein, an
attorney at Dow Lohnes, a Washington law firm that has represented the company.
"Companies are buying accreditation," said Kevin Kinser, an associate professor at the State University of New
York at Albany, who studies for-profit higher education. "You can get accreditation a lot of ways, but all ofthe
others take time. They don' t have time. They want to boost enrollment 100 percent in two years."
Exploiting Loopholes
The nation' s for-profit higher education companies have tripled enrollment to 1.4 million students and revenue
to $26 billion in the past decade, in part through the recruitment of low-income students and active-duty
military. Now they' re taking a new tack in their quest to expand. By exploiting loopholes in government
regulation and an accreditation system that wasn' t designed to evaluate for-profit takeovers, they' re acquiring
struggling nonprofit and religious colleges-- and their coveted accreditation. Typically, the goal is to transform
the schools into online behemoths at taxpayer expense.
For-profit education companies, including ITT Educational Services, based in Carmel , Indiana, and Laureate
Education Inc., in Baltimore, have purchased at least 16 nonprofit colleges with regional accreditation since
2004, according to corporate announcements and filings with the U.S. Securities and Exchange Commission.
Jack Welch, the former chief executive of General Electric Co., and Michael Milken, the U.S. junk bond
pioneer, have invested in for-profit companies that bought or formed partnerships with nonprofit, regionally
accredited schools.
Academic Status
By acquiring regional accreditation, trade and online colleges gain a credential usually associated with the
traditional academic culture of liberal arts, faculty scholarship and selective admissions. Normally the
accreditation process takes about five years and requires evaluations by outside professors. The regional bodies
examine financial stability, academic rigor and commitment to "teaching, learning, service and scholarship,"
according to the Web site of the Commission on Institutions of Higher Education, which accredits colleges in
New England.
175
Enrollment at Grand Canyon University, a Christian college in Phoenix bought by investors in 2004, has soared
to 37,700, as of Dec. 31, up from 1,500, said Brian Mueller, chief executive of Grand Canyon Education Inc.
Ninety-two percent of students now take classes on11ne, according to the company's most recent 10-K.
Bridgepoint Education Tnc. , based in San Diego, has boosted enrollment of two regionally accredited colleges it
bought in 2005 and 2007 to 53,688 students as ofDec. 31, up from 400 combined, according to a company
filing. Ninety-nine percent of those students take courses exclusively online.
Growth Potential
Daniel Webster "could parallel Grand Canyon or Bridgepoint's growth curve," said Clifford, who was part of
the investor group that purchased Grand Canyon.
ITT Educational rose two cents, or less than one percent, to $109.80 at 4:15p.m. today in Nasdaq stock market
trading. The company rose 2.5 percent in the 12 months ended today.
ITT Educational declined to comment for this story. The company plans to open more Daniel Webster
campuses and also expand online offerings, Kevin Modany, ITT Educational' s chairman and chief executive
officer, said in a Feb. 22 presentation to analysts. The company expects to introduce programs including
accounting, education and health sciences, he said.
Daniel Webster will attract more students "a little on the higher end" in income whose tuition would be paid by
private employers rather than federal financial aid, Modany said.
New Regulations
The U.S. Department of Education, which doled out $129 billion in federal financial aid to students at
accredited postsecondary schools in the year ended Sept. 30, is examining whether these kinds of acquisitions
circumvent a federal law that new for-profit colleges can' t qualify for assistance for two years, Deputy
Undersecretary ofEducation Robert Shireman said in a telephone interview.
Under federal regulations taking effect July 1, accrediting bodies may also have to notify the secretary of
education if enrollment at a college with online courses increases more than 50 percent in one year.
"It's an area that we are watching closely," Shireman said. "It certainly has been a challenge both for
accreditors and the Department of Education to keep up with the new creative arrangements that have been
developing. "
Immediate Benefits
Buying accreditation lets the new owners benefit immediately from federal student aid, which provides more
than 80 percent of revenue for some for-profit colleges, instead of having to wait at least two years. Tradit1onal
colleges are also more inclined to offer transfer credits for courses taken at regionally approved institutions,
making it easier to attract students nationwide.
The six nonprofit regional accrediting bodies, which rely on academic volunteers, bestow the valuable
credential with scant scrutiny of the buyers' backgrounds, Barmak Nassirian, associate executive director of the
American Association of Collegiate Registrars & Admissions Officers in Washington, said in a telephone
interview.
While accrediting bodies treat these purchases as changes of ownership, the acquisitions, in reality, create new
colleges that should be required to earn certification from scratch, Kinser said.
Maintain Mission
For accreditation to continue once the college is sold, the buyer must promise not to change its mission, Steven
Crow, former execut1ve director of the Chicago-based Higher Learning Commission, the largest regional body,
said in a telephone interview. Once accreditation is maintained, the acquirer seeks permission, which is usually
granted, to start branch campuses and online programs, Crow said.
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"You knew by month six they would come back to you with a new game plan," said Crow, now a consultant to
publicly traded Corinthian Colleges Inc., based in Santa Ana, California. It acquired regionally accredited San
Francisco-based Heald College on Jan. 4.
Obama administration officials have recently questioned whether the accreditation system is effective in
protecting academic standards. Accrediting decisions Jack transparency and take too long, Undersecretary of
Education Martha Kanter said in a Jan. 26 speech in Washington to the annual meeting of the Council for
Higher Education Accreditation.
Considering Termination
The inspector general of the Education Department in December urged the agency to consider terminating
recognition of the Higher Learning Commission, which has approved more for- profit colleges than its
counterparts around the country.
The inspector general criticized the commission' s decision to accredit Career Education Corp.'s online
American Intercontinental University, citing concerns about how much time students spent in class. The
approval was appropriate, the commission and Hoffman Estates, lllinois-based Career Education said.
More vigilance by the Education Department and accrediting groups is likely to slow enrollment growth and the
share prices of higher education companies that rely on acquisitions, said Clifford. While publicly held
postsecondary education companies rose 29.9 percent in the 12 months ended March 3, they lagged behind the
S&P 500, which increased 60.7 percent over the same period, said Jeffrey Silber, an analyst for BMO Capital
Markets in New York. The shortfall reflected investors' fears oftighter federal regulation of for-profit colleges,
Silber said.
Accreditation' s Worth
Regional accreditation is worth $10 million to a for-profit acquirer, Clifford said in a telephone interview.
That's how much it would cost to start a regionally accredited college, a process that can take 10 years and has
only a 50-50 chance of success, he said. On top of the $10 million, buyers typically pay $23,000 to $50,000 per
enrolled student, making the purchase ofDaniel Webster a bargain, Clifford said.
Clifford and his fellow investors popularized the strategy of acquiring nonprofit colleges with regional
accreditation by purchasing Grand Canyon University in 2004 and building online enrollment.
Grand Canyon " is the same institution," Mueller said in an e-mail. "It was important to the new leadership
group that the mission of providing a high-quality Christian-based education remain intact. "
Grand Canyon, which went public in November 2008, derived 83 percent of its revenue from federal financial
aid in 2009, according to a company filing.
Bridgepoint, Ashford
Bridgepoint Education bought the regionally accredited Franciscan University of the Prairies in 2005 and
Colorado School ofProfessional Psychology in 2007. It renamed them Ashford University and University of the
Rockies, respectively, and refocused them online. Ashford gained 86 percent of its revenue from federal student
aid in 2009 and University of the Rockies got 85 percent, according to a 10-K filing by Bridgepoint, which went
public in April.
"There are several meaningful continuities" from the colleges before they were acquired, including campus
athletic and social events, Shari Rodriguez, a Bridgepoint spokeswoman, wrote in an e-mail.
Clifford participated in the 2008 purchase of Myers University in Cleveland, which was renamed Chancellor
University. Chancellor attracted Welch as an investor last year and named its new online management institute
after him. Welch collaborated with faculty in developing curricula for a master' s program in business
administration, Clifford said.
' Something New'
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"We chose to work with Chancellor University because it gave us the flexibility to start something new," Welch
said through a spokeswoman, Betsy Linaberger. " As a for-profit venture, we have the resources to invest in the
student experience and the very best faculty, and we want to provide a high quality business education."
Knowledge Universe Learning Group, chaired by Milken, entered into a partnership in 2007 with regionally
accredited Sierra Nevada College in Incline Village, Nevada, agreeing to provide as much as $15 million in
return for an opportunity to share in online revenue, Geoffrey Moore, a senior adviser to Milken, said inane-
mail. The company is a unit of Santa Monica, California-based Knowledge Universe Inc., of which Milken is
co-founder and chairman. Knowledge Universe Learning Group has three seats on the nonprofit college' s nine-
member board, Moore said.
'Existing Character'
"This partnership preserved the existing character of Sierra Nevada College," he said. "That was important to us
and the college."
A 2006 regulatory change fostered online growth and made takeovers more attractive, said Silber, the BMO
analyst. That year, Congress eliminated a rule prohibiting colleges that offered more than half of their courses
online from receiving federal financial aid.
ITT Educational Services Inc. didn' t buy Daniel Webster just for its 52-acre red-brick campus and science and
technology programs including training pilots and air traffic controllers.
"Regional accreditation was very important" to the company, said Goldstein, co-leader of the higher education
practice at Dow Lohnes. "I don' t think there' s any question that was the most attractive element."
Of the $20.8 million purchase price, $20.6 million went to pay off the college' s debt, according to an ITT
Educational 1 0-Q filing.
Making Changes
lTT Educational Services, which was spun off from ITT Corp. in the 1990s, wasted no time making changes at
Daniel Webster. It renovated a main building and razed a dilapidated dormitory. It also dismissed one fourth of
the staff, fired President Robert Myers, and has been accused by faculty members of misleading the New
England accreditor, the Commission on Institutions of Higher Education, based in Bedford, Massachusetts.
"ITT didn' t really have much interest in anything other than having acquired a regionally accredited
institution," said Myers, now president of the New England Culinary Institute in Montpelier, Vermont. "Ifl had
it to do all over again, I wouldn't have gone anywhere near ITT. The fundamental nature of the college has
changed."
"We' re making fantastic progress with the cultural assimilation" ofDaniel Webster, Modany said in a Jan. 21
call with analysts. " Things are going really well there, great group of staff and faculty, and everybody is getting
on board."
' Something Different'
Barbara Brittingham, director of the Commission on Institutions of Higher Education, declined to comment on
its approval of the Daniel Webster sale.
In general, "when these institutions are bought, they are not at the moment successful in the financial sense or
they wouldn't be for sale," Brittingham said. "There' s an understanding that whoever buys them is going to
want to do something different."
Accreditation is higher education' s way of regulating itself. The nonprofit associations set standards on
financial stability, governance, faculty and academic programs and use volunteers from college presidents to
professors to assess quality. It is a peer review system: a marketing professor is more likely than a poet to
evaluate a business school.
For more than a century, regional organizations have evaluated most public and private universities. Starting in
the 1950s, leaders of for-profit colleges, which were then ineligible for regional approval, established seven
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national accrediting bodies for career education and training. The regions dropped their for-profit ban in the
1960s.
Cachet, Credits
Apollo Group Inc.' s University of Phoenix, whose enrollment of 455,600 makes it the nation's second-largest
university behind the State University of New York system, is accredited by a regional body, the Higher
Learning Commission. Students enrolled at both regionally and nationally accredited colleges can receive
federal grants and loans.
Regional accreditation is important to for-profit colleges because students are attracted to its cachet and can
transfer course credits more easily. Only 14 percent of nonprofit universities accept credits transferred from
nationally certified schools, according to a 2006 study by the University Continuing Education Association, in
Washington.
The six regional associations scrutinize takeovers of nonprofit colleges in advance, and then follow up
afterward, accrediting officials said in telephone interviews. They could cite few, if any, cases in which they
refused to continue accreditation, they said.
Heald Purchase
Corinthian Colleges' past difficulties with California state regulators didn't matter to accreditors when it
purchased Heald Capital LLC, parent company of Heald College, for $395 million. Corinthian, the country' s
seventh-largest higher education company by market value, has more than 100 campuses in North America, and
had 106,052 students as ofDec. 31, including Heald, said Anna Marie Dunlap, a Corinthian spokeswoman.
Corinthian paid a $6.5 million settlement in July 2007 to the California attorney general ' s office, over allegedly
misrepresenting graduates' job placement rates and salaries. It also agreed to cease enrolling students in 11
programs at nine campuses. The Santa Ana, California-based Corinthian said in a 10-K filing that it didn' t
admit wrongdoing.
"We strongly disagreed with the Attorney General ' s conclusions, but we are pleased to have settled the matter,"
Dunlap said in an e-mail.
Exclusively Online
Regionally accredited Heald College had 11 campuses with 12,900 students, primarily in two-year health-care
and business programs, as ofDec. 31. The college was nonprofit before its purchase in 2007 by Palm Ventures
LLC, a Greenwich, Connecticut, investment company. Heald expects to start enrolling exclusively online
students this year, Corinthian Chief Executive Peter Waller wrote in an e-mail.
The Accrediting Commission for Community & Junior Colleges in Novato, California, which certifies two-year
institutions in California and Hawaii, approved the change in Heald' s ownership.
"We judge the college we accredit," said Barbara Beno, president of the commission. "It would be unfair to say,
' Heald, you' ve been bought by a parent corporation that doesn't have as fine a track record as you do.
Therefore, we' ll condemn you,"' she said in a telephone interview.
Heald will "continue to meet ACCJC's accreditation standards and eligibility requirements," Waller said.
The scrutiny "doesn' t remotely satisfy the sloppiest of due-diligence requirements," said Nassirian of the
American Association of Collegiate Registrars & Admissions Officers. "There is no methodical review of who
has bought the college. If the Cosa Nostra applied, you would think you' d take a look."
'Same Animal'
The nation' s biggest regional accreditor is starting to take a closer look. The Higher Learning Commission,
which certifies more than 1,000 colleges from Arkansas to Wisconsin, stiffened its rules on ownership changes
last year.
Buyers must wait from one to four years to reapply for accreditation if the college won' t stay "the same
animal," President Sylvia Manning said in a telephone interview. The commission now charges $10,000 for
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ownership changes to pay for more extensive research. New owners must be approved by its board, rather than
at the staff level, Manning said.
The commission applied its newfound rigor to Mayes Education Inc. ' s purchase of Waldorf College in Forest
City, Iowa, putting the brakes on online expansion. A subsidiary of online privately held Columbia Southern
University in Orange Beach, Alabama, Mayes agreed in May to buy the assets of Waldorf, an Evangelical
Lutheran college with 500 students, for an undisclosed sum. The deal closed on Jan. 8.
Approval Condition
As a condition of approval, the commission stipulated that Waldorf can't offer online-only degrees at least until
2011-2012. Mayes Education plans to boost Waldorfs enrollment to 2,300 students in three years through
programs combining online classes with face-to-face instruction at temporary sites around the country, Jessica
Brown, a spokeswoman for Columbia Southern, said in a telephone interview.
The sale "barely made it through" the commission, former Waldorf president Richard Hanson said in a
telephone interview.
"Columbia Southern wanted to ramp up the online program quickly. The commissioners said, ' If we maintain
accreditation, Waldorf has to remain the college we know."'
Columbia Southern wasn' t the only for-profit that expressed interest in buying Waldorf, Hanson said. Another
company that lacked regional accreditation also contacted him: ITT Educational Services.
ITT Educational, runs 120 nationally accredited technical institutes with 80,000 students, most of whom pursue
associate degrees.
Graduation Rate
The cost of attending an ITT Technical Institute, including tuition, fees and off-campus room and board, was
$26,775 in 2008-09, according to the National Center for Education Statistics. Of students who entered ITT's
two-year schools in 2004, 29 percent graduated. 1TT derived 70 percent of its 2009 revenue from federal
financial aid, according to a company filing.
ITT Educational is in the preliminary stages of seeking regional accreditation for its technical institutes through
the Higher Learning Commission, which sent a team to visit the company in late 2009, a commission
spokeswoman, Susan Van Kollenburg, said in an e-mail. The commission hasn' t acted on this evaluation, she
said.
Daniel Webster is ITT Educational ' s first regionally accredited campus. Founded in 1965 as the New England
Aeronautical Institute, the college is tucked beside Nashua' s municipal airport, and keeps its fleet ofPipers and
Cessnas there. The campus includes an aviation center, a library, an administration building, classrooms,
dormitories, and a student center called the Common Thread.
' Good Reputation'
Over the years, the college expanded from flight instruction into training air traffic controllers and airline
managers, as well as teaching computer science, engineering, and business.
It has "a longstanding good reputation," said Gary Kiteley, executive director of the Aviation Accreditation
Board International in Auburn, Alabama, which licenses the college' s aviation programs.
Financially, Daniel Webster never enjoyed a cushion. With an endowment that peaked at about $3 million in
2008, it relied on tuition revenue, Myers said. The airline industry' s decline after 9/ 11 and the collapse of
Internet stocks hurt enrollment in aviation and computer science, said former provost Michael Fishbein, who
said he suffered a heart attack from the stress of keeping the college alive.
Red Ink
Just as trustees reached consensus on a strategic plan in 2008, fuel costs skyrocketed, and "we were running red
ink again," Rodney Conard, the former chairman of the board, said in a telephone interview.
180
The Commission on Institutions of Higher Education and the U.S. Department of Education expressed concerns
that Daniel Webster didn' t meet their financial standards, placing its accreditation and eligibility for federal aid
in jeopardy, according to a filing last April 23, by the college in a New Hampshire court.
ITT Educational contacted Myers in December 2008, he said. Modany visited Daniel Webster the next month,
and the parties reached agreement in April. The acquisition would enable the company to target a more upscale
audience, Modany told Wall Street analysts on April 23.
While ITT Educational' s institutes drew unskilled "career changers," the regionally accredited college would
appeal to " career advancers" seeking to enhance their capabilities, Modany said.
The Commission on Institutions of Higher Education approved the sale that same month.
' Public Interest'
"It' s in the public interest to have these small institutions continue to function," said Bruce Mallory, a
commission member and education professor at the Uni versity of New Hampshire in Durham. "If a proprietary
school can come in, continue to provide the same level of education and assure viability, that' s all for the
better. "
Modany promised to leave Daniel Webster' s administrators in charge because they were experts in running a
four-year residential college, Myers and Fishbein said. At a campus event introducing the ITT Educational chief
executive to the college community, Modany said the company was growing and there would be ample job
opportunities, said Myers.
Growing Suspicions
As Myers negotiated the sale, he came to suspect that the company wasn' t being forthright about its intentions,
he said. When he and Conard, who chaired the college' s board of trustees, worked out at a YMCA a week
before the June closing, they discussed canceling the deal, Myers said. Only after consulting colleagues did they
decide to go through with it, he said.
"We had lots of conversations when it was on the table," said Conard, a management consultant. " Should we
take it? We didn' t have to take it. There was a point where we realized, they were going to be more businesslike
about it. It didn' t feel as comfy as we were hoping."
Going through with the sale was the right decision, Conard said.
"ITT is in this for the long haul, and I'm very comfortable with where they plan to take Daniel Webster,"
Conard said.
Another former trustee, Cathy Trower, went along with the sale as a last resort to save the college and honor
commitments to students, she said.
"A for-profit should not be able to buy accreditation," Trower, a research director at Harvard University' s
Graduate School ofEducation in Cambridge, Massachusetts, said in a telephone interview. "To me, that's
almost like buying a degree and not actually earning it."
Duplicating Functions
In July, ITT Educational dismissed more than 20 Daniel Webster employees, Myers said. It believed they were
duplicating functions that the company' s corporate offices in Indiana could provide, two people familiar with
the company' s thinking said. ITT Educational also replaced Conard, Trower and the other trustees.
Appointees to the college' s new board included Charles Cook, former director of the Commission on
Institutions of Higher Education, which accredits Daniel Webster. Cook soon resigned because of a potential
conflict of interest with his position as a director of Corinthian' s Heald College, he said in a telephone
interview.
"I was never substantively involved with Daniel Webster," Cook said.
Questioning Changes
181
At the time of the firings, Myers was circulating a draft report questioning whether some ofiTT Educational ' s
changes were in accord with the standards of the accreditation commission, which call for a faculty role in
curriculum and governance, he said.
"ITT came in and said, 'We only want faculty to teach,"' Myers said. "We' ll develop curricula in Carmel,
Indiana, and give them to you."
On August 5, ITT Educational ousted him, Myers said. Nadine Dowling, director of the Woburn,
Massachusetts, campus ofiTT Tech, became interim president.
In an unusual move in credential-conscious academia, fTT Educational also named an assistant professor
without an advanced degree to a deanship. When Triant Flouris, who has a doctorate and has written four
books, resigned as dean of aviation sciences, he was replaced by David Price, who only has a bachelor' s degree.
Price is weeks away from completing a master's degree at Daniel Webster, and will enroll in a doctoral program
in the coming academic year at President Dowling' s request, he said in a telephone interview. "ITT has
continued the strong emphasis we' ve always had on getting a higher degree," he said.
Fewer Worries
The biggest difference at Daniel Webster under new ownership is "worrying Jess," Price said.
"There are a lot of schools that would just go under, students would be out of a school , faculty and staff would
be out of a job that they love passionately. I'm allowed to stay in the position I'm in because of ITT."
In November, faculty members told a team from the New England commission visiting the campus that ITT
Educational had rewritten a college self-study report prepared by professors and staff for the accrediting group.
Faculty members complained that the company' s revisions glossed over inadequacies in such areas as
governance, according to two people who attended the session.
When asked about the allegations concerning the self-study report, Richard Schneider, president of Norwich
University in Northfield, Vermont, who chaired the team, said that in his experience colleges don' t try to
deceive accrediting bodies.
Facebook Group
About 450 people have joined a Facebook group entitled, "I went to Daniel Webster before it sold out,"
including Chad Los Schumacher, 20. After his sophomore year at Daniel Webster, where he majored in
homeland security and joined the paintball club, Los Schumacher transferred for the current academic year to
Saint Leo University in Saint Leo, Florida.
"It was a very hard decision to come to, but I knew I could not stay there," Los Schumacher said.
Los Schumacher was bothered by an ITT Educational policy that students receiving financial assistance through
work-study programs sign an agreement that the company owned their intellectual output, he said.
"If I created the next Facebook or Twitter, it would be theirs," Schumacher said.
Matthew Mcinnis, a flight operations major, stayed at Daniel Webster.
"A lot of big names in aviation have come through here and taught here," the senior from Beverly,
Massachusetts, said as he headed to the aviation center on Jan. 27. "Looking in the long term, the ITT buyout
should add value. Hopefully, it will attract better professors and more students."
Personnel Moves
The personnel moves took New Hampshire regulators aback, the officials said.
ITT Educational "did give me the sense they would continue as before," said Kathryn Dodge, executi ve director
of the New Hampshire Postsecondary Education Commission, in Concord, which approved the sale in May.
"We did not expect to see the turnover in staffing happen when it happened."
As a result of the Webster case, Dodge said, she is proposing to require colleges in ownership transition to
outline plans for faculty and staff contracts and internal governance.
182
"It's a cultural issue," Dodge said. "Unless we're extremely specific in our requests, for-profits aren' t as
forthcoming as nonprofits."
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From:
Sent:
To:
Subject:
Macias, Wendy
Friday, March 05, 2010 7:01 AM
Finley, Steve
for-profits buying nonprofits for accred
Bloomberg.com
Your Taxes Support For-Profits as They Buy Colleges (Update3)
Share Business ExchangeTwitterFacebookl Email! Print I A A A
By Daniel Golden
March 4 (Bloomberg)-- ITT Educational Services Inc. paid $20.8 million for debt-ridden Daniel Webster
College in June. In return, the company obtained an academic credential that may generate a taxpayer-funded
bonanza worth as much as $1 billion.
ITT Educational, the U.S. ' s third-biggest higher education company with a market value of$3.8 billion, may
increase it by 26 percent, or $1 billion, within five years because of the purchase of 1,200-student Daniel
Webster in Nashua, New Hampshire, according to Michael Clifford, an investor in Del Mar, California, who
has participated in the acquisitions of four nonprofit colleges. At least 75 percent of new revenue would come
from access to the more than $100 billion a year in financial aid the U.S. hands out to college students, he said.
Key to tapping that money is Webster' s regional accreditation, which is the same gold standard of academic
quality enjoyed by Harvard University and helps students transfer course credits from one college to another.
Daniel Webster' s accreditation was its "most attractive" feature to ITT Educational , said Michael Goldstein, an
attorney at Dow Lohnes, a Washington law firm that has represented the company.
"Companies are buying accreditation," said Kevin Kinser, an associate professor at the State University ofNew
York at Albany, who studies for-profit higher education. "You can get accreditation a lot of ways, but all of the
others take time. They don' t have time. They want to boost enrollment 100 percent in two years."
Exploiting Loopholes
The nation' s for-profit higher education companies have tripled enrollment to 1.4 million students and revenue
to $26 billion in the past decade, in part through the recruitment of low-income students and active-duty
military. Now they' re taking a new tack in their quest to expand. By exploiting loopholes in government
regulation and an accreditation system that wasn' t designed to evaluate for-profit takeovers, they' re acquiring
struggling nonprofit and religious colleges-- and their coveted accreditation. Typically, the goal is to transform
the schools into online behemoths at taxpayer expense.
For-profit education companies, including ITT Educational Services, based in Carmel, Indiana, and Laureate
Education Inc. , in Baltimore, have purchased at least 16 nonprofit colleges with regional accreditation since
2004, according to corporate announcements and filings with the U.S. Securities and Exchange Commission.
Jack Welch, the former chief executive of General Electric Co., and Michael Mil ken, the U.S. junk bond
pioneer, have invested in for-profit companies that bought or formed partnerships with nonprofit, regionally
accredited schools.
Academic Status
By acquiring regional accreditation, trade and online colleges gain a credential usually associated with the
traditional academic culture of liberal arts, faculty scholarship and selective admissions. Normally the
accreditation process takes about five years and requires evaluations by outside professors. The regional bodies
examine financial stability, academic rigor and commitment to "teaching, learning, service and scholarship,"
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according to the Web site of the Commission on Institutions of Higher Education, which accredits colleges in
New England.
Enrollment at Grand Canyon University, a Christian college in Phoenix bought by investors in 2004, has soared
to 37,700, as of Dec. 31, up from 1,500, said Brian Mueller, chief executive of Grand Canyon Education Inc.
Ninety-two percent of students now take classes online, according to the company's most recent 1 0-K.
Bridgepoint Education Inc. , based in San Diego, has boosted enrollment of two regionally accredited colleges it
bought in 2005 and 2007 to 53,688 students as of Dec. 31 , up from 400 combined, according to a company
filing. Ninety-nine percent of those students take courses exclusively online.
Growth Potential
Daniel Webster "could parallel Grand Canyon or Bridgepoint's growth curve," said Clifford, who was part of
the investor group that purchased Grand Canyon.
ITT Educational rose two cents, or less than one percent, to $109.80 at 4:15p.m. today in Nasdaq stock market
trading. The company rose 2.5 percent in the 12 months ended today.
ITT Educational declined to comment for this story. The company plans to open more Daniel Webster
campuses and also expand onJine offerings, Kevin M.odany, ITT Educational's chairman and chief executive
officer, said in a Feb. 22 presentation to analysts. The company expects to introduce programs including
accounting, education and health sciences, he said.
Daniel Webster will attract more students "a little on the higher end" in income whose tuition would be paid by
private employers rather than federal financial aid, Modany said.
New Regulations
The U.S. Department ofEducation, which doled out $129 billion in federal financial aid to students at
accredited postsecondary schools in the year ended Sept. 30, is examining whether these kinds of acquisitions
circumvent a federal law that new for-profit colleges can' t qualify for assistance for two years, Deputy
Undersecretary ofEducation Robert Shireman said in a telephone interview.
Under federal regulations taking effect July 1, accrediting bodies may also have to notify the secretary of
education if enrollment at a college with online courses increases more than 50 percent in one year.
"It' s an area that we are watching closely," Shireman said. " It certainly has been a challenge both for
accreditors and the Department of Education to keep up with the new creative arrangements that have been
developing."
Immediate Benefits
Buying accreditation lets the new owners benefit immediately from federal student aid, which provides more
than 80 percent of revenue for some for-profit colleges, instead of having to wait at least two years. Traditional
colleges are also more inclined to offer transfer credits for courses taken at regionally approved institutions,
making it easier to attract students nationwide.
The six nonprofit regional accredit1ng bodies, which rely on academic volunteers, bestow the valuable
credential with scant scrutiny of the buyers' backgrounds, Barmak Nassirian, associate executive director of the
American Association of Collegiate Registrars & Admissions Officers in Washington, said in a telephone
interview.
While accrediting bodies treat these purchases as changes of ownership, the acquisitions, in reality, create new
colleges that should be required to eam certification from scratch, Kinser said.
Maintain Mission
For accreditation to continue once the college is sold, the buyer must promise not to change its mission, Steven
Crow, former executive director of the Chicago-based Higher Learning Commission, the largest regional body,
said in a telephone interview. Once accreditation is maintained, the acquirer seeks permission, which is usually
granted, to start branch campuses and online programs, Crow said.
"You knew by month six they would come back to you with a new game plan," said Crow, now a consultant to
publicly traded Corinthian Colleges Inc., based in Santa Ana, California. It acquired regionally accredited San
Francisco-based Heald College on Jan. 4.
Obama administration officials have recently questioned whether the accreditation system is effective in
protecting academic standards. Accrediting decisions lack transparency and take too long, Undersecretary of
Education Martha Kanter said in a Jan. 26 speech in Washington to the annual meeting of the Council for
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Higher Education Accreditation.
Considering Termination
The inspector general of the Education Department in December urged the agency to consider terminating
recognition of the Higher Learning Commission, which has approved more for- profit colleges than its
counterparts around the country.
The inspector general criticized the commission' s decision to accredit Career Education Corp.' s online
American Intercontinental University, citing concerns about how much time students spent in class. The
approval was appropriate, the commission and Hoffman Estates, TI!inois-based Career Education said.
More vigilance by the Education Department and accrediting groups is likely to slow enrollment growth and the
share prices of higher education companies that rely on acquisitions, said Clifford. While publicly held
postsecondary education companies rose 29.9 percent in the 12 months ended March 3, they lagged behind the
S&P 500, which increased 60.7 percent over the same period, said Jeffrey Silber, an analyst for BMO Capital
Markets in New York. The shortfall reflected investors' fears of tighter federal regulation of for-profit colleges,
Silber said.
Accreditation' s Worth
Regional accreditation is worth $10 million to a for-profit acquirer, Clifford said in a telephone interview.
That' s how much it would cost to start a regionally accredited college, a process that can take 10 years and has
only a 50-50 chance of success, he said. On top of the $10 million, buyers typically pay $23,000 to $50,000 per
enrolled student, making the purchase of Daniel Webster a bargain, Clifford said.
Clifford and his fellow investors popularized the strategy of acquiring nonprofit colleges with regional
accreditation by purchasing Grand Canyon University in 2004 and building online enrollment.
Grand Canyon " is the same institution," Mueller said in an e-mail. "It was important to the new leadership
group that the mission of providing a high-quality Christian-based education remain intact."
Grand Canyon, which went public in November 2008, derived 83 percent of its revenue from federal financial
aid in 2009, according to a company filing.
Bridgepoint, Ashford
Bridgepoint Education bought the regionally accredited Franciscan University of the Prairies in 2005 and
Colorado School ofProfessional Psychology in 2007. It renamed them Ashford University and University of the
Rockies, respectively, and refocused them online. Ashford gained 86 percent of its revenue from federal student
aid in 2009 and University of the Rockies got 85 percent, according to a 10-K filing by Bridgepoint, which went
public in April.
"There are several meaningful continuities" from the colleges before they were acquired, including campus
athletic and social events, Shari Rodriguez, a Bridgepoint spokeswoman, wrote in an e-mail.
Clifford participated in the 2008 purchase ofMyers University in Cleveland, which was renamed Chancellor
University. Chancellor attracted Welch as an investor last year and named its new online management institute
after him. Welch collaborated with faculty in developing curricula for a master' s program in business
administration, Clifford said.
' Something New'
"We chose to work with Chancellor University because it gave us the flexibility to start something new," Welch
said through a spokeswoman, Betsy Linaberger. "As a for-profit venture, we have the resources to invest in the
student experience and the very best faculty, and we want to provide a high quality business education. "
Knowledge Universe Learning Group, chaired by Milken, entered into a partnership in 2007 with regionally
accredited Sierra Nevada College in Incline Village, Nevada, agreeing to provide as much as $15 million in
return for an opportunity to share in online revenue, Geoffrey Moore, a senior adviser to Mil ken, said inane-
mail. The company is a unit of Santa Monica, California-based Knowledge Universe Inc. , of which Milken is
co-founder and chairman. Knowledge Universe Learning Group has three seats on the nonprofit college' s nine-
member board, Moore said.
' Existing Character'
"This partnership preserved the existing character of Sierra Nevada College," he said. "That was important to us
and the college."
A 2006 regulatory change fostered online growth and made takeovers more attractive, said Silber, the BMO
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analyst. That year, Congress eliminated a rule prohibiting colleges that offered more than half of their courses
online from receiving federal financial aid.
ITT Educational Services Inc. didn' t buy Daniel Webster just for its 52-acre red-brick campus and science and
technology programs including training pilots and air traffic controllers.
"Regional accreditation was very important" to the company, said Goldstein, co-leader of the higher education
practice at Dow Lohnes. "I don' t think there' s any question that was the most attractive element."
Of the $20.8 million purchase price, $20.6 million went to pay offthe college' s debt, according to an ITT
Educational 10-Q filing.
Making Changes
ITT Educational Services, which was spun off from ITT Corp. in the 1990s, wasted no time making changes at
Daniel Webster. It renovated a main building and razed a dilapidated dormitory. It also dismissed one fourth of
the staff, fired President Robert Myers, and has been accused by faculty members of misleading the New
England accreditor, the Commission on Institutions of Higher Education, based in Bedford, Massachusetts.
"ITT didn' t really have much interest in anything other than having acquired a regionally accredited
institution," said Myers, now president of the New England Culinary Institute in Montpelier, Vermont. "Ifl had
it to do all over again, I wouldn' t have gone anywhere near ITT. The fundamental nature of the college has
changed."
"We' re making fantastic progress with the cultural assimilation" ofDaniel Webster, Modany said in a Jan. 21
call with analysts. "Things are going really well there, great group of staff and faculty, and everybody is getting
on board."
'Something Different'
Barbara Brittingham, director of the Commission on Institutions of Higher Education, declined to comment on
its approval of the Daniel Webster sale.
In general, "when these institutions are bought, they are not at the moment successful in the financial sense or
they wouldn't be for sale," Brittingham said. "There' s an understanding that whoever buys them is going to
want to do something different."
Accreditation is higher education' s way of regulating itself. The nonprofit associations set standards on
financial stability, governance, faculty and academic programs and use volunteers from college presidents to
professors to assess quality. It is a peer review system: a marketing professor is more likely than a poet to
evaluate a business school.
For more than a century, regional organizations have evaluated most public and private universities. Starting in
the 1950s, leaders of for-profit colleges, which were then ineligible for regional approval , established seven
national accrediting bodies for career education and training. The regions dropped their for-profit ban in the
1960s.
Cachet, Credits
Apollo Group Inc. ' s University ofPhoenix, whose enrollment of 455,600 makes it the nation's second-largest
university behind the State University ofNew York system, is accredited by a regional body, the Higher
Learning Commission. Students enrolled at both regionally and nationally accredited colleges can receive
federal grants and loans.
Regional accreditation is important to for-profit colleges because students are attracted to its cachet and can
transfer course credits more easily. Only 14 percent of nonprofit universities accept credits transferred from
nationally certified schools, according to a 2006 study by the University Continuing Education Association, in
Washington.
The six regional associations scrutinize takeovers of nonprofit colleges in advance, and then follow up
afterward, accrediting officials said in telephone interviews. They could cite few, if any, cases in which they
refused to continue accreditation, they said.
Heald Purchase
Corinthian Colleges' past difficulties with California state regulators didn't matter to accreditors when it
purchased Heald Capital LLC, parent company of Heald College, for $395 million. Corinthian, the country' s
seventh-largest higher education company by market value, has more than 100 campuses in North America, and
had 106,052 students as of Dec. 31, including Heald, said Anna Marie Dunlap, a Corinthian spokeswoman.
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Corinthian paid a $6.5 million settlement in July 2007 to the California attorney general ' s office, over allegedly
misrepresenting graduates' job placement rates and salaries. It also agreed to cease enrolling students in 11
programs at nine campuses. The Santa Ana, Callfornia-based Corinthian said in a 1 0-K filing that it didn' t
admit wrongdoing.
"We strongly disagreed with the Attorney General' s conclusions, but we are pleased to have settled the matter,"
Dunlap said in an e-mail.
Exclusively Online
Regionally accredited Heald College had 11 campuses with 12,900 students, primarily in two-year health-care
and business programs, as of Dec. 31. The college was nonprofit before its purchase in 2007 by Palm Ventures
LLC, a Greenwich, Connecticut, investment company. Heald expects to start enrolling exclusively online
students this year, Corinthian Chief Executive Peter Waller wrote in an e-mail.
The Accrediting Commission for Community & Junior Colleges in Novato, California, which certifies two-year
institutions in California and Hawaii, approved the change in Heald' s ownership.
"We judge the college we accredit," said Barbara Beno, president of the commission. "It would be unfair to say,
' Heald, you' ve been bought by a parent corporation that doesn' t have as fine a track record as you do.
Therefore, we'll condemn you,"' she said in a telephone interview.
Heald will "continue to meet ACCJC' s accreditation standards and eligibility requirements," Waller said.
The scrutiny "doesn' t remotely satisfy the sloppiest of due-diligence requirements," said Nassirian of the
American Association of Collegiate Registrars & Admissions Officers. "There is no methodical review of who
has bought the college. If the Cosa Nostra applied, you would think you'd take a look."
'Same Animal '
The nation' s biggest regional accreditor is starting to take a closer look. The Higher Learning Commission,
which certifies more than 1,000 colleges from Arkansas to Wisconsin, stiffened its rules on ownership changes
last year.
Buyers must wait from one to four years to reapply for accreditation if the college won't stay "the same
animal," President Sylvia Manning said in a telephone interview. The commission now charges $10,000 for
ownership changes to pay for more extensive research. New owners must be approved by its board, rather than
at the staff level, Manning said.
The commission applied its newfound rigor to Mayes Education Inc. ' s purchase of Waldorf College in Forest
City, Iowa, putting the brakes on online expansion. A subsidiary of online privately held Columbia Southern
University in Orange Beach, Alabama, Mayes agreed in May to buy the assets of Waldorf, an Evangelical
Lutheran college with 500 students, for an undisclosed sum. The deal closed on Jan. 8.
Approval Condition
As a condition of approval, the commission stipulated that Waldorf can' t offer online-only degrees at least until
2011-2012. Mayes Education plans to boost Waldorfs enrollment to 2,300 students in three years through
programs combining online classes with face-to-face instruction at temporary sites around the country, Jessica
Brown, a spokeswoman for Columbia Southern, said in a telephone interview.
The sale "barely made it through" the commission, former Waldorf president Richard Hanson said in a
telephone interview.
"Columbia Southern wanted to ramp up the online program quickly. The commissioners said, ' If we maintain
accreditation, Waldorf has to remain the college we know."'
Columbia Southern wasn't the only for-profit that expressed interest in buying Waldorf, Hanson said. Another
company that lacked regional accreditation also contacted him: ITT Educational Services.
ITT Educational , runs 120 nationally accredited technical institutes with 80,000 students, most of whom pursue
associate degrees.
Graduation Rate
The cost of attending an ITT Technical Institute, including tuition, fees and off-campus room and board, was
$26,775 in 2008-09, according to the National Center for Education Statistics. Of students who entered ITT' s
two-year schools in 2004, 29 percent graduated. ITT derived 70 percent of its 2009 revenue from federal
financial aid, according to a company filing.
ITT Educational is in the preliminary stages of seeking regional accreditation for its technical institutes through
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the Higher Learning Commission, which sent a team to visit the company in late 2009, a commission
spokeswoman, Susan Van Kollenburg, said in an e-mail. The commission hasn' t acted on this evaluation, she
said.
Daniel Webster is ITT Educational ' s first regionally accredited campus. Founded in 1965 as the New England
Aeronautical Institute, the college is tucked beside Nashua' s municipal airport, and keeps its fleet ofPipers and
Cessnas there. The campus includes an aviation center, a library, an administration building, classrooms,
dormitories, and a student center called the Common Thread.
' Good Reputation'
Over the years, the college expanded from flight instruction into training air traffic controllers and airline
managers, as well as teaching computer science, engineering, and business.
It has "a longstanding good reputation," said Gary Kiteley, executive director of the Aviation Accreditation
Board International in Auburn, AJabama, which licenses the college' s aviation programs.
Financially, Daniel Webster never enjoyed a cushion. With an endowment that peaked at about $3 million in
2008, it relied on tuition revenue, Myers said. The airline industry' s decline after 9/ll and the collapse of
Internet stocks hurt enrollment in aviation and computer science, said former provost Michael Fishbein, who
said he suffered a heart attack from the stress of keeping the college alive.
Red Ink
Just as trustees reached consensus on a strategic plan in 2008, fuel costs skyrocketed, and "we were running red
ink again," Rodney Conard, the former chairman of the board, said in a telephone interview.
The Commission on Institutions of Higher Education and the U.S. Department of Education expressed concerns
that Daniel Webster didn' t meet their financial standards, placing its accreditation and eligibility for federal aid
in jeopardy, according to a filing last April23, by the college in a New Hampshire court.
ITT Educational contacted Myers in December 2008, he said. Modany visited Daniel Webster the next month,
and the parties reached agreement in April. The acquisition would enable the company to target a more upscale
audience, Modany told Wall Street analysts on April 23.
While ITT Educational ' s institutes drew unskilled "career changers," the regionally accredited college would
appeal to " career advancers" seeking to enhance their capabilities, Modany said.
The Commission on Institutions of Higher Education approved the sale that same month.
' Public Interest'
"It's in the public interest to have these small institutions continue to function," said Bruce Mallory, a
commission member and education professor at the University of New Hampshire in Durham. "If a proprietary
school can come in, continue to provide the same level of education and assure viability, that's all for the
better."
Modany promised to leave Daniel Webster' s administrators in charge because they were experts in running a
four-year residential college, Myers and Fishbein said. At a campus event introducing the ITT Educational chief
executive to the college community, Modany said the company was growing and there would be ample job
opportunities, said Myers.
Growing Suspicions
As Myers negotiated the sale, he carne to suspect that the company wasn' t being forthright about its intentions,
he said. When he and Conard, who chaired the college' s board of trustees, worked out at a YMCA a week
before the June closing, they discussed canceling the deal, Myers said. Only after consulting colleagues did they
decide to go through with it, he said.
"We had lots of conversations when it was on the table," said Conard, a management consultant. "Should we
take it? We didn' t have to take it. There was a point where we realized, they were going to be more businesslike
about it. It didn' t feel as comfy as we were hoping."
Going through with the sale was the right decision, Conard said.
" ITT is in this for the long haul , and I'm very comfortable with where they plan to take Daniel Webster,"
Conard said.
Another former trustee, Cathy Trower, went along with the sale as a last resort to save the college and honor
commitments to students, she said.
" A for-profit should not be able to buy accreditation," Trower, a research director at Harvard University' s
189
Graduate School of Education in Cambridge, Massachusetts, said in a telephone interview. "To me, that' s
almost like buying a degree and not actually earning it."
Duplicating Functions
In July, ITT Educational dismissed more than 20 Daniel Webster employees, Myers said. It believed they were
duplicating functions that the company' s corporate offices in Indiana could provide, two people familiar with
the company's thinking said. ITT Educational also replaced Conard, Trower and the other trustees.
Appointees to the college' s new board included Charles Cook, former director of the Commission on
Institutions of Higher Educat1on, which accredits Daniel Webster. Cook soon resigned because of a potent1al
conflict of interest with his position as a director of Corinthian' s Heald College, he said in a telephone
interview.
"I was never substantively involved with Daniel Webster," Cook said.
Questioning Changes
At the time of the firings, Myers was circulating a draft report questioning whether some of ITT Educational ' s
changes were in accord with the standards of the accreditation commission, which call for a faculty role in
curriculum and governance, he said.
"ITT came in and said, ' We only want faculty to teach,"' Myers said. "We'll develop curricula in Carmel,
Indiana, and give them to you."
On August 5, ITT Educational ousted him, Myers said. Nadine Dowling, director of the Woburn,
Massachusetts, campus of ITT Tech, became interim president.
In an unusual move in credential-conscious academia, ITT Educational also named an assistant professor
without an advanced degree to a deanship. When Triant Flouris, who has a doctorate and has written four
books, resigned as dean of aviation sciences, he was replaced by David Price, who only has a bachelor' s degree.
Price is weeks away from completing a master's degree at Daniel Webster, and will enroll in a doctoral program
in the coming academic year at .President Dowling' s request, he said in a telephone interview. "ITT has
continued the strong emphasis we' ve always had on getting a higher degree," he said.
Fewer Worries
The biggest difference at Daniel Webster under new ownership is "worrying Jess," Price said.
"There are a lot of schools that would just go under, students would be out of a school , faculty and staff would
be out of a job that they love passionately. I'm allowed to stay in the position I'm in because of ITT. "
In November, faculty members told a team from the New England commission visiting the campus that ITT
Educational had rewritten a college self-study report prepared by professors and staff for the accrediting group.
Faculty members complained that the company' s revisions glossed over inadequacies in such areas as
governance, according to two people who attended the session.
When asked about the allegations concerning the self-study report, Richard Schneider, president of Norwich
University in Northfield, Vermont, who chaired the team, said that in his experience colleges don' t try to
deceive accrediting bodies.
Facebook Group
About 450 people have joined a Facebook group entitled, "I went to Daniel Webster before it sold out,"
including Chad Los Schumacher, 20. After his sophomore year at Daniel Webster, where he majored in
homeland security and joined the paintball club, Los Schumacher transferred for the current academic year to
Saint Leo University in Saint Leo, Florida.
"It was a very hard decision to come to, but I knew I could not stay there," Los Schumacher said.
Los Schumacher was bothered by an ITT Educational policy that students receiving financial assistance through
work-study programs sign an agreement that the company owned their intellectual output, he said.
"If I created the next Facebook or Twitter, it would be theirs," Schumacher said.
Matthew Mcinnis, a flight operations major, stayed at Daniel Webster.
"A lot of big names in aviation have come through here and taught here," the senior from Beverly,
Massachusetts, said as he headed to the aviation center on Jan. 27. "Looking in the long term, the ITT buyout
should add value. Hopefully, it will attract better professors and more students."
Personnel Moves
The personnel moves took New Hampshire regulators aback, the officials said.
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ITT Educational "did give me the sense they would continue as before," said Kathryn Dodge, executive director
of the New Hampshire Postsecondary Education Commission, in Concord, which approved the sale in May.
" We did not expect to see the turnover in staffing happen when it happened. "
As a result of the Webster case, Dodge said, she is proposing to require colleges in ownership transition to
outline plans for faculty and staff contracts and internal governance.
"It's a cultural issue," Dodge said. "Unless we're extremely specific in our requests, for-profits aren' t as
forthcoming as nonprofits."
To contact the reporter on this story: Daniel Golden in Boston at dlgolden@bloomberg.net
Last Updated: March 4, 2010 17:02 EST
Related Videos
watch
For-Profit Schools Reap Bonanzas at Taxpayer Expense
March 4 (Bloomberg)-- Matthew Mcinnis, a student at Daniel Webster College, talks with Bloomberg' s
Dan Golden about the changes at the school since ITT Educational Services Inc. bought it last June. With its
purchase of the debt-ridden school, ITT obtained an academic credential that may generate a taxpayer-
funded bonanza worth as much as $1 billion.
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From: Madzelan, Dan
Sent:
To:
Wednesday, April 28, 201 o 5:31 PM
Bergeron, David
Subject: RE: This article names the analyst
Is there a copy available of the actual report to go along with this AP recitation of the
report?
-----Original Message-----
From: Bergeron) David
Sent: Tuesday) April 27) 2010 12:56 PM
To: Madzelan) Dan
Subject: Fw: This article names the analyst
David A. Bergeron
Sent using BlackBerry
----- Original Message -----
From: Yuan) Georgia
To: Shireman) Bob; Bergeron) David
Cc: McFadden) Elizabeth
Sent: Tue Apr 27 11:24:14 2010
Subject: This article names the analyst
DeVry leads ed. stocks lower as Credit Suisse downgrades on regulatory) job market concerns
Associated Press
04/26/10 9:30 AM PDT
NEW YORK - DeVry led decliners in education stocks Monday after a Credit Suisse analyst said
the for-profit school could be hurt by proposed regulatory changes and an improving job
market that could slow enrollment.
The administration has pushed hard for gainful employment regulations) which stipulate that
graduates of schools must not spend more than 8 percent of their income on paying student
loans.
It's meant to help improve school quality- making sure students are qualified and the
courses help increase their incomes - as student loan defaults soar.
If schools failed to pass this test) the government could block their access to federal loans
for students) the bulk of their revenues.
In early April) the Education Department said schools with 50 percent graduation rates and 70
percent job placement rates would be exempt from a proposed rule linking graduates' incomes
to required debt payments.
Analyst Kelly Flynn) however) said Washington sources believe the more lenient proposal might
not wind up in a draft of the law that will be posted by mid-May or June.
192
Flynn downgraded DeVry and ITT Educational Services Inc. to "neutral" from "outperformJ"
cutting target prices to $65 from $75 and $110 from $135J respectively.
Shares of DeVry Inc. fell $4.59J or 6.6 percentJ to $64.87J while ITT stock dropped fell
$2.07J or 1.8 percentJ to $109.71.
Shares of Apollo Group Inc.J which runs the largest for -profit school J the University of
PhoenixJ also slid 93 centsJ or 1.5 percentJ to $62.60J while Corinthian Colleges Inc. stock
fell 59 centsJ or 3.3 percentJ to $17.30. Career Education Corp. fell 61 centsJ or 1.8
percentJ to $33.49 and Strayer Education Inc. dropped $2.54J or 1 percentJ to $250.49.
MeanwhileJ Flynn cited DeVry's warning on slower enrollment growth in one of its divisions
and ITT's warning on higher advertising spending.
For- profit schools have seen big gains in enrollment because of the recession and high
unemployment. As the job market improvesJ people may not feel as much as a need to bolster
their resumes.
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From:
Sent:
To:
Cc:
Subject:
Attachments:
Manheimer, Ann
Friday, April30, 2010 2:38PM
Dannenberg, Michael; Shireman, Bob
Arsenault, Leigh; Pauline Abernathy; Deanne Loonin
bloomberg article
image001 .jpg
The Homeless at College
Business Week
The unemployed high school dropout who attends Alcoholics Anonymous and has been
homeless for 10 months is being courted by lhe University of Phoenix ....
194
From:
Sent:
To:
Subject:
Forwarding - ann
From: Jones, Andrew
Manheimer, Ann
Thursday, April 01 , 201 o 4:05 PM
Ahuj a, Kiran; Annino, Angelica; Arsenault, Leigh; Aylward, Rayna; Barrett, Tarik; Berry,
Dennis; Cej a, Alej andra; Chong, Dana; Cummings, Glenn; Dannenberg, Michael ; Darnieder,
Greg; Estrella-Lemus, Angela; Ferguson, Keith; Laitinen, Amy; Lewis, Andre; Martin, Phil;
O'Bergh, Jon; Pacchetti, Edward; Pugh, Lisa; Schwartz, Gail; Sepulveda, Juan; Shireman,
Bob; Uvin, Johan; Wilson, John; Young, Nicole
FW: news clips for April 1, 201 0
Sent: Thursday, April 01, 2010 1:50PM
To: Newsclips
Subject: news clips for April1, 2010
News Cl ips for April1, 2010
Today there are eight articles for your review
Applications To Elite Universities Rise. The New York Times (4/1 , Steinberg) reports, "With many
of the nation's most selective colleges and universities scheduled to inform applicants of their
decisions on Thursday, one trend already appears to be emerging: Applications to elite private
colleges rose again this academic year, despite the economic constraints on many families."
According to the Times, "As a result, admission rates often fell to record lows. Harvard, the University
of Pennsylvania, Dartmouth, Cornell , Stanford, M.l. T. and Duke each reported sharp increases in
applications this year compared with last year."
Many DC-Area Colleges Limit Tuition Increases. The Washington Post ( 4/1 , De Vise) reports,
"Many of the most prestigious-- and expensive-- colleges in the [D.C.] region have capped annual
tuition increases at 4 percent for the coming academic year, a gesture, school officials said, of fiscal
restraint and a signal to families of the college-bound that they are doing their part to be affordable.
Several schools said their fall tuition reflects the smallest annual increase in many years."
Benefits Of Higher Ed Lendi ng Overhaul Outlined. Michelle Singletary writes in a column for the
Washington Post (4/1 ), "Tucked inside the health-care reform law is significant f inancial relief for the
millions of students who borrow to obtain a higher education. No longer will private lenders play the
middleman in federal student-loan transactions." According to Singletary, "As of July, all new federal
loans will come directly" from ED.
Student Loan Overhaul Legislation Applauded. The Coloradan (3/31) editorialized, "The student-
loan reform signed into law Tuesday by President Barack Obama is a common-sense approach that
should help make college a bit more affordable for families. In recent decades, student loans have
been a mixture of direct lending from the federal government and federally subsidized loans made by
private companies." According to the Coloradan, "The change signed into law by Obama will cut out
the middle man and have all future federally backed student loans coming directly from the
government."
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Inside Higher Ed
Prepaid Bailouts Present Dilemma
April 1, 201 0
It's been a politically popular move for lawmakers to bail out prepaid college tuition plans that are now
going broke, but doing so raises some potentially troubl ing questions of equity. Indeed, these bailouts
could have the net impact of forgiving investment losses for middle- and upper-income families at the
expense of low-income people, higher education researchers say.
It' s easy to understand why parents flocked to prepaid tuition plans, and it's not surprising many of
them are now crying foul. Parents say they reasonably assumed that paying into plans "guaranteed"
their children would receive a college education, and they're none too happy to hear state officials
now say that investment losses and skyrocketing tuition increases have put the plans on a path
toward insolvency.
The political and legal pressure to honor the plans has led a number of states to dig into greatly
depleted coffers to bail out the programs. In so doing, states have made the calculation that those
who were savvy enough to invest in prepaid plans-- typically middle and upper income parents- are
rightfully saved by money drawn from the state' s overall tax base, according to scholars who've
studied the growth of prepaid programs.
"That means the people who can't afford to go to college are going to be fundamentally underwriting
the ability of the wealthy [to attend college] ," said Michael Olivas, director of the Institute for Higher
Education Law and Governance at the University of Houston. "It's very regressive, extremely
regressive, and in our society it seems to me it ought to be the wealthy who subsidize the poor going
to college, not the reverse. "
The median household income of parents using state-sponsored prepaid plans is $100,000,
according to a spring 2003 survey conducted by the Investment Company Institute, a national
association of U.S. investment companies.
While prepaid programs are not without critics, they are not a societal ill because they encourage
families to make responsible preparations for their children's education, Ol ivas said. The problem,
however, is that states greatly underestimated the rates of future tuition increases and didn't have
plans in place to deal with the consequences of a recession, he said. That was a poor model destined
to implode, and now states have created the expectation that they'll bail out participants -- even if
some of the contracts aren't explicitly backed by the "full faith and credit" of the state.
"That' s like me going to TIAA-CREF and saying 'Look I did poorly last year, you've got to make it up
for me,'" Olivas said.
Plans May Actually Deter Low Income
Prepaid plans are among two college savings vehicles known as 529 programs, which are named for
the federal tax code that gives special benefits to participants. The prepaid plans typically allow
parents to pay a certain monthly fee over a period of years while locking in a specific tuition rate.
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Other 529 plans are savings arrangements that create a tax incentive for setting aside money for
higher education-related expenses.
"It targets people who have money to save; it targets people in higher tax brackets, and it targets
people who have kids they are quite certain are going to go to college," said Katie Baird, associate
professor of politics, philosophy and economics at the University of Washington at Tacoma.
Most who enter into prepaid plans are college-educated and married or living with partners, the
Investment Company Institute reported.
There are a number of factors that make prepaid programs appealing to higher-income families, and
may actually make them unattractive to low-income students, research suggests. Since money
placed in prepaid plans counts as a student resource, saving for college in these plans would actually
reduce the amount of need-based aid for which a low-income student was eligible, according to a
2004 report from the Congressional Research Service.
Prepaid programs not only deter low-income students from participation, but they may even be
inappropriate for all but the wealthiest families, the Congressional Research Service reported.
Penalties for pull ing money out of the plans are substantial , and middle-income famil ies are more
likely than high-income earners to need immediate access to the money in the event of a reversal of
fortune such as unemployment or high medical bills.
"For some middle-income families, saving for college through a vehicle not dedicated to a single
purpose might be a more prudent choice," according to the report, "Saving For College Through
Qualified Tuition."
A 2008 update of the report further noted that a tax break in the plan "confers greater benefits on
famil ies with relatively high incomes."
Characteristics of Households Saving for College
Saving with Prepaid Plans Saving Without Prepaid Plans
Age 42
Household Income $100,000 $75,000
Married or Living with Partner 95%
College or Postgraduate Degree 71% 54%
Employed 90% 84%
Source: Investment Company Institute
Prepaid programs not only cater to higher income individuals; they also make those individuals less
concerned about tuition hikes, Baird said. With a locked-in tuition rate, they no longer have a vested
interest in keeping tuition low.
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"I think the state definitely has an interest in trying to channel more and more people into higher
education, and the primary way they can do it is to make sure it' s affordable to those who otherwise
cannot afford it and to make sure the kids have the skills they need to [do college-level work]. Prepaid
tuition has nothing to do with those objectives in my mind," Baird said.
Yet, supporters of the programs are fierce in their advocacy. In Alabama, where lawmakers are
wrestling with how to address shortfalls in the state's prepaid program, parents have made an
organized push for a state rescue. Save Alabama PACT argues that lawmakers have an obligation to
deliver on the agreement, citing the state's repeated assurances that the Prepaid Affordable College
Tuition (PACT) program constituted a "guarantee. "
Richard Huckaby, who co-founded the grassroots coalition, said he put money into the prepaid
program with the understanding that it would secure his children's educational future regardless of the
whims of the stock market or fluctuations in tuition rates.
"We bought it as a guarantee," he said. "We believed that no matter how ignorant we might be with
our money, if we bought into this program we had guaranteed our child an education. That' s what we
believed, and that's what many parents believed."
As for parents who didn't get into the prepaid plans, Huckaby says he's sorry they missed out. For
years, Huckaby has been paying $70 for one child and $80 for another into PACT. He's unconvinced
others couldn't have done the same.
"You're telling me there's anybody in any general population that couldn't pay 70 to 100 a month?
That's just a lifestyle decision," he said. "Quit smoking cigarettes, quit going out to eat, quit drinking."
'Full Faith and Credit'
PACT officials initially argued that the fine print of their agreements offered no guarantee, but that
position has provoked threats of lawsuits from aggrieved parents. While there are legal arguments to
be made about Alabama's obligations, the state is not among those whose programs are backed by
the "full faith and credit" of the state. Of the 16 state-sponsored 529 plans with a prepaid option, just
five carry the "full faith and credit" seal , according to savingforcollege.com.
Regardless of the language of the agreements, Alabama lawmakers have proposed legislation that
would cover prepaid participants. A Senate bill would infuse $236 million into the program, and a
House bill would put just as much money in while also capping tuition increases for PACT participants
at 2.5 percent in most years. Save Alabama PACT and the Alabama Education Association, a
powerful teachers' union, both say the caps are necessary to deliver on the program' s promise, but
universities have opposed the caps and argued that the tuition limits would force them to hike tuition
even more on non-PACT students.
Bailing out PACT participants, while allowing tuition hikes on all but that protected class of students,
would present a serious equity problem in a state that already does little to support low-income
students, according to Steve Suitts, vice president of the Southern Education Foundation. In 2005-6,
Alabama provided assistance to fewer than 4 percent of students with demonstrated financial need,
the foundation reported.
"If that bill passes, it essentially will mean that Alabama will have spent $230 million in rescuing
primari ly middle-class students and their families and still leaving low-income students without any
resources except for those available through the Pel! Grant," Suitts said. "V\Ihile everybody
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understands why the state has to uphold its obligations, the bigger more long-range problem is
Alabama has not made promises to its low-income students. They are out in the cold and that reality
is the broader scope and the tragedy of the situation. "
PACT officials said they don't track income levels of participants, and some reject the notion that
prepaid programs are the province of the well-heeled.
"Of the 45,000 contracts, many were marketed heavily to state and education employees, most of
whom have average income or below, and all have sacrificed greatly to pay into the program," said
Paul Hubbert, executive secretary of the Alabama Education Association, a union affiliated with the
National Education Association.
As for whether a tuition cap simply shifts the cost burden to non-PACT participants, Hubbert said
universities routinely differentiates tuition for some students and not others. By way of example,
Hubbert noted that universities often waive out-of-state tuition for students living within 50 miles of the
Alabama border, and subsidies are also offered to the children of faculty members.
"Universities make the decision to shift tuition burdens every day, we ask that they continue that
practice by participating in this solution to help the state meet its obligation to PACT contract holders,"
Hubbert wrote in an e-mail.
Like a number of states, Alabama has stopped taking enrollments in its prepaid program. Other states
no longer accepting participants include Colorado, Kentucky, Ohio, South Carolina and West Virginia,
according to savingforcollege.com.
Texas has suspended enrollment in its Guaranteed Tuit ion Plan, but another program called the
Texas Tuition Promise Fund has been introduced. A key distinction with the Promise Fund is that the
universities- not the state- are responsible if tuition rates exceed investment returns from the fund.
As for those who invested in the now-defunct Guaranteed Tuition Plan, the state permitted them to
pull out all the money they had invested and then some. The Texas plan was backed by the full faith
and credit of the state, and parents came running to extract their money when a projected deficit of
$2.1 billion was forecast by 2030. Not only did those participants get back everything they had put
into the plans, despite investment losses, but the state also covered any tuition increases that
exceeded the principal participants had paid into the fund.
The state comptroller' s office had suggested participants only be refunded the principal of their
investments, but parents exerted enough political pressure to secure additional funds to cover tuition
increases. Once refunded, participants weren't obligated to use the money for educational purposes.
"I wish I had had the opportunity to get into it," said Allen Spelce, spokesman for the comptroller. "It's
a great deal. "
"The people that were in this plan were very smart people, " he added. "They knew what they were
getting, and they had the economic means to do it. "
- Jack Stripling
How Students Fare at For-Profits
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April 1, 201 0
Where does the truth about for-profit colleges lie?
Is it in the harshly critical investigative reports that stitch together one damaging anecdote after
another to suggest that the institutions prey on academically underprepared, low-income students,
leaving them with huge student loan debts and few job prospects?
Or, as the colleges' officials themselves assert, is there a different (and more favorable) truth to be
found in the huge numbers of underrepresented students who are flocking to the institutions in ever-
growing numbers and emerging with credentials that help them enter the job market, to their own
satisfaction and that of their employers?
Both supporters and critics of the for-profit higher education sector have tended to agree that the only
way to really get at the reality of the institutions' performance is by laying uncontested data about their
students and graduates alongside those of other colleges, to directly compare their results with those
of other types of institutions.
"Without credible data done by independent researchers, there is an existential threat to the operation
of the sector," Harris Miller, president of the Career College Association, the sector's main advocacy
group, said last fall at a meeting on just this topic. "The overriding suggestion is that we're overselling
or underdelivering. The only way we can ultimately combat that is with high-quality, independent
research on outcomes. The big questions are, are they getting good jobs and are they able to repay
their student loans?"
Some for-profit colleges have vowed to make their data available for independent researchers to
mine, but so far, at least, no such work has emerged. This week, though, one of the country's largest
for-profit providers of higher education, Corinthian Colleges, is releasing a study it commissioned that
its officials say begins to fill the information gap.
The study, which was conducted by the Parthenon Group, a strategic consulting firm that has worked
with some for-profit colleges but also with major city school districts in Chicago and Boston, uses
Education Department data to paint a picture that compares the sector's institutions favorably to
public community colleges.
The report can be roughly summarized in the following way, portraying for-profit colleges as:
Expanding their enrollments at roughly four times the rate of their public two-year college
counterparts.
Enrolling greater proportions of students who are academically at risk than are public two-year
colleges.
Providing education at a cost roughly comparable to that at community colleges, once all state
and public subsidies are lumped in with students' own tuition payments.
Producing outcomes that are roughly comparable to (if not somewhat better than) those of
public two-year colleges, in terms of transfer or completion of associate degrees or certificates.
Improving the socioeconomic standing of students, to an extent roughly comparable to the
boost provided by community colleges.
Leaving graduates with debt that is manageable in relation to the income they earn.
"We're trying to answer the claim, with data instead of anecdotes, that students enroll in these
schools and they don't get anything out of it except debt," says Mark Pelesh, executive vice president
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for government and regulatory affairs at Corinthian. "We all bel ieve education is a good investment,
and this shows it."
Experts on student aid and higher education finance who reviewed the report do not question the
legitimacy of its data, but challenge some of its assertions and conclusions. Sandy Baum, a senior
policy analyst at the College Board, says that the report may, as Pelesh suggests, put in more
favorable context the stories suggesting that the typical for-profit student is left drowning in debt and
worse off than before.
But while the report may show that the students' "lives are not ruined," it does not answer the
question of whether "their lives are better than they would be if they'd gone to a community college,"
spending $10,000 a year less, Baum says. "Just saying, 'It's not a terribly onerous debt burden' isn't
really enough. Why is it worth their having done that? Did they get something they otherwise could
not have gotten? I don't see it."
High Stakes Questions
The debate about whether for-profit (or "private sector," as the institutions themselves prefer to call
themselves) colleges are successfully educating and training students is no small matter. The
companies themselves are worth billions of dollars to investors, and from a publ ic policy standpoint,
steadily increasing amounts of federal financial aid dollars are flowing to the colleges through their
rapidly increasing numbers of students.
The most recent federal data show that for-profit colleges enrolled about 8 percent of all
postsecondary students in 2007, a figure that has almost certainly swelled to close to 10 percent by
now. The fact that students at the institutions pull in a disproportionate amount of Pell Grant aid--
nearly a quarter in the most recent federal accounting -- has become a source of significant concern
for some policy makers, as have the comparatively high rates at which students who attend for-profit
colleges default on their student loans. Many of the leading for-profit colleges derive as much as 88
percent of their revenue from federal financial aid funds (a law requires that proportion to fall below 90
percent).
With those facts in mind, the Education Department has engaged in recent months in a high-profile
review of the need for new regulations designed to ensure that colleges in the sector are not taking
advantage of students-- and that the ever-growing federal money flowing to the colleges is producing
outcomes of value.
It is in that context that Corinthian contracted with Parthenon to conduct a study comparing how
students in associate degree or certificate programs fare at different types of institutions, says Pelesh.
"There is so much being written and said about our institutions, and it is driven by anecdote," he says.
"We wanted to see if we could come at the issue in a much more systematic way."
Pelesh says Corinthian selected Parthenon's Education Center for Excellence from among several
bidders for the research project because the consulting firm's leaders "thought they could mine
[federal] data in a way that hadn't been done before." Robert Lytle, who heads the firm's education
practice and was lead researcher on the project, says that Parthenon --which has done significant
consulting work with private sector colleges -- had conducted its study in ways that were fully
replicable, so that any researchers who might question its findings could repeat it.
"We tried to leave as clear an audit trail as we could," Lytle says. "People have free rein to go at it."
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The Findings
The basic narrative that Corinthian and Parthenon hope to tell with the report they've produced is that
for-profit colleges are successfully fulfilling a national need that many other postsecondary institutions
have ignored: providing a viable path to a college credential for the growing numbers of academical ly
and financially high-risk students that the U.S. must educate to achieve President Obama's college
completion goals.
Using three federal longitudinal data sets-- the Beginning Postsecondary Students (BPS) survey, the
Integrated Postsecondary Education Data System (IPEDS), and the National Postsecondary Student
Aid Study (NPSAS) -the researchers build a set of arguments designed to make that case, focused
on students enrolled in postsecondary programs of two years or less in duration. (Two-year or less
students make up less than a third of all enrollments at for-profit colleges; Parthenon researchers say
they focused on two-year and less programs because the BPS data set "covers five years of time,"
making it "useful for short programs ... but not relevant for the four-year student. ")
Enrollments in two-year or less programs grew by 6.2 percent in private sector colleges from 2005-
2008, and by 1.2 percent at public colleges, the research shows. At a time when policy makers have
concluded that the country must add at least 5 million college completers in the next decade, "it's the
private sector that's been adding seats, because the government just can't afford to," says
Parthenon's Lytle.
Not only are for-profit colleges enrolling more students, but they are enrolling the sort of at-risk
students that the American higher education system has historically done the worst job of educating.
About 36 percent of the students enrolled in public and independent two-year colleges in 2004 were
considered "high risk" (meaning that they had at least three of seven risk factors, such as having no
high school diploma, being enrolled part time, being single parents, or being financially independent),
compared to 54 percent at private sector institutions.
"If we're going to get to the president's goals, it's going to have to come out of this group" of high-risk
students, says Pelesh. "It's about who is serving this group, or making inroads with them."
The Corinthian/Parthenon study defines the institutions' relative educational success with their
respective pools of students by looking at how students fared five years after enrolling. As seen in the
table below, nearly three in five students who enrolled at the private sector colleges in 2001 had
earned either an associate degree or a certificate five years later, about twice the comparable
proportion for public two-year institutions.
When students who had transferred out were included, the proportions grew closer. About 62 percent
of public two-year students had "positive outcomes" (defined as either earning a credential or
transferring), compared to 69 percent at for-profit colleges. The figures held across different types of
students (Pell Grant recipients, those whose parents did not attend college, etc.), the researchers
found.
Outcomes for Students at 2-Year Public and For-Profit Colleges, 2001-6
Outcome Public Private Sector
Associate Degree 15% 9%
202
Certificate 13%
1
48%
Transferred 30% j11%
Dropped Out 36% 31%
+
Still Enrolled 6% 0%
The other major indicator that the study uses to show that students at private sector students fare as
well or better than those at public community colleges is that of annual income post-graduation. The
researchers find that two-year students who entered for-profit colleges between 2002 and 2005 did so
with an average income of $14,700, and were earning $22,500 after they graduated, a gain of 54
percent. Comparable students at public two-year institutions, by contrast, started out at a higher pre-
enrollment level-- $20,300-- and ended up higher as well , at $27,600. The income gain for the latter
group was $7,300, or 36 percent.
The Corinthian report presents a "basic analysis that would indicate that they are doing as good or
better a job" in producing good outcomes for their students, says Sara Goldrick-Rab, an assistant
professor of educational policy studies and sociology at the University of Wisconsin at Madison who
specializes in students' access to higher education. But she and Baum of the College Board both say
that the analysis leaves several important questions unanswered.
The for-profit colleges' strong student outcomes are largely built on the awarding of certificates rather
than associate degrees or transfer to a four-year institution, Baum and Goldrick-Rab note, and "we
don't know anything about the duration or quality of those certificates," Baum says. (Officials at
Parthenon say that data were not available on the length or type of certificate programs.)
"It looks like the way you get to better completion rates is through the completion of certificates,"
Goldrick-Rab says. "The nice, meaty, difficult question that emerges is, is it better to lead a larger
proportion of students to associate degrees and transfer and have some dropouts, as the community
colleges do, or to have some dropouts and lots of terminal certificates?"
Given the academic underpreparation and high risk nature of the private-sector college students,
Goldrick-Rab says, "these are kids who shouldn't be able to finish college on time. If they appear to
graduate on time at higher rates at for-profit colleges, shouldn't that raise questions? Unless for-
profits have developed some miraculous fast-track remedial instruction, it would seem like they're
handing out degrees."
Pelesh responds that many private sector colleges do have intensive and successful practices -- he
calls them "high touch" -- designed to keep students engaged and on track toward graduation. "If a
student misses a single day of classes, we're on the phone, asking, 'What's the problem, are you
having child care or transportation issues, is there something we can do?' " The institutions too often
get little credit for those practices, he says.
Baum says that without better information on the types of certificates awarded, the available data
suggest to her that those coming out of community colleges end up better off, given that their
incomes after earning the credentials are significantly higher.
203
If people are going to college to improve their financial situations, she says, "How much money you
make [afterward] has nothing to do with how much you made before .... If the credentials [students
receive from the two sets of institutions] are comparable, why it is that there's such a large difference
in how much community college recipients make [compared to those from private sector institutions]?
If you're going to get a certificate one place or the other, why are you going to make more money
coming out of the public [institution]?"
Cost and Price
If all the preceding information in the Corinthian/Parthenon study is designed to make the case that
students emerge from for-profit colleges with an outcome that has value, the last major set of data
that the study presents is designed to combat critics' view that the price of those credentials is
excessive.
The study comes at this two ways. First, it seeks to compare the full cost of producing a "positive
outcome" for a typical student at both a public two-year college and a private sector institution,
weighing all the sources of funds. For the private sector institutions, two main sources contribute to
the $26,700 cost of producing a successful student: several thousand dollars in Pell Grant money and
a significant amount (roughly $17,000) in student-paid tuition and fees. (A small amount of "other"
money also factors in.)
At the community college, by contrast, a smaller amount of Pell Grant money and $3,000 or $4,000 in
student tuition costs are supplemented by about $15,000 in state and local subsidy to cover the
$25,300 cost of producing a successful outcome there. The point, says Pelesh of Corinthian, is that
those who criticize the high tuitions at for-profit colleges compared to community colleges usually
ignore the fact that taxpayers are paying to heavily subsidize the public institutions' low tuitions.
When considering the full cost of what it takes to produce a successful student at the two types of
institutions-- "all the money that goes in the door," says Pelesh --for-profit colleges look like a much
better bargain to policy makers and taxpayers than critics typically concede, he asserts.
The way that the study looks at the "cost" of for-profits is by analyzing the average loan debt and
payments that graduates of the institutions face afterward. The median graduate of a private sector
institution accumulates about $8,300 in loans for a less-than-two-year credential and about $14,600
for an associate degree, according to the federal data used in the report. Using a standard 6 percent
interest rate for student loans, the report asserts, those figures work out to average monthly
payments of $92 for the less-than-two-year graduates and $162 for the two-year graduates-- "about
the cost of a typical cable bill," says Parthenon's Lytle.
That works out to about 4. 7 percent of the typical monthly income of $1 ,943 for a certificate holder
and 7.6 percent of the $2,123 monthly income for an associate degree recipient from a for-profit
institution, the report says. That outcome rebuts the idea that the typical graduate of these colleges is
overwhelmed by debt, Pelesh says.
Skepticism Remains
The cost and price data leave Baum and Goldrick-Rab largely unpersuaded. While Pelesh and
Corinthian are clearly (and admittedly) aiming their analysis at Education Department officials and
other federal and state policy makers who might be inclined to impose price controls on for-profit
institutions or otherwise crack down on their ability to tap into publ ic financial aid dollars for their
students, the only thing that matters to financial aid analysts is what students themselves pay.
204
"The societal cost per outcome slide is silly-- it's the tuition and fees that matter to students," says
Goldrick-Rab.
And on that front, the report's data are questionable, says Baum. It would be virtually impossible for
student in a two-year program to accumulate $14,600 in federal student loan debt given existing limits
on how much students can borrow-- which means that that figure would almost certainly include
meaningful amounts of non-federal (private) loan debt that would carry a much higher interest rate
than 6 percent, she says. (Some alternative student loans have rates into the mid-teens.)
"I'd push back on the assumptions behind that $162 monthly payment," Baum says.
Even if the median figures were accurate, significant proportions almost certainly "end up having to
pay more than they can afford," Baum says. (The College Board's show that 20 percent of two-year
for-profit college students have borrowed more than $20,000, she says.)
"If they could have spent $10,000 a year less" by enrolling at a community college, might not they be
better off? she says.
Baum and Goldrick-Rab and Pelesh and Lytle agree on at least one thing. As Pelesh puts it: "This is
the starting point for a conversation. We'd love to see it built upon" by other research.
"I want to give them credit for thinking about evidence, and for trying to think about what are the
important outcomes to measure," says Goldrick-Rab. "At the same time, we need to find better ways
to get at the quality of the credentials that students are receiving."
Adds Baum: "I think they're raising important questions, and someone should do further analysis on a
bunch of the issues they raise. I don't think just saying, 'These guys are bad guys' is the right answer.
But nothing here convinced me of anything. At core, this is advocacy, not research."
- Doug Lederman
Chronicle of Higher Education
U. of Minnesota Integrates Study Abroad Into the Curriculum
By Karin Fischer
Back in the late 1990s, the University of Minnesota was contending with mediocre study-abroad
participation.
The university wanted to send 50 percent of its students overseas as part of its strategic goal to
become a more international institution, yet only about 15 percent studied abroad, a rate lower than
those of its Big 10 peers.
In certain majors, the rates were even more dismal. Just 15 of the 4,300 students who were enrolled
in the Institute of Technology, the college of engineering, mathematics, and physical sciences on the
Twin Cities campus, studied in another country that year.
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One of the biggest barriers, officials at Minnesota discovered, was that many faculty members and
students believed that going abroad wouldn't work in a given course of study, for reasons of quality
and timing.
The overseas programs didn't meet the university's academic standards, they feared, and spending
time abroad could delay participants' graduation.
Those concerns ran especially deep in highly structured disciplines, like engineering. As a
consequence, few students in those majors studied abroad.
Such obstacles are not unique to Minnesota, of course, and the university's solution has served as a
model for other institutions. To get more students overseas, Minnesota officials decided they needed
to focus on what was happening back at home, by working to better integrate study-abroad
opportunities into the curriculum.
Over the past decade, administrators in the international-programs office have sat down with
individual departments to identify programs in which students can study and earn academic credit
that complements their home-campus course work, and to map out when in a course of study
students can go abroad. They have also engaged professors to vet foreign programs and to create
and lead their own trips overseas.
"We've worked with aviation science and zoology and everything in between," says Gayle Woodruff,
director of curriculum and campus internationalization.
The effort has taken t ime, patience, and personnel. And it is never-ending, requiring updating as
disciplines change and study-abroad programs come and go.
Still, the project has helped Minnesota increase its education-abroad numbers across departments
and disciplines. Today, 30 percent of undergraduates at the university's five campuses travel
overseas.
Getting on the Same Page
Minnesota's curriculum-integration work grew out of a conversation between Peter J. Hudleston, then
associate dean at the Institute of Technology, and the director of the university's learning-abroad
center at the time.
Both men, says Mr. Hudleston, who is now a professor of geology, were concerned that so few
science and engineering students went overseas.
They arranged for study-abroad staff members to meet with professors to identify the impediments.
They soon discovered that misperceptions existed on both sides.
Faculty members associated study abroad with students' spending all or part of the junior year
overseas-the worst time for those in highly regimented science or engineering courses to be away,
Mr. Hudleston said.
The professors worried that "taking time off" in the "heart of the major" would set students back and
leave them scrambling to graduate on time. In fact, students at Minnesota who go abroad are more
likely than others to graduate on schedule.
206
What's more, Mr. Hudleston says, the professors saw a global experience as an add-on, not
something integral to students' course work. Study abroad was for liberal-arts majors and language
students, they believed, not for scientists and engineers.
For their part, international educators say they came in with their own biases and didn't fully
understand the fields.
"We can forget that they really care about their curriculum," says Martha J. Johnson, the current
director of the learning-abroad center. "They don't want to trust their students to just anyone."
"We had to say," she adds, "here are all the things we're not going to interfere with."
The early work with the Institute of Technology set the tone for the curriculum-integration process:
Initial discussions between faculty members and a point person in the international-education office
focus on learning outcomes for the major and how studying abroad could further those goals.
For engineering, studying in another country might be relevant because of the increasingly global
nature of the profession, while for students of graphic design, the appeal could be the opportunity to
explore the influence of foreign artists on their home turf.
Each department "defines in its own terms why it's important to go abroad," Ms. Johnson says.
The group then works together to pinpoint times when overseas study can best fit into the curriculum.
And Ms. Johnson and her staff work to provide programmatic choices.
Over the last decade, Minnesota has added more than 50 programs to enable students in
nontraditional disciplines to study abroad, says Ms. Johnson, who gets ribbed by colleagues from
other colleges on visits to study-abroad sites when she asks about offerings in areas like soil
sciences or volcanology. Some 200 Minnesota faculty members have also gone overseas in recent
years to review programs.
Other study-abroad options include academic exchanges that grow out of professors' international
research collaborations and short-term programs led by Minnesota faculty members. For example,
professors affiliated with the university's health-careers center, which works with students considering
jobs in medicine and other health-related careers, are planning a seminar in India, focusing on public
health and primary care in tribal areas.
In all , the university has more than 300 options for students wishing to study overseas.
The common thread, Ms. Johnson says, is that all programs must be evaluated and approved by the
department, not just her office.
The work is also driven by the particular challenges of each department or college. Staff members
with the health-careers center and the education-abroad office are wrestling with ways to get
professors in health-related discipl ines, many of whom teach only at the graduate level, to lead
overseas programs. They also are setting up a workshop that would prepare students to go abroad
and work in a health-care setting.
To aid students and their academic counselors, the international office creates discipline-specific
advising sheets. A sheet for maj ors in geology, one of more than 100 disciplines covered, outlines the
207
progression of the maj or, suggests when students should be planning for overseas study, and
highlights t imes when international travel isn't feasible.
Prospective geologists can't study abroad in the summer following their sophomore year, for example,
when they must take a mandatory introduction-to-field-geology course. But they might want to sign up
for a faculty-led "global seminar" on the geology of Iceland during their junior summer, the sheet
suggests.
Mark H. Pedelty, an associate professor of communication studies, says the advising sheets don't
dictate a lockstep course of study but rather give students an idea of what's possible. "It's important
that it's a template," he says, "not one size fits all ."
Changing the Conversation
To keep advisers and faculty members current, the international-programs office offers regular
workshops and training sessions, holds an annual universitywide conference on curriculum
integration, and sends faculty and staff members to key international-education meetings.
But it can be tough to keep advising sheets fresh, as major requirements change and as the
university adds and subtracts international-study programs. Right now, as Minnesota moves to put all
the sheets online, Ms. Johnson has noted that a number of them are outdated.
The increase in overseas offerings has also meant that the university, which awards credit for all
study done abroad, has had to deal with the complexities of course transfers and equivalencies, Ms.
Woodruff says.
Such work is labor-intensive, its supporters acknowledge, and figuring out how to meld education
abroad into major courses of study can take several months-or, in some cases, several years.
As for costs, Minnesota received several grants to get the curriculum-integration project started, but
today there are few hard costs, Ms. Woodruff says, as the endeavor is spread across the university
and built into the workload of study-abroad staff members, academic advisers, and administrators.
Despite gains in participation, Minnesota is still far short of its goal of sending half of its students
overseas.
Even if that target is reached, there will still be the 50 percent of students who haven't gotten to travel
internationally, Ms. Woodruff points out.
As a result, in recent years, curriculum-integration efforts have begun to focus less on working study
abroad into the curriculum and more on how to make sure courses offered on the home campuses
have an international flavor.
While other institutions, like Oregon State University and the University of California at San Diego,
have adopted the Minnesota model , whether curriculum integration is appropriate for all institutions is
unclear.
Many liberal-arts colleges, which have high study-abroad rates, say they naturally incorporate
overseas education into their academic programs.
208
Still , Ms. Johnson says, a number of her counterparts at liberal-arts institutions have imitated parts of
Minnesota's curriculum-integration strategy, such as major-advising sheets.
She argues that the effort was critical at a large research university like Minnesota, where it can be
difficult to raise the profile of international education.
And the process is moving forward. New departments and academic programs, like Jewish studies,
mortuary science, and the university's academic health center, are working on curriculum integration.
The business school now requires all its students to have an international experience. Mr. Hudleston,
the former associate dean, says that even in disciplines like engineering, he has noticed a difference.
During his first years as a dean, he doesn't recall any students or parents asking about study abroad.
But by the time he stepped down in 2007, he says, "I can't remember a meeting where it didn't come
up."
209
From: Manheimer, Ann
Sent:
To:
Tuesday, March 30, 2010 3:38PM
Arsenault, Leigh
Subject: FW: Apollo Weakness for Phoenix Revenues Spurring Short
For GE file - Ann
-----Original Message- - - - -
From: Jane
Sent: March 2010 5:20 PM
To: Ann
Subject: Apollo Weakness for Phoenix Revenues Spurring Short
Bloomberg's article --
Apollo Weakness for Phoenix Revenues Spurring Short Sellers 2009-10-30 04:00:01.2 GMT
By Daniel Golden
Oct. 30 (Bloomberg) -- The University of the largest for-profit college in the
may have set off on a collision course with the federal government and investors in
2001. when its John urged executives at his 80th birthday party to
boost enrollment fivefold to half a million a goal it has almost accomplished.
Apollo Group is facing challenges to its growth. The
Securities and Exchange Commission is investigating how Apollo books the company
said Oct.
27. Apollo recorded a charge of $80.5 million to cover costs it expects to pay to settle a
lawsuit alleging that it violated federal student recruitment rules. Profit in the quarter
ended Aug. 31 fell 60 percent largely because of that charge.
Apollo which had more than doubled since may have difficulty rebounding
from an 18 percent decline the day after the SEC probe was disclosed. Phoenix may also face
scrutiny as the U.S. Education Department examines for-profit universities that rely heavily
on taxpayer - supported financial aid. In fiscal Phoenix derived 86 percent of its $3.77
billion in revenue from federal grants and up from 48 percent in and approaching
a federal limit of 90 percent.
((The outlook for Apollo next year has definitely become a lot said Robert
an analyst for RBC Capital Markets in New who lowered his rating on Apollo
shares on Oct. 28 to uunderperform."
Growth
enrollment has almost doubled to from in fiscal 2004. About 90
percent of that growth has come from a two-year online college called created in 2004.
While Phoenix originally focused on degree and graduate degree programs for
managers whose employers paid their Axia attracts students with lower income and
less academic the majority of whom depend on federal financial aid.
revenue was $1.1 billion during the three months ended Aug. five times the
amount during the same period in 2001. Net income rose almost threefold to $91.5 million.
The shares fell or 3.2 to $58.15 on Oct. 29 in New York Stock
Exchange composite trading. Before the close on Oct. the stock had fallen 4.8 percent
this compared with an 18 percent rise in the Standard & 500 Index.
210
Investors have bet against ApolloJ with 10 percent of its shares sold short as of Oct.
15J compared with 3.5 percent for the New York Stock Exchange as a whole. ApolloJs short
interest has risen to 13.4 million shares from 6.6 million a year ago.
Obama Administration
Phoenix now has to deal with the Obama administration) which is tightening review of
for-profits and has close ties to community colleges that compete with Axia. Driven in part
by the shift to AxiaJ PhoenixJs growing reliance on taxpayer funds is drawing government
attention. The average annual tuition is $10J350J $500 less than what federal aid will pay
for a low- income freshman under age 24. By comparison) annual tuition at public community
colleges this year averages $2J544J according to the College BoardJ the New York- based
nonprofit organization that owns the SAT college admissions test.
"It makes sense to examine institutions that rely heavily on federal aidJ" Robert
ShiremanJ Deputy Undersecretary of EducationJ said in an interview without singling out any
university. "CertainlyJ one of the data points we look at for triggering possible program
reviews is a large growth in the use of federal financial aid."
Uncover Problems
Such a program review would be designed to uncover problems with financial management or
signing up students who are unqualified or arenJt fully aware theyJre taking out loansJ and
may result in finesJ suspensions or terminations from eligibility for financial aidJ Shireman
said.
Students are reliant on aid because of the recession and rising college costsJ said Sara
JonesJ an Apollo spokeswoman.
Phoenix expanded into online two-year degrees to continue its shift from a niche institution
for degree completion into a comprehensive university) not to obtain more financial aid
dollarsJ she said. The 90 percent limit on federal revenueJ enacted in 1992J penalizes
schools for having low- income studentsJ said Gregory CappelliJ Apollo Co-Chief Executive
Officer.
we want to help peopleJ" Cappelli said in a Sept. 9 interview at the companyJs Phoenix
headquarters. "They need to be able to read and write and compete at the college level. Know
what? We donJt want your money otherwise."
The company believes the revenue recognition policies being investigated by the SEC are
appropriate) Brian SchwartzJ ApolloJs chief financial officer and treasurerJ said in an Oct.
27 conference call.
Few Graduate
While Phoenix has succeeded in drawing studentsJ most donJt graduateJ leaving them
without degrees and often burdened by loans. Only 8.9 percent of Phoenix students without
prior college experience complete a degree in six yearsJ including 5 percent of those who
attend classes onlineJ according to the National Center for Education Statistics) in
Washington. The national graduation rate is 56.1 percent for four -year schools and 30.9
percent for two-year schools.
Besides leaving school prematurely) many students arenJt able to pay their billsJ with
U.S. taxpayers picking up the balance. Of Phoenix students who should have begun repaying
loans in 2007J 9. 3 percent have defaultedJ up from a 7.2 percent rate a year earlier and more
than the national average of 6.7 percentJ according to the Education Department.
The university works closely with lenders and delinquent students to stave off defaultsJ
said Robert CollinsJ ApolloJs vice president for financial aid.
cReplacement CurveJ
PhoenixJs dropout rate means the school needs to recruit 250J000 new students a year
equivalent to six University of Michigans -- to maintain current enrollments) said former
211
Apollo manager Mark DeFusco> now an education investment banker at Berkery> Noyes & Co. in
New York.
"The replacement curve is astronomical>" DeFusco said.
"You have to feed the beast."
Phoenix>s growth is hardly uncontrolled> said Jones> the Apollo spokeswoman. The
university has "more than 288 campuses and learning centers" which means it can add 1>888
students a day by enrolling five at each one> she said. Phoenix gained 182>888 new students
in the quarter ended Aug. 31> according to Charles B. Edelstein> Apollo Co-CEO.
The question of whether recruiters sign up unqualified students is the focus of the
lawsuit that Phoenix said it expects to settle for $88.5 million. The 2883 suit brought by
two former employees in federal court in California alleges that Phoenix violated a 1992 ban
on paying recruiters on the basis of enrollment numbers. The company has denied wrongdoing.
as Doornail>
In a deposition in the lawsuit> Jennifer Kahn> a recruiter who left Phoenix in 2886>
said she complained to her boss about a prospect who couldn>t handle college.
"I had a student> let> s refer to him as dumb as a doornail/' Kahn said. "And my manager
told me> him.
It>s not our call to say who has a right to an education.> As a consequence> he started> he
went to the first night> he knew he was in deep doo-doo> and dropped. He never should have
been there."
Tom Corbett> a former director of online enrollment at Phoenix who provided an affidavit
in the lawsuit> said in an interview that the school>s recruiters were like brokers peddling
subprime mortgages.
"The University of Phoenix>s management culture is fueled by greed> the same as the
housing scenario>" Corbett said.
"There was no emphasis on the student>s actual values> goals> background, experiences."
Compensation Methods
Timothy Hatch, an outside counsel for Phoenix and a partner in the Los Angeles office of
Gibson, Dunn & Crutcher, said the school enrolled the student mentioned by Kahn because he
had completed an associate's degree at another for-profit college.
Phoenix's compensation methods are legal because teamwork and student retention figure
into its salary adjustments along with enrollment expectations, he said. The criticisms by
Corbett and other former employees don't reflect the views of Phoenix recruiters and managers
in general, he said.
The Education Department may tighten 2882 rules that let colleges pay recruiters partly
on the basis of enrollment, according to Shireman, the deputy undersecretary.
The department announced on Sept. 9 that it may prohibit misrepresentations of
information provided to students and prospective students. The move was prompted partly by
reports the department received about Axia recruiters> according to a federal official
familiar with the matter.
Prospective Students
In tape - recorded telephone calls heard by Bloomberg News> Axia recruiters told Wall
Street researchers posing as potential applicants that its credits could be transferred to
Harvard University and Columbia University. Those schools don't grant transfer credit for
online undergraduate courses, the universities' spokesmen said in e-mails.
Cappelli said he isn't aware of the alleged misrepresentations.
((There's not a mandate or a directive from anyone in the management team to fool or hurt
people," he said . "Traditional colleges make errors, too."
Phoenix has a pilot program to improve student readiness for college, Cappelli said
during a conference call with analysts on Oct. 27. Lower retention rates and extra remedial
212
instruction and other support services for Axia students have damped Apollo profits, he said
in September.
Effort'
uwe are making a concerted effort to get back our focus on bachelor's and master's
degrees," said Cappelli, a former Credit Suisse research analyst who joined Apollo in 2007.
((The return to the student is better if they stay in school and complete their bachelor's
degree. The return to us is better, too. Not all of our growth is coming from Axia anymore."
The company supports a proposal in Congress that would allow colleges to exceed the 90
percent ceiling on the portion of revenues from financial aid until 2012, and not to count
increases in student loan limits as federal revenue.
The proposal, which passed the House last month as part of a broader education bill,
isn't included in a Senate version, said Mark Kantrowitz, publisher of the FinAid.org and
FastWeb.com financial -aid Web sites based in Cranberry Township, Pennsylvania.
Phoenix officials said the 8.9 percent graduation rate measured by the government counts
only first -time students.
Including transfer students, 27 percent of Axia students graduate, according to the
university's 2008 Academic Annual Report. Of those pursuing bachelor's degrees, Phoenix said
38 percent graduate.
No Placement
Phoenix doesn't help graduates land jobs, nor does it track where they find employment,
Jones, the Apollo spokeswoman, said.
She said most Phoenix students already have jobs.
Simon Saffery, 30, a Hawaii resident, transferred to Phoenix's online program as a
junior in 2006 and graduated last year with a 3.9 average out of 4.0 in computer science. He
said he has applied for 25 entry-level information technology jobs without receiving a single
interview. Almost half of the openings he sought were at Apollo itself, Saffery said. He is
unemployed, owes $45,000 in student loans and may declare bankruptcy, Saffery said.
Jones declined to comment on individual students, citing privacy considerations.
According to a 2008 survey by Phoenix, graduates of its associate and bachelor's degree
programs earned average increases in personal income of 19 percent and 28 percent,
respectively.
Founder's Dream
Sperling, who has an economic history Ph.D. from Cambridge University in England,
founded Phoenix in 1976. His mission was to give working professionals a convenient way to
get back to school and boost their academic credentials without having to quit their jobs,
according to his 2000 autobiography, ((Rebel With a Cause.'' Students, who learned in teams
and took five - week courses in business, nursing and other fields, tended to be managers in
their mid-30s whose employers reimbursed them for tuition.
Richard Chait, a professor of higher education at Harvard in Cambridge, Massachusetts,
who has studied Sperling's university, said the school ((saves money everywhere" by hiring
part-time faculty, leasing real estate, and centralizing administration.
((The genius of the University of Phoenix is that it spends
$1 million to develop one course that it gives a thousand times," Chait said in an interview
in his office. ((Community colleges spend almost nothing developing a thousand courses that
they will use once."
Expanding Eastward
In the 1990s, Phoenix expanded eastward, opening facilities in Michigan, Maryland and
Pennsylvania. Today, according to its Web site, the university has campuses in 39 states, the
District of Columbia, Puerto Rico, and two Canadian provinces. From 1995 to 2000, Apollo's
213
stock rose more than 10-foldJ making it one of the 30 top-performing stocks in the Russell
3000 Index.
When enrollment was about 20J000J Sperling told executives Phoenix would have 100J000
students by 2000J Bob BarkerJ a former Phoenix executive vice presidentJ said in an
interview.
At his 80th birthday party in 2001J Sperling raised his sights to 500J000J DeFusco said.
Apollo never formally adopted SperlingJs visionJ said JonesJ the spokeswoman. She said
Sperling was unavailable for interviews.
As fast as Phoenix was growingJ it was drawing from a limited customer base of mid-
career managersJ former Apollo president Brian MuellerJ CEO of for-profit Grand Canyon
Education Inc. in PhoenixJ said in an interview. Students had to be at least 23 years old and
have two years of work experience and as many as 60 credits from other colleges.
Rapid Growth
By 2004J the university had eliminated its credit and age requirementsJ Jones said.
DeFuscoJ who worked at Apollo from 1994 to 2003 in academic affairs and then opening
campuses for PhoenixJ said AxiaJs tuition was set just under the federal limit for financial
aid so government grants and loans could cover mostJ if not allJ of the cost.
The collegeJs tuition-pricing ((was a financial -aid playJ" DeFusco said.
Apollo spokeswoman Jones said that was not the case.
Unlike students who came to Phoenix to complete degreesJ the company said that three out
of five Axia attendees havenJt gone to college before.
uitJs no longer the mid-career managerJ itJs somebody working a minimum-wage job
somewhere and looking to get out of that dead endJ" said Laura Palmer NooneJ a former Phoenix
president who is now CEO of Piccolo International UniversityJ an online school based in
ScottsdaleJ Arizona.
Career Aspirations
Sabrina BoganJ 39J a criminal-justice majorJ said in an interview that Axia has improved
her writing. The RichmondJ VirginiaJ mother of threeJ who has a high school equivalency
degree and used to work as an assistant manager at a convenience storeJ said she has written
essays on the death penalty and energy conservation.
((The person that I was before I started taking those classes could not have done thatJ"
Bogan said. She said she hopes to land a job in a lawyerJs office after she finishes her
associateJs degree next year.
Not all Axia students benefit. Laura HolderJ 29J has a diploma from Prairie Grove High
School in Prairie GroveJ ArkansasJ where she took special-education classesJ she said.
According to her motherJ Beatrice McCormackJ Holder has an IQ of
65 to 70J within a range the Washington-based American Association on Intellectual and
Developmental Disabilities defines as intellectually disabled.
Axia Recruiter
HolderJ who lives in an apartment with her husbandJ said she learned about Phoenix on the
Internet and contacted the school in hopes that a college degree would help her find work as
a preschool teacher. The Axia recruiterJ she saidJ asked if she had graduated from high
schoolJ not whether she was in special education.
((They said once I go through the classesJ I would get a job in teachingJ" Holder said.
Holder enrolled at Axia in October 2006 and realized the classes were too hard for herJ
she said. She left school amid a payment dispute without completing a course. A collection
agency dunned her for a tuition balance of $1J710.
JonesJ the Phoenix spokeswomanJ said the school is aware of a handful of instances in
which intellectually disabled students enrolled and soon demonstrated that they didnJt have
the ability to succeed. In those casesJ she saidJ Phoenix worked to help the students
withdraw without financial obligation.
214
Community Colleges
Axia may soon face more competition for students. The Obama administration has proposed
allocating $12 billion to publicly run community which also give two-year degrees.
While Sally a former Apollo oversaw post-secondary education in the George
W. Bush former community- college leader Martha Kanter plays a similar role
now.
some in the if they were advising students who had a choice of going to
a community college or a for-profit would cPick the community said
Scott a Washington lobbyist who represents Apollo.
The Education Department out to shut down or maim"
Cappelli said.
rf Obama means what he that he wants everyone to have one year of how do
you accomplish that without for - profit higher ed?" he said.
For Related News and Information:
Stories about education: NI EDU <GO>
U.S. colleges and universities: USUV <GO> Education organizations: EDOR <GO> Stories about
technology: {NI TEC}
- -With assistance from Robin D Schatz and Jeffrey Tannenbaum in New York. Editors: Jim
Jonathan Kaufman
To contact the reporter on this story:
Dan Golden in Boston at +1-617-21-4610 or dlgolden@bloomberg.net.
To contact the editor responsible for this story:
Jonathan Kaufman at +1-617-210-4638 or
jkaufman17@bloomberg.net
215
From: Manheimer, Ann
Sent:
To:
Friday, March 05, 2010 5:52 PM
Shireman, Bob
Subject: FW: Apollo Weakness for Phoenix Revenues Spurring Short
May not be specific enough for you - but worth scrolling through as prep - Ann
-----Original Message- - - - -
From: Jane
Sent: March 2010 5:20 PM
To: Ann
Subject: Apollo Weakness for Phoenix Revenues Spurring Short
Bloomberg's article --
Apollo Weakness for Phoenix Revenues Spurring Short Sellers 2009-10-30 04:00:01.2 GMT
By Daniel Golden
Oct. 30 (Bloomberg) -- The University of the largest for-profit college in the
may have set off on a collision course with the federal government and investors in
2001. when its John urged executives at his 80th birthday party to
boost enrollment fivefold to half a million a goal it has almost accomplished.
Apollo Group is facing challenges to its growth. The
Securities and Exchange Commission is investigating how Apollo books the company
said Oct.
27. Apollo recorded a charge of $80.5 million to cover costs it expects to pay to settle a
lawsuit alleging that it violated federal student recruitment rules. Profit in the quarter
ended Aug. 31 fell 60 percent largely because of that charge.
Apollo which had more than doubled since may have difficulty rebounding
from an 18 percent decline the day after the SEC probe was disclosed. Phoenix may also face
scrutiny as the U.S. Education Department examines for-profit universities that rely heavily
on taxpayer - supported financial aid. In fiscal Phoenix derived 86 percent of its $3.77
billion in revenue from federal grants and up from 48 percent in and approaching
a federal limit of 90 percent.
((The outlook for Apollo next year has definitely become a lot said Robert
an analyst for RBC Capital Markets in New who lowered his rating on Apollo
shares on Oct. 28 to uunderperform."
Growth
enrollment has almost doubled to from in fiscal 2004. About 90
percent of that growth has come from a two-year online college called created in 2004.
While Phoenix originally focused on degree and graduate degree programs for
managers whose employers paid their Axia attracts students with lower income and
less academic the majority of whom depend on federal financial aid.
revenue was $1.1 billion during the three months ended Aug. five times the
amount during the same period in 2001. Net income rose almost threefold to $91.5 million.
The shares fell or 3.2 to $58.15 on Oct. 29 in New York Stock
Exchange composite trading. Before the close on Oct. the stock had fallen 4.8 percent
this compared with an 18 percent rise in the Standard & 500 Index.
216
Investors have bet against ApolloJ with 10 percent of its shares sold short as of Oct.
15J compared with 3.5 percent for the New York Stock Exchange as a whole. ApolloJs short
interest has risen to 13.4 million shares from 6.6 million a year ago.
Obama Administration
Phoenix now has to deal with the Obama administration) which is tightening review of
for-profits and has close ties to community colleges that compete with Axia. Driven in part
by the shift to AxiaJ PhoenixJs growing reliance on taxpayer funds is drawing government
attention. The average annual tuition is $10J350J $500 less than what federal aid will pay
for a low- income freshman under age 24. By comparison) annual tuition at public community
colleges this year averages $2J544J according to the College BoardJ the New York- based
nonprofit organization that owns the SAT college admissions test.
"It makes sense to examine institutions that rely heavily on federal aidJ" Robert
ShiremanJ Deputy Undersecretary of EducationJ said in an interview without singling out any
university. "CertainlyJ one of the data points we look at for triggering possible program
reviews is a large growth in the use of federal financial aid."
Uncover Problems
Such a program review would be designed to uncover problems with financial management or
signing up students who are unqualified or arenJt fully aware theyJre taking out loansJ and
may result in finesJ suspensions or terminations from eligibility for financial aidJ Shireman
said.
Students are reliant on aid because of the recession and rising college costsJ said Sara
JonesJ an Apollo spokeswoman.
Phoenix expanded into online two-year degrees to continue its shift from a niche institution
for degree completion into a comprehensive university) not to obtain more financial aid
dollarsJ she said. The 90 percent limit on federal revenueJ enacted in 1992J penalizes
schools for having low- income studentsJ said Gregory CappelliJ Apollo Co-Chief Executive
Officer.
we want to help peopleJ" Cappelli said in a Sept. 9 interview at the companyJs Phoenix
headquarters. "They need to be able to read and write and compete at the college level. Know
what? We donJt want your money otherwise."
The company believes the revenue recognition policies being investigated by the SEC are
appropriate) Brian SchwartzJ ApolloJs chief financial officer and treasurerJ said in an Oct.
27 conference call.
Few Graduate
While Phoenix has succeeded in drawing studentsJ most donJt graduateJ leaving them
without degrees and often burdened by loans. Only 8.9 percent of Phoenix students without
prior college experience complete a degree in six yearsJ including 5 percent of those who
attend classes onlineJ according to the National Center for Education Statistics) in
Washington. The national graduation rate is 56.1 percent for four -year schools and 30.9
percent for two-year schools.
Besides leaving school prematurely) many students arenJt able to pay their billsJ with
U.S. taxpayers picking up the balance. Of Phoenix students who should have begun repaying
loans in 2007J 9. 3 percent have defaultedJ up from a 7.2 percent rate a year earlier and more
than the national average of 6.7 percentJ according to the Education Department.
The university works closely with lenders and delinquent students to stave off defaultsJ
said Robert CollinsJ ApolloJs vice president for financial aid.
cReplacement CurveJ
PhoenixJs dropout rate means the school needs to recruit 250J000 new students a year
equivalent to six University of Michigans -- to maintain current enrollments) said former
217
Apollo manager Mark DeFusco> now an education investment banker at Berkery> Noyes & Co. in
New York.
"The replacement curve is astronomical>" DeFusco said.
"You have to feed the beast."
Phoenix>s growth is hardly uncontrolled> said Jones> the Apollo spokeswoman. The
university has "more than 288 campuses and learning centers" which means it can add 1>888
students a day by enrolling five at each one> she said. Phoenix gained 182>888 new students
in the quarter ended Aug. 31> according to Charles B. Edelstein> Apollo Co-CEO.
The question of whether recruiters sign up unqualified students is the focus of the
lawsuit that Phoenix said it expects to settle for $88.5 million. The 2883 suit brought by
two former employees in federal court in California alleges that Phoenix violated a 1992 ban
on paying recruiters on the basis of enrollment numbers. The company has denied wrongdoing.
as Doornail>
In a deposition in the lawsuit> Jennifer Kahn> a recruiter who left Phoenix in 2886>
said she complained to her boss about a prospect who couldn>t handle college.
"I had a student> let> s refer to him as dumb as a doornail/' Kahn said. "And my manager
told me> him.
It>s not our call to say who has a right to an education.> As a consequence> he started> he
went to the first night> he knew he was in deep doo-doo> and dropped. He never should have
been there."
Tom Corbett> a former director of online enrollment at Phoenix who provided an affidavit
in the lawsuit> said in an interview that the school>s recruiters were like brokers peddling
subprime mortgages.
"The University of Phoenix>s management culture is fueled by greed> the same as the
housing scenario>" Corbett said.
"There was no emphasis on the student>s actual values> goals> background, experiences."
Compensation Methods
Timothy Hatch, an outside counsel for Phoenix and a partner in the Los Angeles office of
Gibson, Dunn & Crutcher, said the school enrolled the student mentioned by Kahn because he
had completed an associate's degree at another for-profit college.
Phoenix's compensation methods are legal because teamwork and student retention figure
into its salary adjustments along with enrollment expectations, he said. The criticisms by
Corbett and other former employees don't reflect the views of Phoenix recruiters and managers
in general, he said.
The Education Department may tighten 2882 rules that let colleges pay recruiters partly
on the basis of enrollment, according to Shireman, the deputy undersecretary.
The department announced on Sept. 9 that it may prohibit misrepresentations of
information provided to students and prospective students. The move was prompted partly by
reports the department received about Axia recruiters> according to a federal official
familiar with the matter.
Prospective Students
In tape - recorded telephone calls heard by Bloomberg News> Axia recruiters told Wall
Street researchers posing as potential applicants that its credits could be transferred to
Harvard University and Columbia University. Those schools don't grant transfer credit for
online undergraduate courses, the universities' spokesmen said in e-mails.
Cappelli said he isn't aware of the alleged misrepresentations.
((There's not a mandate or a directive from anyone in the management team to fool or hurt
people," he said . "Traditional colleges make errors, too."
Phoenix has a pilot program to improve student readiness for college, Cappelli said
during a conference call with analysts on Oct. 27. Lower retention rates and extra remedial
218
instruction and other support services for Axia students have damped Apollo profits, he said
in September.
Effort'
uwe are making a concerted effort to get back our focus on bachelor's and master's
degrees," said Cappelli, a former Credit Suisse research analyst who joined Apollo in 2007.
((The return to the student is better if they stay in school and complete their bachelor's
degree. The return to us is better, too. Not all of our growth is coming from Axia anymore."
The company supports a proposal in Congress that would allow colleges to exceed the 90
percent ceiling on the portion of revenues from financial aid until 2012, and not to count
increases in student loan limits as federal revenue.
The proposal, which passed the House last month as part of a broader education bill,
isn't included in a Senate version, said Mark Kantrowitz, publisher of the FinAid.org and
FastWeb.com financial -aid Web sites based in Cranberry Township, Pennsylvania.
Phoenix officials said the 8.9 percent graduation rate measured by the government counts
only first -time students.
Including transfer students, 27 percent of Axia students graduate, according to the
university's 2008 Academic Annual Report. Of those pursuing bachelor's degrees, Phoenix said
38 percent graduate.
No Placement
Phoenix doesn't help graduates land jobs, nor does it track where they find employment,
Jones, the Apollo spokeswoman, said.
She said most Phoenix students already have jobs.
Simon Saffery, 30, a Hawaii resident, transferred to Phoenix's online program as a
junior in 2006 and graduated last year with a 3.9 average out of 4.0 in computer science. He
said he has applied for 25 entry-level information technology jobs without receiving a single
interview. Almost half of the openings he sought were at Apollo itself, Saffery said. He is
unemployed, owes $45,000 in student loans and may declare bankruptcy, Saffery said.
Jones declined to comment on individual students, citing privacy considerations.
According to a 2008 survey by Phoenix, graduates of its associate and bachelor's degree
programs earned average increases in personal income of 19 percent and 28 percent,
respectively.
Founder's Dream
Sperling, who has an economic history Ph.D. from Cambridge University in England,
founded Phoenix in 1976. His mission was to give working professionals a convenient way to
get back to school and boost their academic credentials without having to quit their jobs,
according to his 2000 autobiography, ((Rebel With a Cause.'' Students, who learned in teams
and took five - week courses in business, nursing and other fields, tended to be managers in
their mid-30s whose employers reimbursed them for tuition.
Richard Chait, a professor of higher education at Harvard in Cambridge, Massachusetts,
who has studied Sperling's university, said the school ((saves money everywhere" by hiring
part-time faculty, leasing real estate, and centralizing administration.
((The genius of the University of Phoenix is that it spends
$1 million to develop one course that it gives a thousand times," Chait said in an interview
in his office. ((Community colleges spend almost nothing developing a thousand courses that
they will use once."
Expanding Eastward
In the 1990s, Phoenix expanded eastward, opening facilities in Michigan, Maryland and
Pennsylvania. Today, according to its Web site, the university has campuses in 39 states, the
District of Columbia, Puerto Rico, and two Canadian provinces. From 1995 to 2000, Apollo's
219
stock rose more than 10-foldJ making it one of the 30 top-performing stocks in the Russell
3000 Index.
When enrollment was about 20J000J Sperling told executives Phoenix would have 100J000
students by 2000J Bob BarkerJ a former Phoenix executive vice presidentJ said in an
interview.
At his 80th birthday party in 2001J Sperling raised his sights to 500J000J DeFusco said.
Apollo never formally adopted SperlingJs visionJ said JonesJ the spokeswoman. She said
Sperling was unavailable for interviews.
As fast as Phoenix was growingJ it was drawing from a limited customer base of mid-
career managersJ former Apollo president Brian MuellerJ CEO of for-profit Grand Canyon
Education Inc. in PhoenixJ said in an interview. Students had to be at least 23 years old and
have two years of work experience and as many as 60 credits from other colleges.
Rapid Growth
By 2004J the university had eliminated its credit and age requirementsJ Jones said.
DeFuscoJ who worked at Apollo from 1994 to 2003 in academic affairs and then opening
campuses for PhoenixJ said AxiaJs tuition was set just under the federal limit for financial
aid so government grants and loans could cover mostJ if not allJ of the cost.
The collegeJs tuition-pricing ((was a financial -aid playJ" DeFusco said.
Apollo spokeswoman Jones said that was not the case.
Unlike students who came to Phoenix to complete degreesJ the company said that three out
of five Axia attendees havenJt gone to college before.
uitJs no longer the mid-career managerJ itJs somebody working a minimum-wage job
somewhere and looking to get out of that dead endJ" said Laura Palmer NooneJ a former Phoenix
president who is now CEO of Piccolo International UniversityJ an online school based in
ScottsdaleJ Arizona.
Career Aspirations
Sabrina BoganJ 39J a criminal-justice majorJ said in an interview that Axia has improved
her writing. The RichmondJ VirginiaJ mother of threeJ who has a high school equivalency
degree and used to work as an assistant manager at a convenience storeJ said she has written
essays on the death penalty and energy conservation.
((The person that I was before I started taking those classes could not have done thatJ"
Bogan said. She said she hopes to land a job in a lawyerJs office after she finishes her
associateJs degree next year.
Not all Axia students benefit. Laura HolderJ 29J has a diploma from Prairie Grove High
School in Prairie GroveJ ArkansasJ where she took special-education classesJ she said.
According to her motherJ Beatrice McCormackJ Holder has an IQ of
65 to 70J within a range the Washington-based American Association on Intellectual and
Developmental Disabilities defines as intellectually disabled.
Axia Recruiter
HolderJ who lives in an apartment with her husbandJ said she learned about Phoenix on the
Internet and contacted the school in hopes that a college degree would help her find work as
a preschool teacher. The Axia recruiterJ she saidJ asked if she had graduated from high
schoolJ not whether she was in special education.
((They said once I go through the classesJ I would get a job in teachingJ" Holder said.
Holder enrolled at Axia in October 2006 and realized the classes were too hard for herJ
she said. She left school amid a payment dispute without completing a course. A collection
agency dunned her for a tuition balance of $1J710.
JonesJ the Phoenix spokeswomanJ said the school is aware of a handful of instances in
which intellectually disabled students enrolled and soon demonstrated that they didnJt have
the ability to succeed. In those casesJ she saidJ Phoenix worked to help the students
withdraw without financial obligation.
220
Community Colleges
Axia may soon face more competition for students. The Obama administration has proposed
allocating $12 billion to publicly run community which also give two-year degrees.
While Sally a former Apollo oversaw post-secondary education in the George
W. Bush former community- college leader Martha Kanter plays a similar role
now.
some in the if they were advising students who had a choice of going to
a community college or a for-profit would cPick the community said
Scott a Washington lobbyist who represents Apollo.
The Education Department out to shut down or maim"
Cappelli said.
rf Obama means what he that he wants everyone to have one year of how do
you accomplish that without for - profit higher ed?" he said.
For Related News and Information:
Stories about education: NI EDU <GO>
U.S. colleges and universities: USUV <GO> Education organizations: EDOR <GO> Stories about
technology: {NI TEC}
- -With assistance from Robin D Schatz and Jeffrey Tannenbaum in New York. Editors: Jim
Jonathan Kaufman
To contact the reporter on this story:
Dan Golden in Boston at +1-617-21-4610 or dlgolden@bloomberg.net.
To contact the editor responsible for this story:
Jonathan Kaufman at +1-617-210-4638 or
jkaufman17@bloomberg.net
221
From: Martin, Phil
Sent: Saturday, August 07, 2010 8:57AM
Kvaal, James To:
Subject: Fw: Student Lending Analytics Blog
See phoenix inquiry.
From: noreply+feed proxy@google.com < noreply+feed proxy@google.com>
To: Martin, Phil
Sent: Sat Aug 07 03:11:09 2010
Subject: Student Lending Analytics Blog
Student Lending Analytics Blog
What The Senate HELP Committee Wants To Know About For-Profit Educators?
Posted: o6 Aug 2010 06:59AM PDT
From Apollo Group's (Universi ty of Phoenix) 8K filed today:
Item 8.01 Other Events.
Today, Apollo Group, Inc. (the "Company") announced that it has received a request for information from
the U.S. Senate Committee on Health, Education, Labor and Pensions relating to the Committee's
ongoing hearings relating to for-profit colleges receiving Title IV student financial aid. The request seeks
information to more accurately understand how the Company uses Federal resources, including how it
recruits and enrolls students, sets program price or tuition, determines financial aid including private or
institutional loans, tracks attendance, handles withdrawal of students and return of Title IV dollars and
manages compli ance with the requirement that no more than go% of revenues come from Title IV dollars.
The request also seeks an understanding of the number of students who complete or graduate from
programs offered by t he Company, how many of those students find new work in their educational area,
the debt levels of students enrolling and completing programs and how the Company tracks and manages
the nw-nber of students who risk default within the cohort default rate \vi ndow.
[n furtherance of this, the Committee has requested that the Company provide information a bout a broad
spectrum of the Company's business, including detailed information relating to financial results,
management, operations, personnel, recruiting, enrollment, graduation, student withdrawals, receipt of
Title IV funds, instit utional accreditation, regulatory compliance and other matters. The Company intends
to cooperate with the Committee and to work with the Committee to provide the requested information in
a manner that does not compromise the Company's sensitive proprietary operating and other
information.
The Committee has requested that the Company produce a portion of the specified information by August
222
26, 2010 and the remainder of the information by September 16, 2010.
You are subscribed to email updates from Student Lending Analytics Blog
To stop receiving these emails, you may unsubscribe now.
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223
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Attachments:
Hello team,
Maya_Horii@mckinsey .com
Sunday, March 14, 201 o 6:41 PM
Hall, Linda; Oliveto, Tony; McGinnis, Colleen
FYI : New York Times article on proprietary schools and student debts
A TT00001.gif
You may have already seen this but we thought you would be interested in the article from the front page of the NY Times
today.
Best,
Maya
In Hard Times, Lured Into Trade School and Debt
By PETER S. GOODMAN
One fast-growing American industry has become a conspicuous beneficiary of the recession: for-profit coll eges
and trade schools.
At institutions that train students for careers in areas like health care, computers and food service, enroll ments
are soaring as people anxious about weak job prospects borrow aggressively to pay tuition that can exceed
$30,000 a year.
But the profits have come at substantial taxpayer expense whil e often delivering dubious benefits to students,
according to academics and advocates for greater oversight of financial aid. Critics say many schools
exaggerate the value of their degree programs, selling young people on dreams of middle-class wages while
setting them up for default on untenable debts, low-wage work and a struggle to avoid poverty. And the schools
are harvesting growing federal student aid dollars, incl uding Pell grants awarded to low-income students.
"If these programs keep growing, you' re going to wind up with more and more students who are graduating and
can't find meaningful employment," said Rafael I. Pardo, a professor at Seattle University School of Law and
an expert on educational finance. "They can' t generate income needed to pay back their loans, and they' re
going to end up in financial distress."
For-profit trade schools have long drawn accusations t hat they overpromise and underdeliver, but the woeful
economy has added to the industry' s opportunities along with the risks to students, according to education
experts. They say these schools have exploited the recession as a lucrative recruiting device while tapping a
larger pool of federal student aid.
"They tell people, ' If you don' t have a college degree, you won' t be able to get a job,'" said Amanda Wallace,
who worked in the financial aid and admissions offices at the Knoxville, Tenn., branch ofiTT Technical
Institute, a chain of schools that charge roughly $40,000 for two-year associate degrees in computers and
electronics. "They tell them, ' You' ll be making beaucoup dollars afterward, and you' ll get all your financial aid
covered.' "
224
Ms. Wallace left her job at ITT in 2008 after five years because she was uncomfortable with what she
considered deceptive recruiting, which she said masked the likelihood that graduates would earn too little to
repay their loans.
As a financial aid officer, Ms. Wallace was supposed to counsel students. But candid talk about job prospects
and debt obligations risked the wrath of management, she said.
" If you said anything that went against what the recruiter said, they would threaten to fire you," Ms. Wallace
said. "The representatives would have already conned them into doing it, and you had to just keep your mouth
shut."
A spokeswoman for the school' s owner, ITT Educational Services, Lauren Littlefield, said the company had no
comment.
The average annual tuition for for-profit schools this year is about $14,000, according to the College Board. The
for-profit educational industry says it is fulfilling a vital social function, supplying job training that provides a
way up the economic ladder.
"When the economy is rough and people are threatened with unemployment, they look to education as the way
out," said Harris N. Miller, president of the Career College Association, which represents approximately 1,400
such institutions. "We're preparing people for careers."
Concerned about aggressive marketing practices, the Obama administration is toughening rules that restrict
institutions that receive federal student aid from paying their admissions recruiters on the basis of enrollment
numbers.
The administration is also tightening regulations to ensure that vocational schools that receive aid dollars
prepare students for "gainful employment. " Under a proposal being floated by the Department of Education,
programs would be barred from loading students with more debt than justified by the likely salaries of the jobs
they would pursue.
"During a recession, with increased demand for education and more anxiety about the ability to get a job, there
is a heightened level of hazard," said Robert Shireman, a deputy under secretary of education. "There is a lot of
Pel! grant money out there, and we need to make sure it's being used effectively. "
The administration's push has provoked fierce lobbying from the for-profit educational industry, which is
seeking to maintain flexibility in the rules.
A Lucrative Business
The stakes are enormous: For-profit schools have long derived the bulk of their revenue from federal loans and
grants, and the percentages have been climbing sharply.
The Career Education Corporation, a publicly traded global giant, last year reported revenue of $1.84 billion.
Roughly 80 percent came from federal loans and grants, according to BMO Capital Markets, a research and
trading firm. That was up from 63 percent in 2007.
The Apollo Group- which owns the for-profit University of Phoenix- derived 86 percent of its revenue
from federal student aid last fiscal year, according to BMO. Two years earlier, it was 69 percent.
225
For-profit schools have proved adept at capturing Pell grants, which are a centerpiece of the Obama
administration' s efforts to make higher education more affordable. The administration increased financing for
Pell grants by $17 billion for 2009 and 2010 as part of its $787 billion stimulus package.
Two years ago, students at for-profit trade schools received $3.2 billion in Pell grants, according to the
Department ofEducat1on, less than went to students at two-year public institutions. By the 201 l -12 school year,
the administration now estimates, students at for-profit schools should receive more than $10 billion in Pell
grants, more than their public counterparts. (Those anticipated increases may shrink, depending on the outcome
of wrangling in Congress over health care and student lending.)
Enrollment at for-profit trade schools expanded about 20 percent a year the last two years, more than double the
pace from 2001-7, according to the Career College Association.
Mr. Miller, the association' s president, said for-profit schools were securing large numbers ofPell grants
because their financial aid offices were diligent and because the schools served many low-income students.
But financial aid experts say the surge of federal money reaching such institutions reflects something else: their
aggressive, sometimes deceitful recruiting practices.
Jeffrey West was working at a pet store near Philadelphia, earning about $8 an hour, when he saw
advertisements for training programs offered by WyoTech, a chain of trade schools owned by Corinthian
Colleges Inc., a publicly traded company that last year reported revenue of $1.3 billion.
After Mr. West called the school, an admissions representative drove to his house to sell him on classes in auto
body refinishing and upholstering technology, a nine-month program that cost about $30,000.
Mr. West blanched at the tuition, he recalled, but the representative assured him the program amounted to an
antidote to hard economic times.
"They said they had a very high placement rate, somewhere around 90 percent," he said. "That was one of the
key factors that caused me to go there. They said I would be earning $50,000 to $70,000 a year."
Some 14 months after he completed the program, Mr. West, 21, has failed to find an automotive job. He is
working for $12 an hour weatherizing foreclosed houses.
With loan payments reaching $600 a month, he is working six and seven days a week to keep up.
"I've got $30,000 in student loans, and I really don' t have much to show for it," he said. "It's really frustrating
when you' re trying to better yourself and you wind up back at Square One. "
Corinthian says it bars its recruiters from making promises about pay.
"The majority of our students graduate," said a spokeswoman, Anna Marie Dunlap, in a written statement.
"Most see a significant earnings increase."
The increase in market opportunities for the for-profit education industry comes as governments spend less on
education. In states like California, community colleges have been forced to cut classes just when demand is
greatest.
"This is creating a very ripe environment for the for-profit schools to pick off more students," said Lauren
Asher, president of the Institute for College Access & Success, a nonprofit research group based in California
226
that seeks to make higher education more affordable. "The risks of exploitation are higher, and the potential
rewards of those practices are higher."
For-profit culinary schools have long drawn criticism for leading students to rack up large debts. Now, they are
enjoying striking growth. Enrollment at the 17 culinary school s of the Career Education Corporation - most of
them operated under the name Le Cordon Bleu- swelled by 31 percent in the final months of last year from a
year earlier.
When Andrew Newburg called the Le Cordon Bleu College of Culinary Arts in Portland, Ore., to seek
information, he was feeling pressure to start a new career. It was 2008, and his Florida mortgage business was a
casualty of the housing bust. An associate degree in culinary arts from a school in the food-obsessed Pacific
Northwest seemed like a portal to a new career.
The tuition was daunting - $41,000 for a 15-month or 21-month program- but he said the admissions
recruiter portrayed it as the entrance price to a stable life.
"The recruiter said, ' The way the economy is, with the recession, you need to have a safe way to be sure you
will always have income,'" Mr. Newburg said." ' In today' s market, chefs will always have a job, because
people will always have to eat. ' "
According to Mr. Newburg, the recruiter promised the school would help him find a good job, most likely as a
line cook, paying as much as $38,000 a year.
Last summer, halfway through his program and already carrying debts of about $10,000, Mr. Newburg was
alarmed to see many graduates taking jobs paying as little as $8 an hour washing dishes and busing tables, he
said. He dropped out to avoid more debt.
"They have a basic money-making machine," Mr. Newburg said.
More Bills Than Paychecks
Career Education says admissions staff are barred from making promises about jobs or salaries. The school
requires students to sign disclosures stating that they understand that its programs afford no guarantees.
But promotional materials convey a sense of promise.
"Our students are given the tools needed to become the future leaders in the industry," proclaims the Le Cordon
Bleu Web site. "Many graduates have attained positions of responsibility, visibility, and entrepreneurship soon
after completing their studies."
The job placement results that the school files with accrediting agencies suggest a different outcome. From July
2007 to June 2008, students who graduated from the culinary arts associate degree program landed jobs that
paid an average of$21,000 a year, or about $10 an hour. Oregon' s minimum wage is $8.40 an hour.
The job placement list is cited in a class-action lawsuit filed against the Portland school - previously known as
Western Culinary Institute- by graduates who allege fraud, breach of contract and unlawful trade practices.
Executives at Career Education denied the allegations while asserting it would be wrong to judge the school on
the basis of its graduates' first jobs.
" You go out in the industry and work your way up," said Brian R. Williams, the company' s senior vice
president for culinary arts.
227
On a recent morning at the campus in Portland, hundreds of students donning chefs whites labored in
demonstration kitchens stocked with stainless steel countertops and commercial gas ranges. A chef inspected
plates ofboeufBourgogne and risotto Milanese. Students melted and pulled sugar into multicolored ribbons.
Others used a chainsaw to sculpture blocks of ice into decorative centerpieces.
"It' s employable skills; that's what we teach people here," said the school president, Jon AJberts. "We try to
give them as much of an industry experience in the classroom as possible."
But several local chefs said the program merely simulated what students could learn in entry-level jobs.
"When they graduate and come in the kitchen, I tell them, 'I'm going to treat you like you don' t know
anything,' " said Kenneth Giambalvo, executive chef at Bl uehour, an upscale restaurant in Port! and' s Pearl
District. "It doesn' t really give them any edge."
What the school does give many students is debt, often at double-digit interest rates- debt that even
bankruptcy cannot erase without a lengthy, low-odds legal proceeding.
When TJ Williams arrived in Portland from his home in Utah to enroll at Le Cordon Bleu in 2007, he was
shocked by the terms of the aid package the school had arranged for him: One loan, for nearly $14,000, carried
a $7,327 "finance charge" and a 13 percent interest rate.
"They told me that halfway through the program, [could probably refinance to a lower rate," he said.
When he tried to refinance, the school turned him down, he says.
Career Education declined to discuss Mr. Williams' s case, citing privacy restrictions and saying he had not
signed a waiver.
Mr. Williams has been jobless since last fall and recently returned to Utah, where he moved in with his mother.
After Graduation
The Career Education Corporation e-mailed The New York Times names and contact information for four
graduates "with whom we hope you' ll touch base for important perspective." One came with a wrong number.
A second had graduated 15 years ago.
A third, Cherie Thompson, called the program "a really positive experience" but declined to discuss her debts or
earnings. The fourth, Ericsel Tan, graduated in 2003 and later earned $42,000 a year overseeing catering at a
convention center near Seattle. He said his success reflected his seven years of kitchen experience prior to
culinary school.
Career Education notes that only 5. 9 percent of the federal loans to students at the Western Culinary Institute
that began to come due in 2007- the latest available data- are listed in default by the Department of
Education.
But default rates have traditionally reflected only those borrowers who fail to pay in the first two years
payments are due.
The Department of Education has begun calculating default rates for three years. By that yardstick, Western
Culinary' s default rate more than doubles, to 12.5 percent.
228
For-profit schools have ramped up their own lending to students to replace loans formerly extended by Sallie
Mae, the student lending giant.
These loans are risky: Career Education and Corinthian recently told investors they had set aside roughly half
the money allocated this year for private lending to cover anticipated bad debts.
Financial aid experts say such high rates of expected default prove that graduates will not earn enough to make
their payments, yet the loans make sense for the for-profit school industry by enabling the flow of taxpayer
funds to their coffers: they satisfy federal requirements that at least 10 percent of tuition money come from
students directly or from private sources.
"They' re making so much money off their federal student loans and grants that they can afford to write off their
own loans," said Ms. Asher of the lnstitute for College Access & Success.
Livi ng Off Loans
Feaeal sttrdertt loans hav become a b;ggeT pa:t of <he revenU: of many ior-proftt colleg'lS and :race schools
oo Apollo Group
f\.Hl v o' Pi >O-e'i l()
0
Corinlhi:Jn Collegll.'s Career Ill duCDtfonal
Services
..,....., I f'"" '!' f""' I J t l I , I i I i , I
'99 -o '03 05 "07 oo '99 '<)l cs -cs ':oi 09 "99 o "03 os '07 09 '99 'Oi ro '05 or og
+========================================================================+
This email is confidenti a l and may be p rivileged. If you have received i t
in error, ple a se notify us i mmediately and then del ete i t . Pl ease do not
copy i t , discl ose its contents or use it for any purpose .
+========================================================================+
229
From:
Sent:
To:
Cc:
Subject:
Attachments:
Bill, Sam and Jim,
Maya_Horii@mckinsey .com
Sunday, March 14, 201 o 6:40 PM
Taggart, Bill ; Dunbar, Samantha; Runcie, James
Tony_ Goland@mckinsey .com; Andrew_ Sellgren@mckinsey .com
FYI : New York Times article on proprietary schools and student debts
A TT00001 .gif
You may have already seen this but we thought you would be interested in the article from the front page of the NY Times
today.
Best,
Maya
In Hard Times, Lured Into Trade School and Debt
By PETER S. COODMAN
One fast-growing American industry has become a conspicuous beneficiary of the recession: for-profit colleges
and trade schools.
At institutions that train students for careers in areas like health care, computers and food service, enrollments
are soaring as people anxious about weak job prospects borrow aggressively to pay tuition that can exceed
$30,000 a year.
But the profits have come at substantial taxpayer expense while often delivering dubious benefits to students,
according to academics and advocates for greater oversight of financial aid. Critics say many schools
exaggerate the value oftheir degree programs, selling young people on dreams of middle-class wages while
setting them up for default on untenable debts, low-wage work and a struggle to avoid poverty. And the schools
are harvesting growing federal student aid dollars, including Pell grants awarded to low-income students.
"If these programs keep growing, you' re going to wind up with more and more students who are graduating and
can' t find meaningful employment," said Rafael I. Pardo, a professor at Seattle University School of Law and
an expert on educational fi nance. "They can' t generate income needed to pay back their loans, and they' re
going to end up in financial distress."
For-profit trade schools have long drawn accusations that they overpromise and underdeliver, but the woeful
economy has added to the industry' s opportunities along with the risks to students, according to education
experts. They say these schools have exploited the recession as a lucrative recruiting device while tapping a
larger pool of federal student aid.
"They tell people, ' If you don' t have a college degree, you won' t be able to get a job,'" said Amanda Wallace,
who worked in the financial aid and admissions offices at the Knoxville, Tenn. , branch of ITT Technical
Institute, a chain of schools that charge roughly $40,000 for two-year associate degrees in computers and
electronics. "They tell them, 'You' ll be making beaucoup doll ars afterward, and you' ll get all your financial aid
covered.' "
230
Ms. Wallace left her job at ITT in 2008 after five years because she was uncomfortable with what she
considered deceptive recruiting, which she said masked the likelihood that graduates would earn too little to
repay their loans.
As a financial aid officer, Ms. Wallace was supposed to counsel students. But candid talk about job prospects
and debt obligations risked the wrath of management, she said.
" If you said anything that went against what the recruiter said, they would threaten to fire you," Ms. Wallace
said. "The representatives would have already conned them into doing it, and you had to just keep your mouth
shut."
A spokeswoman for the school' s owner, ITT Educational Services, Lauren Littlefield, said the company had no
comment.
The average annual tuition for for-profit schools this year is about $14,000, according to the College Board. The
for-profit educational industry says it is fulfilling a vital social function, supplying job training that provides a
way up the economic ladder.
"When the economy is rough and people are threatened with unemployment, they look to education as the way
out," said Harris N. Miller, president of the Career College Association, which represents approximately 1,400
such institutions. "We're preparing people for careers."
Concerned about aggressive marketing practices, the Obama administration is toughening rules that restrict
institutions that receive federal student aid from paying their admissions recruiters on the basis of enrollment
numbers.
The administration is also tightening regulations to ensure that vocational schools that receive aid dollars
prepare students for "gainful employment. " Under a proposal being floated by the Department of Education,
programs would be barred from loading students with more debt than justified by the likely salaries of the jobs
they would pursue.
"During a recession, with increased demand for education and more anxiety about the ability to get a job, there
is a heightened level of hazard," said Robert Shireman, a deputy under secretary of education. "There is a lot of
Pel! grant money out there, and we need to make sure it's being used effectively. "
The administration's push has provoked fierce lobbying from the for-profit educational industry, which is
seeking to maintain flexibility in the rules.
A Lucrative Business
The stakes are enormous: For-profit schools have long derived the bulk of their revenue from federal loans and
grants, and the percentages have been climbing sharply.
The Career Education Corporation, a publicly traded global giant, last year reported revenue of $1.84 billion.
Roughly 80 percent came from federal loans and grants, according to BMO Capital Markets, a research and
trading firm. That was up from 63 percent in 2007.
The Apollo Group- which owns the for-profit University of Phoenix- derived 86 percent of its revenue
from federal student aid last fiscal year, according to BMO. Two years earlier, it was 69 percent.
231
For-profit schools have proved adept at capturing Pell grants, which are a centerpiece of the Obama
administration' s efforts to make higher education more affordable. The administration increased financing for
Pell grants by $17 billion for 2009 and 2010 as part of its $787 billion stimulus package.
Two years ago, students at for-profit trade schools received $3.2 billion in Pell grants, according to the
Department ofEducat1on, less than went to students at two-year public institutions. By the 201 l -12 school year,
the administration now estimates, students at for-profit schools should receive more than $10 billion in Pell
grants, more than their public counterparts. (Those anticipated increases may shrink, depending on the outcome
of wrangling in Congress over health care and student lending.)
Enrollment at for-profit trade schools expanded about 20 percent a year the last two years, more than double the
pace from 2001-7, according to the Career College Association.
Mr. Miller, the association' s president, said for-profit schools were securing large numbers ofPell grants
because their financial aid offices were diligent and because the schools served many low-income students.
But financial aid experts say the surge of federal money reaching such institutions reflects something else: their
aggressive, sometimes deceitful recruiting practices.
Jeffrey West was working at a pet store near Philadelphia, earning about $8 an hour, when he saw
advertisements for training programs offered by WyoTech, a chain of trade schools owned by Corinthian
Colleges Inc., a publicly traded company that last year reported revenue of $1.3 billion.
After Mr. West called the school, an admissions representative drove to his house to sell him on classes in auto
body refinishing and upholstering technology, a nine-month program that cost about $30,000.
Mr. West blanched at the tuition, he recalled, but the representative assured him the program amounted to an
antidote to hard economic times.
"They said they had a very high placement rate, somewhere around 90 percent," he said. "That was one of the
key factors that caused me to go there. They said I would be earning $50,000 to $70,000 a year."
Some 14 months after he completed the program, Mr. West, 21, has failed to find an automotive job. He is
working for $12 an hour weatherizing foreclosed houses.
With loan payments reaching $600 a month, he is working six and seven days a week to keep up.
"I've got $30,000 in student loans, and I really don' t have much to show for it," he said. "It's really frustrating
when you' re trying to better yourself and you wind up back at Square One. "
Corinthian says it bars its recruiters from making promises about pay.
"The majority of our students graduate," said a spokeswoman, Anna Marie Dunlap, in a written statement.
"Most see a significant earnings increase."
The increase in market opportunities for the for-profit education industry comes as governments spend less on
education. In states like California, community colleges have been forced to cut classes just when demand is
greatest.
"This is creating a very ripe environment for the for-profit schools to pick off more students," said Lauren
Asher, president of the Institute for College Access & Success, a nonprofit research group based in California
232
that seeks to make higher education more affordable. "The risks of exploitation are higher, and the potential
rewards of those practices are higher."
For-profit culinary schools have long drawn criticism for leading students to rack up large debts. Now, they are
enjoying striking growth. Enrollment at the 17 culinary school s of the Career Education Corporation - most of
them operated under the name Le Cordon Bleu- swelled by 31 percent in the final months of last year from a
year earlier.
When Andrew Newburg called the Le Cordon Bleu College of Culinary Arts in Portland, Ore., to seek
information, he was feeling pressure to start a new career. It was 2008, and his Florida mortgage business was a
casualty of the housing bust. An associate degree in culinary arts from a school in the food-obsessed Pacific
Northwest seemed like a portal to a new career.
The tuition was daunting - $41,000 for a 15-month or 21-month program- but he said the admissions
recruiter portrayed it as the entrance price to a stable life.
"The recruiter said, ' The way the economy is, with the recession, you need to have a safe way to be sure you
will always have income,'" Mr. Newburg said." ' In today' s market, chefs will always have a job, because
people will always have to eat. ' "
According to Mr. Newburg, the recruiter promised the school would help him find a good job, most likely as a
line cook, paying as much as $38,000 a year.
Last summer, halfway through his program and already carrying debts of about $10,000, Mr. Newburg was
alarmed to see many graduates taking jobs paying as little as $8 an hour washing dishes and busing tables, he
said. He dropped out to avoid more debt.
"They have a basic money-making machine," Mr. Newburg said.
More Bills Than Paychecks
Career Education says admissions staff are barred from making promises about jobs or salaries. The school
requires students to sign disclosures stating that they understand that its programs afford no guarantees.
But promotional materials convey a sense of promise.
"Our students are given the tools needed to become the future leaders in the industry," proclaims the Le Cordon
Bleu Web site. "Many graduates have attained positions of responsibility, visibility, and entrepreneurship soon
after completing their studies."
The job placement results that the school files with accrediting agencies suggest a different outcome. From July
2007 to June 2008, students who graduated from the culinary arts associate degree program landed jobs that
paid an average of$21,000 a year, or about $10 an hour. Oregon' s minimum wage is $8.40 an hour.
The job placement list is cited in a class-action lawsuit filed against the Portland school - previously known as
Western Culinary Institute- by graduates who allege fraud, breach of contract and unlawful trade practices.
Executives at Career Education denied the allegations while asserting it would be wrong to judge the school on
the basis of its graduates' first jobs.
" You go out in the industry and work your way up," said Brian R. Williams, the company' s senior vice
president for culinary arts.
233
On a recent morning at the campus in Portland, hundreds of students donning chefs whites labored in
demonstration kitchens stocked with stainless steel countertops and commercial gas ranges. A chef inspected
plates ofboeufBourgogne and risotto Milanese. Students melted and pulled sugar into multicolored ribbons.
Others used a chainsaw to sculpture blocks of ice into decorative centerpieces.
"It' s employable skills; that's what we teach people here," said the school president, Jon AJberts. "We try to
give them as much of an industry experience in the classroom as possible."
But several local chefs said the program merely simulated what students could learn in entry-level jobs.
"When they graduate and come in the kitchen, I tell them, 'I'm going to treat you like you don' t know
anything,' " said Kenneth Giambalvo, executive chef at Bl uehour, an upscale restaurant in Port! and' s Pearl
District. "It doesn' t really give them any edge."
What the school does give many students is debt, often at double-digit interest rates- debt that even
bankruptcy cannot erase without a lengthy, low-odds legal proceeding.
When TJ Williams arrived in Portland from his home in Utah to enroll at Le Cordon Bleu in 2007, he was
shocked by the terms of the aid package the school had arranged for him: One loan, for nearly $14,000, carried
a $7,327 "finance charge" and a 13 percent interest rate.
"They told me that halfway through the program, [could probably refinance to a lower rate," he said.
When he tried to refinance, the school turned him down, he says.
Career Education declined to discuss Mr. Williams' s case, citing privacy restrictions and saying he had not
signed a waiver.
Mr. Williams has been jobless since last fall and recently returned to Utah, where he moved in with his mother.
After Graduation
The Career Education Corporation e-mailed The New York Times names and contact information for four
graduates "with whom we hope you' ll touch base for important perspective." One came with a wrong number.
A second had graduated 15 years ago.
A third, Cherie Thompson, called the program "a really positive experience" but declined to discuss her debts or
earnings. The fourth, Ericsel Tan, graduated in 2003 and later earned $42,000 a year overseeing catering at a
convention center near Seattle. He said his success reflected his seven years of kitchen experience prior to
culinary school.
Career Education notes that only 5. 9 percent of the federal loans to students at the Western Culinary Institute
that began to come due in 2007- the latest available data- are listed in default by the Department of
Education.
But default rates have traditionally reflected only those borrowers who fail to pay in the first two years
payments are due.
The Department of Education has begun calculating default rates for three years. By that yardstick, Western
Culinary' s default rate more than doubles, to 12.5 percent.
234
For-profit schools have ramped up their own lending to students to replace loans formerly extended by Sallie
Mae, the student lending giant.
These loans are risky: Career Education and Corinthian recently told investors they had set aside roughly half
the money allocated this year for private lending to cover anticipated bad debts.
Financial aid experts say such high rates of expected default prove that graduates will not earn enough to make
their payments, yet the loans make sense for the for-profit school industry by enabling the flow of taxpayer
funds to their coffers: they satisfy federal requirements that at least 10 percent of tuition money come from
students directly or from private sources.
"They' re making so much money off their federal student loans and grants that they can afford to write off their
own loans," said Ms. Asher of the lnstitute for College Access & Success.
Livi ng Off Loans
Feaeal sttrdertt loans hav become a b;ggeT pa:t of <he revenU: of many ior-proftt colleg'lS and :race schools
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in error, ple a se notify us i mmediately and then del ete i t . Pl ease do not
copy i t , discl ose its contents or use it for any purpose .
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235
From:
Sent:
To:
Subject:
Mike Allen (politicoplaybook@politico.com]
Sunday, August 08, 201 o 10:23 AM
Kvaal, James
POLITICO Playbook, presented by University of Phoenix-- Browner: Majority of BP fines
should go to Gulf-- Odierno: U.S. to push 'a bit harder' for Iraq gov't -- HP CEO paid off
accuser-- Ron Klain, Marc Ambinder b'days
WHITE HOUSE VIDEO-- "A special Gulf Coast edition of West Wing Week," with correspondent Josh
Earnest-- Arun Chaudhary and Jessica Slider go on assignment for a "Dispatches from the Gulf"
http://bit.ly/9skTvZ
RANGEL: I WANTED DEAL, GOP DEMANDED TRIAL-- N.Y. Daily News: "Rep. Charles Rangel told
Harlem leaders Saturday he signed a plea deal on ethics charges but that the GOP pushed for a trial."
http:/ /bit.ly/dfbchl Haberman http:/ /politi.co/aX928X
FIRST LOOK-- THE NEW YORKER: AHMADINEJAD WANTS OBAMA TO GRANT AN
INTERVIEW TO AN IRANIAN REPORTER-- Jon Lee Anderson, "Letter from Tehran-- AFTER THE
CRACKDOWN: Talking to Mahmoud Ahmadinejad -- and the opposition-- about Iran today .. . In a rare
interview with a Western reporter in Iran, the President denied repressing the opposition. 'Everyone is free,' he
said" : "Not long after arriving in Tehran, I attended a press conference held by Ahmadinejad-at which I was the
only Westerner present-and not a single reporter mentioned the Green Movement. .. . AJi Akbar Javanfekr,
Ahmadinejad's senior media adviser and the director of !RNA, Iran's official news agency, ... politely suggested
that I could be 'more than just the President's interviewer, but an instrument of peace.' ... As I left Javanfekr's
office, he gave me a letter to forward to Robert Gibbs ... In it, he mentioned my interview with President
Ahmadinejad and suggested that the White House should 'positively reciprocate' by granting an interview with
Obama, the first with a U.S. President by an Iranian reporter."
JOHN F. HARRIS, on the " This Week" roundtable, calls George Packer's takedown of the U. S. Senate "a
great portrait." Packer's "The Empty Chamber" http://bit.ly/djutiL
BREAKING-- WSJ's Ben Worthen: "Mark Hurd, who resigned Friday as chief executive ofHewlett-Packard,
... reached a settlement with the unidentified contractor on Thursday regarding her sexual-harassment claims ."
AP's Jordan Robertson: "The person familiar with the case told the AP that Hurd agreed to pay the woman."
TALmAN KILLS CHRISTIANS --McClatchy Newspapers' Dion Nissenbaum and Hashim Shukoor, in
Kabul : "Ten members of an internatlonal medical mission, including six Americans, were robbed and killed
while returning from a two-week trek through risky parts of eastern Afghanistan ... In a text message claiming
responsibility, the Taliban said they killed the aid workers because they were preaching Christianity and spying
for Western forces in Afghanistan. The killings are likely to send a chill through an international aid community
that faces constant risks while working in Afghanistan."
"60 KILLED IN IRAQ ahead of Ramadan," by AFP's Salam Faraj , in Baghdad: "Weekend violence across
Iraq killed 60 people, officials said on Sunday, just days ahead of the start of the holy Muslim fasting month of
Ramadan when insurgents typically step up their attacks. The unrest has fuelled concerns about security here--
more than 100 people have died so far this month-- amid a massive pullout of American forces, although US
officers insist Iraqi soldiers and police are up to the task."
ZlNG -- lLJ. DIONNE JR., in Monday's column: "I've reached the point where I'd abolish the Senate ifl
could. It is more profoundly undemocratic than it was when the Founders created it and less genuinely
236
deliberative-- problems compounded by a Republican minority's strategy of delay and obstruction." --
Investor's Business Daily
THE BIG lDEA --EZRA KLEIN, on WP's Business front, "Would that all presidents were this anti-business:
According to the St. Louis Federal Reserve, corporate profits hit $1.37 trillion in the first quarter-- an all-time
high . . . . And the Obama administration has cut taxes for small businesses and big ones alike. Maybe the
president could be anti-me for a while. I could use the money. The reality is that America's supposedly anti-
business president has led an extremely pro-business recovery. The corporate community has recovered first,
and best. The populist tone that conservative magazines and business groups decry is partly in reaction to this:
As corporate America's position is getting better and better, the recovery is looking shakier and shakier. "
http:/ /bit.ly/92bllis
**A message from the University of Phoenix: University ofPhoenix is committed to providing an accredited,
accountable and accessible higher education to more Americans. Because an Educated World is a Better World.
Learn more at http://bit.ly/9zJlmz **
THE SHOWS, on fast forward:
CAROL BROWNER, President Obama's energy adviser, to David Gregory on "Meet the Press," on Day 111
of the Gulf crisis: "I think the first phase is over, because the well is not leaking ... We see this as a phase, but
not the end, by any means . .. . This was the largest response to an environmental disaster: We had over 6,000
vessels, more than 40,000 people ... There was the skimming, there was the burning, there was the containing--
it was VERY SUCCESSFUL . ... The good news is we're not seeing huge amounts of oil in our beaches and in
our marshes . ... There's still a lot of work to do."
--Browner on BP: "BP will be held absolutely accountable .. .. There will be a large financial penalty .. .. They
wilt be responsible for paying to clean up the natural-resource damages .... Under the current law, it goes to the
Treasury. We think it should be returned to the Gulf coast, obviously.
--Browner, on Gulf-state senators' proposal that at least 80 percent of BP fines go to Gulf Coast recovery: "I
think that makes a lot of sense .... We're going to have to work with Congress . .. . He [the president] supports
the notion of returning it to the region."
--Browner said the deepwater-drilling moratorium will be lifted if appropriate, and said an energy bill could be
done in lame-duck session "POTENTIALLY": "Congress is coming back. We will continue to see if we can
get 1 egi sl ati on."
UP NEXT on "Meet," House Republican Leader John Boehner said the moratorium should be lifted: "I think
that we're risking 100,000 jobs in the Gulf coast with this moratorium."
--"I continue to believe that it IS a challenge for us to take back the House ... But we want to EARN BACK the
majority .... The American people are screaming at the top of their lungs to Washington: 'STOPI Stop the
spending, stop the job-killing policies.' ... We're going to come forward with our agenda, right after Labor Day .
. . . It's time to stop the spending-spree in Washington, D.C."
GEN. RAY ODIERNO, the outgoing commander ofU.S. forces in Iraq, to Christiane Amonpour on ABC's
"This Week": " Obviously, I believe there will be people who attempt to take advantage of the opportunity of
the attention being brought upon the August 31st date. And so there will be groups who try to take advantage of
that and show weakness in the government of Iraq, and try to create some sort of lack of confidence of the
people in the process as we move forward . ... But I believe we can overcome that concern . ... Iraqis have to
understand the importance of forming the government, doing it as quickly as possible, and getting themselves
237
ready to leap forward so they can make progress on the economic front and the diplomatic front. And they gotta
SET THEMSELVES UP for that. ... I think we're starting to see that that: We've seen negotiations pick up
over the last couple weeks .... It's a very fine line here, Christiane. What we want is we want to have the Iraqis
form their own government. ... [W]e, behind the scenes, have tried to facilitate the process without being
directive in who should do what. And I think we've done a pretty fair job of that. And I think as time goes on
we'll try to facilitate it a bit harder to get them to move forward a bit quicker."
VIRGINIA GOV. BOB McDONNELL (R), to Candy Crowley on CNN's "State of the Union: "I think, in the
short run, some of the stimulus funding has helped us in some of the areas, although we've turned some of it
down and made the decisions to make the cuts that are necessary. But we cannot continue to have all the states
rely on the federal government. ... [W]hen we have Republicans in Congress standing up for less spending and
less government control, one size fits all policies out of Washington, I think they're on the right track. And I
think they'll be rewarded at the polls in November."
MICHIGAN GOV. JENNIFER GRANHOLM (D), to Candy: "I certainly am not Pollyanna about it. This is
going to be a tough slog, because the situation on the ground of the country is so hard. So there's a lot of anger.
There's a lot of anxiety. But the question is, do people want to go back to the Bush kind of policies, which, of
course, started this whole recession to begin with? Or do they feel a sense of progress and momentum and that
things have turned around-- you know, turned the corner? We're on an upswing. Yeah, we're not there as fast as
we'd like, but, boy, if you revert to the old policies, then you'll be heading downhill very quickly. And I think
that's the story that Democrats need to tell."
BIRTHDAYS: David Bass (hat tip: Tim Burger) ... Ron Klain ... Marc Am binder ... New Hampshire's
Michael Biundo (h/t Columbus) ... MONDAY: BURTON!
THE NARRATVE -- "US lawmakers face home-front skeptics," by AFP's Olivier Knox: "Defending an
armload of historic legislative wins with a pocketful of arguments, President Obama's Democratic allies in
Congress are wooing wary voters 90 days before critical November elections . ... Republicans face a different
challenge: Insurgent 'tea party' activists on the right and the candidates they champion, whom some in the party
say could drive off more mainstream independent voters."
ON THE ROAD-- "In Ky. , tea party vs. Obama proxy war," by Jonathan Martin: "FANCY FARM, Ky. -
Rand Paul is ostensibly running against Jack Conway in the Kentucky Senate race, but the two are quickly
becoming stand-ins for the marquee proxy war of this election year. ... Conway, the state attorney general, is a
centrist Democrat . . . The battle ... played out Saturday ... at the 130th rendition of one of the country's longest-
running political affairs, the Fancy Farm picnic . .... [V]eterans ofFancy Farm- a down-home affair that is
equal parts country fair, family reunion, tent revival, pep rally and tailgate party - said attendance was bigger
this year ... Mixing with the locals, who attend mostly for the bingo and barbecued pork and mutton, and the
clubby political crowd, which makes the trek from Louisville and Lexington, were Paul enthusiasts, many of
them new to politics. The tea party activists, a few of which wore colonial garb, were not there for the food and
conviviality at what is billed on signs as 'the world's largest picnic' ... Conway, in an interview with a handful
of reporters after the speeches, ... made plain he wouldn't be inviting Obama ... McConnell ... said in an
interview that the GOP Senate hopeful's best course would be staying focused entirely on federal spending . ...
Asked if Paul had gotten the message about lowering his national profile, McConnell would only say: 'I think
he's doing well."' http://bit.ly/b21693
FRANK RICH, "How to Lose an Election Without Really Trying: Running against Bush in 2010 won't
cut it": "COULD George W. Bush be a kind of Gipper-in-reverse and win yet one more for the Democrats?
Clearly this White House sees him as the gift that will keep on giving .... Sounds plausible, but it's Obama
who's on the wrong side of that bet, to his own political peril. Betting on amnesia is almost always a winning,
not a losing, wager in America . . . . The Democrats have already retreated from immigration and energy reform.
238
If they can't make the case ... that they offer more hope for a job than a radical conservative movement poised
to tear down what remains of the safety net, they deserve to lose." http://nyti .ms/bBfAbJ
THE AGENDA-- GREEN GROUPS MOVE RESOURCES TO DEFENDING EPA --POLITICO's Darren
Samuelsohn: " [L ]eaders at some of the country's most influential green groups are moving cash and staff away
from cap and trade. Environment America, the Sierra Club and the Union of Concerned Scientists, with more
than 2.5 million members combined, now consider it their top job to defend the Environmental Protection
Agency's authority to write climate rules against attacks in the courts and on Capitol Hill. ... The groups also
are hoping to defend and expand on state and regional climate laws and compacts, including a carbon market
for power plants operating in the Northeast and emerging systems in the West. And they will work at the state
public utility commission level to make carbon dioxide emissions a crux in reviewing permits for new and
existing coal-fired power plants. The Sierra Club is spending $18 million and has 100 people across the country
working on challenges to coal-fired electricity ... Two green heavies- Environmental Defense Fund and the
Natural Resources Defense Council- aren't giving up the fight. Combined, they employ several dozen experts,
from attorneys to economists and public-health scientists. " http://bit.ly/dg2HLC
TOP TALKER -- MAUREEN DOWD, "Feliz Cumpleafios, and Adios: Michelle goes her own way with the
girls": "Her critics used to paint her as a scary Marxist. Now they cast her as a spoiled princess . ... Michelle
Obama is the most popular figure in the administration, but last week she had her first brush with getting
brushed back in the press . ... In politics and pop culture, optics are all. And Michelle's optics sent a message
that likely made some in the White House and the Democratic Party wince. She seemed to be gigging her
husband a bit: I'm going to do what I want to do. I can't worry about whether it gives the Tea Partiers ammo or
makes Democrats (including you) campaigning against the excesses of the rich look hypocritical. Even if the
country is sliding into a double-dip recession, I'm going abroad to a five-star hotel ... and give a boost to
another country's economy .... Michelle has done such a good job that she silenced her vituperative
conservative critics for a year a half. ... The inimitable columnist Mary McGrory once said that if a first lady
simply made her husband toast, that was enough, given how hard his job was . ... During the campaign,
Michelle tried to offset her husband's existential detachment with familial warmth. Now that he holds the
world's loneliest office, he needs that more than ever." http://nyti.ms/dSyMhD
THE FIRST LADY WRAPS UP VACATION -- "PALMA DE MALLORCA, Spain (AP)- U.S. first lady
Michelle Obama and daughter Sasha had lunch with Spain's king and queen on Sunday at the royal family's
holiday retreat on the resort island ofMallorca in the Mediterranean. Mrs. Obama and her daughter arrived at
Marivent palace shortly before l p.m. and were greeted at the front door of the residence by King Juan Carlos,
Queen Sofia and Princess Letizia. The king, a keen yachtsman, has for decades spent August vacations at the
palace with its dramatic cliff-top views of the sea on the Balearic island's southwestern coast near Palma de
Mall orca.
Lunch was Andalusian-style chilled gazpacho soup, chargrilled turbot, veal escalopes with mustard, Oriental
rice with sauteed mushrooms, a Mall orca-style vegetable ratatouille and sliced fruit with ice cream,
accompanied by wines from the northern regions of Rueda and Rioja, the palace said. The lunch meeting
marked the end of a five-day private visit to Spain by Mrs. Obama, who toured beauty spots in the southern
region of Andalusia including Marbella, Ronda and the Alhambra palace in Granada. The king gave Mrs.
Obama some seeds for the White House garden as a parting gift, while the queen made a present of handicrafts
typical ofMallorca, the palace said. After lunch the first lady's party was due to fly back to the United States. "
--CORRECTION: Aides say that contrary to a Spanish newspaper report picked up by The AP (which was
quoted by Playbook), the First Lady was never going to attend a charity event hosted by actors last night.
MEDIA WATCH-- Steve Myers, Poynter Online Managing Editor, goes behind the scenes at our corporate
sibling: "TBD, the new local news site run by the company that brought you Politico, and led by ex-Washington
239
Post online head Jim Brady, will launch next week. On Friday, Brady and other top staff outlined their editorial
and business strategy and showed screen shots of the website .... TBD has built several features into its site that
emphasize transparency as well as traditional journalism values such as fairness and accuracy. Every article on
the site wilt be accompanied by a 'complete this story' feature, where reporters will acknowledge weaknesses in
the reporting and ask for the community's help in filling those gaps . ... Users' responses will go to a group of
five or six editors and managers, who will review them and send them to a reporter if they look promising. The
editors may credit the contributor if they have permission ....
"On the business side, the bloggers can participate in TBD's ad network, with Allbritton staff selling the ads.
Bloggers will get 35 percent of the gross take. Because TBD will take commissions and fees out of its split,
[Steve Buttry, director of community engagement] said the net share is closer to 50/50. In addition, Brady said
he'd like to explore what kinds of business services TBD can provide for these independent sites, from creating
ads to serving them to reaching out to businesses that are too small to be served by large sites . ... News Channel
8 will be rebranded TBD T V ~ the ABC affiliate will retain its brand and maintain its emphasis on weather
coverage. (TBD's weather page will carry the affiliate's logo.) 'We are realty now a multimedia operation that is
fueled by Web and TV,' said Steve Chaggaris, Allbritton's vice president for cable news." http://bit.ly/9Fgt3k
http://www.tbd.com Twitter: @tbd
**A message from the University of Phoenix: University of Phoenix. Because an Educated World is a Better
World. There's no doubt that better educated Americans create a stronger American workforce. It's University
ofPhoenix's mission to provide an accredited, accountable, accessible education to more people, nationwide,
including the 73% of students who are choosing to take a nontraditional path to education, the growing majority
of college students with full-time jobs, families and responsibilities. It's just one of the ways we're working to
educate more Americans more effectively, and striving to make the American economy more competitive. To
learn more about what we're doing, visit http://bit.ly/9zJI mz **
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240
From:
Sent:
To:
Subject:
Mike Allen (politicoplaybook@politico.com]
Thursday, August 05, 2010 8:12AM
Kvaal, James
POLITICO Playbook ON THE ROAD IN HOLLYWOOD, presented by University of Phoenix-
Todd S. Purdum's big question of Obama's presidency: Can he play the game, yet transcend
the game? - GPG hires top Republican - How Malia used her one phone call from camp
BULLETIN-- Michael Hastings, the Rolling Stone contributing editor who wrote "The Runaway General ,"
tells Mika: "Unfortunatel y, I recently recei ved a letter from the public affairs staff denying me access to an
embed that had been approved in June .... I was scheduled to go on this embed in September. I just received a
letter that said I was now DISapproved from going on that embed with the 101 st Airborne. So I think that was a
very unfortunate decision that was a direct result of the article about General McChrystal."
DAVID AXELROD will be on Chuck & Savannah's "The Daily Rundown," live from the White House
briefing room at 9:10a.m. on MSNBC. Chuck will be in D.C. and Savannah in the Windy City.
CNBC's PBJL LEBEAU, auto and airline-industry reporter, will interview President Obama today on the Ford
assembly-plant floor in Chicago, after his 11:15 a.m. ET remarks. CNBC will air one excerpt before "Nightly,"
then show the whole sit-down on Friday.
@SpeakerPelosi : "I will be calling the House back into session early next week [Tuesday] to save teachers' jobs
and help seniors & children #FMAP."
TRYING TO DISPROVE GEORGE PACKER http://bit.ly/djutlL- " Surprising even themselves, Democrats
broke through Republican lines . . . [with] twin 61-38 Senate votes ... [for] a long-sought t1scal aid bill intended
to avert layoffs of state workers and public school teachers this fall. ... Maine Republican Sens. Susan Collins
and Olympia Snowe joined in support of the $26.1 billion measure after Democrats agreed to pay for the costs
with cuts from their own priorities, including food stamps for the poor." - David Rogers http://bit.ly/cv060H
BREAKING, from the DNC: "[T]he DNC is launching a full-scale effort to force Republicans (both
incumbents and candidates) to stand with the Tea Party or disavow their beliefs .... [Today], we're sending out
releases and urging local reporters to press Republican candidates on whether they will join the House's newly
formed Tea Party Caucus." From the release, going out today in 80 customized versions: "Throughout the
month of August, concerned citizens will be asked to confront Republican incumbents and candidates for the
House at events and through online tools like Twitter and Facebook asking them to state definitively if they plan
to join the House Tea Party Caucus and whether or not they agree with the Tea Party's extreme positions."
TIME MANAGING EDITOR RICK STENGEL tells "Morning Joe" the mag got "a record number of e-
mails and letters-- on the order offive or 600" about the controversial Mghanistan cover, which gets a Rod
Norland story from Kabul in today's Times. http://nyti .ms/aagNP5
SIREN-- TODD S. PURDUM spends Wed., April14- Day 450 of the Obama presidency- in the West Wing
for "Washington, We Have a Problem ... Broken Washington," in the new Vanity Fair (Lady Gaga on the
cover): "[T]he modern presidency- Barack Obama's presidency- has become a job of such gargantuan size,
speed, and complexity as to be all but unrecognizable to most of the previous chief executives . . .. Rahm
Emanuel, whose Friday-afternoon mantra has become 'Only two more workdays till Monday! ,' sums up today's
Washington [as] 'Fucknutsville.' ... Is there a way to play the Washington game- on its own ugly terms, and
even to play it ferociously, because you have to- and yet transcend the game in some fundamental way? This is
the central question of the Obama administration, as its senior officials are well aware- because, in countless
241
ways, their boss has told them so. They all talk candidly about that question, which remains unanswered ....
Obama's gamble is that, if you look after the doing of the presidency, the selling of the presidency will look
after itself"
--David Axelrod: "We did not exactly easy into the tub. The world is so much smaller, and events reverberate
so much more quickly, and one person can create an event so quickly from one computer terminal."
--Denis McDonough: "It's the constancy of it, the constantly new information coming in, the constant stream of
threats. "
--Dan Pfeiffer: "What they teach you on the first day of press-secretary school is to worry about blowing
something up by giving attention to it. ... 'Don't blow something up."' Todd S. Purdum: "But today, he says,
there's no choice- the story will get blown up anyway, and you simply have to respond."
--MOST INTERESTING PARAGRAPH: "When Obama arrives in the office this morning, just before 9:30,
the first item on his agenda, as always, is a meeting with his chief of staff for a quick rundown of the coming
day: 'three minutes, four minutes, five minutes- whatever it takes, but you've got to make it quick,' Rahm
Emanuel says. On its face, the imbalance between time and task is absurd: three, four, five minutes, to sum up
the world. Emanuel himself has been up since 5:15, and in his office since before 7:30, when he holds hi s first
meeting with the rest of the senior staff, followed by a second one with the 'expanded' staff and the legislati ve
liaisons."
--BEST COLOR: The President rides each morning from the Residence to the ground floor, "just outside the
White House kitchen," in "the private, wood-paneled family elevator- installed in the same shaft used by
Theodore Roosevelt's son Quentin to bring his pet pony upstairs. " POTUS can straighten his tie using "the
mirrored back wall of the cab"!
We'll feature the link when the piece goes online. And, Todd, thanks for the kind shout to Playbook!
FIRST LOOK- "The Glover Park Group [will announce later today] that Alex Mistri, most recently a
Strategic Analysis and Economic Officer in the U.S. Embassy in Baghdad, has joined the firm as a Managing
Director in its Government Affairs practice .... Previously, Mistri served as Special Assistant to the President
for Legislative Mfairs, representing President Bush in the House of Representatives .... 'Alex is a proven leader
in public policy and international business development,' said Joel Johnson, Managing Director of The Glover
Park Group's Government Relations practice .... Mistri is a graduate of Appalachian State University, Boone,
North Carolina with a B.A. in Interdisciplinary Studies."
TRANSITIONS: Elizabeth (Liz) Wasden, who has been in Forbes' corporate communications group for the
past four years, is the new P.R. director of the "CBS Evening News with Katie Couric."
**A message from the University of Phoenix: University of Phoenix is committed to providing an accredited,
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Good Thursday morning from the Renaissance Hollywood Hotel , where we'll be spending the next three days
with the motivated young participants in the Asian American Journalists Association's 21st annual national
convention. Also psyched to see Pedro's huge new pad behind Universal Studios. Our message for the students:
There are more opportunities to thrive in journalism than ever-- with more smart people consuming more news
in more ways, and in more places, than at any time in history. Across Highland Avenue from the hotel is
"Highland Hookah," an upstairs hookah lounge that also offers "quality cigars. "
242
DRIVING THE DAY- The president is waking up in Chicago, where page A10 of the Trib is headlined,
"President celebrates 49th birthday at home, by Duaa Eldeib: "Without his wife or daughters, President Barack
Obama celebrated his 49th birthday in Chicago on Wednesday with close friends and prominent supporter
Oprah Winfrey .... Obama, along with aides Rahm Emanuel , Valerie Jarrett, Gibbs and Patrick Gaspard, arrived
at O'Hare International Airport about 5 p.m. Gov. Pat Quinn and Mayor Richard Daley greeted the president.
After Marine One landed at Soldier Field, with first dog Bo in tow, the president's motorcade reached his house
in the Kenwood neighborhood just before 6 p.m. After a quick stop home, the stream of black SUVs, white vans
and police cars made their way down South Greenwood Avenue but encountered some familiar traffic before
they made it downtown for dinner [at] Graham Elliot, a restaurant in the River North neighborhood ... Obama's
guests at the birthday dinner included Jarrett, Winfrey, Winfrey's friend Gayle King, University of Chicago
Medical Center Vice President Dr. Eric Whitaker and businessman Marty Nesbitt. "
--Obama's day, per the White House- At 9:55a.m. CDT, "the President will visit the Ford Motor Company
Chicago Assembly Plant and continue to tell the story of how the tough choices he made to save the American
auto industry were necessary to save a million American jobs, stave off economic devastation in our auto
communities and revitalize an entire American industry. Later this year, the Chicago Assembly Plant will begin
production of the new, fuel efficient 2011 Ford Explorer. Ford just announced that thanks in part to new
Department of Energy loan guarantees aimed at helping companies retool their plants to make more fuel
efficient vehicles, the Chicago plant is adding 1,200 new jobs .... In the afternoon, the President will deliver
remarks on behalf of Senate Candidate Alexi Giannoulias at the Palmer House Hilton. Later, the President will
deliver remarks at a DNC finance event at the Chicago Cultural Center. .. . In the evening, the President will
attend a DNC finance event at a private residence . ... Later in the evening, the President will return to
Washington, DC."
--POTUS' message, per the White House: " [T]he President will focus on how the steps that the American auto
companies are taking to build the new, fuel efficient cars of the future means that they are not only making the
vehicles Americans want to buy, but they are increasing their exports as well. ... As evidence of the American
auto industry's success increasing its exports, tomorrow the Export-Import Bank of the United States will
announce a new loan guarantee for Ford that will finance $3 .l billion of export sales for over 200,000 vehicles
being sold to buyers in Canada and Mexico."
--Sun-Times Political Reporter Abdon M. Pall ash: "Last week, sources in both parties said Giannoulias and the
DNC were having trouble filling the rooms for the fund-raisers. But as of Wednesday, Giannoulias campaign
treasurer Harvey Wineberg said the Giannoulias fund-raiser today at the Palmer House Hilton was oversold.
They hope to raise$] million from about 350 guests paying $1,000 to $2,400 each. That would be more than
double what Giannoulias raised in the last quarter, coming off the bad news about the government shuttering
and selling his family's Broadway Bank. The DNC hopes to raise another $2.5 million from a $250-a-plate
event at the Chicago Cultural Center and a more exclusive $30,000-a-ticket gathering for 50 people and Obama
at the home of real estate mogul David Bluhm."
--Carol E. Lee: "The Secret Service even bought Obama a secret birthday gift. 'We don't want to get into
specifics on what it is but it was a heartfelt gift,' Robert Gibbs, the White House press secretary, cryptically
explained to reporters. Obama also received 'Happy Birthday' phone calls from the first lady, Michelle Obama,
and their 9-year-old daughter Sasha, who are vacationing at a luxury resort in Spain. Around lunch time, first
daughter Malia, 12, used up her one phone call at summer camp on her dad. 'Needless to say both those calls
were the highlights of his day,' Gibbs said."
IS IT A GOOD IDEA ... to e-mail seven single dudes for their advice about buying a minivan? Only if you
want pointers like Butterfield's: "I'd go with one of those ford econolines with captains chairs in the back. Those
are dope. Sent from my iPhone."
243
PULLING BACK THE CURTAIN --Obama's donor stops are closed to the press: More restrictive policy than
Bush, who allowed reporters to cover remarks in hotels-- Robert Gibbs at July 29 briefing: "This has been our
practice since the campaign, and that is if the President makes formal remarks that it's either an open-- a full
open event or open to a pool. And if it's not open, it's because the President is not making remarks .... The
President hasn't made formal remarks, no," at recent donor events.
--POLITICO's Matt Negrin: "Obama did talk to donors, just not necessarily behind a lectern or with a
microphone. A Democrat familiar with the fundraisers described the routine: First, the President would briefly
address the group of a few dozen donors to express his gratitude, in cursory, impromptu remarks. Then, he
would spend roughly an hour, speaking one-on-one with supporters or addressing groups of up to five of them
at a time. At events where the donors are seated at tables, Obama might sit down at each table to chat, with
someone more familiar with the donors to guide him and make introductions .... Two oflast week's closed-
press, 50-person fundraisers were held at the New York estate of Vogue editor Anna Wintour and the
Washington home of Sen. Jay Rockefeller (D-W.Va.). A third private event was at the Four Seasons hotel in
Manhattan, while another 50 Democrats ate dinner with him behind closed doors at Washington's Mandarin
Oriental ... White House press secretaries under President Bush said ... that [i]f a fundraiser was held in a
private home, reporters weren't allowed in to cover it."
--Scott McClellan e-mails Matt: "I think the thinking was it was a chance to allow the president to speak
candidly with big donors and keep the media from having glitzy photos of the president inside a wealthy
supporter's mansion. While the press corps always wants to cover the president's remarks- whether formal or
informal, it is not much of an issue with the public. When it is a closed press event, the President gets the
opportunity to provide big donors more candid insights into his thinking on politics and policies than he would
publicly . ... If the president's remarks happen to get leaked by someone at the event or someone taping it, the
press is usually going to have a few good quotes for a story or two. If it were open press they tend to get the
standard fare, not to mention standard backdrop." http://bit.ly/blulxS
CAMPAIGN 101 -- "Trackers take midterms by storm," by Maggie Haberman: " [C]ampaigns and parties are
using savvier and quicker technology- and sometimes even multiple operatives- to record their rivals' every
move. Trackers ... [are] exploding in number in part because of the dwindling press corps .... Some of the best
oppo hits of this election cycle have been from trackers for committees or campaigns- GOP Senate candidate
Ken Buck in Colorado spouting off on the absence of'high heels' as a vote getter, ... Indiana Democratic Senate
hopeful Brad Ellsworth trekking to Canada to hobnob with trial lawyers ... [T]he National Republican
Senatorial Committee had actually deployed several teams of trackers to Vancouver, British Columbia, after
discovering that numerous Democratic Senate nominees from across the country would be attending fundraisers
held at a trial lawyers convention .... Among the lessons [trackers] are taught: Be assertive but not aggressive,
be willing to take abuse and know, one strategist said, 'that it's better to be the one getting hit on camera than to
be the one doing the hitting."' http://bit.ly/9RMyWK
VIDEO DU JOUR- Assistant Secretary of State Michael Posner talks to Stephen Colbert about the importance
of stable democracies enforcing human rights around the world. http://bit.ly/8Yyif5
VIDEO DU JOUR IT- Rep. Mike Pence tells CBN, "I believe the Obama administration is the most anti-Israel
administration in the modem history of the state oflsrael and our relationship with her." http://bit.ly/drslnH
FRONT AND CENTER-- LA Times AI, "Ruling against Prop. 8 could lead to federal precedent on gay
marriage," by Maura Dolan and Carol J. Williams: " A federal judge declared California's ban on same-sex
marriage unconstitutional Wednesday, saying that no legitimate state interest justified treating gay and lesbian
couples differently from others and that "moral disapproval" was not enough to save the voter-passed
Proposition 8 .... The ruling was the first in the country to strike down a marriage ban on federal constitutional
grounds. Previous cases have cited state constitutions. Lawyers on both sides expect the ruling to be appealed
244
and ultimately reach the U.S. Supreme Court during the next few years." Story http://bit.ly/c8zmJ L LAT p. 1
image http://bit.ly/39ZQ8K
--HuffPo banner, with slideshow of gay-rights activists celebrating, "EL8TED! " -links to AP story with
reactions: "The ruling by Chief U.S. District Judge Vaughn Walker touched off a celebration outside the
courthouse. Gay couples waved rainbow and American flags and erupted with cheers in the city that has long
been a haven for gays." http://huff.to/cr8trP
COMMENTATOR CROSSFIRE, by Tim Alberta:
--Debra Saunders in the San Francisco Chronicle, "The Judge Has Spoken- Whether You Like It or Not":
"Some Californians will see this decision as the work of an elitist gay judge imposing his pre-ordained political
views on voters .... It's pretty clear that given time ... California voters would choose to legalize same-sex
marriage .... Barring a backlash, you would expect state voters to approve same-sex marriage within the decade
--which would avoid lasting rancor over a court-imposed decision. Instead, Walker went with: Whether you
like it or not." http://bit.ly/95FDEL
--Scott Herbold in the San Jose Mercury News, "A victory for the cause of equality":" ... Judge Vaughn
Walker's overruling of California's same-sex marriage ban Wednesday struck a blow for both common sense
and equality under the law .... Under the spotlight of scrutiny, the arguments for Proposition 8 evaporated like
water on a hot sidewalk. We were left only with the residue of prejudice .... [T]he fight is not over. But
somehow you had the sense Wednesday that one of our hottest cultural wars was approaching its end."
http://bit.ly/bbKzNA
SEIU's TEDDY DAVIS E-MAILS: "MOBILIZING FOR ECONOMIC FAIRNESS ... [w]orkers and
community allies are preparing a series events during the August congressional recess to restore fairness to our
economy. The mobilizations will call for a variety of policies: investing in jobs, cutting taxes for middle-class
families, ending the Bush tax cuts for the rich, forcing Wall Street to pay its fair share, stopping giveaways to
the oil industry, fighting efforts to water down health-care reform, fixing our broken immigration system, and
protecting Social Security and Medicare. 'Fairness is going to be front and center this August recess,' e-mails a
coalition spokesperson .... The events, which will be announced in detail locally, are taking place in multiple
states across the country. Organizers include SEIU, US Action, Health Care for America Now, Americans for
Responsible Taxes, Jobs for America Now, Strengthen Social Security, and the Alliance for Retired
Americans."
MEDIA WATCH - MSNBC host Rachel Maddow tells Davi d Letterman on "The Late Show" that Fox News
was the biggest loser in Shirley Sherrod episode while CNN and MSNBC walked away winners. Video
http://bit.ly/8YlQaL
BUSINESS BURST- FT A 1, "US banks braced for slump in profits," by Francesco Guerrera and Michael
MacKenzie: "US banks with Wall Street operations are bracing for a slump in trading profits this year after the
third quarter got off to a poor start, with global economic uncertainty and Europe's sovereign debt woes leading
to a slowdown in market activity in July. "
SPORTS BLINK- AP, "A-Rod hits 600th HR as Yankees beat Blue Jays": "Alex Rodriguez added his own
memento to Monument Park, even though retirement remains years off. After struggling to hit his 600th home
run, A-Rod reached the milestone with his usual dramatic flair. He became the youngest player to attain the
mighty mark and did it by driving a pitch over Yankee Stadium's center-field fence and into the area where the
pinstriped greats are remembered. And remarkably, he did it exactly three years to the day after his SOOth
homer." Story w/ video http://es.pn/9oOvGM ESPN video: The road to 600 http://es.pn/9rwDpK
245
DESSERT- The most amazing catch of the baseball season didn't happen in America. It happened in Japan,
where Hiroshima Toyo Carp's Masato Akamatsu climbed the fence- literally -to rob a home run. Video
http://yhoo.it/baOl hP
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From:
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To:
Subject:
Mike Allen (politicoplaybook@politico.com]
Monday, August 02, 2010 7:45AM
Kvaal, James
POLITICO Playbook, presented by University of Phoenix-- SIDNEY HARMAN POISED TO
WIN NEWSWEEK: Don Graham prefers him among three finalists-- Promises continuity;
announcement 'imminent' -- Fox gets front-row White House chair-- Brian Nick engaged
Good Monday morning. OBAMA IN ATLANTA SPEECH TODAY: " [O]ur commitment in Iraq is changing-
from a military effort led by our troops to a civilian effort led by our diplomats." POTUS will repeat a
commitment to "remove all our troops from Iraq by the end of next year."
KEY WIDTE HOUSE POINT: " [E]ven with the surge in Afghanistan, the total number of U.S. troops in Iraq
and Afghanistan will have been reduced from 177,000 [when Obama took office] to roughly 146,000" next
month.
LOOK FOR THE PRESlDENT to repeatedly make the case this month that the promised drawdown is really
occurring. As part of the administration-wide focus on Iraq, the president will chair an NSC meeting on Iraq
mid-month, is likely to appear with troops again, and there'll be high-profile administration visits to the region.
PRESIDENT OBAMA, to CBS' Harry Smith, just now on "The Early Show": "We now have a strategy that
can work. We've got one of our best generals today, Petraeus, on the ground. I've been very clear that we are
going to move forward on a process of training Afghans so that they can provide for their own security. And
then by the middle of next year, by 2011, we are gonna start thinning out our troops and giving Afghans more
responsibility. Ifi didn't think that it was important for our national security to finish the job in Afghanistan,
then I would pull them out today, because I have to sign letters to these families-- families who have lost loved
ones."
PLAYBOOK FACTS OF LIFE: This policy was baked with the assumption that conditions would be
dramatically better. Instead, a new government hasn't been formed, and whoever eventually heads it may have a
target on their back-- a possible factor in the Iraqi foot-dragging.
A TOP DEM. STRATEGIST phoned while reading the Sunday papers to say that "Week in Review" was
really "Bush in Review," between David E. Sanger's cover piece about years of"seriously flawed" Afghanistan
strategy; http://nyti.ms/9IROHr David Stockman's Op-Ed blaming the modern Republican Party for " serial
financial bubbles" ; http://nyti.ms/bNn416 and the lead editorial, about the "alarming" deficit:
http:// nyti.ms/cX9XSK "It was reall y about the legacy we're all dealing with right now."
SIDNEY HARMAN, husband of Rep. Jane Harman (D-Calif.), is the GALLOPING FAVORITE to buy
Newsweek from The Washington Post Company and an announcement is IMMINENT, top sources tell
Playbook. Donald E. Graham, chairman of the board, is personally deciding the winning bid for the family
jewel, and has concluded that Dr. Harman would provide more continuity than either of the other two remaining
competing bids, according to a family friend familiar with his thinking. The sources warn that no deal like this
is done until it's done. But Harman won over Graham by pledging to retain the majority ofNewsweek's 350
employees. The magazine's print edition will continue, and Harman's politics are safely centrist. The N.Y.
Times' Jeremy W. Peters reported last week that the company was " closely examining" Harman's offer. And it
turns out that Graham liked what he saw. But the decision was as much about optics as it was about numbers-
crunching. The other two finalists are New Yorkers: Marc Lasry, an influential Democratic donor who heads
Avenue Capital Group, a hedge fund where Chelsea Clinton worked; and Fred Drasner, former part owner of
the Washington Redskins and former co-publisher of the New York Daily News. Dr. Harman struck Graham as
247
the most palatable --or "clubbable," as they used to say. He plans no radical change in journalistic or business
direction (though staff changes are possible), and is ideologically moderate. But reporters will press Harmon on
whether Newsweek will remain a money pit, or whether he has a credible plan for turning it around, despite
forswearing deep staff cuts.
THE NEW YORKER ridicules the arcane obstructions of the dysfunctional Senate in "The Political Scene--
THE EMPTY CHAMBER: Just how broken is the Senate?" by George Packer: "While senators are in
Washington, their days are scheduled in fifteen-minute intervals: staff meetings, interviews, visits from
lobbyists and home-state groups, caucus lunches, committee hearings, briefing books, floor votes, fund-raisers .
. . . Tom Daschle ... said, 'When we scheduled votes, the only day where we could be absolutely certain we had
all one hundred senators there was Wednesday afternoon.' Nothing dominates the life of a senator more than
raising money .... Dasch! e sketched a portrait of the contemporary senator who is too busy to think:
'Sometimes, you're dialling for dollars, you get the call, you've got to get over to vote, you've got fifteen
minutes. You don't have a clue what's on the floor, your staff is whispering in your ears, you're running onto the
floor, then you check with your leader-you double check-but, just to make triple sure, there's a little sheet of
paper on the clerk's table: The leader recommends an aye vote, or a no vote. So you've got all these checks just
to make sure you don't screw up, but even then you screw up sometimes. But, if you're ever pressed, "Why did
you vote that way?" -you just walk out thinking, Oh, my God, I hope nobody asks, because I don't have a clue."'
http:/ /bit.ly/djutlL
FOX GAINS FRONT -ROW SEAT ON OBAMA PRESIDENCY -- White House Correspondents'
Association statement: "The board ... has agreed, by consensus, to move The Associated Press to the front row,
center seat in the James S. Brady Briefing Room [Helen's seat]. The board further agreed to move Fox News to
the front row seat previously occupied by AP, and relocate NPR into the second row seat previously held by
Fox, next to Bloomberg News .... The board received requests from Bloomberg and NPR in addition to Fox ...
But the board ultimately was persuaded by Fox's length of service and commitment to the White House
television pool. The board also made a series of adjustments to the larger seating chart, including the addition of
a new seat for the foreign press pool. These deliberations mark the third time in four years the board has tackled
this issue, and we urge members to view seating room changes as an ongoing process that will be revisited
again as our industry evolves . ... [T]he board member from NPR [Don Gonyea] abstained from debate."
http:/ /bit.ly/9V slg 1
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DRIVING THE DAY-- President Obama delivers a major Iraq speech at 11 :30 a.m., at the Disabled Veterans
of America Conference, at the Hyatt Regency in Atlanta. From the president's prepared remarks: " As a
candidate for President, I pledged to bring the war in Iraq to a responsible end. Shortly after taking office, I
announced our new strategy for Iraq and for a transition to full Iraqi responsibility. And I made it clear that by
August 31, 2010 America's combat mission in Iraq would end. And that is exactly what we are doing-as
promised, on schedule. Already, we have closed or turned over to Iraq hundreds of bases. We're moving out
millions of pieces of equipment in one of the largest logistics operations that we've seen in decades. By the end
of this month, we'll have brought more than 90,000 of our troops home from Iraq since I took office-more than
90,000.
"Today- even as terrorists try to derail Iraq's progress- because of the sacrifices of our troops and their Iraqi
partners, violence in Iraq continues to be near the lowest it's been in years. And next month, we will change our
military mission from combat to supporting and training Iraqi security forces . ... As agreed to with the Iraqi
government, we will maintain a transitional force until we remove all our troops from Iraq by the end of next
year. During this period, our forces will have a focused mission-supporting and training Iraqi forces, partnering
248
with Iraqis in counterterrorism missions, and protecting our civilian and military efforts. These are dangerous
tasks. And there are still those with bombs and bullets who will try to stop Iraq's progress. The hard truth is we
have not seen the end of American sacrifice in Iraq. But make no mistake, our commitment in Iraq is changing-
from a military effort led by our troops to a civilian effort led by our diplomats. And as we mark the end of
America's combat mission in Iraq, a grateful America must pay tribute to all who served there.
"For our nation has had vigorous debates about the Iraq War. There are patriots who supported going to war,
and patriots who opposed it. But there has never been any daylight between us when it comes to supporting, the
more than one million Americans in uniform have served in Iraq-far more than any conflict since Vietnam.
These men and women from across our country have done more than meet the challenges of this young century.
Through their extraordinary courage, confidence and commitment, these troops and veterans have proven
themselves as a new generation of American leaders. While our country has sometimes been divided, they have
fought together as one. While other individuals and institutions have shirked responsibility, they have welcomed
it. And while it is easy to be daunted by overwhelming challenges, the generation that has served in Iraq has
overcome every test before them."
FACTS AND FIGURES ON DRA WDOWN IN IRAQ, per the White House:
--"When President Obama took office in February 2009, there were 144,000 U.S. troops in Iraq. At his Camp
Lejeune speech on February 27, 2009, President Obama announced that the United States would end its combat
mission on August 31, 2010, and retain a transitional force of up to 50,000 U.S. troops to train and advise Iraqi
Security Forces; conduct partnered and targeted counter-terrorism operations; and protect ongoing U.S. civilian
and military efforts. By January 2010, there were 112,000 U.S. troops in fraq. By the end of May 2010, that
number had been reduced to 88,000 . ... By the end of August 2010, the number of U.S. troops in Iraq will be
further reduced to 50,000. "
--"By the end of August 2010, U.S. Forces in Iraq will reduce the total number of equipment in Iraq from 3.4
million pieces in January 2009 to a total of 1.2 million pieces."
--"In June 2009, U.S. Forces occupied 357 bases. U.S. Forces currently occupy 121 bases, and are expected to
reduce that number to 94 bases by the end of August.
--"The Big Picture: U.S. troops "Boots on the Ground" (BOG) in Iraq and Afghanistan-- In January 2009, there
were about 177,000 U.S. troops in Iraq and Afghanistan: 144,000 in Iraq and 33,000 in Afghanistan. In July
2010, there are about 169,000: 81,000 in Iraq and 87,000 in Afghanistan. In September 2010, there will be
about 146,000: 50,000 in Traq and 96,000 in Afghanistan. So even with the surge in Afghanistan, the total
number ofU.S. troops in Iraq and Afghanistan will have been reduced from 177,000 to roughly 146,000."
OUCH-- The N.Y. Times' 2-col. lead is: "A Benchmark ofProgress, Electrical Grid Fails Iraqis: As U.S.
Troops Prepare to Leave, Shortages Are Chronic, and Theft Is Common." Inside is a huge, memorable photo:
"Widad, 60, fanned her 6-month-old grandson last month in their Baghdad home after the electricity went out.
The capital got five hours of power a day in July." It's the first of a three-part series, "What Is Left Behind,"
"examining America's legacy in Iraq. The subsequent articles will examine the price paid by both Iraqis and
Americans, in lost and altered lives." http://nyti.ms/bpe8nD
--L.A. Times AI , "IMPASSE CLOUDS FUTURE OF IRAQ," by Liz Sly in Baghdad: "Most politicians are
predicting that the 5-month-old impasse will continue at least until September ... Iraqis fear violence will
intensify as ... insurgents seek to take advantage of the vacuum left by the departing troops .... [U]ncertainty
deepened Sunday after the effective collapse of an already frayed alliance between the two major Shiite Muslim
blocs ... Ahmad Chalabi ... said the group was severing negotiations with the current prime minister, Nouri
Maliki ... The move intensified pressure on Maliki, who is facing increasingly harsh criticism of his refusal to
249
relinquish power despite failing to win support from any of the other blocs. " http://bit.ly/9PzWtb
ENGAGED: Caroline Bryant and Brian Nick, former Dole CoS and NRSC flack, who now works for Fred
Davis at Strategic Perception. ("No hat tip, since he may kill me!")
POLITICO print edition, p.l image http://politi.co/aWxhKp
SNEAK PEEK-- Secretary Geithner's remarks at NYU's Stem School of Business when the markets close at 4
this afternoon: "We had an obligation to rebuild our financial system so it could, once again, be an engine for
economic growth and innovation . ... The reforms that are now the law of the land will help us rebuild a pro-
growth, pro-investment financial system .... We will move as quickly as possible to bring clarity to the new
rules of finance. The rule-writing process traditionally has moved at a frustrating, glacial pace. We must change
that. ... We will not simply layer new rules on top of old, outdated ones. Everyone that is part of the financial
system -- the regulated and regulator -- knows that we have accumulated layers of rules that can be
overwhelming. So alongside our efforts to strengthen and improve protections for the economy, we will
eliminate rules that did not work. Wherever possible, we will streamline and simplifY."
--TREASURY ROAD SHOW -- An official tells Ben "Morning Money" White: "Treasury hits the road this
week to highlight the opportunity before us to build on the legislation passed by Congress last month and
unleash a new era of economic growth. The historical record shows that the reforms that followed the Great
Depression laid the foundation for decades of prosperity and led to one of the most-impressive records of
investment, innovation and growth any major economy had ever seen .... On the heels of the Secretary's
remarks, senior Administratlon officials will fan out for a series of speeches in which they will continue to lay
out the path forward in implementing financial reform for regional audiences. Treasury Assistant Secretary
Michael Barr will speak before the Charlotte Chamber of Commerce on Wednesday morning, and Treasury
Deputy Secretary Neal Wolin will hit both Boston and Philadelphia on Thursday for events hosted by The New
England Council and the Wharton School of the University ofPennsylvania. Look for events in other cities. "
OUT TODAY-- HHS' Centers for Medicare & Medicaid Services will release a new report arguing that health-
care reform will give Medicare $8 billion in savings by the end of 2012. An HHS official: "Since the law was
passed more than four months ago, CMS has begun work to implement many of the key cost saving provisions
that will reduce Medicare spending more than $575 billion over the next 10 years. These reforms include new
provisions that will improve the quality of care, develop and promote new models of care delivery,
appropriately price services, modernize the health system, and fight waste, fraud, and abuse." See the 10-page
report http://politi.co/bmOsfY
2010-- THE NARRATIVE-- N.Y. Times Al , "Congressional Memo: In Personal Ethics Battles, aPartywide
Threat," by David M. Herszenhorn and Carl M. Hulse: "The [Charlie Rangel and Maxine Waters] trials threaten
to tarnish Democrats as they try to turn the midterm elections into a choice between keeping them in power or
returning to Bush-era policies. The trials would also stand to remind voters that Democrats, who in recent years
extended their reach into the traditionally Republican turf of the rural West and South, are still anchored by an
urban, liberal base and led by entrenched veteran lawmakers from big cities. And the cases could feed racial
strains both inside the Democratic caucus, where black members are asking why so many investigations seem to
be aimed at them, and out among voters, especially in rural and white districts where many conservative
Democrats face tight races." http://nyti .ms/cKEYfs
--WSJ lead story, "Ethical Woes Fog Democrat Hopes for November," by Naftali Bendavid and Brody Mullins:
"The scenario is reminiscent of 1994 and 2006, when ethics scandals dominated the political landscape in
advance of elections, and control of the House changed hands. That prospect is far from certain this time ....
Former Rep. Rahm Emanuel (D. , lll.), who led House Democrats' 2006 campaign efforts, attacked what he
called a Republican 'culture of corruption' and created a web site featuring 'Tom DeLay's House of Scandal .' ...
250
Republicans are already emulating Mr. Emanuel's tactics. The National Republican Congressional Committee
... has publicly highlighted Mr. Rangel 's contributions to individual Democratic candidates."
http://bit.ly/8XSsL2
--VIDEO -- ABC Senior Washington Editor Rick Klein, "DEFENSE: Democrats Confront Reality of Changed
Map in 2010." http://bit.ly/blDBXe
TOP TALKER-- Part 2 of The Wall Street Journal's "What They Know" investigative series-- "Microsoft
Quashed Effort to Boost Online Privacy," by Nick Wingfield: "In early 2008, Microsoft Corp.'s product
planners for the Internet Explorer 8.0 browser intended to give users a simple, effective way to avoid being
tracked online . ... That triggered heated debate inside Microsoft. ... The winners: executives who argued that
giving automatic privacy to consumers would make it tougher for Microsoft to profit from selling online ads.
Microsoft built its browser so that users must deliberately turn on privacy settings every time they start up the
software . ... Microsoft General Counsel Brad Smith says that in developing the new browsers, the company
tried to 'synthesize' both points of view about privacy 'in a way that advanced both the privacy interests of
consumers and the critical role advertising plays in content. "' http://bit.ly/9LObad
PHOTO DU JOUR- The president leaves a private basketball game at Fort McNair yesterday.
http://polit1.co/bKo3W9
VIDEO DU JOUR-- Obama takes in yesterday's WNBA game between the Washington Mystics and Tulsa
Shock. http://yhoo.it/aOMtF7
VIDEO DU JOUR IT- Shaq serenades teeny-bopper sensation Justln Bieber before the young heartbreaker's
concert in Phoenix. http://yhoo.it/cszaxn
BEYOND THE BELTWAY- WSJ Al , "Stressed States Are Forcing Workers to Retire Later," by Jeannette
Neumann, Michael Corkery and Marcus Walker: "Lawmakers in at least 10 states have voted this year to
require many new government employees to work longer before retiring with a full pension, or have increased
penalties for early retirement. A similar proposal is pending in California. Mississippi, already among the states
requiring more years of service for a pension, is weighing the additional step of increasing its retirement age."
http://bit.ly/d5ymUT
COMMENTATOR CROSSFIRE, by Tim Alberta:
--Arthur Laffer in the WSJ, "The Soak-the-Rich Catch-22": "Sadly, in the debate over whether to extend the
2001 and 2003 tax cuts, and if so whether the cuts should be extended to those people who are in the highest tax
bracket, there is a false presumption that higher tax rates on the top 1% of income earners will raise tax
revenues. Anyone who is familiar with the historical data available from the IRS knows full well that raising
income tax rates on the top 1% of income earners will most likely reduce the direct tax receipts from the now
higher taxed income-even without considering the secondary tax revenue effects, all of which will be negative.
And who on Earth wants higher tax rates on anyone if it means larger deficits?" http://bit.ly/9sW4Zr
--Fareed Zakaria in Newsweek, "Raise My Taxes, Mr. President!": "The Bush tax cuts remain the single largest
cause of America's structural deficit-that is, the deficit not caused by the collapse in tax revenues when the
economy goes into recession .... The simple fact is this: all the Bush tax cuts were unaffordable. They were an
irresponsible act of hubris enacted during an economic boom .... We have in front of us a simple, easy way to
bring America's fiscal house in order, reduce our dependence on foreign borrowing, restore U.S. credibility and
power, and give us a stable revenue base from which to make key investments for future growth. All we need is
for Congress to do what it does so well-nothing." http://bit.ly/c0u4IR
251
BUSINESS BURST- NYT Al , "U.A.E. Is to Bar BlackBerry E-Mail Over Security Issues," by Barry Meier
and Robert F. Worth: "The United Arab Emirates, citing security concerns, said Sunday that it would suspend
BlackBerry mobile services like e-mail and text messaging beginning in October, the latest high-stakes clash
between governments and communications providers over the flow of digital information. The Emirates have
been in a long dispute with Research In Motion, the smartphone's producer, over the BlackBerry's highly
encrypted data system, which offers security to users but makes it more difficult for governments to monitor
communications. The decision could have significant implications for BlackBerry use in the Persian Gulf
region, where Saudi Arabia has been closely studying the issue and may follow suit. Other countries, including
Kuwait and Bahrain, have also raised concerns." http://nyti.ms/cTyk42
SPORTS BLINK- AFP, "White Sox manager claims Asians aided over Latinos": "Major League Baseball
players from Asia receive superior treatment to those from Latin America, according to Chicago White Sox
manager Ozzie Guillen, a native of Venezuela who spoke out on Sunday. Guillen called it unfair that Japanese
players who come to Major League Baseball clubs are assigned translators when they come to play in North
America but Latin Americans receive no such help in coping with the English language. 'Very bad,' Guillen
said. 'I say, why do we have Japanese interpreters and we don't have a Spanish one? I always say that. Why do
they have that privilege and we don't? They take advantage of us. We bring a Japanese player and they are very
good and they bring all these privileges to them. We bring a Dominican kid ... go to the minor leagues. Good
luck." http://bit.ly/dpdzyx
DESSERT- L.A. Times, "Lindsay Lehan freed from jail, goes to rehab," by Andrew Blankstein and Rich
Connell : "Lindsay Lehan was ordered released from a county jail in Lynwood at l :35 a.m. Monday after
serving 13 days for violating probation on a 2007 conviction for driving under the influence. She was to go
directly to a substance abuse treatment center, sheriff's spokesman Steve Whitmore said. Whitmore would not
name the treatment facility but said Lehan left in a minivan with multiple individuals." http://bit.ly/bUnGTx
**A message from the University of Phoenix: University of Phoenix. Because an Educated World is a Better
World. There's no doubt that better educated Americans create a stronger American workforce. It's University
ofPhoenix's mission to provide an accredited, accountable, accessible education to more people, nationwide,
including the 73% of students who are choosing to take a nontraditional path to education, the growing majority
of college students with full-time jobs, families and responsibilities. It's just one of the ways we're working to
educate more Americans more effectively, and striving to make the American economy more competitive. To
learn more about what we're doing, visit http://bit.ly/9zJ1 mz **
Go to POLITICO Playbook Now >> http://www.politico.com/ playbook
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252
From:
Sent:
To:
Nassirian, Barmak [NassirianB@aacrao.org]
Friday, October 30, 2009 9:24AM
Shireman, Bob
Subject: FW: Apollo Weakness for Phoenix Revenues Spurring Short Sellers
FYI
Barmak Nassirian
AACRAO
1 Dupont Circle, Suite 520
Washington, DC 20036
202/ 263-0290 Direct
202/ 872-8857 Fax
-----Original Message-----
From: Nassirian, Barmak
Sent: Friday, October 30, 2009 9:14AM
To: List - DGR Monday Group
Subject: Apollo Weakness for Phoenix Revenues Spurring Short Sellers
APOL (BN) : Apollo Weakness for Phoenix Revenues Spurring Short Sellers
By Daniel Golden
Oct . 30 {Bl oomberg) -- The University of Phoenix, the largest for-profit college in
the U.S., may have set off on a collision course with the federal government and
investors in 2001 . That ' s when its founder , John Sperling, urged executives at his 80th
birthday party to boost enroll ment fivefold to half a mi l l ion students , a goal it has
almost accomplished.
Now, Phoenix' s parent, Apollo Group Inc., is facing challenges to its growth. The
Securi t i es and Exchange Commission is investigating how Apol lo books revenue, the company
said Oct .
27 . Apoll o recorded a charge of $80 . 5 million to cover costs it expects to pay to settl e
a lawsui t alleging that it violated f ederal student recruitment rules . Profi t in the
quarter ended Aug . 31 fell 60 percent largely because of that charge .
Apollo shares , which had more than doubled since 2006, may have difficulty
rebounding from an 18 percent decl ine the day after the SEC probe was disclosed. Phoenix
may a l so face scrutiny as the U. S . Education Department examines for-profit universities
that rel y heavily on taxpayer-supported financial aid. In fi scal 2009 , Phoenix derived 86
percent of its $3 . 77 bi l lion in revenue from federal grants and loans , up from 48 percent
in 2001 , and approaching a federal l imit of 90 percent .
" The outl ook for Apol lo next year has definitel y become a l ot tougher," sai d Robert
Wetenhal l , an anal yst for RBC Capital Markets in New York, who lowered his rating on
Apol lo shares on Oct . 28 to "underperform."
Axia ' s Growth
Phoenix' s enrol lment has a l most doubl ed to 443 , 000 from 227 , 800 i n fiscal 2004 .
About 90 percent of that growth has come from a two-year online col l ege called Axia ,
created in 2004 .
Whi l e Phoeni x original ly focused on bachelor's degree and graduate degree programs for
managers whose employers pai d their tuition, Axi a attracts students wi th l ower i ncome and
less academic preparation, the majority of whom depend on f ederal financial a i d .
Apoll o ' s revenue was $1 . 1 bil lion during the three months ended Aug . 31, five times
the amount during the same period in 2001 . Net i ncome rose almost threefol d to $91 . 5
mi l l ion.
253
The company' s shares fell $1 . 91 , or 3 . 2 percent , to $58 . 15 on Oct . 29 in New York
Stock Exchange composite trading . Before the close on Oct. 27, the stock had fallen 4 . 8
percent this year, compared with an 18 percent rise in the Standard & Poor's 500 Index .
Investors have bet against Apollo, with 10 percent of its shares sold short as of
Oct. 15, compared with 3 . 5 percent for the New York Stock Exchange as a whole . Apollo's
short interest has risen to 13 . 4 million shares from 6 . 6 million a year ago .
Obama Administration
Phoenix now has to deal with the Obama administration, which is tightening review of
for-profits and has close ties to community colleges that compete with Axia . Driven in
part by the shift to Axia, Phoenix' s growing reliance on taxpayer funds is drawing
government attention . The average annual tuition is $10,350, $500 less than what federal
aid will pay for a low-income freshman under age 24 . By comparison, annual tuition at
public community colleges this year averages $2,544, according to the College Board, the
New York-based nonprofit organization that owns the SAT college admissions test .
"It makes sense to examine institutions that rely heavily on federal aid," Robert
Shireman, Deputy Undersecretary of Education, said in an interview without singling out
any university. "Certainly, one of the data points we look at for triggering possible
program reviews is a large growth in the use of federal financial aid. "
Uncover Problems
Such a program review would be designed to uncover problems with financial
management or signing up students who are unqualified or aren't fully aware they're
taking out loans , and may result in fines, suspensions or terminations from eligibility
for financial aid, Shireman said.
Students are reliant on aid because of the recession and rising college costs, said
Sara Jones, an Apollo spokeswoman.
Phoenix expanded into online two-year degrees to continue its shift from a niche
institution for degree completion into a comprehensive university, not to obtain more
financial aid dollars , she said. The 90 percent limit on federal revenue, enacted in
1992, penalizes schools for having low-income students, said Gregory Cappelli, Apollo Co-
Chief Executive Officer.
"We want to help people," Cappelli said in a Sept. 9 interview at the company's
Phoenix headquarters. "They need to be able to read and write and compete at the college
level . Know what? We don't want your money otherwise . "
The company believes the revenue recognition policies being investigated by the SEC
are appropriate, Brian Schwartz, Apollo's chief financial officer and treasurer, said in
an Oct .
27 conference call .
Few Graduate
While Phoenix has succeeded in drawing students, most don't graduate, leaving them
without degrees and often burdened by loans . Only 8 . 9 percent of Phoenix students without
prior college experience complete a degree in six years, including 5 percent of those who
attend classes online, according to the National Center for Education Statistics, in
Washington . The national graduation rate is 56.1 percent for four-year schools and 30.9
percent for two-year schools .
Besides leaving school prematurely, many students aren' t able to pay their bills ,
with U. S . taxpayers picking up the balance. Of Phoenix students who should have begun
repaying loans in 2007, 9.3 percent have defaulted, up from a 7 . 2 percent rate a year
earlier and more than the national average of 6 . 7 percent , according to the Education
Department.
The university works closely with lenders and delinquent students to stave off
defaults, said Robert Collins, Apollo' s vice president for financial aid .
' Replacement Curve'
Phoenix' s dropout rate means the school needs to recruit 250, 000 new students a year
equivalent to six University of Michigans to maintain current enrollments, said
254
former Apollo manager Mark DeFusco, now an education investment banker at Berkery, Noyes
& Co . in New York .
"The replacement curve is astronomical ," DeFusco said .
"You have to feed the beast . "
Phoenix' s growth is hardly uncontrol led, said Jones , the Apollo spokeswoman. The
university has "more than 200 campuses and learning centers " which means it can add 1 , 000
students a day by enrol l ing five at each one, she said. Phoenix gained 102, 000 new
students in the quarter ended Aug . 31, according to Charles B. Edelstein, Apollo Co-CEO.
The question of whether recruiters sign up unqual ified students is the focus of the
lawsuit that Phoenix said it expects to settle for $80 . 5 million . The 2003 suit brought
by two former empl oyees in federal court in California all eges that Phoeni x viol ated a
1992 ban on paying recruiters on the basis of enroll ment numbers . The company has deni ed
wrongdoing .
' Dumb as Doornail '
In a deposition in the lawsuit, Jenni f er Kahn, a recruiter who left Phoenix in 2006,
said she compl ained to her boss about a prospect who couldn' t handle college .
"I had a student , l et' s refer to him as dumb as a doornail , " Kahn said. "And my
manager told me , 'Enrol l him.
It' s not our cal l to say who has a right to an education .' As a consequence , he started,
he went to the first night , he knew he was in deep doo-doo, and dropped. He never should
have been there ."
Tom Corbett , a former director of online enrollment at Phoenix who provided an
affidavit in the lawsuit, said in an interview that the school' s recruiters were l ike
brokers peddling subprime mortgages .
"The University of Phoenix' s management cul ture is fueled by greed, the same as the
housing scenario," Corbett said.
"There was no emphasis on the student ' s actual val ues , goals , background, experiences ."
Compensation Methods
Timothy Hatch, an outside counsel for Phoenix and a partner in the Los Angeles
office of Gibson, Dunn & Crutcher , said the school enrol led the student mentioned by Kahn
because he had completed an associate' s degree at another for-profit col lege .
Phoenix' s compensation methods are legal because teamwork and student retention
figure i nto its salary adjustments along with enrollment expectations , he said . The
criticisms by Corbett and other former employees don' t reflect the views of Phoenix
recruiters and managers in general, he said.
The Education Department may tighten 2002 rules that let coll eges pay r ecruiters
partly on the basis of enrollment , according to Shireman, the deputy undersecretary.
The department announced on Sept . 9 that it may prohibit mi srepresentations of
information provided to students and prospective students . The move was prompted partl y
by reports the department received about Axi a recruiters , according to a federal official
familiar with the matter .
Prospective Students
In tape-recorded telephone calls heard by Bloomberg News , Axia recruiters told Wal l
Street researchers posing as potential applicants that its credits could be transferred
to Harvard University and Columbia Uni versity. Those schools don' t grant transfer credit
for online undergraduate courses , the universi ties ' spokesmen said in e-mai l s .
Cappelli said he isn' t aware of the alleged misrepresentati ons .
" There' s not a mandate or a directi ve from anyone in the management team to fool or
hurt people," he said. "Traditional col l eges make errors , too . "
Phoenix has a pilot program to improve student readiness for college, Cappell i said
during a conference cal l with analysts on Oct . 27 . Lower retention rates and extra
remedial instruction and other support services for Axia students have damped Apollo
profits, he said in September .
' Concerted Effort '
255
"We are making a concerted effort to get back our focus on bachelor's and master's
degrees ," said Cappelli, a former Credit Suisse research analyst who joined Apollo in
2007 . "The return to the student is better if they stay in school and complete their
bachelor's degree . The return to us is better, too. Not all of our growth is coming from
Axia anymore ."
The company supports a proposal in Congress that would allow colleges to exceed the
90 percent ceiling on the portion of revenues from financial aid until 2012, and not to
count increases in student loan limits as federal revenue .
The proposal , which passed the House last month as part of a broader education bill,
isn't included in a Senate version, said Mark Kantrowitz, publisher of the FinAid.org and
FastWeb . com financial-aid Web sites based in Cranberry Township , Pennsylvania.
Phoenix officials said the 8 . 9 percent graduation rate measured by the government
counts only first-time students . Including transfer students , 27 percent of Axia students
graduate, according to the university's 2008 Academic Annual Report . Of those pursuing
bachelor's degrees, Phoenix said 38 percent graduate .
No Placement
Phoenix doesn't help graduates land jobs, nor does it track where they find
employment , Jones, the Apollo spokeswoman, said. She said most Phoenix students already
have jobs .
Simon Saffery, 30, a Hawaii resident, transferred to Phoenix' s online program as a
junior in 2006 and graduated last year with a 3 . 9 average out of 4.0 in computer science .
He said he has applied for 25 entry-level information technology jobs without receiving a
single interview. Almost half of the openings he sought were at Apollo itself, Saffery
said . He is unemployed, owes $45 , 000 in student loans and may declare bankruptcy, Saffery
said .
Jones declined to comment on individual students , citing privacy considerations .
According to a 2008 survey by Phoenix, graduates of its associate and bachelor's degree
programs earned average increases in personal income of 19 percent and 28 percent,
respectively .
Founder's Dream
Sperling, who has an economic history Ph.D. from Cambridge University in England,
founded Phoenix in 1976 . His mission was to give working professionals a convenient way
to get back to school and boost their academic credentials without having to quit their
jobs, according to his 2000 autobiography, "Rebel With a Cause .'' Students, who learned
in teams and took five- week courses in business, nursing and other fields, tended to be
managers in their mid-30s whose employers reimbursed them for tuition .
Richard Chai t , a professor of higher educati on at Harvard in Cambridge,
Massachusetts , who has studied Sperling' s university, said the school "saves money
everywhere" by hiring part-time faculty, leasing real estate, and centralizing
administration .
"The genius of the University of Phoenix is that it spends $1 million to develop one
course that it gives a thousand times , " Chait said in an interview in his office .
"Community colleges spend almost nothing developing a thousand courses that they will use
once ."
Expanding Eastward
In the 1990s, Phoenix expanded eastward, opening facilities in Michigan, Maryland
and Pennsylvania . Today, according to its Web site, the university has campuses in 39
states, the District of Columbia , Puerto Rico, and two Canadian provinces. From 1995 to
2000, Apollo's stock rose more than 10-fold, making it one of the 30 top-performing
stocks in the Russell 3000 Index.
When enrollment was about 20 , 000, Sperling told executives Phoenix would have
100,000 students by 2000 , Bob Barker, a former Phoenix executive vice president , said in
an interview.
At his 80th birthday party in 2001 , Sperling raised his sights to 500, 000 , DeFusco said.
Apollo never formally adopted Sperling' s vi sion, said Jones , the spokeswoman. She
said Sperling was unavailable for interviews .
256
As fast as Phoenix was growing, it was drawing from a limited customer base of mid-
career managers, former Apollo president Brian Mueller, CEO of for-profit Grand Canyon
Education Inc. in Phoenix, said in an interview. Students had to be at least 23 years old
and have two years of work experience and as many as 60 credits from other colleges .
Rapid Growth
By 2004 , the university had eliminated its credit and age requirements , Jones said.
DeFusco, who worked at Apollo from 1994 to 2003 in academic affairs and then opening
campuses for Phoenix, said Axia's tuition was set just under the federal limit for
financial aid so government grants and loans could cover most , if not all , of the cost.
The college's tuition-pricing "was a financial-aid play,# DeFusco said .
Apollo spokeswoman Jones said that was not the case .
Unlike students who came to Phoenix to complete degrees, the company said that three
out of five Axia attendees haven' t gone to college before .
"It' s no longer the mid-career manager , it' s somebody working a minimum-wage job
somewhere and looking to get out of that dead end, # said Laura Palmer Noone , a former
Phoenix president who is now CEO of Piccolo International University, an online school
based in Scottsdale, Arizona .
Career Aspirations
Sabrina Bogan, 39, a criminal-justice major , said in an interview that Axia has
improved her writing . The Richmond, Virginia, mother of three, who has a high school
equivalency degree and used to work as an assistant manager at a convenience store, said
she has written essays on the death penalty and energy conservation.
"The person that I was before I started taking those classes could not have done
that,# Bogan said. She said she hopes to land a job in a lawyer ' s office after she
finishes her associate's degree next year .
Not all Axia students benefit . Laura Holder , 29, has a diploma from Prairie Grove
High School in Prairie Grove, Arkansas, where she took special-education classes, she
said. According to her mother, Beatrice McCormack, Holder has an IQ of 65 to 70, within a
range the Washington-based American Association on Intellectual and Developmental
Disabilities defines as intellectually disabled.
Axia Recruiter
Holder, who lives in an apartment with her husband, said she learned about Phoenix on
the Internet and contacted the school in hopes that a college degree would help her find
work as a preschool teacher . The Axia recruiter, she said, asked if she had graduated
from high school , not whether she was in special education .
"They said once I go through the classes , I would get a job in teaching,# Holder
said.
Holder enrolled at Axia in October 2006 and realized the classes were too hard for
her, she said. She left school amid a payment dispute without completing a course . A
collection agency dunned her for a tuition balance of $1 , 710 .
Jones, the Phoenix spokeswoman, said the school is aware of a handful of instances in
which intellectually disabled students enrolled and soon demonstrated that they didn' t
have the ability to succeed. In those cases , she said, Phoenix worked to help the
students withdraw without financial obligation.
Community Colleges
Axia may soon face more competition for students. The Obama administration has
proposed allocating $12 billion to publicly run community colleges, which also give two-
year degrees . While Sally Stroup, a former Apollo lobbyist, oversaw post-secondary
education in the George W. Bush administration, former community-college leader Martha
Kanter plays a similar role now .
"Some in the administration, if they were advising students who had a choice of going
to a community college or a for-profit college, would say, 'Pick the community college, ' #
said Scott Fleming, a Washington lobbyist who represents Apollo .
The Education Department isn't out to "shut down or maim# for-profits, Cappelli said.
257
" If Obama means what he says , that he wants everyone to have one year of coll ege ,
how do you accompl ish that without for-profi t hi gher ed?" he sai d .
258
From:
Sent:
To:
Subject:
Neil @gmail.com]
Thursday, April 29, 201 o 1 :26 PM
Campbell, Neil
Profits, Pell Grants, and College Degrees
Sent to you by Neil via Google Reader:
Profits, Pell Grants, and College Degrees
via Eduflack by Eduflack on 4/29/1 0
Do for-profit businesses have a legitimate role in ensuring more Americans secure that college
degree that is quickly becoming a non-negotiable in today's economy? With commercials for the
University of Phoenix and Kaplan University on what seems like a constant loop on television, it is
a question few ask. We seem to assume, in today's day and age, that for-profit institutions of
higher education are a permanent part of the landscape, quickly becoming no different than
distinguishing between public and private colleges.
Discussions of academic quality, growth, and such was left to the regional accreditation bodies.
Yes, we've targeted the diploma mills who exchanged checks for diplomas. But if a for-profit could
convince a team higher ed officials (most from traditional NFPs) that they had a legitimate plan,
they were in business. Some focused on a particular state or geographic region. Others, like
Phoenix, went national. And some have focused exclusively on online education (though,
interestingly, it can be more difficult to get accreditation from the online authorizing body than from
a regional accreditor).
Yesterday, though, Bob Shireman-- U.S. deputy undersecretary for education- changed the
game. As reported here by Inside Higher Education, Shireman took issue with growing
enrollments at for-profits, increased profit margins at such institutions, and a flawed regulatory
process that doesn't necessarily protect the rights and needs of the student. He even went so far
as to suggest that higher education could be headed the way of Wall Street, with some gaming the
system.
Shireman's comments have been a long time coming. A champion of affordable education for low-
income students and a strident opponent of unnecessary college loan debt, Shireman has long
been a leading advocate for the consumer - the adults or young adults who are seeking to better
their lives with postsecondary degrees. And he knows better than most that the approval systems
for college approval-- at the federal , regional , and state level- are seldom focused on academic
quality or return on investment. Instead, they are often the playground of lobbyists, lawyers, and
consultants. (And that is true for for-profit and not-for-profit institutions alike.)
Over the past year, Shireman and company fought hard to increase funding for Pell grants and
make college generally more affordable for all. Those outside of the system expect that these
additional dollars are likely going to State U and local community colleges. But Shireman pointed
out a funny thing has happened between intent and execution. Corinthian Colleges' revenue from
Pell grants has increased 38 percent in the first three quarters of the fiscal year. DeVry has seen
259
their share jump 42 percent. Similar gains have been posted by ITT, Strayer, and others.
His remarks touched on the three legs of the higher ed stool-- the feds, the states, and the
regional accreditors --to work together to ensure quality and efficiency. But after spending some
time in the for-profit higher ed field years ago, Eduflack would like to add one more box to check
on the ol' forms. That box is ROI.
With Pell grant dollars increasing even in difficult budget times, we should all be committed to
ensuring that these precious dollars are actual ly yielding return on investment. If the objective is to
break down financial barriers and get more kids into college, then the ultimate goal should be to
ensure that those kids are actually leaving school with a degree in hand. The experience of higher
ed is important, but leaving school halfway through is a lost opportunity for both the student and
the Pell grant system.
We shouldn't have an issue with Corinthian and DeVry and the rest if they are enrolling more
students and more students are thus earning an accredited college degree. We should, though,
take major issue with colleges and universities who are reaping huge financial benefits from the
system, but aren't actually educating the customers they are serving. And at the end of the day,
that education is measured by degree completion.
This is not just an issue for for-profits, it should be true for any institution operating in the
postsecondary space. Doesn't matter if you are a NFP research university, state college,
community college, private liberal arts school, or a career college, a degree is a degree. Students
enroll in college to earn a degree. They earn a degree to secure a job. When they secure a job,
they can then pay off those student loans and generally contribute to the economy and society.
And so is the circle of college life, as those loans are repaid and the money given to the next
generation of students.
Last month the American Enterprise Institute released a new report showing that just over half of
Hispanic students earn a bachelor's degree six years after enrollment. That means nearly half of
all Hispanic students who go on to college spend their money, family funds, scholarships, grants,
and loans on an education that never offers the ultimate ROI. They may finish up with some great
stories, good friends, and wealth of experiences, but what does it mean without the degree?
If Shireman and company really want to change the way higher education does business and
ensure that the interests of the customer-- the student-- are truly addressed, they would find a
way for at least one of the stool's three legs to factor in graduation rates as part of their evaluation
and approval process. Those schools that take Pell grants should make sure that Pell students
are graduating with degrees. If they aren't, why not? And if they aren't, should we really al low
them to increase their profit from these federal grants, if they are failing to live up to the
expectation that such grants (and loans) are intended to help students earn college degrees?
Things you can do from here:
Subscribe to Eduflack using Google Reader
Get started using Google Reader to easily keep up with all your favorite sites
260
261
From: Reynolds, Cyndi
Sent: Thursday, March 04, 201 o 1 :05 PM
To: rosemary beavers; Miller, Frank X; Avoletta, Brenda; Gottschalk, Sarah; Grebeldinger, Beth;
McGinnis, Colleen; Oliveto, Tony; Brown, Deborah; Dickey, Pauline; Goldstein, Barry;
Johnson, Terri; Murphy, Robert
Subject: FW: News clips for March 4th, 2010
Attachments: image001 .jpg; image002.gif
From: Dawson, Dawn
Sent: Thursday, March 04, 2010 11:48 AM
To: Reynolds, Cyndi; Oliveto, Tony; McGinnis, Colleen
Subject: FW: News clips for March 4th, 2010
From: Jones, Andrew
Sent: Thursday, March 04, 2010 11:06 AM
To: Newsclips
Subject: News clips for March 4th, 2010
News Clips for March 4, 2010
Today there are fifteen articles for your review
Duncan Outlines Benefits Of Proposed Higher Ed Lending Reforms. Secretary of Education
Arne Duncan wrote in an op-ed for the Buffalo News (3/3) that ED "currently subsidizes student loans
to the tune of $9 billion every year .... President Obama is ready to put an end to that deal." According
to Duncan, "Based on the president's proposal, the House of Representatives has passed the
Student Aid and Fiscal Responsibility Act," and the Senate "is still working on its version of the
legislation .... These changes are an essential part of our plans to expand college access and relieve
student borrowers of an impossible burden of debt. "
Letter: Sallie Mae Back's Duncan's Higher Ed Lending Reform Push. John Remondi, vice
chairman and chief financial officer of Sallie Mae, writes in a letter to the Washington Post (3/4),
"Contrary to Education Secretary Arne Duncan's assertions [" Investing in students, not the banks,"
Washington Forum, Feb. 26], Sallie Mae is not lobbying to preserve today's student-loan program. In
fact, our efforts have been focused on supporting the foundation of the president's proposal with a
few enhancements that would preserve jobs and deliver a better program for students, schools and
taxpayers." According to Remondi, "We stand ready to work with Mr. Duncan to seize this 'once in a
generation' opportunity."
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USA Today Backs Obama's Proposed Higher Ed Lending Reforms. The USA Today (3/4)
editorializes, "Under a federal program run by banks, Washington buys or guarantees student loans"
and from the "banks' perspective, it's a sweet deal." Thus, when "President Obama proposed ending
this scandal-plagued program, at a savings of $87 billion over 10 years, the banking community was
taken aback .... Cutting out the middleman makes a lot of sense."
Richard Hunt, president of the Consumer Bankers Association, writes in an "opposing view" op-ed
for USA Today (3/4) 'The Obama administration has described passage of the Student Aid and Fiscal
Responsibility Act as a 'no-brainer' and presented arguments to support that conclusion. However,
closer examination of the issues surrounding SAFRA suggests that there is more to this story and
that enactment of the bill in its current form would be a grave mistake." Ultimately, Congress "should
adopt the proposal put forward by the private sector."
Eric Hardmeyer, president of the Bank of North Dakota, writes in a letter to the Washington Times
(3/4), "I could not agree more with your contention that the Student Aid and Fiscal Responsibility Act
'is a bad idea because it takes away consumer choice' ('Academic malpractice,' Editorials, Feb. 18).
The elimination of the Federal Family Education Loan (FFEL) Program would force all private and
public universities and colleges to use exclusively the Direct Loan Program."
Duncan Calls Education Bill Critical To College Affordability. The Tufts Daily (3/4, Kan) reports,
"Secretary of Education Arne Duncan in a live web chat yesterday highlighted the importance of
passing the Student Aid and Fiscal Responsibility Act (SAFRA), saying it would have a huge impact
on college affordability ... . Yesterday's chat was open to questions from the publ ic and also featured
Melody Barnes, assistant to the president and director of the Domestic Policy Council."
College Students Rally Over Tuition, Education Quality. USA Today (3/4, Marklein) reports,
"College students on more than 100 campuses nationwide plan walkouts, rallies and other actions
Thursday to protest budget cuts, layoffs and tuition increases, which they say erode quality of
education and limit access. Students in at least 32 states are expected to join the grass-roots
campaign. It has been bubbling up since demonstrations last fall in California, where students, faculty
and unions protested plans for a 32% tuition increase amid the state's fiscal crisis."
Taxes Supporting For-Profit Firms As They Acquire Colleges. Bloomberg News (3/4, Golden)
reports, "ITT Educational Services Inc. paid $20.8 million for debt-ridden Daniel Webster College in
June," and in "return, the company obtained an academic credential that may generate a taxpayer-
funded bonanza worth as much as $1 bill ion." ED, "which doled out $129 billion in federal financial aid
to students at accredited postsecondary schools in the year ended Sept. 30, is examining whether
these kinds of acquisitions circumvent a federal law that new for-profit colleges can't qualify for
assistance for two years, Deputy Undersecretary of Education Robert Shireman said in a telephone
interview."
Tough Real Estate Market "A Silver Lining" For Overcrowded Colleges. Inside Higher Ed reports
on USA Today's (3/4, Moltz) website, "Community college leaders eyeing institutional expansion have
found a silver lining to the depressed real estate market. Though dwindling state appropriations have
halted new construction on many campuses, burgeoning student enrollments have inspired some
college officials to buy dilapidated storefronts and acquire public property for development." Among
the examples cited in the article is St. Louis Community College in Missouri , which is considering "an
abandoned Circuit City" near one of its campuses. Carla Chance, vice chancellor for finance, said the
former store was "ideal ," since it was relatively inexpensive, and had "a pretty much open floor plan,"
allowing the school to easily redesign the space to suit its needs. Chance said, "The cost of the
acquisition of this property and the renovation will be a third of what we would have spent building a
new building from the ground up."
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Chronicle
Duncan Defends Planned Switch to Direct Lending in Appearance Before House Panel
By Libby Nelson
Washington
Testifying before the House education committee on Wednesday morning, Education Secretary Arne
Duncan defended the Obama administration's plan to move all colleges to direct lending and said
such a switch could still be accomplished by July without major glitches.
At the committee hearing on President Obama's proposed education budget for the 2011 fiscal year,
Mr. Duncan dismissed concerns raised by Republican members that the switch to direct lending
would be too difficult for colleges to accomplish quickly.
"We understand this transition, and what a big deal it is, and we want to make sure we do this
absolutely smoothly if possible," Mr. Duncan said.
The Student Aid and Fiscal Responsibility Act, which would end bank-based lending to students and
move to 1 00-percent direct lending, in which federal money is lent directly to students, would require
that all colleges switch to direct lending by July 1. The House passed the bill in September, but it has
been stalled in the Senate.
Thousands of colleges have switched to direct lending on their own in the past few years, Mr. Duncan
told the committee in response to several questions. For most institutions, the transition has taken
place in a matter of weeks, he said.
"We've gone from 1,000 universities participating to 2,300 participating, and I don't think you've heard
a peep," he said. "There haven't been any huge stories about lack of service."
Republicans, though, repeatedly questioned the wisdom of switching to direct lending this summer,
citing fears that students would be unable to get their loans in time for fall classes.
Rep. Glenn Thompson Jr., a Republican of Pennsylvania, argued that the institutions that voluntarily
switched might not represent the direct-lending experience nationally. Large colleges have an easier
time with direct lending than do smaller institutions because they have more resources, he said.
"I think we've cherry-picked, voluntarily, those who are best adapted," Mr. Thompson said. "What sort
of Plan B does the department have in place in case the plans to convert don't go as smoothly as
what you'd like?"
Reiterating that many colleges have already switched successfully, Mr. Duncan said the department
has "Plan A, Plan B, Plan C." But he declined to provide details on alternate plans.
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"We're really focused on Plan A right now," he said.
Questions on Teacher Training
Mr. Duncan defended the cost of the Obama administration's education budget for 2011 at a separate
hearing on Capitol Hill last week. telling the House Budget Committee that a proposed 7.5-percent
increase in education spending was necessary for long-term economic development. Questions at
Wednesday's hearing, which lasted more than 90 minutes, dealt with policy issues.
The questions about student lending were a rare moment in the spotlight for higher education at a
hearing that focused on elementary and secondary education. Many questions tackled the Obama
administration's proposed changes in the Elementary and Secondary Education Act, the federal law
governing precollege education that is now called No Child Left Behind. The act is overdue for
renewal , and although legislation to reauthorize it has not yet been introduced in Congress, the issue
is a top priority for legislators, said the committee's chairman, Rep. George Miller.
"We would really like to get this done this session of Congress," said Mr. Miller, a Democrat of
California.
In response to questions about proposed changes in the act, Mr. Duncan, who has often criticized
schools of education. said colleges and universities should be more focused on providing hands-on
training and should instruct future teachers on how to use data.
He repeated his support for alternative-certification programs, which bypass teachers' colleges to
draw potential teachers from other fields. Some teachers' colleges are skeptical of such programs,
which have become a point of controversy in discussing revisions to the Elementary and Secondary
Education Act.
"I always think these are false dichotomies," he said of the divide between traditional and alternative
certification. "We just need more great teachers coming in."
Grief in the Age of Facebook
Courtesy of Kelsey Butler
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After the death of Casey Feldman (right), many of her friends changed their photographs of
themselves on their Facebook profiles to a snapshot of them with Casey. Above, Kelsey Butler's
Facebook photo, with Casey.
Courtesy of Kelsey Butler
After the death of Casey Feldman (right), many of her friends changed their photographs of
themselves on their Facebook profiles to a snapshot of them with Casey. Above, Kelsey Butler's
Facebook photo, with Casey.
By Elizabeth Stone
On July 17 last year, one of my most promising students died. Her name was Casey Feldman, and
she was crossing a street in a New Jersey resort town on her way to work when a van went barreling
through a stop sign. Her death was a terrible loss for everyone who knew her. Smart and dogged,
whimsical and kind, Casey was the news editor of the The Observer, the campus paper I advise, and
she was going places. She was a final ist for a national college reporting award and had just been
chosen for a prestigious television internship for the fall , a fact she conveyed to me in a midnight text
message, entirely consistent with her al l-news-all-the-time mind-set. Two days later her life ended.
I found out about Casey's death the old-fashioned way: in a phone conversation with Kelsey, the
layout editor and Casey's roommate. She'd left a neutral-sounding voice mail the night before, asking
me to call when I got her message, adding, "It's OK if it's late." I didn't retrieve the message till
midnight, so I called the next morning, realizing only later what an extraordinary effort she had made
to keep her voice calm. But my students almost never make phone calls if they can help it, so
Kelsey's message alone should have raised my antenna. She blogs, she tweets, she texts, and she
pings. But voice mail? No.
Paradoxically it was Kelsey's understanding of the viral nature of her generation's communication
preferences that sent her rushing to the phone, and not just to call boomers like me. She didn't want
anyone to learn of Casey's death through Facebook. It was summer, and their friends were scattered,
but Kelsey knew that if even one of Casey's 801 Facebook friends posted the news, it would
immediately spread.
So as Kelsey and her roommates made calls through the night, they monitored Facebook. Within an
hour of Casey's death, the first mourner posted her respects on Casey's Facebook wall , a post that
any of Casey's friends could have seen. By the next morning, Kelsey, in New Jersey, had reached
The Observer's editor in chief in Virginia, and by that evening, the two had reached fellow editors in
California, Missouri , Massachusetts, Texas, and elsewhere-and somehow none of them already
knew.
In the months that followed, I've seen how markedly technology has influenced the convent ions of
grieving among my students, offering them solace but also uncertainty. The day after Casey's death,
several editorial-board members changed their individual Facebook profi le pictures. Where there had
been photos of Brent, of Kelsey, of Kate, now there were photos of Casey and Brent, Casey and
Kelsey, Casey and Kate.
Now that Casey was gone, she was virtually everywhere. I asked one of my students why she'd
changed her profile photo. "It was spontaneous," she said. "Once one person did it, we all joined in."
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Another student, who had friends at Virginia Tech when, in 2007, a gunman killed 32 people, said
that's when she first saw the practice of posting Facebook profile photos of oneself with the person
being mourned.
Within several days of Casey's death, a Facebook group was created called "In Loving Memory of
Casey Feldman," which ran parallel to the wake and funeral planned by Casey's family. Dozens wrote
on that group's wall , but Casey's own wall was the more natural gathering place, where the
comments were more colloquial and addressed to her: "casey im speechless for words right now,"
wrote one friend. " i cant believe that just yest i txted you and now your gone ... i miss you soo much.
rest in peace."
Though we all live atomized lives, memorial services let us know the dead with more dimension than
we may have known them during their lifetimes. In the responses of her friends, I was struck by how
much I hadn't known about Casey-her equestrian skill, her love of animals, her interest in
photography, her acting talent, her penchant for creating her own slang ("Don't be a cow"), and her
curiosity-so intense that her friends affectionately called her a "stalker."
This new, uncharted form of grieving raises new questions. Traditional mourning is governed by
conventions. But in the age of Facebook, with selfhood publicly represented via comments and
uploaded photos, was it OK for her friends to display joy or exuberance online? Some weren't sure.
Six weeks after Casey's death, one student who had posted a shot of herself with Casey wondered
aloud when it was all right to post a different photo. Was there a right t ime? There were no
conventions to help her. And would she be judged if she removed her mourning photo before most
others did?
As it turns out, Facebook has a "memorializing" policy in regard to the pages of those who have died.
That policy came into being in 2005, when a good friend and co-worker of Max Kelly, a Facebook
employee, was killed in a bicycle accident. As Kelly wrote in a Facebook blog post last October, "The
question soon came up: What do we do about his Facebook profile? We had never really thought
about this before in such a personal way. How do you deal with an interaction with someone who is
no longer able to log on? When someone leaves us, they don't leave our memories or our social
network. To reflect that reality, we created the idea of 'memorial ized' profi les as a place where people
can save and share their memories of those who've passed."
Casey's Facebook page is now memorialized. Her own postings and lists of interests have been
removed, and the page is visible only to her Facebook friends. (I thank Kelsey Butler for making it
possible for me to gain access to it.) Eight months after her death, her friends are still posting on her
wall, not to "share their memories" but to write to her, acknowledging her absence but maintaining
their ties to her-exactly the stance that contemporary grief theorists recommend. To me, that seems
preferable to Freud's prescription, in "Mourning and Melancholia," that we should detach from the
dead. Quite a few of Casey's friends wished her a merry Christmas, and on the 17th of every month
so far, the postings spike. Some share dreams they've had about her, or post a detail of interest. "I
had juice box wine recently," wrote one. "I thought of you the whole time:( Miss you girl!" From
another: "i miss you. the new lady gaga cd came out, and if i had one wish in the world it would be
that you could be singing (more like screaming) along with me in my passenger seat like old t imes. "
It was against the natural order for Casey to die at 21 , and her death still reverberates among her
roommates and fellow editors. I was privileged to know Casey, and though I knew her deeply in
certain ways, I wonder-l'm not sure, but I wonder-if I should have known her better. I do know,
however, that she would have done a terrific trend piece on "Grief in the Age of Facebook. "
267
Elizabeth Stone is a professor of English, communication, and media studies at Fordham University.
She is the author of the memoir A Boy I Once Knew: What a Teacher Learned From Her Student
(Algonquin, 2002).
Younger Professors Say a Successful Career Should Not Require Long Hours
By Robin Wilson
In conversations with a dozen faculty members, researchers with a project on work-life issues run by
Harvard University have found that "Generation X" professors value efficiency over "face time" and
believe that quality is more important than quantity in academic work.
The Collaborative on Academic Careers in Higher Education, a long-term project run by Harvard's
Graduate School of Education, conducted interviews with 12 professors born between 1964 and 1980
on three campuses in the mid-Atlantic: a liberal-arts college, a private master's-degree-granting
university, and a large public institution. Neither the interview subjects nor the institutions are named
in the report.
The Generation X professors said they did not want to be holed up in their campus offices until11
p.m., and talked about the "diminishing returns" of working too many hours. The professors perceive
their attitudes to be different from those of older faculty members, who they see as being completely
devoted to their jobs and unable to say no to more work.
"My biggest concern ... is that I want to be able to be good at my job but work 8:00 to 6:00 five days a
week," one Gen X faculty member told the interviewers. "I want to succeed, but I don't want to work
18 hours a day."
The report, "New Challenges, New Priorities: The Experience of Generation X Faculty," is to be
posted today on the project's Web site.
Inside Higher Ed
You Say You Want a Revolution?
March 4, 2010
By Jeff Abernathy
It seems everybody is talking revolution in higher ed these days.
How many times have I read in the higher ed news of the coming revolution in classroom instruction,
in the major, in the tenure system, in governance?
Google "higher education revolution" and you find radical reform rising in every direction. Many are
sparked by the billions state systems are losing as our economy lurches out of the tank, others by the
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increasing commodification of the college degree. Some promise to "transform" the American
university as they have transformed-- egad!-- the American newspaper. New models of for-profit
education promise a revolution in the higher education business model that is already threatening the
viability of traditional colleges across the country.
But I can't help wondering if we've spirited all our revolutionary rhetoric for another day at the office.
We tend to talk ourselves right past revolutions in higher education. Our burning impulse to revitalize
learning often concludes with a return to the status quo: we end up arguing, say, over our respective
roles in shared governance, or over the turf we'd have to give up for genuine improvement in learning.
We can do better.
At a recent conference, I had a glimpse into how the real transformation might unfold. The Teagle
Foundation brought together professors, administrators and researchers from across the country to
discuss with its board members key questions the foundation has been addressing in recent years:
How might we make systematic improvements in student learning?
What evidence is there that we're using what we know about student learning to reform
academe?
These, of course, were the very same questions asked by the ill-fated Spellings Commission. Teagle
has found success by engaging the strengths of the academy -- and especially the talents and
creativity of faculty--by supporting liberal arts college in piloting solutions to the challenges before
academe. In doing so, they have started transformative efforts that will deepen student learning while
also balancing resources.
With the public university system in crisis-- Clark Kerr's master plan for California has been set adrift
along with the strategies for renewal in state after state -- a focus on liberal arts colleges could seem
to some like a boutique project. The Teagle Foundation's great insight has been that the nation's
liberal arts colleges remain a bellwether for the health of the academy and that small colleges have a
great opportunity to model what the 21st century higher education might become.
Teagle has funded dozens of collaborative efforts at liberal arts colleges over the past six years
supporting faculty-driven, ground-up assessment projects of student learning outcomes at colleges
and universities across the country.
The work that colleges are doing in these Teagle pilots tests the basic assumptions of a college
education. Some have examined the meaning and value of general education, exploring radical
revision of the ways in which general education might come to be embedded in helping students to
think about the ways they will live their lives. One project brought four colleges together to assess
how effectively undergraduate students acquire and refine the spiritual values that lie at the heart of
their institutional missions. Another explores effective models of community-based learning efforts at
three prominent colleges.
Such work aims to deepen student learning and growth at colleges across the country. As
importantly, it will help small colleges to think about ways to distinguish themselves in a landscape
that increasingly sees no difference between a liberal arts college degree and a degree from, say, the
University of Phoenix. Liberal arts colleges must, to use Robert Zemsky's phrase, be "market-smart
and mission-centered," and the pilots that Teagle has funded in recent years point us toward
solutions to drifting missions and to struggling finances alike.
269
At Augustana College, we are taking seriously the Teagle Foundation's charge to find ways to use
what we know about student learning for reform. Working in a Teagle-funded collaborative of seven
colleges across the Midwest-- Alma, Augustana, Illinois Wesleyan, Luther, Gustavus Adolphus,
Washington and Jefferson, and Wittenberg -- over the past five years, we have begun to question the
1 00-year-old credit model system that is at the heart of the American baccalaureate. Our consortium
of colleges has begun to ask whether we can still justify the existence of a system that was brought
into being mostly to serve the needs of our business offices.
Will federal pressure for transferability of credit only make more secure a system that is now straining
under the weight of new understanding of learning and the new pedagogies that follow? In an era
when we ask faculty to be deeply engaged with students through interdisciplinary education,
undergraduate research, international study, and other high impact practices, can we continue to
justify a credit system that has remained unchanged for a century? We are questioning whether the
course unit as now constituted --that three- or four-hour sliver of a college degree or the correlating
seat time - is the best means of measuring student learning.
My colleagues at Augustana and I have begun other pilots that will explore the other hard questions
before our college, and all colleges: how will we make better use of vital resources while
demonstrating the value of a liberal education to parents, employers, and graduate schools?
We have developed a series of experiments that may answer the question. Our faculty have created
a senior capstone program -- Senior Inquiry - by using a backward design model to re-envision
nearly every major on campus, ensuring that all Augustana students will have the sort of hands-on,
experiential learning opportunity that will demonstrate their skills to employers and graduate schools
al ike (even as it provides us with a great chance to evaluate all they have done in four years here).
We have redefined scholarship in the Boyer model , embracing the scholarship of teaching and
learning. We are piloting new partnerships with universities, community colleges and high schools; we
are asking how technology might deepen the advantages of traditional classroom learning models.
And we have built our newest program-- Augie Choice-- around the idea that experiential learning-
through research, international study and internships -- ought to be the heart of a liberal arts
education.
We don't yet know where all of these experiments will lead us. But, in our 150th year at Augustana,
we have learned from the Teagle Foundation that pilots may help us to ensure that we will thrive for
the next 150 years.
That, I'm certain, is revolution enough.
Jeff Abernathy is vice president and dean of the college at Augustana College, in Illinois. This
summer, he will become president of Alma College, in Michigan.
Medical Schools Expand -- and Contract
March 4, 2010
In the span of a week in September 2008, the "rubber band" that held together the University of Utah
School of Medicine broke.
270
First, the federal government cut $10 million in Medicaid funding to the university' s hospital. Then,
days later, the state Legislature eliminated $2.5 million in support. In all, the medical school lost 40
percent of its education budget nearly instantly, with no revenue-creating solution in sight.
"We were a rubber band stretched to the extreme, " says David Bjorkman, the school' s dean. "We
were already spending every dollar we had, maximally cross-subsidizing with clinical revenue from
our health system." After months of lobbying and left with no other choice, the school shrunk the size
of its fall 2009 entering class to 82 from 102. While the rest of the university raised tuition by 10
percent, medical school tuition went up 15 percent.
Though Utah's medical school has seen more dramatic cuts than most, the economic realities of a
prolonged recession are forcing medical schools across the United States to reduce the number of
seats available for new students or to curtail expansion efforts initiated during better economic times,
even as demand far outstrips supply in many experts' projections on the size of the future physician
work force.
State higher education budget cuts mean that Indiana University School of Medicine's entering class
this fall will be 13 percent smaller than last fall' s. One scenario for higher education cuts in Nevada
would include shutting down the University of Nevada School of Medicine, the state's only medical
school. Development of a new medical school at the University of California at Merced has stalled.
And more cuts could be on the way.
Edward S. Salsberg, director of the Association of American Medical Colleges' Center for Workforce
Studies, says he has seen some evidence of medical schools taking in fewer first-year students or
slowing their planned growth rates. "It's up to the individual schools to make decisions that work for
them," he says. Public medical schools "have to go to their state legislatures to get support and we
know state budgets aren't in good condition in most states."
For the medical establishment, tight budgets and enrollment cuts couldn't have come at a worse time.
The Council on Graduate Medical Education estimated in 2005 that the United States would face a
shortage of 85,000 to 96,000 physicians by 2020 unless medical schools were able to increase the
number of new M.D.'s they graduate each year by several thousand. Other groups, too, project a
physician shortage or at least the need to draw physicians to underserved regions and toward
practicing high-demand specialties such as internal medicine and geriatrics.
In June 2006, the AAMC responded by undertaking an effort to expand medical school enrollments
by 30 percent nationwide by 2015 (after initially suggesting 15 percent growth). To meet the goal,
U.S. medical schools would need to enroll 21 ,434 first year students in 2015 --nearly 5,000 more
than they did in 2002, when first-year enrollments totaled 16,488.
The AAMC envisioned that the creation of new medical schools and the expansion of existing ones
would provide additional slots that, in all , would total close to 20,000 across all four years of traditional
allopathic medical school.
Universities and hospital systems heeded the call. Dozens initiated or stepped up efforts to expand
their medical schools, adding seats to their first-year classes and opening branch campuses to
broaden their geographical reach. Others began laying the groundwork for new medical schools that
would at once build institutional prestige and contribute to the larger national goal.
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By last fall, enrollments had grown 11 .5 percent over 2002 levels, with 18,390 students in the entering
class. Close to 200 of those seats were in medical schools that opened in 2009: Commonwealth
Medical College in Scranton, Pa. ; Florida International University College of Medicine in Miami ; Texas
Tech University Health Sciences Center's PaulL. Foster School of Medicine in El Paso; and the
University of Central Florida College of Medicine in Orlando.
Before the AAMC began its expansion efforts, it estimated that medical schools would add 919 new
first-year seats between the fall of 2005 and the fall of 201 0. Instead, between the creation of new
schools and the expansion of existing ones, close to 1,400 spots were created by the fall of 2009.
"We're encouraged that schools and communities are listening to our recommendations," Salsberg
says. "We're encouraged because we do think the goal is happening."
But economic realities are clearly having an effect on just how quickly medical schools are being
created and expanding. And even in good economic times, it might be a stretch to add 3,000 seats in
half a dozen years.
Even if expansion continues at its current rate for the next six entering classes, U.S. medical schools
won't reach the goal on time, Salsberg says. "We don't think that we' ll make it by 2015," he says. "We
recommended, but it's up to the schools to make the expansion happen .... We're making progress,
just not as much as we would have liked."
Salsberg anticipates that there will be 20 or 21 percent more first-year seats in American medical
schools in 2014 than there were in 2002. The degree to which future enrollment cuts may erode those
numbers -- even with growth elsewhere -- is unclear.
Sharp Declines for the Hoosiers
The Indiana University School of Medicine had plotted expansion by the AAMC book. After a work
force study of the state' s physicians "confirmed that the 30 percent national estimate was true in
Indiana as well ," says Peter Nalin, interim executive associate dean for educational affairs, the school
set its sights on expanding its entering class size with the goal of growing enrollment 30 percent by
2013.
"The rationale has always been that there is a need for family physicians, primary care physicians,
physicians in underserved areas," he says. "We need to respond to an aging population and
increasing demand for health care overall in society."
To expand the first-year class from 280 students in the fall of 2006 to 364 in 2013, administrators
planned to add 14 more seats to each of the school's entering classes. Through August 2009, the
plan was right on track, with 322 students starting at the medical school. The school was promised $5
million in state appropriations to pay for the expansion
When the state whittled that $5 million down to $3 million in its October estimate of the 2010 budget ,
the medical school responded by extending its expansion plan to reach the 30 percent goal. The
school would've added six new seats in 2010 and eventually reached the goal of 364 first-year seats
by 2015.
Then the budget picture got worse.
In December, Gov. Mitch Daniels cut funding to the state's public colleges and universities by $150
million, more than a third of which would be taken from Indiana University's state appropriations. By
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then, Michael McRobbie, the university's president, had already made one-time cuts of $79 million
and recurring cuts totaling $98 million annually.
With what amounted to a $59 million hole in state funding, McRobbie decided to trim $7 million from
the medical school's budget, a choice that a spokesman told the Indianapolis Star was simply part of
distributing the pain throughout the university. "Every single school and every department, even the
president's office, is cutting a proportional amount of their budget," the spokesman said. "No one was
excluded. Not one dean has been spared the pain of having to cut something."
Daniels' office issued a statement deflecting blame. 'The university made the decision about how to
implement the reduction. We don't have any comment about why IU decided this was the best
direction to take among the many areas it likely reviewed."
On its own, the $7 million in cuts might have slowed or even stopped the medical school' s expansion
effort. But, when coupled with the realization that the $5 million that had dwindled to $3 million would
not materialize at all , the blow was even blunter, Nalin says. In all , the school' s state funding would be
$12 million below what administrators had projected for the 2010-11 academic year.
So, not only did the medical school lose its funding for future expansion but it also lost the financial
capacity to sustain the growth that had taken place in the last few years. The class that enters in
August will probably total 280, Nalin says, the same that it was in pre-expansion 2006. "Our goal is
ultimately to respond to that target of 30 percent-- it remains our vision of where we'd like to be," he
says. "However, we must roll it back based on the current financial situation and hope that we'll
eventually be able to achieve that 30 percent."
Nalin says the school hopes to restart its expansion efforts (which, at first, would be efforts to restore
classes to the size they reached last fall) in the next year or two. In a worst-case scenario, he'd like to
see class size expand again by 2014. Any growth, though, depends on the state. "We respect the fact
that if there aren't state revenues then appropriated monies can't be realized. But we hope those
revenues will return."
New Medical Schools
In raw numbers, the greatest contribution to the expansion is coming from new medical schools.
Schools that were already building their facilities or applying for accreditation by the Liaison
Committee on Medical Education have not lost momentum.
Besides the four medical schools that took their first students last fall, eight more have already started
the official accreditation process. Virginia Tech' s Carilion School of Medicine is screening applicants
this spring and will open in the fall with 42 first-year students. The Hofstra University School of
Medicine, which is affiliated with the North Shore-Long Island Jewish Health System, aims to open in
2012.
Candice Chen, co-principal investigator of the Medical Education Futures Study at the George
Washington University School of Public Health and Health Services, says she hasn't seen state cuts
and lagging philanthropy doing too much damage-- so far, anyway. "We haven't seen a slowdown in
new schools saying 'We were getting close to opening but now we're not,'" she says. "You never
know if there would' ve been more right now if the economy was doing better."
But some medical schools that were early on in the planning stages have put their plans on hold until
local economies and state budgets loosen up a bit.
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The University of California at Merced, which opened in 2005, was well on its way to planning a
medical school. A consultant had conducted a feasibility study, the UC Board of Regents had
approved the continuation of the planning process, and the university's chancellor had appointed a
vice provost for health sciences to oversee the school' s development. Administrators predicted that
the school could take its first students in the fall of 2013.
All of that progress had happened by mid-Sept. 2008. Then the financial sky fell , across the nation
and in California. Since then, says Patti lstas, a spokeswoman for Merced, the ambitions have
become far less grandiose and immediate. "All these changes in the economy and the state budget
have slowed things down," she says. "We're still in the infancy stages. It's too early to pinpoint when
the school might be able to open."
Though Merced is "still hoping to open a fully accredited school of our own," the university focused on
"lots of concurrent activities while waiting for the funding to be allocated, " says lstas.
A team at Merced is working to create a branch campus of another UC medical school -- possibly
Davis or San Francisco-- that could provide basic science instruction for the first two years of medical
school. Faculty and administrators are also building up the university's health-related research
operations that could provide some of the foundation needed to fund and operate a medical school.
The economy has touched those efforts, too, though, lstas says. "It has slowed things down."
More than 300 miles to the south, in Riverside, a new UC medical school has already applied for
accreditation by the LCME and plans to enroll 50 first-year students in the fall of 2012. The difference
between the two projects: the timing.
Riverside was ahead of Merced in first considering its medical school -- faculty started debating the
possibility of establishing a school in 2003 -- and continued to be ahead of Merced as the planning
process progressed. Perhaps fortuitously (as lstas puts it, "timing is everything"), Riverside got final
approval by the UC Board of Regents in July 2008, just before most people came to see just what a
bad state the economy was in.
Before the end of 2008, Riverside secured some state funding, as well as the support of several
foundations and local medical centers. Development continued and fortune continued to be in the
school's favor. Construction began on a new health science building and the university made plans to
renovate existing instructional buildings.
In December, President Obama signed an appropriations bill for the U.S. Department of Health and
Human Services that included an earmark of $4 million to support construction at Riverside.
G. Richard Olds, who became the school's founding dean in February. "I wouldn't have taken this job
if I thought this wasn't going to happen, " he says. "When no new programs were being added to the
UC budget, the president still put our medical school into the budget. It was a bold thing to do and
makes it clear that UC is serious about starting this medical school."
Cutting Class Size, But Not Budgets
Though the Pritzker School of Medicine at the University of Chicago isn't facing big budget cuts, its
leaders decided more than two years ago that the best way to serve students and the community was
to shrink its enrollment. After welcoming entering classes of 104 students for more than three
decades, Pritzker had a first-year class of just 88 in the fall of 2009.
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The 15 percent drop in class size is an effort "to more powerfully fund each of the students who enroll
here," says Holly Humphrey, the school' s dean. The goal, she says, is to produce better-trained
doctors who won't face financial barriers in choosing to practice in underserved areas or low-paying--
but high need --fields.
"Without any new big donations, we became convinced that reducing class size would be the best
way to ... increase supervision and feedback, redirect learning and impact performance in a way that
would truly benefit our students, " she says.
One new program funded by the savings that came with the enrollment cut is Repayment for
Education to Alumni in Community Health (REACH), an effort to attract Pritzker graduates who have
just completed their residencies to work in the underserved South Side of Chicago. In addition to their
salaries, graduates in the program will be paid $40,000 a year for up to four years to help ease the
burden of loan repayments. By reducing the debt burden on alumni , Humphrey says, Chicago hopes
to see more graduates take jobs that strategically target areas in need of more physicians.
The average American medical student graduates with $140,000 in debt, but Humphrey hopes that
by reducing class size, Pritzker will put its graduates well below that average. "One of the questions
that isn't often asked about expanding medical school class size is whether you're also expanding
financial aid dollars," she says. "And the answer is often No. "
Though this year' s first-year class has 16 fewer students than last year's, the class is still receiving
the same total dollar amount in institutional aid. "We're taking the same number of scholarship dollars
and applying it to a smaller group, Humphrey says. "Short of getting a philanthropist to underwrite a
big chunk of aid -- without considering whether or not you can sustain that over time -- this was the
best way for us to try to reduce debt for the largest number of our students."
After announcing the class size reduction, Humphrey says, the school got "lots of questions--
medicine and health care in general are accustomed to growing, expanding and getting bigger, so
why on earth would we make something smaller rather than bigger?" Her answer: the changes make
sense for the school and students, even if they may on the surface seem to run contrary to AAMC' s
goal and the needs of the nation.
And, if Pritzker can figure out ways to cut costs or boost revenues, "we will expand the class as
quickly as we can," Humphrey says. "But that's going to take us a few years to figure out."
- Jennifer Epstein
'Harnessing America's Wasted Talent'
March 4, 2010
Peter P. Smith's career in and out of higher education has not followed the straight and narrow.
Amid forays into politics (as a member of Congress and lieutenant governor of Vermont) and
international affairs (at UNESCO), Smith has been a higher education innovator, helping to found the
statewide Community College of Vermont in 1970 and serving for 10 years as founding president of
Cal ifornia State University's Monterey Bay campus, beginning in 1995.
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In those jobs and his current one, as senior vice president for academic strategies and development
at Kaplan Higher Education, Smith has pushed existing colleges and universities to better serve the
adults and other students who have been least well served by traditional higher education. In his new
book, Harnessing America's Wasted Talent: A New Ecology of Learning (Jossey-Bass), he argues
that the country needs to reach deeper into its population than it historically has to produce a
sufficient number of educated and skilled workers, and that the thousands of current colleges cannot
do that job.
He responded via e-mail to questions about the book.
Q. You write that only a third of American ninth graders even take a shot at college, and that
the country can't continue to function effectively, let alone compete economically and
internationally, unless those in the "middle third" --that is, those who finish high school but
do not experience college-- get some postsecondary training. What have been the biggest
factors preventing them from doing so until now?
A. The middle third also includes people who have some college experience, but no certificate or
degree. I think of this phenomenon as a "failure to thrive" educationally. Many of the reasons
described in the book - mode of teaching and learning, lack of recognition of transfer credit and
learning done outside of school - contribute.
There is a huge expectations gap. Like the student named Bob, whom I mentioned in the book,
people have been acculturated to believe that college is not for them, an expectation that is reinforced
throughout high school. This t ies directly to the lack of personalization and custom ization in the
traditional model. The real low-hanging fruit here are the estimated one mill ion high school graduates
every year who are qualified but simply don't go to college. So, we have to work on how we offer
post-secondary education to capture this audience. We also have to work on communicating to the
public that people have potential and capacity, and that college is for them.
Q. You argue that the existing higher education system (or, more accurately, "non-system," as
you point out) won't be able to educate that middle third -- that it is both "maxed out" in terms
of capacity and incapable of changing (or unwilling to change) the nature of teaching and
learning to accommodate the different needs of today's learners. Why do the students you're
most worried about hit a "dead end" in our current education system?
A. There is a long list of reasons why students hit a dead end, some of which colleges and
universities cannot control. For example, when I was at California State University, Monterey Bay, we
had to work very hard to keep first-generation Latino students in school because cultural norms called
for them to live at home and work rather than attending college.
The metaphor that I would use to describe this challenge is swimming under water. The longer you
are under water, the more it hurts. And, if your goal is to swim to the other end of the pool , but you
have never known anyone who did it, it is easier to simply climb out of the water and walk away. On
the other hand, if you believe you are meant to swim, it is easier to fight through the pain and reach
your goal.
With first-generation learners, it is critical to connect with them personally, customize the learning to
their needs, offer unwavering support, and respect their personal story and the learning that comes
with it.
Q. An underlying theme of your book is that higher education has essentially failed to
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innovate sufficiently. Yet your own career path-- starting two different (and, at their time,
innovative) types of institutions, and now working at a third that is part of a emerging sector
trying new approaches --would seem to challenge that view. How do those square?
A. In the first two cases, I watched as the rest of the field either ignored or explained their success as
an exception. I am frankly astonished that there has never (to my knowledge, anyway) been a
replication of the Community College of Vermont model. Cal State Monterey Bay is a terrific institution
that incorporates several core "best practices" in its operations. But that institution is still subject to
the same constraints that I described in the book. For example, with the current budget crisis in
California, each CSU has faced employee furloughs and student body caps, leaving thousands
without access to higher education. One reason that I chose to come to Kaplan Higher Education
after my time at UNESCO is to experience a culture without these types of constraints.
At Kaplan Higher Education, we do have some fairly traditional practices, but we also have the
capacity to innovate, develop, and continuously improve. For instance, if we want to implement
diagnostics in the post-enrollment process, we can do so and then evaluate, refine, and improve our
processes. The traditional model lacks this type of nimbleness and flexibility. Without the constraints
inherent in the traditional model, we can model emerging best practices, help define them and, in
effect, help lead the change we seek.
Q. Define the "personal learning" that you think is undervalued/under-recognized by the
current higher education system. And do the current mechanisms that exist to account for
knowledge gained outside the classroom (the Council for Adult and Experiential Learning's
prior learning assessments, and the American Council on Education's military credit system,
for instance) not get at this issue?
A. Students are rarely asked, in depth, what they want from their college education and are almost
never engaged in an ongoing conversation about it with someone who can affect their higher
education experience. Until institutions personally connect the learner with the curriculum and the
college experience, the learner is vulnerable. And the "at risk" learner is always more vulnerable.
Additionally, the older one becomes the more experience one has to compare with what they are
being taught. So, to fail to integrate someone's experience into the curriculum both trivializes and
frustrates them. That' s why starting with the assessment of prior learning is such an educationally
important thing to do.
As one of the founding board members of CAEL, I agree wholeheartedly that its prior learning
assessment and other approaches like the ACE military credit system are central to the issue. What
people involved in both of these efforts, and others like them, will tell you is that the credits awarded
are often honored "in the breach. " That's a nice way of saying that they are not honored by other
institutions and, in some cases, by other departments in the institution that awarded them. The
biggest pain point for most of these approaches is that the credit will be included in a transcript, but
not counted towards the degree.
What I am calling for in the book is the mainstreaming of these concepts and the development of a
market that honors credit awarded by accredited institutions as progress towards a degree at other
institutions.
Q. How much is this a credentialing problem? Are we as a society basically under
credentialing (failing to give credentials for knowledge, etc., that isn't now recognized) or over
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credentialing (is there too much emphasis, by employers, etc., on credentials, rather than on
the underlying knowledge that Americans have)?
A. Credentialing is part of the problem, but only part of it. As a society, we fail to recognize what
people know. So, if a soldier returning from active duty service has not only courses but also
experiences, why shouldn't those things be acknowledged and included in his degree plan?
Also, as educators, we do not adequately value reflection on the part of the learner. I view reflection
as the process through which the learner distinguishes between their broad experience (in a course
or in life) and what they learned because of it. This is where and when learning is realized. Employers
want accurate information about the qualifications of people wishing to advance in or enter a
profession. So, while a credential might well be the exponent of that, the learning outcome and a
validated third-party guarantee that the learning occurred will be increasingly important.
Q. What are the developments (you call them "game changers") that make you believe the
time is right to create an alternate path to a postsecondary education for these students?
A. You see evidence every day. When AARP solicits proposals for a learning platform for its
members, the balance has shifted. When the Peer-to-Peer University moves into its second "term,"
the balance has shifted. When Straighterline is recognized for its courseware alone, the balance has
shifted. When the global OpencourseWare Consortium gets three million hits a month, the balance
has shifted.
In the book, I devoted a chapter to the "End of Scarcity" and its impact on higher education. It is
difficult to overestimate the significance of this trend. Colleges are built and organized around scarcity
-the expertise of faculty is in short supply, classrooms and labs are limited because they are
expensive, and the authority to offer a course of study is limited. Additionally, reputation is built
around who you exclude as much as it is who you include and who succeeds. In fact, the whole
concept of meritocracy is built on the notion of scarcity because there is not enough room "at the top"
for everyone.
Put this set of assumptions, and the practices that are in place because of them, up against the
current reality. Excellent content is increasingly commodified and available. Time and place are no
longer determinants of when a person can learn. And in the ultimate reversal, the educational
challenge vis a vis the workforce can no longer winnow people out and validate merit. Instead,
employers must help create merit because there are now more jobs that require higher education
than there are people qualified for them. And this is projected to be the case for years to come.
Q. Explain the newfangled institution(s) that you envision-- Colleges for the 21st Century-- as
a potential environment for these students. Do any existing colleges and universities (like
your current employer) qualify? If so, which? If not, who would be likeliest to create them?
A. That is the big question. The reason I developed the characteristics of the Colleges for the 21st
Century (C21 C) and did not suggest a model is that I don't know what it will look like. As Justice
Potter Stewart said when discussing pornography, "I can't define it, but I know it when I see it. "
What won't change, however, are the elements in the higher education teaching-learning value
proposition, although they might be rearranged. At its heart lies the transfer of information, the impact
of that information on the receiver, and the assessment and reflection that assures the transfer is
complete and meets a high standard. All of these things are organized around the human, intellectual,
civic, and economic development of the learner. From a teaching-learning perspective, the focus will
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increasingly be on learning outcomes, the standards they reflect, and the process by which they are
employed.
I believe that the services modeled by places like AcademyOne and its founder, David Moldoff, will
change the back office of higher education profoundly, transforming learner mobility from a risk factor
to a fact of life.
And I certainly hope (and expect) that when the list of C21 Cs is first published that Kaplan Higher
Education will be on it. And I believe that many in the market-driven sector will play roles in
developing the concept of the C21 C precisely because we are metric-driven laboratories of
innovation. Having said that, Burck Smith has proven with Straighterline that core change can come
from any direction, not just those in the academy. In a world where learner choice and control is a
driving force; where the learning platform, not the campus, is the basic architecture; and where the
network, not the faculty, defines the process, new organizational structures will develop.
- Doug Lederman
Washington Post
Area students will protest higher education tuition hikes
By Jenna Johnson and Daniel de Vise
Washington Post Staff Writer
Thursday, March 4, 201 0; 7:15 AM
Leaders of a California-born protest movement will try to spread their message across the nation
Thursday, with student rallies, panel discussions and other events to express opposition to budget
cuts and tuition hikes at public colleges and universities.
Organizers say they hope the events will dramatize the frustration that has been building as the
recession forces deep cuts in higher education budgets, especially in California, where the fiscal
situation is especially dire. Colleges there have raised tuition sharply, reduced enrollment and cut
faculty pay.
Students in California have declared Thursday as a Day of Action to Defend Public Education. Rallies
are planned for nearly every college and university campus in the state, in addition to several K-12
schools. Organizers said there would be events in 30 states.
"There are student activists all over the country who are looking to California as something to
emulate," said Doug Singsen, 32, a graduate student at the City University of New York who has
helped organize events outside of California. "We want this to be the beginning of a movement that
gets stronger."
At the University of Maryland in College Park, students plan to walk out of classes at noon, meet in
the student union and then march to an academic building. There they plan to occupy the building
while they talk about "hip-hop and education, race and gender in the classroom, the corporate
university, sports and education, and whatever else we want," according to an invitation on a
Facebook site created by organizers.
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Organizer Bob Hayes said Maryland students are angry that their tuition dollars are going to pay for
development projects and the salaries of administrators, instead of better instruction.
We feel disconnected from our education," Hayes said. "We're being run by a Fortune 500 company
instead of by a university."
California has long been considered one of the top public higher education systems in the nation, but
drastic decreases in state funding have strained services, sparking protests.
At the University of California, Berkeley, students and faculty members plan to strike today and will
form picket lines at 7 a.m. Unlike picket lines during past protests, when students just walked around
in circles with their signs, the plan is to link arms and aggressively hinder people from entering
campus buildings, said Callie Maidhof, a Berkeley graduate student who is serving as the
movement's spokeswoman.
At noon the crowd plans to rally on campus and march five miles to Oakland. Some Oakland teachers
plan to bring their classes to the march, even if that means organizing a ''field trip or impromptu tours
of the neighborhood," Maidhof said. "There's really been a dedication at Berkeley for us to come out
of our ivory tower and go to Oakland," Maidhof said.
Last week a riot erupted at the Berkeley as more than 200 people set fires, shattered windows and
clashed with the six police agencies that were called in. On Monday five students were arrested in
Sacramento for refusing to leave a state assemblyman's office because he wouldn't sign a letter
promising increased financial support. Wednesday morning students broke into the Humanities
building at California State University, Fullerton and barricaded themselves inside for several hours.
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Education pages. Bookmark them!
Tuition crunch
HOUSTON CHRONCLE
Tuition increases threaten affordable public higher education
March 3, 2010, 7:50PM
The Texas Legislature's ill-considered deregulation of state university tuition in 2003 was a blunder
that just keeps on taking from the state's students and their families.
Because Texas lawmakers subsequently have failed to adequately fund higher education, regents at
the University of Houston and other state systems are caught in a fiscal squeeze. They must choose
between damaging academic quality with layoffs and program cuts or passing along the pain to
students. One exception: Texas Tech imposed a tuition freeze this past year. But for the most part it
is the students who are paying more to shore up Lone Star universities.
Last month University of Houston System regents approved tuition increases, including nearly 4
percent at the central campus, 16.5 percent at its law school , 4.5 percent at UH-Ciear Lake and more
than 5 percent at UH-Downtown. The bill for a 12-hour semester for a resident undergraduate at the
main campus is now $3,483, and at UH-Downtown $2,205.
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The current cost of a year of UH law school for residents, just over $21 ,000, will rise above $26,000.
The UH System will raise more than $8 million in additional tuition revenue.
The action provoked a letter to UH Chancellor Renu Khator from Houston state Sen. John Whitmire,
a UH graduate and lawyer. He was most concerned about the UH-Downtown increase, since it is a
gateway for working, older students who may not qualify for student assistance.
"Chancellor, how many of the students at UH-Downtown have you or the Regents met with
personally?" asked Whitmire in his letter. "I know them well, they are my constituents and I know that
many of them are struggling to get by even at current tuition rates."
Whitmire's sentiments were seconded by UH regent and law school graduate Nandita Berry, the lone
trustee to vote against the tuition hike.
Chancellor Khator did not answer Whitmire's letter, but a request by the Chronicle brought a response
issued by the UH administration. According to the statement, the university leaders share Whitmire's
concern about families and students, and the board of regents "is committed to meeting its
responsibilities to provide quality higher education in this community. " The statement points out that
UH guarantees free tuition and mandatory fees for four years to incoming in-state freshmen whose
families make below $45,000.
The UH administration and Whitmire are in agreement that state universities desperately need more
funding from the Legislature to reduce their dependence on tuition for revenue.
Right now both universities and their students are victims of state government's misplaced spending
priorities. Until lawmakers increase higher-education funding, continuing tuition raises will restrict
access to our institutions of higher learning at a time when our economy demands a highly educated
work force.
Voters should support state legislators on the ballot this year who back affordable higher education
for our young people and older working students.
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From:
Sent:
To:
Subject:
Ritsch, Massie
Tuesday, May 18, 201 o 2:08 PM
Shireman, Bob
Don't take it personally ...
Colleges Surge as Government Official Is Said to Quit (Updatel)
By Lu Wang and Daniel Golden
May 17 (Bloomberg)-- Education stocks including Apollo Group Inc. rallied on speculation that a proposal to toughen
regulation of for-profit education companies may not materialize because one of its main backers is leaving his position.
U.S. Education Deputy Undersecretary Robert Shireman will leave and return to California, according to a person familiar
with the situation. Shireman is pushing to produce tougher regulations that may reduce the amount of federal financial
aid that for-profit colleges receive. He made an April 28 speech that was viewed as critical of the increasing taxpayer
money provided to for-profit colleges.
"The investment community has viewed Shireman as the key driver of increased scrutiny on the for-profit sector," Jeffrey
M. Silber, an analyst with BMO Capital Markets in New York, wrote in a note. The regulation "could limit the sector's
profitability and growth if enacted as currently proposed."
Federal aid to the industry has jumped to $26.5 billion in 2009 from $4.6 billion in 2000, according to the Education
Department, prompting concern that students of those schools are taking on too much debt.
The tougher proposed rules, which are expected to be released for public comment in coming weeks, would require
Apollo's University of Phoenix and Career Education Corp. to show that their graduates earn enough money to pay off
their student loans. If for-profit colleges can't meet the standard, they could lose federal financial aid, which typically
makes up three-quarters of their revenue.
The Standard & Poor's 1500 Education Services Sub-Industry Index, which tracks nine companies, today jumped 7.4
percent, the most since Sept. 21. Apollo, the biggest U.S. for-profit education provider, advanced 9.6 percent to $57.85.
Career Education climbed 9.8 percent to $31.66. Corinthian Colleges Inc. rallied 13 percent to $15.99 and DeVry Inc.
gained 4.9 percent to $62.03.
On April 21, 2009, when Shireman was appointed, the stock index slumped 6.9 percent.
Shireman told U.S. Secretary of Education Arne Duncan when he was recruited that he could only hold the position until
now because his family was moving to Washington from California just for the 2009-2010 academic year, according to a
person familiar with his plans. He will leave his post at the end of June, the person said.
News of Shireman's departure was earlier reported by the Chronicle of Higher Education.
To contact the reporters on this story: Lu Wang in New York at lwanq8@bloomberg.net; Daniel Golden in Boston at
dlqolden@bloomberg.net.
282
From:
Sent:
To:
Cc:
Subject:
Attachments:
Dear Secretary Duncan,
Jennifer Webber Qwebber@ticas.org]
Tuesday, June 22, 2010 1:22PM
Duncan, Arne
Arsenault, Leigh; 'Ann.manheimer@ed.gov; Pauline Abernathy; Connie Myers
Update to 5/20 coalition letter regarding negotiated rulemaking
Neg_reg_coalition_support_letter_to_Duncan.pdf
Please find attached an update to the letter originally sent to you May 20 by Lauren Asher, and last updated June 15, on
behalf of a broad coalition supporting strong and effective regulation of career education programs. This version of the
letter includes an additional signer, the California Coalition for Civil Rights. There are no other changes. Thank you once
again for your initiative on this important issue.
Jennifer Webber
Email: jwebber@ticas.org
Tel: 415.608.6223
283
From:
Sent:
To:
Subject:
Attachments:
Rogers, Margot
Wednesday, April 21 , 201 o 10:00 AM
Miller, Tony
FW: Report on Gainful in Inside Higher Ed today
2010-04-21 Inside Higher Ed.doc
-----Original Message- - - - -
From: Georgia
Sent: April 2010 9:50AM
To: Haroldj Stevej Bobj Charliej Davidj
Dan
Cc: Elizabethj Margotj Martha
Subject: Report on Gainful in Inside Higher Ed today
FYI
http://www.insidehighered.com/news/201 0/04/21/gainfui#Comments
Going Ahead With Gainful Employment
April 21, 2010
WASHINGTON- A long recession and a wavering job market have brought for-profit higher education institutions
into the public eye as never before. Big advertising budgets have given them name recognition. Dramatic enrollment
growth (fueled by increasing amounts of federal financial aid) and assurances to students that a degree or certificate
is the path to a comfortable job in a specific field have brought them scrutiny.
Many newspapers, websites and TV networks have told the tale of programs at for-profit institutions that don't
prepare students for the jobs they've been all but promised --and plunge them into debt in the process. While the
anecdotes are often true, they're only part of the story; plenty of for-profit colleges (the institutions themselves prefer
the term "private secto( or "market funded") do prepare students for good jobs and don't sink them in a pool of post-
graduation debt.
Title IV of the Higher Education Act of 1965 requires all for -profit offerings other than those clearly designated as
"liberal arts," and non-degree vocational programs at nonprofit institutions, to show that they prepare students for
"gainful employment in a recognized occupation." If they don't, they' re not supposed to be eligible for federal financial
aid dollars.
No one, the U.S. Department of Education has contended, seems to have a satisfactory way of determining which
programs meet that standard. "It's illuminating for us that when we ask institutions how they' re complying with this
current law. we have not received adequate answers," says Bob Shireman, deputy undersecretary of education. "And
this is the law."
Through a process of negotiated rule making that began last year after passage of the Higher Education Opportunity
Act in 2008, the department has sought to develop a formulaic solution to the dilemma, in the form of regulations that
define "gainful employment" using data on incomes and debt loads, as well as completion, job placement and loan
repayment rates.
In essence, this is a crude mechanism to assess the quality and value of vocational programs. The "good" programs
that help students get jobs without saddling them with debt could continue to exist and deliver Pell Grants and
subsidized loans to their students. The "bad" programs-- the ones found to lead graduates to jobs they could've
gotten without the educational experience or that don't pay well enough for borrowers to repay their loans -would be
identified and put under closer scrutiny.
Representatives of the for-profit sector have aggressively fought such an approach, but most analyses so far suggest
that the proposed regulations are unlikely to be a sector killer. The department has acknowledged the need for
nonprofit and for-profit vocational programs, and has estimated that just 6 to 8 percent of programs that qualify for
Title IV under gainful employment would potentially need to change under the proposed rules.
In research that's been circulated but not yet publicly released, the Career College Association, the trade group that
represents for-profit colleges and universities, has less-conservatively estimated that close to 20 percent of career
college programs and a third of the colleges' students would be affected. In what the department would consider a
positive outcome, some of the "bad" programs would shut down. while others would lower prices or work to improve
their completion and job placement rates.
Though some observers have suggested that rewriting federal financial aid policy would be a better way to address
these problems, the Obama administration's Education Department is seizing on the opportunity it has now, with
Democratic majorities in both houses of Congress, to effect change. The revision of the gainful employment rules
could be a once-in-an-administration (if not once-in-a-career) chance for Shireman- who has advocated for reform
and increased protections for borrowers since serving in the Clinton White House - and his staff to tackle what they
consider to be a major source of student debt.
Shireman himself does not put it that way. 'We have to do everything we can in the regulatory process, as well as in
the legislative process, to protect taxpayers and students, he says. "We have these regulatory opportunities so we
have to take them. "
He does acknowledge that he is unwilling to wait for the next renewal of the Higher Education Act, in 2013, when
lawmakers would be most likely to make major changes in the law. "We're not going to wait for a reauthorization to
ensure that federal funds are being used appropriately."
The department sent a version of the regulations to the White House Office of Management and Budget this month,
and, though it's still being revised, a final draft will be published by mid-June. Over the summer, there will be one last
chance for public input and, by Nov. 1, the regulations will be printed in the Federal Register, to go into effect on July
1, 2011 .
Defining Gainful Employment
The Education Department was slow to formulate a proposed definition of gainful employment. In November and
December, during the first two week-long rule making sessions, the discussion among negotiators focused on
whether the department had the statutory authority to establish a formulaic definition of gainful employment.
Many negotiators saw the department's suggestions - particularly one that sought to determine the value a credential
would add to a recent graduate's earning power, and to use that to determine an acceptable maximum tuition - as
price controls. The most vocal opponent was the lone negotiator representing for-profit institutions, Elaine Neely,
senior vice president of regulatory affairs at Kaplan Higher Education. In December, Neely said she was
"flabbergasted that (the department) would impose price controls when clearly Congress itself has not been able to
come to the decision to do that on higher education." By warning of a "slippery slope" toward price controls
throughout higher education, Neely was able to get many representatives of nonprofit institutions on board in
opposition to the proposal.
An idea that took up much less of the panel's time was the department's proposal to determine whether the starting
salary in the field for which a program prepared students was sufficient to pay the average annual debt obligation of
the program' s graduates. If the average debt load for a program's graduates was $9,000 on a 10-year loan with a 6.5
percent interest rate, students would have loan obligations of $1 ,250. With a debt-service-to-income ratio of 5
percent, the starting income in that field would have to be at least $25,000 to be considered "gainful employment."
By mid-January, as the department and negotiators prepared for the third and final round of rule making, this debt-
service ratio had become the department's preferred regulatory path. Based on a partial reading of a 2006 paper by
Sandy Baum, of the College Board, and Saul Schwartz, of Ontario's Carleton University, the department's ratio
became 8 percent. (While Baum and Schwartz' s paper discusses 8 percent as a generally accepted standard, most
likely derived from mortgage underwriting standards, the authors suggest that a ratio as high as 18 percent could be
appropriate for single people earning $150,000 annually.)
Under the proposal made in January, which remains the only complete definition made public by the department,
vocational programs would be eligible for Title IV funds if their graduates' median annual payments on a 1 0-year loan
were no more than 8 percent of the Bureau of Labor Statistics' 25th percentile of annual earnings for people in
occupations for which a given program prepared students.
Programs that exceed 8 percent could still be eligible for Title IV funds by producing what the department considers
good outcomes: by showing that its graduates' annual earnings are higher than the BLS's 25th percentile and keep
the debt-income ratio below 8 percent; by documenting that students have at least a 75 percent repayment rate on
federal loans; or by demonstrating a program completion rate of at least 70 percent and an in-field employment rate
of at least 70 percent.
In the third round of negotiations, debate was contentious and without resolution. Terry W. Hartle, senior vice
president for government and public affairs at the American Council on Education, said he worried about cost, privacy
and the potential for " unintended consequences." A former Bush administration Education Department official , Todd
Jones, president and general counsel of the Association of Independent Colleges and Universities of Ohio, said he
saw the proposal as ripe for lawsuits.
Department officials were unwilling to reconsider the approach entirely, though they were open to constructive
feedback. "We put things on the table partly because we think they're a good idea and partly to get input," Shireman
says.
The department started with its most extreme - but politically viable idea -- and was ready to negotiate, but many
negotiators seemed too intent on persuading officials to obliterate the proposals to make good, constructive
suggestions.
And, since the third round of negotiations ended in late January, the department has continued to discuss the
proposals with stakeholders and to get feedback. "We recognize that some people felt -even we felt- that there was
not enough discussion at negotiated rule making for whatever reasons," Shireman says. "So we continue to hear from
associations and institutions, getting input from them that continues to be helpful, to continue to hear what
suggestions they have about what the term gainful employment should mean."
Who Would Be Hit
In broad terms, the Department of Education' s goal is to determi ne which programs really are preparing students for
gainful employment and not sinking graduates into chasms of debt.
"There's a tremendous number of students graduating with incredibly high levels of debt, " says Rich Williams, higher
education associate at the U.S. Public Interest Research Group, who represented students on the negotiated rule
making panel. "And in some cases they're unable to enter the fields they studied at the levels they thought they'd be
qualified for."
Pauline Abernathy, vice president of the Institute for College Access and Success, anticipates the regulations "will
lead to programs that are currently leaving students in terrible debt either having to change the quality of their
programs or their cost structure." Before Shireman joined the Obama administration, he was TICAS's president.
But rt's unclear whether the department's proposed rules would really weed out those programs and would do so in a
way that kept all good programs up and running. '' I don't think you can draw a line that separates the wheat from the
chaff perfectly," says Mark Kantrowitz, publisher of Finaid.org. "The choices are tough -you either throw out the baby
with the bathwater or, because you want to keep the baby no matter what, you' re going to get some bathwater too. I
think that's a reality that everyone needs to come to terms with."
When applied to the existing landscape of vocational programs, the department's approach would seem to favor
programs at public institutions over private ones (either for-profit or nonprofit), those that required fewer credits
earned over more credits, and those in higher-paid fields like nursing and information technology over lower-paid
careers in the arts.
Because the rules would apply only to certificate programs at community colleges, state universities and private,
nonprofit institutions, they' re less likely to force any real change at non profits. Tuition on these programs at public
instit utions is so low that it's relatively rare for students to take out loans. If they do, they' re likely to be small. Even at
private nonprofits, where tuition is likely to be of a similar magnitude as at for-profit colleges, the fact that the rules
apply only to non-degree programs will keep many programs out of regulatory reach.
Shireman and other department officials have insisted in many instances that the department is not "out to get" for-
profit colleges and that it is not the department's intention to regulate the sector out of existence. "We have made it
quite clear that we are interested in improvement and outcomes all across the spectrum, all across the sectors," he
says.
Nonetheless, it seems clear that the gainful employment regulations will force the most change on for-profit
institutions, which will have to choose between lowering tuition, improving student outcomes or shutting down
programs that don't align with the rules. In the short run, at least, all of these options would hurt the institutions'
bottom lines.
Even if some programs end, says Abernathy, of TICAS, "there will be plenty of other for-profit programs that will be
very eager and capable of being able to meet that need, but that do so in a way where students and taxpayers are
better off."
For a field in which a for-profit institution offers multiple certificate and degree options, the ones that cost the least-
and often require the fewest credits - are the ones least likely to be regulated out of existence. If an institution offered
certificates, associate degrees and bachelor's degrees in, for example, culinary arts, t hat all led to the same Labor
Department-classified jobs and the same Bureau of Labor Statistics-reported 25th percentile of income, it's logical
that the 8 percent rule would make the preferred outcome a certificate and not a bachelor's degree.
Kantrowitz, of Finaid.org, says that though the department's existing proposals "really didn't consider the impact on
bachelor's and graduate degrees," he thinks the next draft of regulations will because the department hasn't shown
any indication of wanting to discourage students from pursuing longer programs. "Take an associate's degree versus
a bachelor's degree. Students are in school twice as long, paying twice the tuition, but they don't have twice the
income."
Though programs would have the option of collecting their own salary data rather than relying on the BLS numbers,
institutions often find it difficult to collect this information. As of now, observers say, few institutions have a
comprehensive view of their graduates' incomes.
Kantrowitz and others have suggested that the department use different labor data - in his own calculations,
Kantrowitz used federal Census data, which details age group and educational attainment but not field of employment
-- but the ideal data set does not exist.
Apollo Group, which owns the University of Phoenix and other institutions, said in a March 30 earnings call that it has
begun the process of analyzing its programs. B u ~ "given the number and range of disciplines offered by our
universities as well as the uncertainty regarding the implementation process of the draft proposal , our analysis is both
extensive and complex."
In mid-March, analysts at Morgan Stanley said they thought that Education Management Corp. (which runs the Art
Institutes and Argosy University, among others) and ITT Educational Services would need to undergo the most
widespread change to meet the regulations because of high tuition rates and, at Education Management, an
enrollment that leans heavily toward low-paying arts fields.
Two companies that would have very few endangered programs, according to Morgan Stanley: American Public
Education, Inc., which focuses on serving members of the military and public servants, who are less likely to take out
student loans; and Capella Education Company, whose programs have very low loan default rates and would be able
to qualify for Title IV funds under one of the alternative definitions of gainful employment.
Gregory W. Thom, Capella's vice president of government affairs and general counsel, agrees that his company
would probably have to make few changes to abide by the gainful employment regulation. "Capella is viewed by folks
within the department as a high quality institution, " he says. "We have a degree of comfort that however this plays
out, Capella would be fine and Capella would be in good shape. "
And yet, until the final regulations go into place and the institution can collect and calculate all the appropriate data,
Capella can't be sure that it's out of the woods. "There are so many moving parts, Thom says. "It's premature to
engage in speculation on how this is going to play out ... at Capella on a program-by-program basis."
A leader at another for-profit institution with low cohort default rates said he also thought his programs would meet at
least one of the gainful employment rules, but still worried that they might not. Insufficient data and a still -unclear
sense of the precise regulations the department wil l decide upon has left him feeling a bit uneasy about the
outcomes.
The Feedback
At every hint that the Department of Education is backing down from proposed regulations that would force some
programs offered at for-profit colleges to lower their prices, improve their outcomes or shut down, Wall Street analysts
and the for-profit institutions breathe a sigh of relief.
When Secretary of Education Ame Duncan testified before the House of Representatives' Education and Labor
Committee on March 3, and was questioned on the gainful employment regulations, his comments that the
department was "by no means wedded to any one direction" and "[didn't] want to be overly heavy-handed" were
perceived by for-profit boosters as signs that the department was open to scaling back the regulations.
Before and since, the Career College Association and lobbyists for for-profit institutions have pounded the halls of
Congress trying to get members to put pressure on the department. Some members of the Congressional Black
Caucus sent a letter to Duncan charging that the rules are discriminatory because for-profit institutions
disproportionately serve minority students. A bipartisan group of 18 House members wrote to Duncan asking that he
pull the plug on the department's approach altogether.
Last week, when a report from Credit Suisse cited someone "close" to the Office of Management and Budget as
saying that the department had decided to seemingly soften one of the alternative methods of qualifying for Title IV,
higher education stocks soared as the rumor spread. The source told the bank that the option to demonstrate a
program completion rate of at least 70 percent and an in-field employment rate of at least 70 percent had become a
50 percent completion rate and a 70 percent employment rate.
Though it is one of the possibilities the department is considering, the switch to a 50 percent completion rate is not
final. Officials submitted a draft to the OMS to begin the process leading to the publication of rules and the public
comment process, but are said to be continuing to analyze data and listen to feedback.
The for-profit institutions tout these small bits of news and others as indications that the department may be backing
away from its tough-line approach, but it is unclear whether any perceived motion on the department's part will
actually materialize as dramatic changes to the next draft of regulations.
Teddy Downey, of Washington Research Group, says he doubts the department would take any steps that would
dramatically lessen the reach of the regulations. In a e-mail message last week after the Credit Suisse rumor
circulated, he said he anticipates "a very low chance that this change will amount to a truly significant loophole."
In an interview, he went further. "I don't think the department would do anything it doesn't think will have the desired
effect. I think they have the data to support whatever they choose to do."
Kantrowitz, of Finaid.org, is skeptical of whether the department has the data, but he agrees that the department isn't
backing down on gainful employment. "They're not going to do anything that doesn't have teeth in it," he says. "It may
just be some kind of educated guess, but it's going to have teeth."
- Jennifer Epstein
Comments on Going Ahead With Gainful Employment
Schools do not give students their diplomas
Posted by LL , Concerned taxypayer on April21 , 2010 at 9:00am EDT
These schools are a waste of taxpayer dollars! Schools like these are not giving students their
diplomas. It is ridiculous and I applaud the Dept of Ed for finally taking a stand to regulate these institutions.
This is another example of private profits, public loss.
Unintended consequences
Posted by Concerned Educator on April21, 2010 at 9:30am EDT
The proposed regulations will decrease the likelihood that low-income, minority and difficult-to-serve
students will encounter general education coursework. (Accredited degree programs must have at least 33%
gen ed coursework. Certificate programs have no such requirement.) Is that a desirable outcome?
Does the Department intend to engage in social engineering, whereby the less well -to-do cannot pursue
careers in the arts? Selective institutions offer a limited number of seats. At least some passionate young
artists who lack the support and specialized knowledge required to attain one of those seats will be left out I
can think of few outcomes more depressing than eliminating support for young artists. Is starting salary the
most important measurement of success in artistic fields?
At my for-profit coll ege, we struggle mightily to help students who have been previously unsuccessful in
educational endeavors. It's difficult work, and not everyone makes it, but for the ones who do it's very
satisfying on graduation day - t o us, but apparently not to the Department. The proposed regulations
devalue the work of those of us who take on the tough cases.
I have a dream of opening a high-quality institution of higher education in the inner city. The proposed
regulations make unacceptably risky. Is that what we want? People say that community colleges already do
that. In my state the graduation rate at community colleges is 11%, up from 9% last year. Isn't it cynical to
suggest that students should simply accept that?
Some of our programs result in careers that don't yield high salaries until a few years after graduation. Do
we really want to get rid of those programs?
Few baccalaureate degree programs at non-profit institutions would meet the 8% standard. Why is that okay
for those graduates to have more debt but not for ours?
What is this really about?
Posted by NG on April 21, 2010 at 9:30am EDT
For profits have adapted and quickly changed majors/programs that are deemed to provide gainful
employement.
These schools( using the term loosely)do a better job of providing training to their communities then most
community colleges.
They don't have the heavy burden of unions and byrocracy hence they're flexible and can change their
programs they offer quickly to meet demand.
Because of the aging US population and its move away from manufacturing most of the new programs are
now in Healthcare. There is a shortage of healthcare professionals and these guys are filling a need by
providing a product thats needed in the marketplace today.
This intiative will do nothing t o change the landscape of Higher Ed.
From:
Sent:
To:
Cc:
Subject:
Rogers, Margot
Wednesday, June 17, 2009 9:41AM
Miller, Tony; Private - Duncan, Arne; 'Martha Kanter'; Rose, Charlie; Cunningham, Peter
Hamilton, Justin; Shireman, Bob
Article about For Profit Fervor
Thought everyone would be interested in this; I think it is worth your taking 5 minutes to read it. I have pasted below
for your convenience.
http://www.insidehighered.com/news/2009/06/16/cca
Ferment Over For-Profit Colleges
June 16, 2009
ORLANDO- The last few weeks have witnessed a truly remarkable discussion in Washington and on Wall Street surrounding for-profit
higher education.
Reports (and sometimes rumors) about the prospect of tougher federal regulation of career colleges by the Obama administration have
made the rounds among Wall Street analysts, driving the stocks of the largest, publicly traded companies in the sector down by more
than 20 percent and prompting the U.S. Education Department two weeks ago to hold unprecedented conference calls with investors
and analysts to try to reassure them that department officials did not have it in for for-profit colleges.
That step did not calm the markets, though, in large part, many observers of the for-profit market assert, because several "short sellers"
--investors who bet that the value of a certain stock or group of stocks will fall-- have been doing their best to promote uncertainty on
Wall Street. On Monday, a leading department official took another shot at it at the annual meeting here of the Career College
Association, which represents most of the country's for-profit institutions.
"I can stand here and tell you that I've been at the Department of Education for 30 years, and I have never heard any one of our policy
officials say, 'We've got to get that sector. Let's put it to the for-profits,'" said Dan Madzelan, who is the acting assistant secretary for
postsecondary education. "That is not how any of our policy officials operate. They're concerned about what's best for students and
taxpayers, and agnostic with respect to the kind of institution affected. They are not interested in singling out any one sector."
That language differed little from the words that Robert Shireman --the deputy under secretary for education and the person whose
alleged animus for for-profit higher education has been the primary bogeyman for those predicting the sector's downfall in recent weeks
-- used in last month's calls with investors.
"Our overall goal at the Department of Education in postsecondary education is to make sure that students -- potential students--
whether young or old, have access to college, they have the information they need to make good choices, and that they have good
quality postsecondary education that serves both them as students and taxpayers as well," Shireman said. "If that's not the case, if
there is not quality, we want to know about it and if we can, we want to do something about it. Whether that involves a public institution,
a nonprofit, a for-profit, a two-year, a four-year, a trade program, whatever type or sector of institution, we want to do all we can to make
sure that we good quality and get the degrees and certificates that we need in this country."
So why haven't department officials' repeated assertions that they aren't out to get for-profit colleges managed to reassure some
people in the sector? Do most career college officials believe that their institutions have a target sign on their back in the Obama
administration? And what does it say about for-profit higher education that the Education Department's leaders even care what Wall
Street analysts say?
Those are other questions were much discussed by at least some of those attending this week's Career College Association meeting,
though hardly by most people here. While the public conception of for-profit colleges is dominated today by the handful of national
companies whose campuses are found just off the highways in many American cities -- the University of Phoenix, DeVry, Kaplan
Higher Education, to name several -the vast majority of career colleges are still the mom-and-pop truck driving, beauty and,
increasingly, allied health schools that have been mainstays of many towns for decades. While those institutions, too, are subject to
Education Department regulation of higher education, they have little to no stake in what Wall Street analysts say or think about their
bigger cousins.
The publicly traded companies, however, have a great deal at stake in what the analysts and investors say, and in recent months, a
small number of them have been saying not-so-flattering things. Perhaps most prominent among them has been James Chanos, an
analyst at Kynikos Associates who, in several recent presentations at investor conferences and on television shows like James
Cramer's "Mad Money." has been comparing for-profit education companies to health care companies that make excessive profits by
feeding at the public trough (in the colleges' case, through the Pel! Grant and federal student loan programs).
Chanos's thesis, which has been embraced by several other analysts who follow the for-profit sector, is that the Obama administration
(unlike its predecessor) is preparing to crack down on such corporate behavior. (A PowerPoint presentation he gave at an investor
conference last month features an image of Obama in a cowboy hat under the tag line "There's a new sheriff in town.") Obama's chief
deputy in higher education in this line of argument is Shireman, and it was his appointment to the Education Department's leadership in
early February that started the Wall Street decline.
The biggest dust-up, though, came last month when the department announced that it would undertake a new round of negotiations
over possible changes to federal regulations governing policy areas, such as incentive compensation paid to student recruiters, that are
predominantly a factor among career colleges.
The announcement of the new regulatory review was made quietly (as is the norm) in the Federal Register, but after some analysts
cast the review as big trouble for the industry and others began bombarding the department with calls seeking clarification, Shireman
decided to hold the unprecedented conference calls.
But Shireman's insistence in the calls with for-profit investors and analysts that he would be an equal opportunity regulator was offset
for some Wall Street watchers by a Deutsche Bank analyst's report that, in a call the day before with officials of traditional nonprofit
colleges, he had talked about the department's desire to find "victims" who had been wronged by for-profit colleges that give incentives
to their student recruiters.
According to several accounts of the call with nonprofit college leaders, though, Shireman spoke of "victims and lawyers for those
victims" only in response to a question that used that phrase, saying that the department would seek to protect students who were
wronged by unscrupulous practices wherever they occurred.
Department officials have expressed increasing frustration that their assertions that they do not plan to single out for-profit colleges are
keep getting ignored or twisted in meaning. Experts on career colleges offer differing reasons why.
Some believe it's because the thesis just makes sense, given the backgrounds of the players and of the sector. Obama has made no
secret of his disgust with the larger corporate culture that contributed mightily to last fall's financial meltdown, and Shireman, as a
former Congressional and Clinton White House aide and as an advocate for low-i ncome students, has long fought for policies that
protect students from excessive debt and seek to ensure that they get a meaningful education.
While he has not been openly critical of for-profit colleges to any significant degree in the past, he can fairly be said to see himself as a
protector of the type of needy students that predominate at for-profit colleges, and to be simpatico with consumer protection groups that
see themselves as watchdogs of the for-profit sector, which went through a wrenching scandal in the late 1980s that flushed many bad
actors out of business.
Trace Urdan, who analyzes for-profit colleges for Signal Hi ll , describes this line of thinking about the career college sector as being a
microcosm of fears about the Obama administration's overall approach to corporate America. "It's as much about Wall Street's paranoia
about Obama as about the Education Department," he said. "The fear isn't about the details of incentive compensation. The fear is that
Shireman thinks that somehow Apollo is robbing students and taxpayers."
But other analysts and many leaders in the career college sector offer a more nefarious explanation for the drumbeat of assertions that
the department is gunning for for-profit colleges. They attribute the stream of analyst reports to "short sellers" (investors who buy and
sell stocks in patterns that reward them when the stocks tumble) who have been trying (unsuccessfully) for several years to drive down
the price of shares of the publicly traded higher education companies, which have generally outperformed the overall stock market for
more than a decade.
At a time when the enrollments of for-profit colleges are growing and the government is pouring billions more dollars into Pel! Grants
and other programs that aid the low-i ncome students who populate career coll eges, these investors are turning to "nonsense" li ke the
assertions about increased regulatory scrutiny to drive down the institutions' stocks, Harris N. Miller, president of the Career College
Association, said in an interview Monday after Madzelan's speech.
2
"I don't know how the department could be any clearer in its public statements" than it has been, Miller said. "To me you just have to
take them at their face."
"We've been working well with the department," said Arthur Keiser, president of Keiser Colleges, a Florida-based chain of colleges that
is privately held and therefore not subject to the recent stock swoon. "There's a lot of paranoia out here, but I think we' re all focused on
the same thing: making sure students succeed. They want that and we want that "
Jeffrey Volshteyn, a vice president at J.P. Morgan, is among the analysts who thinks that "people are just reading way too much into
this," and that the department will "enforce the rules just like it always has," for the for-profit colleges and all others.
Jeffrey Silber of BMO Capital Markets, who is among the longest-serving analysts of the career college sector, tends to agree with
Volshteyn that the department is not taking particular aim at for-profit colleges. But he also said that the uncertainty about the
department's agenda for rule making (an agenda that will take shape, in part, out of public hearings that begin this week) and the
general inclination toward regulation of a Democratic administration are likely to provide plenty of fodder for those who seek to keep for-
profit colleges - and their stocks - on the defensive.
"Could you see increased regulation" of for-profit colleges? he asked rhetorically. "Sure, though probably on the margins. But this thing
is not going to be resolved for months, and there's no telling what kind of noise will be generated in the meantime."
3
From:
Sent:
To:
Subject:
Shireman, Bob
Tuesday, May 11, 201 o 5:27 PM
Kanter, Martha; Dannenberg, Michael; Martin, Carmel; Gomez, Gabriella
RE: print from today's event
"even though a t ranscript of Mr. Shireman's remarks showed that he actually spoke more t emperately"
From: Kanter, Martha
Sent: Tuesday, May 11, 2010 4:47 PM
To: Shireman, Bob; Dannenberg, Michael; Martin, Carmel; Gomez, Gabriella
Subject: FW: print from today's event
From: Yale, Matt
Sent: Tuesday, May 11, 2010 4:22 PM
To: Kanter, Martha; Miller, Tony; Rogers, Margot; Cunningham, Peter; Duran, Maribel
Subject: print f rom today's event
May11,2010
Duncan Says For-Profit Colleges Are Important to Obama's 2020
Goal
By Andrea Fuller
Washington
Arne Duncan, the secretary of education, expressed support on Tuesday for the role that for-profit colleges play in
higher education at a policy forum here held by DeVry University.
For-profit institutions have come under fire recently for their low graduation rates and high levels of student debt. A
Frontline documentary last week focused on the for-profit sector, and a speech by Robert Shireman, a top
Education Department official, was initially reported as highly critical of for-profit colleges, even though a transcript
ofMr. Shireman's remarks showed that he actually spoke more temperately.
Mr. Duncan said on Tuesday in a luncheon speech at the forum that there are a "few bad apples" among actors in the
for-profit college sector, but he emphasized the "vital role" for-profit institutions play in job training.
Those colleges, he said, are critical to helping the nation achieve President Obama's goal of making the United St ates
the nation with the highest portion of college graduates by 2020. Mr. Duncan also praised a partnership between
DeVry and Chicago high schools that allows students to receive both high-school and college credit while still in high
school .
4
Mr. Duncan's comments come at a time when for-profit college officials are anxiously awaiting the release of new
proposed federal rules aimed at them. A proposal that would tie college borrowing to future earnings has the sector
especially concerned.
The rule is not yet final, but the Education Department is considering putting a cap on loan payments at 8 percent of
graduates' expected earnings based on a 10-year repayment plan and earnings data from the Bureau of Labor
Statistics.
Supporters of for-profit colleges say the rule would basically force them to shut down educational programs and as a
consequence leave hundreds of thousands of students without classes.
Matthew A. Yale
Deputy Chief of Staff
U.S. Department of Education
Washington, D.C.
5
From:
Sent:
To:
Subject:
Shireman, Bob
Friday, April30, 2010 10:27 AM
Hamilton, Justin; Cunningham, Peter
FW: (BN) Homeless Dropouts From High School Lured by For-Profit
Homeless Dropouts From High School Lured by For-Profit Colleges 2010-04-30 04:01:00.4 GMT
By Daniel Golden
April 30 (Bloomberg) -- Benson Rollins wants a college degree. The unemployed high
school dropout who attends Alcoholics Anonymous and has been homeless for 10 months is being
courted by the University of Phoenix. Two of its recruiters got themselves invited to a
Cleveland shelter last October and pitched the advantages of going to the country's largest
for-profit college to 70 destitute men.
Their visit spurred the 23-year-old Rollins to fill out an online form expressing
interest. Phoenix salespeople then barraged him with phone calls and e-mails, urging a tour
of its Cleveland campus. ((If higher education is important to you for professional growth,
and to achieve your academic goals, why wait any longer? Classes start soon and space is
limited," one Phoenix employee e-mailed him on April 15. ((I'll be happy to walk you through
the entire application process."
Rollins's experience is increasingly common. The boom in for-profit education, driven by
a political consensus that all Americans need more than a high school diploma, has
intensified efforts to recruit the homeless, Bloomberg Businessweek magazine reports in its
May 3 issue. Such disadvantaged students are desirable because they qualify for federal
grants and loans, which are largely responsible for the prosperity of for-profit colleges.
Federal aid to students at for-profit colleges jumped to $26.5 billion in 2009 from $4.6
billion in 2000. Publicly traded higher education companies derive three-fourths of their
revenue from federal funds, with Phoenix at 86 percent, up from just 48 percent in 2001 and
approaching the 90 percent limit set by federal law.
Biweekly Stipend
The privately held Drake College of Business, which trains people to be medical and
dental assistants, relied on taxpayers for 87 percent of its revenue in 2007. Almost 5
percent of the student body at its Newark, New Jersey, branch is homeless, says Jean Aoun,
director of admissions and student services there.
Late in 2008, it began offering a $350 biweekly stipend to students who show up for 80
percent of classes and maintain a uc" average.
((It's basically known in the community: If you're homeless, and you need some money, go
to Drake," says Carmella Hutson, a case manager at the Goodwill Rescue Mission in Newark,
where about 20 clients have enrolled at Drake in the past two years. ((It would put money in
my pocket, help me buy a car,"
adds Jerome Nickens, 45, who lived at the mission when he talked to a Drake representative
but decided not to enroll.
Formal Investigation
After Bloomberg Businessweek called the Accrediting Council for Independent Colleges &
Schools to inquire about the stipends, the council opened an investigation into the college's
recruitment practices. The inquiry could lead to revoking Drake's accreditation, leaving it
ineligible for federal aid.
Chancellor University in Cleveland, which counts Jack Welch as an investor and features
a weekly video for students by the former General Electric Co. chief executive, explicitly
focused recruiting efforts on local shelters after it realized that Phoenix, owned by Apollo
6
Group Inc.J was doing so. Chancellor has stopped pursuing the homelessJ and Phoenix says any
recruiting by its employees in Cleveland shelters was unauthorized. PhoenixJs business code
prohibits recruiting at sheltersJ and any employee violating the ban could face terminationJ
Apollo says.
Phoenix wants to ensure that ((only students who have a reasonable chance to succeed
enroll in our programsJ" Apollo spokesman Manny Rivera said in an e-mail.
Welfare Population
Other schools see nothing wrong with reaching out to the disadvantaged. rcwe donJt
exclusively target the homelessJ"
says Ziad FadelJ chief executive of DrakeJ which also sends recruiters to welfare and
employment agencies. uwe are in a community that is low-income and happens to have a lot of
people on welfare."
The every-other- Friday payment encourages Drake students to stay in school and graduateJ
he says. The stipendJ which about three-fourths of DrakeJs 1J200 students receiveJ is not ((a
gimmick to just get students in the front doorJ'' Fadel says. He adds that a sample analysis
of 30 graduates placed by DrakeJs career services office found ((some very substantial
improvements in income."
While many caseworkers for the homeless are gratified by the attentionJ some see only
exploitation. The companies ((are preying upon people who are already vulnerable and canJt
make it through a universityJ" says Sara CohenJ a case manager at Shelter Now in MeridenJ
Conn. ((ItJs evil."
The current state of for -profit education has an element of deja vu. Twenty years ago
the sector had grown wild and unrulyJ as fly-by-night trade schools siphoned off students
from welfare and unemployment linesJ ostensibly to train them as truck drivers or
hairdressers. Often these enterprises provided little or no schooling; their aim was the
federal student aid. Default rates on student loans skyrocketed to 22 percent before Congress
enacted tough regulations in 1992. Among them were limits on default rates for individual
colleges as well as a cap on the percentage of their revenue that they could receive from the
government . The schools were also forbidden to pay recruiters based on how many students they
enrolled.
The reforms injected discipline into the industry and brought down default rates. ThenJ
a decade laterJ the Bush administration relaxed the ban on incentive compensation for
recruitersJ opening the door for the aggressive wooing of the homeless.
reTargeting vulnerable populations who are not likely to benefit is one example of
overzealous recruiting that can be driven by paying based on enrollment numbersJ" says Robert
ShiremanJ Deputy Under Secretary of the U.S. Education DepartmentJ which is pushing to
tighten the rules.
Unleashing Potential
The Bush Administration also sought to unleash online educationJs potential. Phoenix now
boasts 458J600 studentsJ with more than 200J000 in its two-year online program. Enrollment in
for-profit colleges grew to 1.8 million in 2008 from 673J000 in 2000. Revenue rose to an
estimated $29.2 billion this year from
$9 billion in 2000J says Jeffrey SilberJ an analyst for BMO Capital Markets in New York.
Operating margins averaged 21 percent in 2009; schools typically charge $10J000 to $20J000 a
yearJ well above comparable programs at community colleges.
The industry is now fully mainstream. Goldman Sachs Group Inc. owns 38 percent of the
for-profit Education Management Corp. in PittsburghJ which has 136J000 students in programs
ranging from fashion to culinary artsJ and former President Bill Clinton took a position as
honorary chancellor of Laureate International UniversitiesJ owned by Baltimore- based Laureate
Education Inc. Investors are flocking to the industryJ drawn by the stability of government
7
funding and the profit potential of online classes. But some of the unsavory practices that
spurred Congress to act are springing back to lifeJ with a new wrinkle or two.
Homeless Circuit
In ClevelandJ Chancellor and Phoenix were both hitting the homeless shelters last year.
Byron ThompsonJ who joined Phoenix in 2009 as a recruiterJ soon made presentations at Y
HavenJ Salvation Army Harbor Light and Transitional HousingJ all of which serve the cityJs
homeless.
ThompsonJ 29J says the recruiting served a social purpose:
"I feel the homeless are a real population that canJt be ignored. Borrowing by the homeless
to pay tuition "is no different from a middle-class student who has to take out a loanJ he
says. He also hoped to boost his pay. "The month I signed up two or three women from
Transitional Housing was a good monthJ he admits. (Phoenix recruiters in Cleveland had a
quota of five students a monthJ according to a former employee.)
Legal Settlement
ThompsonJ who left Phoenix in JanuaryJ acknowledges that his bosses didnJt endorse his
efforts to recruit the homeless.
Apollo Group agreed last December to pay $78.5 million to settle a federal lawsuit in
California alleging that compensation for Phoenix recruiters violated restrictions on
incentive pay. The companyJ which admitted no wrongdoingJ says itJs changing its compensation
model.
While Thompson says he was "welcomed with open arms at the sheltersJ some staff members
were wary. "The question in my mind about Phoenix wasJ cwhy are they doing this?J says Bruce
ShagovacJ a counselor at Y Haven. "ThereJs got to be some payoff for them.
One homeless woman whom Thompson steered to Phoenix was Marisol Lugo. Lugo ran away from
her Chicago home at age 12J became a heroin addictJ and lived on the streets for 22 yearsJ
eating out of restaurant trash bins and sleeping in parks and abandoned cars. After detoxJ
she moved in 2008 to Transitional HousingJ obtained a high school equivalency degreeJ and got
to know Thompson. "He gave me wonderful words of encouragementJ
says Lugo.
With federal grants and loans covering the $10J000-plus annual tuitionJ she began
pursuing a two -year business degree online at Phoenix last August. She soon ran into academic
difficultiesJ failing a course in critical thinking.
Retaining Information
"SometimesJ having used so much drugsJ I have trouble retaining informationJ says LugoJ
who now has her own apartment and a maintenance job at the shelter. According to PhoenixJ she
left the school in November. She says she is still registered and there is a payment dispute.
PhoenixJs forays into shelters were noted by a new Cleveland rival. In 2008J investors
bought nonprofit Myers UniversityJ which was under court receivershipJ and renamed it
Chancellor. A year later Welch acquired a stake in it; the university named its new masterJs
degree program in business administration after himJ and Welch helped develop the curriculum.
At a faculty function last AugustJ Darius NavranJ dean of ChancellorJs School of
Professional StudiesJ sought out Jeffrey Perkins Jr.J an adjunct professor of public
administrationJ and asked how Chancellor could boost its enrollment of about 400.
Nontraditional Students
"If we donJt tap into that populationJ Phoenix willJ
Perkins says he told NavranJ meaning the homeless. The dean agreed.
ChancellorJs small classes and low student-to-faculty ratio are suited to nontraditional
students such as the homelessJ Perkins says. He e-mailed managers of Cleveland social service
agencies in SeptemberJ inviting them to a lunch at Chancellor to "discuss our new plans to
8
recruit the economically disadvantaged and at - risk groups. Many of them are targeted for on-
site recruitment at local transitional housing, halfway houses, and other human service
facilities.
Sixteen human services managers showed up for the lunch.
Two days later, in a memo to Navran, Perkins predicted that the program would produce rca
minimum of at least 19 enrollees by spring term.
cHeavy-Handed'
In the ensuing weeks, Perkins and other Chancellor officials gave presentations at a
dozen social service programs.
Their pitch was "very heavy-handed, says Phillip Hines, housing coordinator for the
Community Women's Shelter. "It was beating the drum, eGo to Chancellor. This is what we
offer.
Financial aid, financial aid, financial aid.'n
Afterward, Hines says, Chancellor hounded him with phone calls and e-mails to ((get these
women rolling. Chancellor's initiative reaped only one or two students and was discontinued.
It "had all the best intentions, CEO Bob Barker said in an e- mail, "but the time and effort
generated very little interest.
In one view, the rise of for - profit colleges represents a laudable merger of public
interest and the private sector. With public colleges beset by budget cuts, for-profit
colleges offer an opportunity for people who are down and out to get ahead.
Students with no assets or collateral can tap federal grants and loans on the theory that
degrees will lead to well-paying jobs that enable borrowers to repay.
Tuition Hikes
The trouble is the cost. Education companies charge high prices that require students to
take on debt. Chancellor charges $9,759 a year -- about four times the $2,499 tab at nearby
Cuyahoga Community College. Poor students can pay Cuyahoga's tuition with federal grants and
don't have to take out loans.
Student advisers from Cuyahoga make the rounds at Cleveland area shelters, helping the
homeless choose colleges and fill out applications.
And for-profit tuitions are rising fast. Drake hiked its tuition from $4,999 in 2997-
2998 to $15,799 this year, which Fadel attributes to new equipment and additional staff.
Borrowers who earned bachelor's degrees from for-profit colleges in 2997-2998 had a median
debt of $32,653, well above the
$22,375 and $17,799 for graduates of four -year private nonprofit and public colleges,
respectively.
Such burdens can be difficult for homeless people who are more likely to suffer from
mental illness and substance abuse than the general population. Bad credit doesn't go away
easily.
In the Cleveland shelters, you can still find people with trade school debts from 29 years
ago. Those who don't repay their student loans may forfeit their chances for public housing
and are also ineligible for federal financial aid to return to college.
Default Consequences
((If the homeless have a bad student loan, they can't find a place to live, they can't go
back to school, and in this economy there's not a lot of work,n said Ardretta Jones, a case
manager at Tacoma Rescue Mission in Tacoma, Washington, "That leaves a person with no
options.
Because they don't have to repay their educational loans until they leave school, some
homeless students spend beyond their means. Kim Rose, a recovering crack cocaine addict and
ex- offender in Raleigh, North Carolina, began pursuing an online bachelor's degree in
business last November at Capella Education Co.'s Capella University, based in Minneapolis.
At the time she was staying in a drug-free program with Internet access.
9
Big Splurge
Rose, 38, receives almost $4,000 each academic quarter in federal grants and loans for
tuition and living expenses. She splurged last Christmas, spending $700 of her financial aid
on presents for her seven-year-old son, who has lived with his grandmother. I got him
everything he wanted," Rose said in a telephone interview. Games, toys. He,s a guitar freak,
I got him a guitar. To make up for me not being there."
In February, Rose moved into a shelter where the only computer was broken. As a result,
she has struggled to keep up, dropping an English composition course. Rose isn,t typical of
Capella students, most of whom are midcareer professionals seeking graduate degrees, says
university spokeswoman Irene
Silber: we would not intentionally recruit someone who is in a life crisis, much less one as
significant as homelessness."
Given the troubled pasts of some homeless students, even a college education hardly
assures a well-paying job. Brenda Torchia, another recovering crack cocaine addict in Raleigh
who has served several prison terms for drug offenses, was in a shelter and looking online
for work when she saw an ad that asked if she wanted to further her education. She answered
yes and was directed to the website of a for - profit school called ECPI College of Technology
based in Virginia Beach, Virginia.
Placement Test
Torchia applied, passed a placement test, and started ECPI,s medical administration
program on March 1. The 40-year- old mother of four is borrowing about half of the $23,000
tab from the federal government, with grants and scholarships paying the rest. ECPI officials
are aware of her background and guarantee me a job in the field," Torchia says. My school
is very, very supportive of me. I guess God opened up their hearts to receive me for whom I
am."
Torchia,s history would be a red flag for health-care employers because hospitals and
clinics have drugs on site, says Susan Eget, communications director of the American Academy
of Medical Administrators. While ECPI doesn,t promise jobs, President Mark Dreyfus says,
medical administration offers Torchia,s best chance because not all employers check
backgrounds and she could process records in a back office where drugs aren,t accessible.
In the end, Benson Rollins didn,t succumb to Phoenix,s hard sell. He is taking a class
for his high school equivalency degree and hopes to study law enforcement in college. For
now, he would like a job so he can pay child support for his 1-year- old daughter, whom he
rarely sees. The Phoenix recruiters, he says, failed to mention a critical point: He would
have to take out a government loan at 5 percent to 7 percent interest to pay the $10,000-plus
annual tuition. I,m in a homeless shelter, and money is hard to come by," Rollins says.
It,s not worth going to school to end up in debt."
For Related News and Information:
Stories about education: NI EDU <GO>
U.S. colleges and universities: USUV <GO> Education organizations: EDOR <GO> Stories about
the Department of Education:
NI EDN <GO>
--With assistance from Marybeth Sandell in Stockholm and Rodney Yap in Los Angeles. Editors:
Robin D. Schatz, Hugo Lindgren
To contact the reporter on this story:
Daniel Golden in Boston at +1 - 617-210-4610 or dlgolden@bloomberg.net.
To contact the editor responsible for this story:
Jonathan Kaufman at +1 -617-210-4638 or Jkaufman17@bloomberg.net.
10
From: Shireman, Bob
Sent:
To:
Sunday, December 20, 2009 5:59 PM
Kanter, Martha
Subject: Fw: my post on t he yesterday's action by IG
Congrats on the snowman!
Here's more news. We are stuck on the tarmac at DCA. ..
From: Pauline Abernathy <pabernathy@ticas.org>
To: Steve Burd <Burd@newamerica.net>; Shireman, Bob; dloonin@nclc.org <dloonin@nclc.org>;
..... -.. ...... who.eo . ov> Lauren Asher <LAsher@ticas.org>; Luke Klipp
< lklipp@ticas.org > help.senate.gov @help.senate.gov>; nassirianb@aacrao.org
<nassirianb@aacrao.org>; Little, Bethany (HELP Committee) @help.senate.gov>
Sent: Sat Dec 19 18:53:14 2009
Subject: RE: my post on the yesterday's action by IG
FYI Below is Bloomberg news' take, including the market reaction. I've also been meaning to share
Kevin Carey's recent piece on accreditation, which use as a case study the tragic story of it taking
decades for accreditors to shut down Southeastern University in DC earlier this year (at which time it
had only six full-t ime faculty members for over 30 academic programs).
http://www. aei. org/doclib/ Accreditation%20-%20Kevin%20Carey. pdf
Career Education Falls Most Since 2006 After U.S.
Finds 'Issue'
Peterson Molly Peterson Fri Dec 18, 7:58am ET
Dec. 18 (Bloomberg) -- Career Education Corp. lost the most since 2006 in New York trading yesterday after investigators for the
U.S. Education Department said accrediting one of its universities wasn' t in the "best interest of students."
A regional certifying board gave fuU accreditation to Career Education' s American InterContinental University after finding "issues"
concerning the school' s "assignment of credit hours," Wanda Scott an assistant inspector general at the Education Department, wrote
in a letter posted yesterday on the government's Web site. Career Education' s shares led declines among for-profit school with its 19
percent phmge.
"We continue to worry that regulatory changes. more oversight and rising student loan default rates could eventuaUy hurt for-profi t
education sector enrollment/margin prospects significantly," Kelly Flynn, an analyst at Credit Suisse Group AG, wrote in a note sent
to clients yesterday. Scott' s letter suggests the inspector general is " looking to pressu.re accreditors to apply more rigorous quality
control standards."
Career Education. based in Hoffman Estates, illinois. lost $5.47 to $22.88 yesterday in Nasdaq Stock Market composite trading,
falling for the first time in 10 days.
The inspector general's letter concerned accreditation by the Higher Learning Commission of the North Central Association of
CoUeges and Schools, one of eight regional accrediting organizations in the U.S.
Industry Slumps
The conunission. among the first agencies to certify online for-profit colleges. al so accredits universities run by Apollo Group h1c. ,
American Public Education Inc., Capella Education Co .. DeVey Inc. and Grand Canyon Education Inc., all of which fell in trading
yesterday. The com1nission evaluates more than 1.000 schools in 19 states.
Apollo slumped 5.1 percent yesterday to $57.38. American Public Education fell2.1 percent to $33.53. Capella retreated 2.1 percent
to $74.87. DeVey lost 3.9 percent to $56.67. Grand Canyon decreased 4.2 percent to $18.72.
Other for-profit schools also declined. Corintll.ian Colleges Inc. retreated 5.5 percent to $13.13. ITT Educational Services Inc. lost 5.5
percent to $90.53. Strayer Education Inc. decreased 2.5 percent to $213.61.
The letter from tl1e Education Department's Office of the Inspector General redacted the full of tl1e questions about
American InterContinental Utl.iversity. wll.ich has campuses in four states and London as well as online classes, according to its Web
site.
11
'Unfounded' Allegation
The conunission' s May decision to accredit American InterContinental University was "entirely appropriate and fully supported by
tl1e facts," the university said yesterday in a statement. The inspector general's suggestion that the commission "failed to act diligently
in accrediting AIU is unfounded. "
Higher Learning Commission President Sylvia Manning said the inspector general "seriously Inischaracterized" the commission' s
action.
The organization is in compliance with federal ruJes, and the inspector general ' s "argument that we' re not is as weak as it gets."
Manning said inane-mailed statement. " We remain confident t11at a thorough and comprehensive examination of aiJ of the facts will
demonstrate t11at HLC acted properly and in accordance with the standards of our industry."
The conunission' s decision to fully accredit American InterContinentaJ University " is not in the best interest of students and calls into
question whether the accrediting decisions made by HLC should be relied upon by the Department of Education when assisting
students to obtain quality education" through federal financial aid programs, Scott said in t11e letter.
On Probation
American InterContinental had previously been certified by the Decatur, Georgia-based Southern Association of Colleges and
Schools.
That agency had placed the school on probation from 2005 to 2007 for academic and administrdtive shortcomings, including an
inadequate number of full-time professors, according to accreditation records.
American InterContinental resolved the association' s concerns, and the improvements it made during those two years have
strengthened the university, Career Education spokesman Jeff Leshay said in an e-mail cited Dec. 15 in a Bloomberg News report on
for-profit online colleges that are taking over higher education for the U.S. military. The companies are lured by a Defense
Department pledge of free schooling up to $4.500 a year for active members of the armed services.
American InterContinental moved its headquarters tlus year from Atlanta to t11e Clucago area and was accredited by tl1e Higher
Leanung Comnlission. The college relocated because its online operations are based there, Leshay said.
To contact t11e reporter on tllis story: Molly Peterson in Washington at mpeterson9@bloomberg.net .
From: Steve Burd [mailto:Burd@newamerica.net]
Sent: Friday, December 18, 2009 11:19 AM
To: Pauline Abernathy; bob.shireman@ed.gov; dloonin@nclc.org; @who.eop.gov; Lauren Asher; Luke
Klipp; @help.senate.gov; nassirianb@aacrao.org; Little, Bethany (HELP Committee)
Subject: my post on the yesterday's action by IG
A little different than I HE's take on it:
http://hiqheredwatch.newamerica.net/blogposts/2009/a shot across the bow from the ed depts iq-25412
From: Pauline Abernathy [mailto:pabernathy@ticas.org]
Sent: Friday, December 18, 2009 12:33 PM
To: bob.shireman@ed.gov; Steve Burd; dloonin@nclc.org; who.eop.gov; Lauren Asher; Luke Klipp;
~ ~ - ~ - . r - - . help.senate.gov; nassirianb@aacrao.org; Little, Bethany (HELP Committee)
Subject: Cummings Urges Hearings On For-Profit Colleges
Wasn' t sure if you saw this. Cummings is a senior member of the House's equivalent of the Senate
Permanent Subcmte on Investigations, which can hold hearings on any federal program or issue.
Towns chairs the full cmte.
FOR IMMEDIATE RELEASE
December 16, 2009
12
Cummings Urges Hearing On For-Profit College Malfeasance Investigation of colleges needed following
expose on University of Phoenix admissions allegedly lying to prospective students.
(Washington, DC) - Congressman Elijah E. Cummings (MD-7) authored a letter to Chairman Edolphus
Towns of the House Committee on Oversight and Government Reform and Chairman George Miller, of the
House Committee on Education and Labor, requesting that they hold hearings on the conduct of for-profit
educational institutions in the United States.
The request followed an expose published recently in ProPublica. The article indicated that the
University of Phoenix has set aside $80 million to settle a whistleblower lawsuit alleging improprieties by
recruiters and recruiting managers to draw students to the for-profit institution.
It was alleged that University of Phoenix admissions representatives lied to prospective students on
multiple issues, particularly regarding potential financial aid, transferring University of Phoenix credits,
and course availability. They also allegedly failed to acknowledge that students' stated interests were not
offered as courses of study.
"The pattern of behavior reported is disheartening at best, and infuriating at worst," said Cummings. "At a
time when our economy has afforded no luxuries to America's working classes, to find that for-profit
institutions allegedly drew students in with disingenuous claims and sometimes outright fabrication,
subjected them to onerous loans, and left them often unusable "credits", is inexcusable."
Cummings urges both Chairmen to, "review the articles and consider conducting hearings ... to shine a
light on the for-profit education industry and provide the American people with a clear picture of the true
costs of education."
Pauline Abernathy
Vice President
The Institute for College Access & Success
510.883.7303 www.ticas.org
13
From: Shireman, Bob
Sent:
To:
Monday, December 07, 2009 8:35PM
Wolff, Russell
Cc: Woodward, Jennifer
Subject: RE: article on the proposed elimination of the incentive comp safe harbors
Thanks for the encouragement.
From: Russell
Sent: December 2009 3:11 PM
To: Bob
Cc: Jennifer
Subject: FW: article on the proposed elimination of the incentive comp safe harbors
Bob:
You may well have seen this if it is excellent. we back
down-you certainly know where we/OGC stand on this issue.
Russ
http://higheredwatch.newamerica.net/blogmain
At Long Department of Education Puts the Interests of Students
First<http://higheredwatch.newamerica.net/blogposts/2009/at_long_last_the_department_of_educa
tion_takes_a_stand_to_safeguard_students- 24548>
* By
* Stephen Burd
December 2009
At Higher Ed we have repeatedly called on federal policymakers to strengthen
regulations
<http://higheredwatch.newamerica.net/blogs/education_policy/2007/11/easing_restrictions_trade
_schools> that aim to prevent unscrupulous for-profit colleges and trade schools from taking
advantage of financially needy students. Our have gone largely unheeded as
under both Republican and Democratic has continued to weaken these
rules<http://higheredwatch.newamerica.net/blogposts/2008/our_biggest_disappointments_with_fin
al_higher_ed_bill -19290>. At the same the Department of Education has long coddled the
for-profit higher education sector by continually turning a blind eye to widespread
allegations of fraud and abuse at some of the largest chains of proprietary schools.
But this the Obama administration let the sector in no uncertain that
those days are over.
On the Department of Education released preliminary regulatory proposals
<http://www.ed.gov/policy/highered/reg/hearulemaking/2009/integrity- session2-issues.pdf> that
aim to strengthen the integrity of the federal student aid programs and prevent unscrupulous
for-profit colleges and trade schools from taking advantage of the low-income and working-
cl ass students they tend to enroll . A top goal for the Obama administration is to stop these
institutions from deliberately recruiting and admitting unqualified who end up
taking on huge amounts of debt for training from which they are unlikely to benefit.
14
The most significant of these preliminary proposals is one that Higher Ed Watch has long
called for
<http://higheredwatch.newamerica.net/blogposts/2009/rewriting_the_rules_on_trade_schools_to_b
etter_safeguard_students-19140> -- reversing changes that the Bush administration made to the
Department of regulations enforcing a federal law barring colleges from
compensating recruiters based on their success in enrolling students.
As we have previously
reported<http://higheredwatch.newamerica.net/blogposts/2008/memo_to_education_department_rewr
Congress in 1992 added a provision to the Higher
Education Act prohibiting colleges from giving "any or other incentive
payment based directly or indirectly on success in securing enrollments" to admissions
officers. The ban on incentive compensation for college recruiters was included as part of a
broader effort by lawmakers to crack down on fly-by-night trade schools that had been set up
to reap profits from the Title IV federal student aid programs . With reports rampant that
trade schools were enrolling unqualified low-income individuals simply to get access to Title
IV policymakers believed it was important to bar postsecondary-education institutions
from paying recruiters on the basis of how many students they enrolled.
A decade top Education Department officials with ties to the for-profit sector
<http://chronicle.com/article/For-Profit-Colleges-Praise-a/13510> set out to weaken this
prohibition. In November the Department issued new regulations that created 12 usafe
harbors" <http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=2002_register&docid=02-
27627-filed> for colleges that wished to provide incentive payments to their admissions
employees. The agency took this action over the objections of a negotiated rulemaking panel
made up of college advocates for and consumer groups that had been
assembled to consider the rule changes and of the two main national organizations
representing college admissions officers (see
here<http://www.newamerica.net/files/AACRAO.pdf> and
here<http://www.newamerica.net/blog/files/NACAC%20Comments.pdf>).
Among other the revised rules allowed colleges to adjust the annual or hourly wages
of recruiters up to twice a as long as the adjustment was unot based solely on the
number of students admitted or awarded financial aid" [emphasis added];
and to provide commission-based recruiting for non-Title IV programs at institutions
participating in the federal student aid programs. These exemptions clearly violate both the
spirit and the letter of the law barring commission-based compensation. The net effect of
adding these safe harbors was to allow particularly for-profit to continue to
engage in the type of predatory recruiting practices that the law expressly prohibits.
In in the years since the ((safe harbors" were some of the largest publicly
traded for-profit higher education companies have been charged with engaging in misleading
recruiting and admission tactics <http://www.sfweekly.com/2007-06-06/news/burnt-chefs/> to
inflate their enrollment numbers. In for the Department reached a $9.8 million
settlement agreement with the University of Phoenix after the agency concluded that the
largest chain of proprietary schools had knowingly violated the incentive compensation ban.
The university is now in negotiations to settle <http://phx.corporate-
ir.net/phoenix.zhtml?c=79624&p=irol-newsArticle&ID=1347031&highlight=> a False Claims lawsuit
<http://www.kroplaw.com/uop/Second.Amended.Complaint.pdf> over allegations by former
recruiters who say they were compensated solely on their success in enrolling students.
Under the Department of new preliminary regulatory all 12 safe harbors
would be eliminated. In offering this the Education Department clearly
acknowledges that the regulatory changes that the former leaders made to the
incentive compensation ban run counter to the underlying law they are meant to enforce. ((The
Department believes that the specific language of the statute is and that the
elimination of all of the regulatory rsafe would best serve to effectuate
15
Congressional intentJ" agency officials wrote in a preamble to the preliminary draft
proposals.<http://www.ed.gov/policy/highered/reg/hearulemaking/2009/integrity-session2-
issues.pdf>
The DepartmentJs leaders also recognize that the rule changes -- particularly the one
allowing schools to provide incentive compensation to recruiters as long as the payments are
not based solely on their success in enrolling students - - have opened the door to fraud and
abuse. ((This csafe harborJ has led to allegations in which an institution concedes that its
compensation structure includes consideration of the number of enrolled studentsJ but avers
that it is not solely based upon such numbersJ" Department officials wrote. "In some of these
instancesJ the substantial weight of the evidence has suggested that the other factors
purportedly analyzed are not truly considered) and thatJ in realityJ the institution based
salaries exclusively upon the number of students enrolled."
The preliminary draft proposals now go to a negotiated rule-making panel
<http://www.ed.gov/policy/highered/reg/hearulemaking/2009/2009-2/team-one-negotiators.pdf>
that the Department has convened to help revise the regulations. The panelJ which is made up
of non-profit and for-profit college leadersJ student advocacy groupsJ and consumer watchdog
groupsJ will debate the agencyJs recommendations and suggest alternatives. If the group does
not reach consensus on the proposals - - which seems likely in this case
<http://www.insidehighered.com/news/2009/12/01/rules> --the Department will be free to
propose whatever it wishes.
Inevitably) some members of the negotiating panel will try to chip away at these proposals.
We would hopeJ and fully expectJ the Obama administration to stand tough -- because the
DepartmentJs new leaders recognize that their job is to safeguard students from unscrupulous
schools and protect the integrity of the student aid programsJ rather than continuing to
coddle the for-profit higher education industry.
16
From: Shireman, Bob
Sent:
To:
Friday, October 30, 2009 9:29AM
Smith, Zakiya
Subject: FW: Bloomberg story on U of P and Apollo
cl ips
From: Babyak, Stephanie
Sent: Friday, October 30, 2009 9:15AM
To: Shireman, Bob; Smith, Zakiya; Hamilton, Justi n
Cc: Glickman, Jane; Abrevaya, Sandra
Subject: Bloomberg story on U of P and Apollo
Apollo Weakness for Phoenix Revenues Spurring Short Sellers
Share Business Ex changeTwitterFacebookl Email 1 Print 1 A A A
By Daniel Golden
Oct. 30 (Bloomberg) -- The University of Phoenix, t he largest for- profi t college in t he U.S., may have set off on a
colli sion course with the federal government and investors in 2001. That's when its f ounder, John Sperl ing, urged
executives at his 80th bi rthday party t o boost enrollment f ivefold to half a million students, a goal it has al most
accomplished .
Now, Phoenix's parent, Apollo Group Inc. , is faci ng chall enges to its growth. The Securities and Exchange
Commission is investigating how Apoll o books revenue, the company said Oct. 27. Apollo recorded a charge of $80.5
milli on to cover costs it expects to pay to settle a lawsuit all egi ng that it violated federal student recruitment rules.
Profit in the quarter ended Aug. 31 fell 60 percent largely because of that charge.
Apollo shares, whi ch had more than doubled si nce 2006, may have difficulty rebounding f rom an 18 percent decline
the day after the SEC probe was disclosed. Phoenix may also face scrutiny as t he U.S. Education Department
exami nes for- profit universit ies that rely heavily on t axpayer-supported fi nancial aid. In fiscal 2009, Phoenix derived
86 percent of its $3.77 billion in revenue f rom federal grant s and loans, up from 48 percent i n 2001, and approachi ng
a federal li mit of 90 percent.
"The outlook for Apoll o next year has definitely become a lot tougher," said Robert Wetenhall, an analyst for RBC
Capital Markets i n New York, who lowered his rating on Apoll o shares on Oct. 28 to " underperform."
17
Axia's Growth
Phoenix's enrollment has almost doubled to 443,000 from 227,800 in fiscal 2004. About 90 percent of that growth has
come from a two-year online college called Axia, created in 2004. While Phoenix originally focused on bachelor's
degree and graduate degree programs for managers whose employers paid their tuition, Axia attracts students with
lower income and less academic preparation, the majority of whom depend on federal financial aid.
Apollo's revenue was $1.1 billion during the three months ended Aug. 31, five times the amount during the same
period in 2001. Net income rose almost threefold to $91.5 million.
The company's shares fell $1.91, or 3.2 percent, to $58.15 on Oct. 29 in New York Stock Exchange composite trading.
Before the close on Oct. 27, the stock had fallen 4.8 percent this year, compared with an 18 percent rise in the
Standard & Poor's 500 Index.
Investors have bet against Apollo, with 10 percent of its shares sold short as of Oct. 15, compared with 3.5 percent
for the New York Stock Exchange as a whole. Apollo's short interest has risen to 13.4 million shares from 6.6 million a
year ago.
Obama Administration
Phoenix now has to deal with the Obama administration, which is tightening review of for-profits and has close ties to
community colleges that compete with Axia. Driven in part by the shift to Axia, Phoenix's growing reliance on taxpayer
funds is drawing government attention. The average annual tuition is $10,350, $500 less than what federal aid will
pay for a low- income freshman under age 24. By comparison, annual tuition at public community colleges this year
averages $2,544, according to the College Board, the New York-based nonprofit organization that owns the SAT
college admissions test.
"It makes sense to examine institutions that rely heavily on federal aid," Robert Shireman, Deputy Undersecretary
of Education, said in an interview without singling out any university. "Certainly, one of the data points we look at for
triggering possible program reviews is a large growth in the use of federal financial aid."
Uncover Problems
Such a program review would be designed to uncover problems with financial management or signing up students
who are unqualified or aren't fully aware they're taking out loans, and may result in fines, suspensions or terminations
from eligibility for financial aid, Shireman said.
Students are reliant on aid because of the recession and rising college costs, said Sara Jones, an Apollo
spokeswoman. Phoenix expanded into online two-year degrees to continue its shift from a niche institution for degree
completion into a comprehensive university, not to obtain more financial aid dollars, she said. The 90 percent limit on
federal revenue, enacted in 1992, penalizes schools for having low-income students, said Gregory Cappelli, Apollo
Co-Chief Executive Officer.
"We want to help people," Cappelli said in a Sept. 9 interview at the company's Phoenix headquarters. "They need to
be able to read and write and compete at the college level. Know what? We don't want your money otherwise."
The company believes the revenue recognition policies being investigated by the SEC are appropriate, Brian Schwartz,
Apollo's chief financial officer and treasurer, said in an Oct. 27 conference call.
Few Graduate
18
While Phoenix has succeeded in drawing students, most don't graduate, leaving them without degrees and often
burdened by loans. Only 8.9 percent of Phoenix students without prior college experience complete a degree in six
years, including 5 percent of those who attend classes online, according to the National Center for Education
Statistics, in Washington. The national graduation rate is 56. 1 percent for four-year schools and 30.9 percent for
two-year schools.
Besides leaving school prematurely, many students aren't able to pay their bills, with U.S. taxpayers picking up the
balance. Of Phoenix students who should have begun repaying loans in 2007, 9.3 percent have defaulted, up from a
7. 2 percent rate a year earlier and more than the national average of 6. 7 percent, according to the Education
Department.
The university works closely with lenders and delinquent students to stave off defaults, said Robert Collins, Apollo's
vice president for financial aid.
'Replacement Curve'
Phoenix's dropout rate means the school needs to recruit 250,000 new students a year-- equivalent to six University
of Michigans -- to maintain current enrollments, said former Apollo manager Mark Defusco, now an education
investment banker at Berkery, Noyes & Co. in New York.
"The replacement curve is astronomical," Defusco said. "You have to feed the beast."
Phoenix's growth is hardly uncontrolled, said Jones, the Apollo spokeswoman. The university has " more than 200
campuses and learning centers" which means it can add 1,000 students a day by enrolling five at each one, she said.
Phoenix gained 102,000 new students in the quarter ended Aug. 31, according to Charles B. Edelstein, Apollo Co-
CEO.
The question of whether recruiters sign up unqualified students is the focus of the lawsuit that Phoenix said it expects
to settle for $80.5 million. The 2003 suit brought by two former employees in federal court in California alleges that
Phoenix violated a 1992 ban on paying recruiters on the basis of enrollment numbers. The company has denied
wrongdoing.
' Dumb as Doornail '
In a deposition in the lawsuit, Jennifer Kahn, a recruiter who left Phoenix in 2006, said she complained to her boss
about a prospect who couldn't handle college.
"I had a student, let's refer to him as dumb as a doornail, " Kahn said. "And my manager told me, 'Enroll him. It's not
our call to say who has a right to an education .' As a consequence, he started, he went to the first night, he knew he
was in deep doo-doo, and dropped. He never should have been there."
Tom Corbett, a former director of online enrollment at Phoenix who provided an affidavit in the lawsuit, said in an
interview that the school's recruiters were like brokers peddling subprime mortgages.
"The University of Phoenix's management culture is fueled by greed, the same as the housing scenario," Corbett said.
"There was no emphasis on the student's actual values, goals, background, experiences. "
Compensation Methods
19
Timothy Hatch, an outside counsel for Phoenix and a partner in the Los Angeles office of Gibson, Dunn & Crutcher,
said the school enrolled the student mentioned by Kahn because he had completed an associate's degree at another
for-profit college.
Phoenix's compensation methods are legal because teamwork and student retention figure into its salary adjustments
along with enrollment expectations, he said. The criticisms by Corbett and other former employees don't reflect the
views of Phoenix recruiters and managers in general, he said.
The Education Department may tighten 2002 rules that let colleges pay recruiters partly on the basis of enrollment,
according to Shireman, the deputy undersecretary.
The department announced on Sept. 9 that it may prohibit misrepresentations of information provided to students and
prospective students. The move was prompted partly by reports the department received about Axia recruiters,
according to a federal official familiar with the matter.
Prospective Students
In tape-recorded telephone calls heard by Bloomberg News, Axia recruiters told Wall Street researchers posing as
potential applicants that its credits could be t ransferred to Harvard University and Columbia University. Those schools
don't grant transfer credit for online undergraduate courses, the universities' spokesmen said in e-mails.
Cappelli said he isn't aware of the alleged misrepresentations.
"There's not a mandate or a directive from anyone in the management team to fool or hurt people/' he said.
"Traditional colleges make errors, too."
Phoenix has a pilot program to improve student readiness for college, Cappelli said during a conference call with
analysts on Oct. 27. Lower retention rates and extra remedial instruction and other support services for Axia students
have damped Apollo profits, he said in September.
'Concerted Effort'
"We are making a concerted effort to get back our focus on bachelor's and master's degrees/' said Cappelli, a former
Credit Suisse research analyst who joined Apollo in 2007. "The return to the student is better if they stay in school
and complete their bachelor's degree. The return to us is better, too. Not all of our growth is coming from Axia
anymore."
The company supports a proposal in Congress that would allow colleges to exceed the 90 percent ceiling on the
portion of revenues from financial aid until 2012, and not to count increases in student loan limits as federal revenue.
The proposal, which passed the House last month as part of a broader education bill, isn' t included in a Senate
version, said Mark Kantrowitz, publisher of the FinAid.org and FastWeb.com financial-aid Web sites based in
Cranberry Township, Pennsylvania.
Phoenix officials said the 8. 9 percent graduation rate measured by the government counts only first-t ime students.
Including transfer students, 27 percent of Axia students graduate, according to the university's 2008 Academic
Annual Report. Of those pursuing bachelor's degrees, Phoenix said 38 percent graduate.
No Placement
20
Phoenix doesn't help graduates land jobs, nor does it track where they find employment, Jones, the Apollo
spokeswoman, said. She said most Phoenix students already have jobs.
Simon Saffery, 30, a Hawaii resident, transferred to Phoenix's online program as a junior in 2006 and graduated last
year with a 3.9 average out of 4.0 in computer science. He said he has applied for 25 entry- level information
technology jobs without receiving a single interview. Almost half of the openings he sought were at Apollo itself,
Saffery said. He is unemployed, owes $45,000 in student loans and may declare bankruptcy, Saffery said.
Jones declined to comment on individual students, citing privacy considerations. According to a 2008 survey by
Phoenix, graduates of its associate and bachelor's degree programs earned average increases in personal income of
19 percent and 28 percent, respectively.
Founder's Dream
Sperling, who has an economic history Ph.D. from Cambridge University in England, founded Phoenix in 1976. His
mission was to give working professionals a convenient way to get back to school and boost their academic credentials
without having to quit their jobs, according to his 2000 autobiography, "Rebel With a Cause." Students, who
learned in teams and took five- week courses in business, nursing and other fields, tended to be managers in their
mid-30s whose employers reimbursed them for tuition.
Richard Chait, a professor of higher education at Harvard in Cambridge, Massachusetts, who has studied Sperling's
university, said the school "saves money everywhere" by hiring part-time faculty, leasing real estate, and centralizing
administration.
"The genius of the University of Phoenix is that it spends $1 million to develop one course that it gives a thousand
times," Chait said in an interview in his office. "Community colleges spend almost nothing developing a thousand
courses that they will use once."
Expanding Eastward
In the 1990s, Phoenix expanded eastward, opening facilities in Michigan, Maryland and Pennsylvania. Today,
according to its Web site, the university has campuses in 39 states, the District of Columbia, Puerto Rico, and two
Canadian provinces. From 1995 to 2000, Apollo's stock rose more than 10-fold, making it one of the 30 top-
performing stocks in the Russell 3000 Index.
When enrollment was about 20,000, Sperling told executives Phoenix would have 100,000 students by 2000, Bob
Barker, a former Phoenix executive vice president, said in an interview. At his 80th birthday party in 2001, Sperling
raised his sights to 500,000, DeFusco said.
Apollo never formally adopted Sperling's visi on, said Jones, the spokeswoman. She said Sperling was unavailable for
interviews.
As fast as Phoenix was growing, it was drawing from a limited customer base of mid-career managers, former Apollo
president Brian Mueller, CEO of for- profit Grand Canyon Education Inc. in Phoenix, said in an interview. Students
had to be at least 23 years old and have two years of work experience and as many as 60 credits from other colleges.
Rapid Growth
By 2004, the university had eliminated its credit and age requirements, Jones said.
21
DeFusco, who worked at Apollo from 1994 to 2003 in academic affairs and then opening campuses for Phoenix, said
Axia's tuition was set just under the federal limit for financial aid so government grants and loans could cover most, if
not all, of the cost.
The college's tuition- pricing "was a financial -aid play," DeFusco said.
Apollo spokeswoman Jones said that was not the case.
Unlike students who came to Phoenix to complete degrees, the company said that three out of five Axia attendees
haven't gone to college before.
"It's no longer the mid-career manager, it's somebody working a minimum-wage job somewhere and looking to get
out of that dead end," said Laura Palmer Noone, a former Phoenix president who is now CEO of Piccolo
International University, an online school based in Scottsdale, Arizona.
Career Aspirations
Sabrina Bogan, 39, a criminal-justice major, said in an interview that Axia has improved her writing. The Richmond,
Virginia, mother of three, who has a high school equivalency degree and used to work as an assistant manager at a
convenience store, said she has written essays on the death penalty and energy conservation.
"The person that I was before I started taking those classes could not have done that," Bogan said. She said she
hopes to land a job in a lawyer's office after she finishes her associate's degree next year.
Not all Axia students benefit. Laura Holder, 29, has a diploma from Prairie Grove High School in Prairie Grove,
Arkansas, where she took special-education classes, she said. According to her mother, Beatrice McCormack, Holder
has an IQ of 65 to 70, within a range the Washington-based American Association on Intellectual and
Developmental Disabilities defines as intellectually disabled.
Axia Recruiter
Holder, who lives in an apartment with her husband, said she learned about Phoenix on the Internet and contacted
the school in hopes that a college degree would help her find work as a preschool teacher. The Axia recruiter, she
said, asked if she had graduated from high school, not whether she was in special education.
"They said once I go through the classes, I would get a job in teaching," Holder said.
Holder enrolled atAxia in October 2006 and realized the classes were too hard for her, she said. She left school amid
a payment dispute without completing a course. A collection agency dunned her for a tuition balance of $1,710.
Jones, the Phoenix spokeswoman, said the school is aware of a handful of instances in which intellectually disabled
students enrolled and soon demonstrated that they didn't have the ability to succeed. In those cases, she said,
Phoenix worked to help the students withdraw without financial obligation.
Community Colleges
Axia may soon face more competition for students. The Obama administration has proposed allocating $12 billion to
publicly run community colleges, which also give two-year degrees . While Sally Stroup, a former Apollo lobbyist,
oversaw post-secondary education in the George W. Bush administration, former community-college leader Martha
Kanter plays a similar role now.
22
"Some in the administration, if they were advising students who had a choice of going to a community college or a
for-profit college, would say, 'Pick the community college,"' said Scott Fleming, a Washington lobbyist who represents
Apollo.
The Education Department isn't out to "shut down or maim" for-profits, Cappell i said.
"If Obama means what he says, that he wants everyone to have one year of college, how do you accomplish that
without for-profit higher ed?" he said.
To contact the reporter on this story: Dan Golden in Boston at dlgolden@bloomberg.net .
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Please copy my job-share partner .Jane Glickman (jane.glickman@ed.gov) on all emails.
Thank you.
23
From:
Sent:
To:
Subject:
Smith, Kathleen
Wednesday, Apri l 21 , 201 o9:53AM
Bergeron, David; Madzelan, Dan
from IHE-
Going Ahead With Gainful Employment
April 21, 2010
WASHINGTON-- A long recession and a wavering job market have brought for-profit higher education
institutions into the publi c eye as never before. Big advertising budgets have given them name recognition.
Dramatic enrollment growth (fueled by increasing amounts of federal financial aid) and assurances to students
that a degree or certificate is the path to a comfortable job in a specific field have brought them scrutiny.
Many newspapers, websites and TV networks have told the tale of programs at for-profit institutions that don' t
prepare students for the jobs they' ve been all but promised --and plunge them into debt in the process. While
the anecdotes are often true, they' re only part of the story; plenty of for-profit coll eges (the insti tutions
themselves prefer the term "private sector" or "market funded") do prepare students for good jobs and don' t sink
them in a pool of post-graduation debt.
Title IV of the Higher Education Act of 1965 requires all for-profit offerings other than those clearly designated
as "li beral arts," and non-degree vocational programs at nonprofit institutions, to show that they prepare
students for "gainful employment in a recognized occupation." If they don' t, they' re not supposed to be eligible
for federal financial aid dollars.
No one, the U.S. Department of Education has contended, seems to have a satisfactory way of determining
which programs meet that standard. "It' s ill uminating for us that when we ask institutions how they' re
complying with this current law, we have not received adequate answers, " says Bob Shireman, deputy
undersecretary of education. "And this is the law."
Through a process of negotiated rule making that began last year after passage of the Higher Education
Opportunity Act in 2008, the department has sought to develop a formulaic solution to the dilemma, in the form
of regulations that define "gainful employment" using data on incomes and debt loads, as well as completion,
job placement and loan repayment rates.
In essence, this is a crude mechanism to assess the quality and value of vocational programs. The "good"
programs that help students get jobs without saddling them with debt could continue to exist and deliver Pell
Grants and subsidized loans to their students. The "bad" programs-- the ones found to lead graduates to jobs
they could' ve gotten without the educational experience or that don' t pay well enough for borrowers to repay
their loans-- would be identi fied and put under closer scrutiny.
Representatives of the for-profit sector have aggressively fought such an approach, but most analyses so far
suggest that the proposed regulations are unlikely to be a sector killer. The department has acknowledged the
need for nonprofit and for-profit vocational programs, and has estimated that just 6 to 8 percent of programs
that quali fy for Title IV under gainful employment would potentially need to change under the proposed rules.
24
In research that' s been circulated but not yet publicly released, the Career College Association, the trade group
that represents for-profit colleges and universities, has less-conservatively estimated that close to 20 percent of
career college programs and a third of the colleges' students would be affected. In what the department would
consider a positive outcome, some of the "bad" programs would shut down, while others would lower prices or
work to improve their completion and job placement rates.
Though some observers have suggested that rewriting federal financial aid policy would be a better way to
address these problems, the Obama administration's Education Department is seizing on the opportunity it has
now, with Democratic majorities in both houses of Congress, to effect change. The revision ofthe gainful
employment rules could be a once-in-an-administration (if not once-in-a-career) chance for Shireman-- who
has advocated for reform and increased protections for borrowers since serving in the Clinton White House--
and his staff to tackle what they consider to be a major source of student debt.
Shireman himself does not put it that way. "We have to do everything we can in the regulatory process, as well
as in the legislat1ve process, to protect taxpayers and students," he says. "We have these regulatory
opportunities so we have to take them."
He does acknowledge that he is unwilling to wait for the next renewal of the Higher Education Act, in 2013,
when lawmakers would be most likely to make major changes in the law. "We' re not going to wait for a
reauthorization to ensure that federal funds are being used appropriately."
The department sent a version of the regulations to the White House Office of Management and Budget this
month, and, though it's still being revised, a final draft will be published by mid-June. Over the summer, there
will be one last chance for public input and, by Nov. 1, the regulations will be printed in the Federal Register,
to go into effect on July 1, 2011.
Defining Gainful Employment
The Education Department was slow to formulate a proposed definition of gainful employment. In November
and December, during the first two week-long rule making sessions, the discussion among negotiators focused
on whether the department had the statutory authority to establish a formulaic definition of gainful employment.
Many negotiators saw the department' s suggestions-- particularly one that sought to determine the value a
credential would add to a recent graduate' s earning power, and to use that to determine an acceptable maximum
tuition-- as price controls. The most vocal opponent was the lone negotiator representing for-profit institutions,
Elaine Neely, senior vice president of regulatory affairs at Kaplan Higher Education. In December, Neely said
she was "flabbergasted that [the department] would impose price controls when clearly Congress itself has not
been able to come to the decision to do that on higher education." By warning of a "slippery slope" toward price
controls throughout higher education, Neely was able to get many representatives of nonprofit institutions on
board in opposition to the proposal.
An idea that took up much less of the panel' s time was the department's proposal to determine whether the
starting salary in the field for which a program prepared students was sufficient to pay the average annual debt
obligation ofthe program' s graduates. If the average debt load for a program's graduates was $9,000 on a 10-
year loan with a 6.5 percent interest rate, students would have loan obligations of $1,250. With a debt-service-
to-income ratio of 5 percent, the starting income in that field would have to be at least $25,000 to be considered
"gainful employment."
By mid-January, as the department and negotiators prepared for the third and final round of rule making, this
debt-service ratio had become the department' s preferred regulatory path. Based on a partial reading of a 2006
paper by Sandy Baum, of the College Board, and Saul Schwartz, of Ontario's Carleton University, the
25
department's ratio became 8 percent. (While Baum and Schwartz' s paper discusses 8 percent as a generally
accepted standard, most likely derived from mortgage underwriting standards, the authors suggest that a ratio as
high as 18 percent could be appropriate for single people earning $150,000 annually.)
Under the proposal made in January, which remains the only complete definition made public by the
department, vocational programs would be eligible for Title IV funds if their graduates' median annual
payments on a 10-year loan were no more than 8 percent of the Bureau ofLabor Statistics' 25th percentile of
annual earnings for people in occupations for which a given program prepared students.
Programs that exceed 8 percent could still be eligible for Title IV funds by producing what the department
considers good outcomes: by showing that its graduates' annual earnings are higher than the BLS' s 25th
percentile and keep the debt-income ratio below 8 p e r c e n t ~ by documenting that students have at least a 75
percent repayment rate on federal loans; or by demonstrating a program completion rate of at least 70 percent
and an in-field employment rate of at least 70 percent.
In the third round of negotiations, debate was contentious and without resolution. Terry W. Hartle, senior vice
president for government and public affairs at the American Council on Education, said he worried about cost,
privacy and the potential for "unintended consequences." A former Bush administration Education Department
official, Todd Jones, president and general counsel of the Association of Independent Colleges and Universities
of Ohio, said he saw the proposal as ripe for lawsuits.
Department officials were unwilling to reconsider the approach entirely, though they were open to constructive
feedback. "We put things on the table partly because we think they' re a good idea and partly to get input,"
Shireman says.
The department started with its most extreme -- but politically viable idea-- and was ready to negotiate, but
many negotiators seemed too intent on persuading officials to obliterate the proposals to make good,
constructive suggestions.
And, since the third round of negotiations ended in late January, the department has continued to discuss the
proposals with stakeholders and to get feedback. "We recognize that some people felt- even we felt- that there
was not enough discussion at negotiated rule making for whatever reasons," Shireman says. " So we continue to
hear from associations and institutions, getting input from them that continues to be helpful, to continue to hear
what suggestions they have about what the term gainful employment should mean."
Who Would Be Hit
In broad terms, the Department of Education' s goal is to determine which programs really are preparing
students for gainful employment and not sinking graduates into chasms of debt.
"There' s a tremendous number of students graduating with incredibly high levels of debt," says Rich Williams,
higher education associate at the U.S. Public Interest Research Group, who represented students on the
negotiated rule making panel. "And in some cases they' re unable to enter the fields they studied at the levels
they thought they' d be qualified for."
Pauline Abernathy, vice president of the Institute for College Access and Success, anticipates the regulations
"will lead to programs that are currently leaving students in terrible debt either having to change the quality of
their programs or their cost structure." Before Shireman joined the Obama administration, he was TICAS' s
president.
26
But it' s unclear whether the department's proposed rules would really weed out those programs and would do
so in a way that kept all good programs up and running. "I don' t think you can draw a line that separates the
wheat from the chaff perfectly," says Mark Kantrowitz, publisher ofFinaid.org. "The choices are tough-- you
either throw out the baby with the bathwater or, because you want to keep the baby no matter what, you' re
going to get some bathwater too. I think that's a reality that everyone needs to come to terms with."
When applied to the existing landscape of vocational programs, the department's approach would seem to favor
programs at public institutions over private ones (either for-profit or nonprofit), those that required fewer credits
earned over more credits, and those in higher-paid fields like nursing and information technology over lower-
paid careers in the arts.
Because the rules would apply only to certificate programs at community colleges, state universities and
private, nonprofit institutions, they' re less likely to force any real change at nonprofits. Tuition on these
programs at public institutions is so low that it's relatively rare for students to take out loans. If they do, they' re
likely to be small. Even at private nonprofits, where tuition is likely to be of a similar magnitude as at for-profit
colleges, the fact that the rules apply only to non-degree programs will keep many programs out of regulatory
reach.
Shireman and other department officials have insisted in many instances that the department is not "out to get"
for-profit colleges and that it is not the department's intention to regulate the sector out of existence. "We have
made it quite clear that we are interested in improvement and outcomes all across the spectrum, all across the
sectors," he says.
Nonetheless, it seems clear that the gainful employment regulations will force the most change on for-profit
institutions, which will have to choose between lowering tuition, improving student outcomes or shutting down
programs that don' t align with the rules. In the short run, at least, all of these options would hurt the institutions'
bottom I i nes.
Even if some programs end, says Abernathy, ofTICAS, "there will be plenty of other for-profit programs that
will be very eager and capable of being able to meet that need, but that do so in a way where students and
taxpayers are better off."
For a field in which a for-profit institution offers multiple certificate and degree options, the ones that cost the
least-- and often require the fewest credits-- are the ones least likely to be regulated out of existence. If an
institution offered certificates, associate degrees and bachelor' s degrees in, for example, culinary arts, that all
led to the same Labor Department-classified jobs and the same Bureau of Labor Statistics-reported 25th
percentile of income, it's logical that the 8 percent rule would make the preferred outcome a certificate and not
a bachelor' s degree.
Kantrowitz, ofFinaid.org, says that though the department's existing proposals " really didn' t consider the
impact on bachelor' s and graduate degrees," he thinks the next draft of regulations will because the department
hasn't shown any indication of wanting to discourage students from pursuing longer programs. "Take an
associate's degree versus a bachelor' s degree. Students are in school twice as long, paying twice the tuition, but
they don ' t have twice the income."
Though programs would have the option of collecting their own salary data rather than relying on the BLS
numbers, institutions often find it difficult to collect this information. As of now, observers say, few institutions
have a comprehensive view of their graduates' incomes.
27
Kantrowitz and others have suggested that the department use different labor data-- in his own calculations,
Kantrowitz used federal Census data, which details age group and educational attainment but not field of
employment-- but the ideal data set does not exist.
Apollo Group, which owns the University ofPhoenix and other institutions, said in a March 30 earnings call
that it has begun the process of analyzing its programs. But, "given the number and range of disciplines offered
by our universities as well as the uncertainty regarding the implementation process of the draft proposal, our
analysis is both extensive and complex."
In mid-March, analysts at Morgan Stanley said they thought that Education Management Corp. (which runs the
Art Institutes and Argosy University, among others) and ITT Educational Services would need to undergo the
most widespread change to meet the regulations because of high tuition rates and, at Education Management, an
enrollment that leans heavily toward low-paying arts fields.
Two companies that would have very few endangered programs, according to Morgan Stanley: American
Public Education, Inc. , which focuses on serving members of the military and public servants, who are less
likely to take out student loans; and Capella Education Company, whose programs have very low loan default
rates and would be able to qualify for Title IV funds under one of the alternative definitions of gainful
employment.
Gregory W. Thorn, Capella' s vice president of government affairs and general counsel, agrees that his company
would probably have to make few changes to abide by the gainful employment regulation. "Capella is viewed
by folks within the department as a high quality institution," he says. "We have a degree of comfort that
however this plays out, Capella would be fine and Capella would be in good shape."
And yet, until the final regulations go into place and the institution can collect and calculate all the appropriate
data, Capella can' t be sure that it' s out of the woods. "There are so many moving parts," Thorn says. "It' s
premature to engage in speculation on how this is going to play out ... at Capella on a program-by-program
basis."
A leader at another for-profit institution with low cohort default rates said he also thought his programs would
meet at least one of the gainful employment rules, but still worried that they might not. Insufficient data and a
still-unclear sense of the precise regulations the department will decide upon has left him feeling a bit uneasy
about the outcomes.
The Feedback
At every hint that the Department ofEducation is backing down from proposed regulations that would force
some programs offered at for-profit colleges to lower their prices, improve their outcomes or shut down, Wall
Street analysts and the for-profit institutions breathe a sigh of relief.
When Secretary of Education Arne Duncan testified before the House ofRepresentatives' Education and Labor
Committee on March 3, and was questioned on the gainful employment regulations, his comments that the
department was "by no means wedded to any one direction" and "[didn' t] want to be overly heavy-handed"
were perceived by for-profit boosters as signs that the department was open to scaling back the regulations.
Before and since, the Career College Association and lobbyists for for-profit institutions have pounded the halls
of Congress trying to get members to put pressure on the department. Some members of the Congressional
Black Caucus sent a letter to Duncan charging that the rules are discriminatory because for-profit institutions
disproportionately serve minority students. A bipartisan group of 18 House members wrote to Duncan asking
that he pull the plug on the department's approach altogether.
28
Last week, when a report from Credit Suisse cited someone "close" to the Office of Management and Budget as
saying that the department had decided to seemingly soften one of the alternative methods of qualifying for
Title IV, higher education stocks soared as the rumor spread. The source told the bank that the option to
demonstrate a program completion rate of at least 70 percent and an in-field employment rate of at least 70
percent had become a 50 percent completion rate and a 70 percent employment rate.
Though it is one of the possibilities the department is considering, the switch to a 50 percent completion rate is
not final. Officials submitted a draft to the OMB to begin the process leading to the publication of rules and the
public comment process, but are said to be continuing to analyze data and listen to feedback.
The for-profit institutions tout these small bits of news and others as indications that the department may be
backing away from its tough-line approach, but it is unclear whether any perceived motion on the department's
part will actually materialize as dramatic changes to the next draft of regulations.
Teddy Downey, of Washington Research Group, says he doubts the department would take any steps that would
dramatically Jessen the reach of the regulations. In a e-mail message last week after the Credit Suisse rumor
circulated, he said he anticipates "a very low chance that this change will amount to a truly significant
loophole. "
In an interview, he went further. "I don't think the department would do anything it doesn't think will have the
desired effect. I think they have the data to support whatever they choose to do."
Kantrowitz, ofFinaid.org, is skeptical of whether the department has the data, but he agrees that the department
isn't backing down on gainful employment. "They're not going to do anything that doesn't have teeth in it," he
says. "It may just be some kind of educated guess, but it's going to have teeth."
-Jennifer Epstein
29
From:
Sent:
To:
Subject :
Sellers, Fred
Thursday, September 16, 201 o 1 :06 PM
Kolotos, John; Chesley, Susan; Finley, Steve; Bergeron, David; Kvaal, James; Kanter,
Martha; Ochoa, Eduardo; Yuan, Georgia
Education Sector report on GE
Don't know if folks have seen the attached analysis but I found it based on an article in Inside Higher Ed. The website
where I found the report is:
http://www.educationsector.org/publications/are-you-gainfully-employed-setting-standards-profit-degrees
Fred
Gainfui -Report_RE
LEASE Educati ...
30
From:
Sent:
To:
Smith, Zakiya
Monda October 05, 2009 9:58AM-.-------.

who.eo . ov

)(8) @omb.eop.gov); @who.eop.gov) ; Annino, Angelica;
Arsenault, Leigh; Babyak, Stephanie; Barrett, Tarik; Ceja, Alejandra; Cummings, Glenn;
Cunningham, Peter; Darnieder, Greg; Glickman, Jane; Hamilton, Justin; Kanter, Martha;
Laitinen, Amy; Manheimer, Ann; Miller, Tony; Montoya Tansey, Hallie; O'Bergh, Jon;
Pacchetti, Edward; Plotkin, Hal; Rogers, Margot; Rose, Charlie; Sepulveda, Juan; Shireman,
Bob; Singiser, Dana E.; Star, Sari; Steenen, Paul; Wilson, John; Young, Nicole; Gomez,
Gabriella; Martin, Carmel; Taggart, Bill; Madzelan, Dan; Dann-Messier, Brenda
Subject: Higher Ed Press 10 06 09
Attachments: Higher Ed Press 10 06 09.doc
Today's clips include reports of the conference call with community college presidents held on Friday, two articles on
responses to stimulus fundi ng, including opinions institutional opportunities and problems with funding, and
perspectives on the utility of 529 savings plans, among other relevant news. See attachment for more detail.
Mutual Back Scratching Inside Higher Ed
Stimulus Money Slow To Reach Colleges Diverse
Stimulus Wreckage (San Francisco Chronicle)
ED: Iowa Student Loan Broke Law. Des Moines Register
Study Argues that Federal Asset Treatment Reduces College Savings
The Impact of College Financial Aid Rules on Household Portfolio Choice
Tweaks Suggested for 529 Plans Wall Street Journal
Vets Get Emergency G.l. Bill Benefits Washington Post
Additional Media Coverage
They line up early for Gl Bill emergency cash Houston Chronicle
Prepaid College Plans May Not Cover All College Costs. New York Times
Large Universities Changing Freshman Experience. AP
(Opinion) Cracks in the Future: Herbert Warns Of Impact Of University Budget Cuts. New York Times
Catholic Colleges Work to Maintain Access as Their Profiles Rise The Chronicle of Higher Education
Recruiter Lawsuit May Get Closure: University of Phoenix Recruiter Lawsuit May Be Settled. Arizona Republic
Zakiya Smith
Policy Advisor
Office of the Under Secretary
U.S. Department of Education
(202) 205-9891
Zakiya.Smith@ed.gov
2
Mutual Back Scratching (Inside Higher Ed)
"Part pep rally, part support group-- and part lobbying effort. All of those elements were present Friday as
a team of Obama administration officials -- including the White House's special guest star for any and all
community college events, Jill Biden -- held a conference call with about 80 two-year college leaders,
which they characterized as a listening session," Inside Higher Ed reports. "But the session and the
stroking also had a subtle but plainly evident ulterior motive: letting an important constituency know that
the administration very much needs its help as the White House pushes Congress to pass legislation to
carry out a massive restructuring of the student aid programs that would, not coincidentally, pour $1 o
billion into community colleges. At several points in the call , administration officials let the two-year
college presidents know that priorities they favor are dependent on Congress passing the Student Aid
and Fiscal Responsibility Act (and the community coll ege focused American Graduation Initiative that is
part of it) this fall."
You can read the complete Oct. 5, 2009 Inside Higher Ed article on-line.
Stimulus Money Slow To Reach Colleges (Diverse)
"President Barack Obama's $787 billion stimulus spending package was supposed to move 'shovel-ready'
construction projects, including campus facilities, toward completion. However, stimulus spending so far
has been focused on financial aid and tax credits, less so on speeding up brick-and-mortar projects on
college campuses," Diverse reports. "The recovery spending also has been hamstrung by delays; only
about 14 percent of the money approved in the American Recovery and Reinvestment Act (ARRA) has
been spent since it was approved in February, according to press accounts. Even so, a major portion of
the funding is about to hit the higher-education community, says Robert Helland, government services
adviser at the Washington, D.C., office of the international law firm Reed Smith. 'The opportunities are
going to go fast and furious, including for historically Black colleges and universities,' he says. About half
of some $32.6 billion in stimulus funds earmarked to stabi lize schools should be reaching states whose
governors will then dole out money to save college teachers' jobs and prevent layoffs caused by the
recession, says Hell and, noting that discretionary state stimulus spending could benefit public HBCUs."
You can read the complete Oct. 2, 2009 Diverse article on-line.
Stimulus Wreckage (San Francisco Chronicle)
Despite having been accused of deceptive business practices by the attorney general,
former students, and ex-employees, Corinthian Colleges are getting millions in federal
stimulus dollars.
http://www. sfweekly. com/2009-09-30/news/stimulus-wreckaqe/1
ED: Iowa Student Loan Broke Law. The Des Moines Register (10/5, Jacobs)
reports, "Iowa Student Loan Liquidity Corp. has been ordered to repay money to the federal
government because the nonprofit used illegal cash inducements to drum up more loan
business. A review by [ED] found that Iowa Student Loan paid the illegal fees to the Iowa State
University Alumni Association to induce it to steer business to Iowa Student Loan. However, the
board chairman of Iowa Student Loan - a private nonprofit company, not a government agency -
denies the organization did anything wrong, believes that the repayment amount is incorrect,
and says it intends to appeal the findings."
Study Argues that Federal Asset Treatment Reduces College Savings
Researchers at the University of Missouri-Columbia have published a study that examines the effect of
asset exclusions from the Federal Methodology for computing financial aid eligibility on household
investment portfolios.
The study, The Impact of College Financial Aid Rules on Household Portfolio Choice, found that families
may escape implicit financial aid taxation by reducing their liquid savings and maximizing their
contributions to retirement assets and increasing home equity. It also found that values of retirement
assets and home equity, which are exempt from financial aid taxation, are significantly correlated with
marginal financial aid "tax" rates.
The authors argue that their findings validate concerns that the Federal Methodology for computing
financial aid eligibility is at odds with incentives offered to households to maintain high levels of savings,
and produces inequitable distribution of need-based student aid.
The study will be published in the December issue of the National Tax Journal.
Tweaks Suggested for 529 Plans (The Wall Street Journal)
"Generous federal and state tax benefits have made 529 college-savings plans popular with affluent
investors, but the federal government would like to see these plans do more for low- and middle-income
families," The Wall Street Journal reports. "The Obama administration has focused attention on the
savings plans as part of its effort to increase college attendance and affordability. And that attention could
lead to changes that would affect all families using 529 plans. In a report released last month, the
Treasury Department called for greater use of low-cost index funds by 529 plans, to reduce investors'
expenses. It also suggested, among other things, a per-beneficiary cap on contributions, without
specifying a dollar amount. The aim is to limit the maximum benefit to a single family so that more federal
money is available to help more families pay for college."
You can read the complete Oct. 5, 2009 Wall Street Journal article on-line.
Vets Get Emergency G.l. Bill Benefits (The Washington Post)
"Some 6,619 student veterans had received emergency checks at the Department of Veterans Affairs' 57
regional offices by 3 p.m. Friday, the first day the aid became available for students across the country
who have yet to receive tuition, books and housing payments under the Post-9/11 Gl Bill," The
Washington Post reports. "Another 6,752 veterans had applied for the aid --a maximum $3,000 advance
against benefits-- online. As of last week, fewer than 1 o percent of the 251,000 veterans who had applied
for Gl Bill benefits had actually received checks, forcing thousands to use savings or take out personal
loans to make ends meet. At the agency's regional office in the District, about 300 veterans waited at
noon in chairs and on the floor for a chance to apply for and receive the checks, which were announced a
week ago by Veterans Affairs Secretary Eric Shinseki."
You can read the complete Oct. 3, 2009 Washington Post article on-line.
Additional Media Coverage
They line up early for Gl Bill emergency cash Houston Chronicle
Prepaid College Plans May Not Cover All College Costs. The New York
Times (10/5, A10, Hamill) reports, "In the last two decades, more than a million families around
the country have invested in state funds that pledged to cover the cost of attending their state's
public colleges and universities, regardless of how much tuition increased. But in the last year,
the stock market slump and rising college costs have combined to drive all but two of the
nation's 18 such funds, known as prepaid college savings plans, into the red, jeopardizing those
pledges." According to the Times, "Even with stock market gains since March, the losses have
forced some programs, like Pennsylvania's and Washington's, to impose new and higher fees
that could amount to thousands of dollars a year in additional costs to parents."
Large Universities Changing Freshman Experience. The AP (10/3, Zagier)
reported, " The freshman experience at large state universities can still resemble a failed social
experiment more than the start of a four-year journey to enlightenment. Overwhelmed freshmen
in many places still sit anonymously in large lecture halls, surrounded by hundreds of peers
whose names the professor couldn't possibly remember." According to the AP, these "cattle-call
approaches to higher education are increasingly out of fashion. At the University of Missouri and
many other schools, from large public universities to selective liberal arts colleges, first-year
students increasingly live and learn in small groups with those who share similar interests -
everything from environmental activism to budding cyber entrepreneurs. At Missouri, there's
even a group for aspiring storm chasers."
(Opinion) Cracks in the Future: Herbert Warns Of Impact Of
University Budget Cuts. In his New York Times (10/3, A23, 1.09M) column, Bob
Herbert writes, "It's dismaying to realize that the grandeur" of UC Berkeley, "and the remarkable
success of the University of California system, of which Berkeley is the flagship," is being
"jeopardized by shortsighted politicians and California's colossally dysfunctional budget
processes. " Berkeley "is aggressively pursuing alternative funding sources. The danger is that
as public support for the school declines, it will lose more and more of its public character."
Colleges and universities "across the country - public and private - are struggling because of the
prolonged economic crisis and the pressure on state budgets. It will say a great deal about what
kind of nation we've become if we let these most valuable assets slip into a period of decline."
Catholic Colleges Work to Maintain Access as Their Profiles Rise (The Chronicle
of Higher Education)
"Catholic higher education has a long history of providing access and opportunity to disadvantaged and
underserved students. But that commitment becomes harder to maintain when a college sees its profile
begin to rise," The Chronicle of Higher Education reports. "How do Catholic colleges stay true to their
mission of access in the face of market realities? That question provided the framework for a symposium
of Catholic college leaders [in Chicago] last week. The meeting, 'Balancing Market and Mission:
Enrollment Management Strategies in Catholic Higher Education,' was sponsored by DePaul University's
Center for Access and Attainment. It brought together enrollment management, marketing, and mission
officers from about a dozen Catholic colleges for what the organizers bel ieve was the first meeting of its
kind."
You can read the complete Oct. 5, 2009 The Chronicle of Higher Education article on-line.
Recruiter Lawsuit May Get Closure: University of Phoenix Recruiter
Lawsuit May Be Settled. The Arizona Republic (10/4, Gilbertson) reported, "Six years
ago, two University of Phoenix enrollment counselors filed a lawsuit accusing the for-profit
school of illegally rewarding them with fat raises and prizes based on the number of students
they enrolled .... A costly end appears to be in sight: " University of Phoenix parent Apollo Group
Inc. "announced Wednesday that it was in settlement talks to resolve the litigation before the
scheduled March trial. The Phoenix company did not disclose potential terms, but one Wall
Street analyst estimates a settlement could run as high as $250 million."
From:
Sent:
To:
Star, Sari
os, 2009 1 0:02-mAmMr..:.:---------.
eo . ov

who.eop.gov) ;
.... -.-n ... g.., e .- ,c""' a;----:Arsenault, Leigh; a ya , ep anie; Barrett,
Subject:
Attachments:
, , Alejandra; Cummings, Glenn; Cunningham, Peter; Damieder, Greg; Emily M.
Loeb; Glickman, Jane; Hamilton, Justin; Kanter, Martha; Laitinen, Amy; Manheimer, Ann;
Martin, Phil; Miller, Tony; Montoya Tansey, Hallie; O'Bergh, Jon; Pacchetti, Edward; Plotkin,
Hal ; Rogers, Margot; Rose, Charlie; Sepulveda, Juan; Shireman, Bob; Singiser, Dana E.;
Smith, Zakiya; Star, Sari; Steenen, Paul; Wi lson, John; Young, Nicole
Higher Ed Press 11 OS 09
Higher Ed Press 11 OS 09.doc
Press on negative reports regarding higher ed, giving financial aid to the needy, Gates foundation financial award,
technology in classrooms, HlNl vaccine, pay cuts for university presidents, twitter possibly being used as a learning tool.
SPIN METER: Ran kings unfair to US higher ed?
Colleges Can Reap Educational Gains by Steering More Aid to the Needy,
Studies Suggest
Chronicle of Higher Education
Gates Foundation Awards $4-Million to Help 7 Cities Improve College-
Completion Rates
Chronicle of Higher Education
Technology Gap
Inside Higher Ed
Swine flu shot? They're taking a pass.
Washington Post
For university presidents, a pay cut is in order
Boston Globe
Tweeting in Class
Inside Higher Ed
Sari Star
Office of the Under Secretary
u.s. Department of Education
sari.star@ed.gov
202.453.7475
2
Higher Ed Press 11105109
SPIN METER: Ran kings unfair to US higher ed?
The AP reports that last week, a "stinging report" was released by "a state colleges
group arguing the United States isn't producing enough college graduates, especially in
science. Similar gloominess emanates from business groups and even the Obama
administration, whose top education goals include again leading the world in proportion of
college graduates." But, according to Cliff Adelman of the Institute for Higher Education Policy, it
is not "fair to try to rank American higher education against the rest of the world." Adelman, who
has for years "railed against tables showing other developed countries bounding ahead in
college achievement," calls the accusations against US higher education "propaganda" from
"people who love to be flagellated" and "want to hear a bad story." The AP lists several popular
beliefs about education in America and Adelman's response to each.
Colleges Can Reap Educational Gains by Steering More Aid to the
Needy, Studies Suggest
"Receiving financial aid appears to have a significant positive impact on the educational
performance of college students from low-income families, but many higher-education
institutions are bending to pressure to give aid to other students who do not necessarily need it,
according to research scheduled to be discussed here this week at the annual conference of the
Association for the Study of Higher Education," Chronicle of Higher Education reports. "One
study being presented here, based on data from the University of Oregon on its scholarship
recipients, found that getting merit-based financial aid appeared to have a positive impact on
students in terms of their first-year grades, with the boost being especially pronounced for
students from low-income backgrounds."
You can read the complete Chronicle of Higher Education article on-line.
Gates Foundation Awards $4-Million to Help 7 Cities Improve College-
Completion Rates
"In an effort to improve college-graduation rates, the Bill & Melinda Gates Foundation has
awarded $4-million in grants to seven cities and to the National League of Cities' Institute for
Youth, Education, and Families," Chronicle of Higher Education reports. "The grants, which
were announced on Thursday, will be used to better coordinate services that colleges, public
school systems, and communities provide to students. The cities are Dayton, Ohio;
Jacksonville, Fla.; Mesa, Ariz.; New York; Phoenix; Riverside, Calif. ; and San Francisco."
You can read the complete Chronicle of Higher Education article on-line.
Technology Gap
Professors think they are doing reasonably well when it comes to using technology in the
classroom, according to a survey released here this week by CDW-G at the annual meeting of
Educause. Not everyone agrees with the faculty view of things.
Consider these statistics from nationally representative samples of students and faculty
members (at two- and four-year institutions, public and private). Asked about their use and their
institutions' support for technology, professors said the foll owing:
75 percent said that their institution "understands how they use or want to use
technology."
67 percent are happy with their own technology professional development.
7 4 percent said that they incorporate technology into every class or almost every
class.
64 percent said that they teach in what they consider to be a smart classroom.
To read more, please visit: Inside Higher Ed
Swine flu shot? They're taking a pass.
Washington Post reports, "Although college-age people are among the most susceptible
of all age groups for contracting swine flu, that distinction is not scaring most into taking
precautions, according to a recent Washington Post-ABC News poll." The poll shows that
"nearly seven out of 10 people in the 18-to-29 age group said they did not plan to heed
warnings to get vaccinated." The nonprofit Commonwealth Fund says that a "sense of
invincibility might be one reason why .. . nearly 30 percent of adults 19 to 29 go without health
insurance, and more than two-thirds of unintentional deaths among 18- to 22-year-olds involve a
motor vehicle accident, according to federal data." Meanwhile, "experts at the Centers for
Disease Control and Prevention said they are so concerned about young people's lack of
concern about swine flu that they are conducting surveys to tease out the basis for the blase
attitudes. Many young adults' belief in the seriousness of the outbreak is diminished by what
they deem hyperbolic media coverage, said Kristine Sheedy, a CDC spokeswoman."
For university presidents, a pay cut is in order
The Boston Globe editorializes, "Private research universities draw heavily on grants
from the deficit-ridden federal government, on donors who have competing claims on their
generosity, and on tuition from families with less and less ability to afford it." As such, "a
corresponding sense of belt-tightening is needed on campus -- starting with the paychecks of
university presidents." According to the Globe, such a measure would be symbolic, "but not
irrelevant," since "the presidents are the ones seeking federal funds, courting rich alumni , and
setting tuition rates. " While conceding that "the 2008 pay packages were set before the worst of
the economic downturn was apparent," the Globe points out that "the 2009 numbers wi ll be
more telling," and "will show whether universities are responsive to their own stresses and those
of their communities, or if greed at the top is truly an epidemic. "
Tweeting in Class
Do Twitter skeptics really believe the popular microblogging service offers no
educational value, or are they just afraid of it?
For W. Gardner Campbell, director of the Academy of Teaching and Learning at Baylor
University, there is no question that fear of straying from the status quo has inhibited the
development of Twitter as a teaching tool. "I go to conferences like Open Education 2009, and I
come back with T-shirts like this: 'Reuse, Revise, Remix, Redistribute,' " he said Wednesday at
the annual Educause conference here. "And all it adds up to is more punishment at the hands of
well-meaning, sometimes, but ultimately self-preserving institutional structures."
While some higher ed officials - including nearly everyone at Wednesday's debate between
Campbell and Bruce Maas, CIO of the University of Wisconsin at Milwaukee - use Twitter for
fun, many balk at the idea of incorporating it into the classroom.
To read more, please visit: Inside Higher Ed
From:
Sent:
Subject:
William E Vajda [william.e.vajda@ugov.gov]
Friday, January 08, 2010 7:22AM
FYSA
Apollo Repaid Education Aid Late, Lax in Counseling Students January 08, 2010, 06:16 AM EST
MORE FROM BUSINESSWEEK
By John Lauerman
Jan. 8 (Bloomberg) -- Apollo Group Inc., owner of the largest for-profit university in the
U.S., was late repaying federal financial aid money and should better inform students about
the costs, requirements and details of its programs, according to a government report cited
by the company.
The findings by the Department of Education will cost Apollo about $1.5 million, the Phoenix-
based company said yesterday in a statement. Apollo fell as much as $3.74, or 5.8 percent, in
Nasdaq Stock Market extended trading after closing at $63.94.
Colleges are required to return at least some of the federal financial aid, called Title IV
funds, when students fail to complete enough of a course paid for with the money. A
preliminary report from the Education Department provided to Apollo on Dec. 31 cited
"untimely return of unearned Title IV funds" for more than 10 percent of sampled students,
the company's statement said .
The Education Department report also "expressed a concern that some students enroll and begin
attending classes before completely understanding the implications of enrollment, including
their eligibility for student financial aid," Apollo said in a filing yesterday with the
Securities and Exchange Commission.
Students should be advised more extensively before they commit to a degree program, the
Education Department said, according to the filing. The department suggested counseling
should cover the costs students will incur, the transferability of academic credits to other
institutions, how many credits they'll need to complete their program of study, and the
availability of additional financial aid for each year of their degree program, the filing
said.
Tighter Rules
"I think the stock fell due to investor concerns over the program-review findings and the
concern that was expressed in the report,'' Trace Urdan, an analyst at Signal Hill Capital
Group in San Francisco said yesterday in a telephone interview. He said market reaction was
overblown. Urdan recommends investors buy Apollo shares and doesn't own them.
The U.S. government is considering tighter rules against paying recruiters for enrollments
and giving misleading information to prospective students, and may require for-profit schools
to show how much their programs increase graduates' earnings, according to department
documents published as part of a process to develop new rules for colleges.
It is also examining institutions that increasingly rely on federal financial aid, deputy
undersecretary Robert Shireman said in a September interview. Apollo operates the University
of Phoenix, which has an enrollment of about 466,000 students. Phoenix derived 86 percent of
its $3.77 billion in revenue in fiscal 2009 from Education Department grants and loans to
students, up from 48 percent in 2001, according to its annual 10-K filing Oct. 27.
Late Payments
The government review said the company repaid government money not that it failed to
repay the said Charles co-chief executive officer and
on a conference call yesterday with investors and analysts.
He said the company has introduced a pilot assessment program of potential skills
to best determine which are most likely to succeed in its programs. Apollo has also
introduced a student debt calculator to help potential enrollees understand what they can
safely the company said.
The average annual tuition is about to depending on courses
taken and according to the Phoenix Web site.
The Education Department conducted its review of the University of Phoenix in February
Apollo said in the statement.
If an audit or program review concludes an institution made late refunds of financial aid
money to 5 percent or more of the students in the the institution must submit an
irrevocable letter of credit equal to 25 percent of the total dollar amount of Title IV
refunds paid by the institution in the previous fiscal according to the Education
Department. For this would amount to about $125 which would be posted by
Jan. the company said.
2
From: Wolff, Russell
Sent:
To:
Tuesday, December 08, 2009 10:17 AM
Woodward, Jennifer
Subject: FW: article on the proposed elimination of the incentive comp safe harbors
Sweet.
-----Origi nal Message-----
From: Bob
Sent: December 2009 8:35 PM
To: Russell
Cc: Jennifer
Subject: RE: article on the proposed elimination of the incentive comp safe harbors
Thanks for the encouragement.
From: Russell
Sent: December 2009 3:11 PM
To: Bob
Cc: Jennifer
Subject: FW: article on the proposed elimination of the incentive comp safe harbors
Bob:
You may well have seen this if it is excellent. we back
down-you certainly know where we/OGC stand on this issue.
Russ
http://higheredwatch.newamerica.net/blogmain
At Long Department of Education Puts the Interests of Students
First<http://higheredwatch. newamerica.net/blogposts/2009/at_long_last_the_department_of_educa
tion_takes_a_stand_to_safeguard_students -24548>
* By
* Stephen Burd
December 2009
At Higher Ed we have repeatedly called on federal policymakers to strengthen
regulations
<http://higheredwatch . newamerica.net/blogs/education_policy/2007/11/easing_restrictions_trade
_schools> that aim to prevent unscrupulous for-profit col l eges and trade schools from taking
advantage of financially needy students. Our have gone largely unheeded as
under both Republican and Democratic has continued to weaken these
rules<http://higheredwatch.newamerica.net/blogposts/2008/our_biggest_disappointments_with_fin
al_higher_ed_bill-19290>. At the same the Department of Education has long coddled the
for-profit higher education sector by continual l y turning a blind eye to widespread
allegations of fraud and abuse at some of the largest chains of proprietary school s.
But this the Obama administration let the sector in no uncertain that
those days are over.
3
On MondayJ the Department of Education released preliminary regulatory proposals
<http://www.ed.gov/policy/highered/reg/hearulemaking/2009/integrity-session2-issues.pdf> that
aim to strengthen the integrity of the federal student aid programs and prevent unscrupulous
for-profit colleges and trade schools from taking advantage of the low-income and working-
class students they tend to enroll. A top goal for the Obama administration is to stop these
institutions from deliberately recruiting and admitting unqualified studentsJ who end up
taking on huge amounts of debt for training from which they are unlikely to benefit.
The most significant of these preliminary proposals is one that Higher Ed Watch has long
called for
<http://higheredwatch.newamerica.net/blogposts/2009/rewriting_the_rules_on_trade_schools_to_b
etter_safeguard_students-19140> -- reversing changes that the Bush administration made to the
Department of EducationJs regulations enforcing a federal law barring colleges from
compensating recruiters based on their success in enrolling students.
As we have previously
reported<http://higheredwatch.newamerica.net/blogposts/2008/memo_to_education_department_rewr
ite_the_rules_on_trade_schools-19256>J Congress in 1992 added a provision to the Higher
Education Act prohibiting colleges from giving aany commissionJ bonusJ or other incentive
payment based directly or indirectly on success in securing enrollments to admissions
officers. The ban on incentive compensation for college recruiters was included as part of a
broader effort by lawmakers to crack down on fly-by-night trade schools that had been set up
to reap profits from the Title IV federal student aid programs. With reports rampant that
trade schools were enrolling unqualified low-income individuals simply to get access to Title
IV fundsJ policymakers believed it was important to bar postsecondary-education institutions
from paying recruiters on the basis of how many students they enrolled.
A decade laterJ top Education Department officials with ties to the for-profit sector
<http://chronicle.com/article/For-Profit-Colleges-Praise-a/13510> set out to weaken this
prohibition. In November 2002J the Department issued new regulations that created 12 ((safe
harbors <http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=2002_register&docid=02-
27627-filed> for colleges that wished to provide incentive payments to their admissions
employees. The agency took this action over the objections of a negotiated rulemaking panel
made up of college officialsJ advocates for studentsJ and consumer groups that had been
assembled to consider the rule changes and of the two main national organizations
representing college admissions officers (see
here<http://www.newamerica.net/files/AACRAO.pdf> and
here<http://www.newamerica.net/blog/files/NACAC%20Comments.pdf>).
Among other thingsJ the revised rules allowed colleges to adjust the annual or hourly wages
of recruiters up to twice a yearJ as long as the adjustment was ((not based solely on the
number of students recruitedJ admitted enrolledJ or awar ded financial aid [emphasis added];
and to provide commission-based recruiting for non-Title IV programs at institutions
participating in the federal student aid programs. These exemptions clearly violate both the
spirit and the letter of the law barring commission-based compensation. The net effect of
adding these safe harbors was to allow collegesJ particularly for-profit onesJ to continue to
engage in the type of predatory recruiting practices that the law expressly prohibits.
In factJ in the years since the ((safe harbors were addedJ some of the largest publicly
traded for -profit higher education companies have been charged with engaging in misleading
recruiting and admission tactics <http://www.sfweekly.com/2007-06-06/news/burnt-chefs/> to
inflate their enrollment numbers. In 2004J for exampleJ the Department reached a $9.8 million
settlement agreement with the University of Phoenix after the agency concluded that the
largest chain of proprietary schools had knowingly violated the incentive compensation ban.
The university is now in negotiations to settle <http://phx.corporate-
ir.net/phoenix.zhtml?c=79624&p=irol-newsArticle&ID=1347031&highlight=> a False Claims lawsuit
4
<http://www.kroplaw.com/uop/Second.Amended.Complaint.pdf> over allegations by former
recruiters who say they were compensated solely on their success in enrolling students.
Under the Department of EducationJs new preliminary regulatory proposalsJ all 12 safe harbors
would be eliminated. In off ering this recommendationJ the Education Department clearly
acknowledges that the regul atory changes that the agencyJs f ormer l eaders made to the
incentive compensation ban run counter to the underlying law they are meant to enforce. ((The
Department bel ieves that t he specific language of the statute is cl earJ and that the
elimination of all of the regulatory (safe harborsJ would best serve to effectuate
Congressional intentJJJ agency officials wrote in a preamble to the prel iminary draft
proposals . <http://www.ed.gov/policy/highered/reg/hearul emaking/2009/integrity-session2-
issues.pdf>
The DepartmentJs leaders also recognize that the rule changes -- particularly the one
allowing schools to provide incentive compensation to recruiters as long as the payments are
not based sol el y on their success in enrolling students - - have opened the door to fraud and
abuse. ((This (safe harborJ has led to allegations in which an institution concedes that its
compensation structure includes consideration of the number of enrolled studentsJ but avers
that it is not solely based upon such numbersJJJ Department officials wrote. uin some of these
instancesJ the substantial weight of the evidence has suggested that the other factors
purportedly analyzed are not trul y consideredJ and thatJ in real ityJ the institution based
salaries exclusively upon the number of students enrolled.))
The preliminary draft proposal s now go to a negotiated rul e-making panel
<http://www. ed.gov/policy/highered/reg/hearulemaking/2009/2009-2/team-one- negotiators.pdf>
that the Department has convened to help revise the regul ations. The panel J which is made up
of non- profit and for -profit college leadersJ student advocacy groupsJ and consumer watchdog
groupsJ will debate the agencyJs recommendations and suggest al ternatives. If the group does
not reach consensus on the proposal s -- which seems likely in this case
<http://www. insidehighered.com/news/2009/12/01/rules> -- the Department will be free to
propose whatever it wishes.
InevitablyJ some members of the negotiating panel will try to chip away at these proposals.
We would hopeJ and fully expectJ the Obama administration to stand tough - - because the
DepartmentJs new leaders recognize that their job is to safeguard students from unscrupulous
schools and protect the integrity of the student aid programsJ rather than continuing to
coddle the for-profit higher education industry.
5
From:
Sent:
To:
Cc:
Subject:
Bob:
Wolff, Russell
Monday, December 07, 2009 3:12PM
Shireman, Bob
Woodward, Jennifer
FW: article on the proposed elimination of the incentive comp safe harbors
You may well have seen this article, but, if not, it is excellent. Hopefull y, we won' t back down- you certainly know
where we/OGC stand on this issue.
Russ
http: //higheredwatch.newamerica.net/blogmain
At Long Last, Department of Education Puts the Interests of Students
First
By
Stephen Burd
December 3, 2009
At Higher Ed Watch, we have repeatedly called on federal policymakers to strengthen regulations that aim to
prevent unscrupulous for-profit colleges and trade schools from taking advantage of financially needy students.
Our calls, however, have gone largely unheeded as Congress, under both Republi can and Democratic
leadership, has conti nued to weaken these rules. At the same time, the Department of Education has long
coddled the for-profit higher education sector by continually turning a blind eye to widespread allegations of
fraud and abuse at some of the nation's largest chains of proprietary schools.
But this week, the Obama administration let the sector know, in no uncertain terms, that those days are over.
On Monday, the Department of Education released preliminary regulatory proposals that aim to strengthen the
integrity of the federal student aid programs and prevent unscrupulous for-profit colleges and trade schools
from taking advantage of the low-income and working-class students they tend to enroll. A top goal for the
Obama administration is to stop these institutions from deliberately recruiting and admitting unqualified
students, who end up taking on huge amounts of debt for training from which they are unlikely to benefit.
The most significant of these preliminary proposals is one that Higher Ed Watch has long called for-- reversing
changes that the Bush administration made to the Department of Education' s regulati ons enforcing a federal law
barring colleges from compensating recruiters based on their success in enrolling students.
As we have previously reported, Congress in 1992 added a provision to the Higher Education Act prohibiting
colleges from giving "any commission, bonus, or other incentive payment based directly or indirectly on
6
success in securing enrollments" to admissions officers. The ban on incentive compensation for college
recruiters was included as part of a broader effort by lawmakers to crack down on fly-by-night trade schools
that had been set up to reap profits from the Title IV federal student aid programs. With reports rampant that
trade schools were enrolling unqualified low-income individuals simply to get access to Title IV funds,
policymakers believed it was important to bar postsecondary-education institutions from paying recruiters on
the basis of how many students they enrolled.
A decade later, top Education Department officials with ties to the for-profit sector set out to weaken this
prohibition. In November 2002, the Department issued new regulations that created 12 "safe harbors" for
colleges that wished to provide incentive payments to their admissions employees. The agency took this action
over the objections of a negotiated rulemaking panel made up of college officials, advocates for students, and
consumer groups that had been assembled to consider the rule changes and of the two main national
organizations representing college admissions officers (see here and here).
Among other things, the revised rules allowed colleges to adjust the annual or hourly wages of recruiters up to
twice a year, as long as the adjustment was "not based solely on the number of students recruited, admitted
enrolled, or awarded financial aid" [emphasis a d d e d ] ~ and to provide commission-based recruiting for non-Title
IV programs at institutions participating in the federal student aid programs. These exemptions clearly violate
both the spirit and the letter of the law barring commission-based compensation. The net effect of adding these
safe harbors was to allow colleges, particularly for-profit ones, to continue to engage in the type of predatory
recruiting practices that the law expressly prohibits.
In fact, in the years since the "safe harbors" were added, some of the largest publicly traded for-profit higher
education companies have been charged with engaging in misleading recruiting and admission tactics to inflate
their enrollment numbers. In 2004, for example, the Department reached a $9.8 million settlement agreement
with the University of Phoenix after the agency concluded that the largest chain of proprietary schools had
knowingly violated the incentive compensation ban. The university is now in negotiations to settle a False
Claims lawsuit over allegations by former recruiters who say they were compensated solely on their success in
enrolling students.
Under the Department ofEducation's new preliminary regulatory proposals, all 12 safe harbors would be
eliminated. In offering this recommendation, the Education Department clearly acknowledges that the
regulatory changes that the agency' s former leaders made to the incentive compensation ban run counter to the
underlying law they are meant to enforce. "The Department believes that the specific language of the statute is
clear, and that the elimination of all ofthe regulatory ' safe harbors' would best serve to effectuate
Congressional intent," agency officials wrote in a preamble to the preliminary draft proposals.
The Department' s leaders also recognize that the rule changes-- particularly the one allowing schools to
provide incentive compensation to recruiters as long as the payments are not based solely on their success in
enrolling students-- have opened the door to fraud and abuse. "This ' safe harbor' has led to allegations in which
an institution concedes that its compensation structure includes consideration of the number of enrolled
students, but avers that it is not solely based upon such numbers," Department officials wrote. " In some of these
instances, the substantial weight of the evidence has suggested that the other factors purportedly analyzed are
not truly considered, and that, in reality, the institution based salaries exclusively upon the number of students
enrolled."
The preliminary draft proposals now go to a negotiated rule-making panel that the Department has convened to
help revise the regulations. The panel, which is made up of non-profit and for-profit college leaders, student
advocacy groups, and consumer watchdog groups, will debate the agency' s recommendations and suggest
alternatives. If the group does not reach consensus on the proposals-- which seems likely in this case-- the
Department will be free to propose whatever it wishes.
7
Inevitably, some members of the negotiating panel will try to chip away at these proposals. We would hope, and
fully expect, the Obama administration to stand tough --because the Department's new leaders recognize that
their job is to safeguard students from unscrupulous schools and protect the integrity of the student aid
programs, rather than continuing to coddle the for-profit higher education industry.
8
From: Wood, Gary
Sent:
To:
Thursday, March 04, 2010 2:04PM
Hurwitz, Hugh
Subject:
Attachments:
FW: News clips for March 4th, 2010
image001 .jpg; image002.gif
Many Direct Loan articles.
Gary
From: Jones, Andrew
Sent: Thursday, March 04, 2010 11:06 AM
To: Newsclips
Subject: News clips for March 4th, 2010
News Clips for March 4, 2010
Today there are fifteen articles for your review
Duncan Outlines Benefits Of Proposed Higher Ed Lending Reforms. Secretary of Education
Arne Duncan wrote in an op-ed for the Buffalo News (3/3) that ED "currently subsidizes student loans
to the tune of $9 billion every year .... President Obama is ready to put an end to that deal." According
to Duncan, "Based on the president's proposal, the House of Representatives has passed the
Student Aid and Fiscal Responsibility Act," and the Senate "is still working on its version of the
legislation .... These changes are an essential part of our plans to expand college access and relieve
student borrowers of an impossible burden of debt."
Letter: Sallie Mae Back's Duncan's Higher Ed Lending Reform Push. John Remondi, vice
chairman and chief financial officer of Sallie Mae, writes in a letter to the Washington Post (3/4),
"Contrary to Education Secretary Arne Duncan's assertions[" Investing in students, not the banks,"
Washington Forum, Feb. 26], Sallie Mae is not lobbying to preserve today's student-loan program. In
fact, our efforts have been focused on supporting the foundation of the president's proposal with a
few enhancements that would preserve jobs and deliver a better program for students, schools and
taxpayers." According to Remondi, "We stand ready to work with Mr. Duncan to seize this 'once in a
generation' opportunity."
USA Today Backs Obama's Proposed Higher Ed Lending Reforms. The USA Today (3/4)
editorializes, "Under a federal program run by banks, Washington buys or guarantees student loans"
and from the "banks' perspective, it's a sweet deal." Thus, when "President Obama proposed ending
this scandal-plagued program, at a savings of $87 billion over 10 years, the banking community was
taken aback .... Cutting out the middleman makes a lot of sense."
Richard Hunt, president of the Consumer Bankers Association, writes in an "opposing view" op-ed
for USA Today (3/4) ''The Obama administration has described passage of the Student Aid and Fiscal
Responsibility Act as a 'no-brainer' and presented arguments to support that conclusion. However.
closer examination of the issues surrounding SAFRA suggests that there is more to this story and
that enactment of the bill in its current form would be a grave mistake." Ultimately, Congress "should
adopt the proposal put forward by the private sector."
9
Eric Hardmeyer, president of the Bank of North Dakota, writes in a letter to the Washington Times
(3/4 ), "I could not agree more with your contention that the Student Aid and Fiscal Responsibility Act
'is a bad idea because it takes away consumer choice' ('Academic malpractice,' Editorials, Feb. 18).
The elimination of the Federal Family Education Loan (FFEL) Program would force all private and
public universities and colleges to use exclusively the Direct Loan Program."
Duncan Calls Education Bill Critical To College Affordability. The Tufts Daily (3/4, Kan) reports,
"Secretary of Education Arne Duncan in a live web chat yesterday highl ighted the importance of
passing the Student Aid and Fiscal Responsibility Act (SAFRA), saying it would have a huge impact
on college affordability ... . Yesterday's chat was open to questions from the publ ic and also featured
Melody Barnes, assistant to the president and director of the Domestic Policy Council."
College Students Rally Over Tuition, Education Quality. USA Today (3/4, Marklein) reports,
"College students on more than 100 campuses nationwide plan walkouts, rallies and other actions
Thursday to protest budget cuts, layoffs and tuition increases, which they say erode quality of
education and limit access. Students in at least 32 states are expected to join the grass-roots
campaign. It has been bubbling up since demonstrations last fall in California, where students, faculty
and unions protested plans for a 32% tuition increase amid the state's fiscal crisis."
Taxes Supporting For-Profit Firms As They Acquire Colleges. Bloomberg News (3/4, Golden)
reports, "ITI Educational Services Inc. paid $20.8 million for debt-ridden Daniel Webster College in
June," and in "return, the company obtained an academic credential that may generate a taxpayer-
funded bonanza worth as much as $1 billion." ED, "which doled out $129 billion in federal financial aid
to students at accredited postsecondary schools in the year ended Sept. 30, is examining whether
these kinds of acquisitions circumvent a federal law that new for-profit colleges can't qualify for
assistance for two years, Deputy Undersecretary of Education Robert Shireman said in a telephone
interview."
Tough Real Estate Market "A Silver Lining" For Overcrowded Colleges. Inside Higher Ed reports
on USA Today's (3/4, Moltz) website, "Community college leaders eyeing institutional expansion have
found a silver lining to the depressed real estate market. Though dwindling state appropriations have
halted new construction on many campuses, burgeoning student enrollments have inspired some
college officials to buy dilapidated storefronts and acquire public property for development." Among
the examples cited in the article is St. Louis Community College in Missouri , which is considering "an
abandoned Circuit City" near one of its campuses. Carla Chance, vice chancellor for finance, said the
former store was "ideal ," since it was relatively inexpensive, and had "a pretty much open floor plan,"
allowing the school to easily redesign the space to suit its needs. Chance said, "The cost of the
acquisition of this property and the renovation will be a third of what we would have spent building a
new building from the ground up."
Chronicle
Duncan Defends Planned Switch to Direct Lending in Appearance Before House Panel
10
By Libby Nelson
Washington
Testifying before the House education committee on Wednesday morning, Education Secretary Arne
Duncan defended the Obama administration's plan to move all colleges to direct lending and said
such a switch could still be accompl ished by July without major glitches.
At the committee hearing on President Obama's proposed education budget for the 2011 fiscal year,
Mr. Duncan dismissed concerns raised by Republ ican members that the switch to direct lending
would be too difficult for colleges to accomplish quickly.
"We understand this transition, and what a big deal it is, and we want to make sure we do this
absolutely smoothly if possible," Mr. Duncan said.
The Student Aid and Fiscal Responsibility Act, which would end bank-based lending to students and
move to 1 00-percent direct lending, in which federal money is lent directly to students, would require
that all colleges switch to direct lending by July 1. The House passed the bill in September, but it has
been stalled in the Senate.
Thousands of colleges have switched to direct lending on their own in the past few years, Mr. Duncan
told the committee in response to several questions. For most institutions, the transition has taken
place in a matter of weeks, he said.
"We've gone from 1,000 universities participating to 2,300 participating, and I don't think you've heard
a peep," he said. "There haven't been any huge stories about lack of service."
Republicans, though, repeatedly questioned the wisdom of switching to direct lending this summer,
citing fears that students would be unable to get their loans in time for fall classes.
Rep. Glenn Thompson Jr. , a Republican of Pennsylvania, argued that the institutions that voluntarily
switched might not represent the direct-lending experience nationally. Large colleges have an easier
time with direct lending than do smaller institutions because they have more resources, he said.
"I think we've cherry-picked, voluntarily, those who are best adapted," Mr. Thompson said. "What sort
of Plan B does the department have in place in case the plans to convert don't go as smoothly as
what you'd like?"
Reiterating that many colleges have already switched successfully, Mr. Duncan said the department
has "Plan A, Plan B, Plan C." But he decl ined to provide details on alternate plans.
"We're really focused on Plan A right now," he said.
Questions on Teacher Training
Mr. Duncan defended the cost of the Obama administration's education budget for 2011 at a separate
hearing on Capitol Hill last week. telling the House Budget Committee that a proposed 7.5-percent
increase in education spending was necessary for long-term economic development. Questions at
Wednesday's hearing, which lasted more than 90 minutes, dealt with policy issues.
11
The questions about student lending were a rare moment in the spotlight for higher education at a
hearing that focused on elementary and secondary education. Many questions tackled the Obama
administration's proposed changes in the Elementary and Secondary Education Act, the federal law
governing precollege education that is now called No Child Left Behind. The act is overdue for
renewal, and although legislation to reauthorize it has not yet been introduced in Congress, the issue
is a top priority for legislators, said the committee's chairman, Rep. George Miller.
"We would really like to get this done this session of Congress," said Mr. Miller, a Democrat of
California.
In response to questions about proposed changes in the act, Mr. Duncan, who has often criticized
schools of education, said colleges and universities should be more focused on providing hands-on
training and should instruct future teachers on how to use data.
He repeated his support for alternative-certification programs, which bypass teachers' colleges to
draw potential teachers from other fields. Some teachers' colleges are skeptical of such programs,
which have become a point of controversy in discussing revisions to the Elementary and Secondary
Education Act.
"I always think these are false dichotomies," he said of the divide between traditional and alternative
certification. "We just need more great teachers coming in."
Grief in the Age of Facebook
Courtesy of Kelsey Butler
After the death of Casey Feldman (right), many of her friends changed their photographs of
themselves on their Facebook profiles to a snapshot of them with Casey. Above, Kelsey Butler's
Facebook photo, with Casey.
El
Courtesy of Kelsey Butler
After the death of Casey Feldman (right), many of her friends changed their photographs of
themselves on their Facebook profiles to a snapshot of them with Casey. Above, Kelsey Butler's
Facebook photo, with Casey.
12
By Elizabeth Stone
On July 17 last year, one of my most promising students died. Her name was Casey Feldman, and
she was crossing a street in a New Jersey resort town on her way to work when a van went barreling
through a stop sign. Her death was a terrible loss for everyone who knew her. Smart and dogged,
whimsical and kind, Casey was the news editor of the The Observer, the campus paper I advise, and
she was going places. She was a finalist for a national college reporting award and had just been
chosen for a prestigious television internship for the fall, a fact she conveyed to me in a midnight text
message, entirely consistent with her all-news-all-the-time mind-set. Two days later her life ended.
I found out about Casey's death the old-fashioned way: in a phone conversation with Kelsey, the
layout editor and Casey's roommate. She'd left a neutral-sounding voice mail the night before, asking
me to call when I got her message, adding, "It's OK if it's late." I didn't retrieve the message till
midnight, so I called the next morning, realizing only later what an extraordinary effort she had made
to keep her voice calm. But my students almost never make phone calls if they can help it, so
Kelsey's message alone should have raised my antenna. She blogs, she tweets, she texts, and she
pings. But voice mail? No.
Paradoxically it was Kelsey's understanding of the viral nature of her generation's communication
preferences that sent her rushing to the phone, and not just to call boomers like me. She didn't want
anyone to learn of Casey's death through Facebook. It was summer, and their friends were scattered,
but Kelsey knew that if even one of Casey's 801 Facebook friends posted the news, it would
immediately spread.
So as Kelsey and her roommates made calls through the night, they monitored Facebook. Within an
hour of Casey's death, the first mourner posted her respects on Casey's Facebook wall , a post that
any of Casey's friends could have seen. By the next morning, Kelsey, in New Jersey, had reached
The Observer's editor in chief in Virginia, and by that evening, the two had reached fellow editors in
California, Missouri , Massachusetts, Texas, and elsewhere-and somehow none of them already
knew.
In the months that followed, I've seen how markedly technology has influenced the conventions of
grieving among my students, offering them solace but also uncertainty. The day after Casey's death,
several editorial-board members changed their individual Facebook profile pictures. Where there had
been photos of Brent, of Kelsey, of Kate, now there were photos of Casey and Brent, Casey and
Kelsey, Casey and Kate.
Now that Casey was gone, she was virtually everywhere. I asked one of my students why she'd
changed her profile photo. "It was spontaneous," she said. "Once one person did it, we all joined in."
Another student, who had friends at Virginia Tech when, in 2007, a gunman killed 32 people, said
that's when she first saw the practice of posting Facebook profile photos of oneself with the person
being mourned.
Within several days of Casey's death, a Facebook group was created called "In Loving Memory of
Casey Feldman," which ran parallel to the wake and funeral planned by Casey's family. Dozens wrote
on that group's wall , but Casey's own wall was the more natural gathering place, where the
comments were more colloquial and addressed to her: "casey im speechless for words right now,"
wrote one friend. " i cant believe that just yest i txted you and now your gone ... i miss you soo much.
rest in peace."
13
Though we all live atomized lives, memorial services let us know the dead with more dimension than
we may have known them during their lifetimes. In the responses of her friends, I was struck by how
much I hadn't known about Casey-her equestrian skill, her love of animals, her interest in
photography, her acting talent, her penchant for creating her own slang ("Don't be a cow"), and her
curiosity-so intense that her friends affectionately called her a "stalker."
This new, uncharted form of grieving raises new questions. Traditional mourning is governed by
conventions. But in the age of Facebook, with selfhood publicly represented via comments and
uploaded photos, was it OK for her friends to display joy or exuberance online? Some weren't sure.
Six weeks after Casey's death, one student who had posted a shot of herself with Casey wondered
aloud when it was all right to post a different photo. Was there a right time? There were no
conventions to help her. And would she be judged if she removed her mourning photo before most
others did?
As it turns out, Facebook has a "memorializing" policy in regard to the pages of those who have died.
That policy came into being in 2005, when a good friend and co-worker of Max Kelly, a Facebook
employee, was killed in a bicycle accident. As Kelly wrote in a Facebook blog post last October, "The
question soon came up: What do we do about his Facebook profile? We had never really thought
about this before in such a personal way. How do you deal with an interaction with someone who is
no longer able to log on? When someone leaves us, they don't leave our memories or our social
network. To reflect that reality, we created the idea of 'memorialized' profiles as a place where people
can save and share their memories of those who've passed."
Casey's Facebook page is now memorialized. Her own postings and lists of interests have been
removed, and the page is visible only to her Facebook friends. (I thank Kelsey Butler for making it
possible for me to gain access to it.) Eight months after her death, her friends are still posting on her
wall, not to "share their memories" but to write to her, acknowledging her absence but maintaining
their ties to her-exactly the stance that contemporary grief theorists recommend. To me, that seems
preferable to Freud's prescription, in "Mourning and Melancholia," that we should detach from the
dead. Quite a few of Casey's friends wished her a merry Christmas, and on the 17th of every month
so far, the postings spike. Some share dreams they've had about her, or post a detail of interest. "I
had juice box wine recently," wrote one. "I thought of you the whole t ime :( Miss you girl!" From
another: "i miss you. the new lady gaga cd came out, and if i had one wish in the world it would be
that you could be singing (more like screaming) along with me in my passenger seat like old times."
It was against the natural order for Casey to die at 21, and her death still reverberates among her
roommates and fellow editors. I was privileged to know Casey, and though I knew her deeply in
certain ways, I wonder-l'm not sure, but I wonder-if I should have known her better. I do know,
however, that she would have done a terrific trend piece on "Grief in the Age of Facebook."
Elizabeth Stone is a professor of English, communication, and media studies at Fordham University.
She is the author of the memoir A Boy I Once Knew: What a Teacher Learned From Her Student
(Algonquin, 2002).
Younger Professors Say a Successful Career Should Not Require Long Hours
By Robin Wilson
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In conversations with a dozen faculty members, researchers with a project on work-life issues run by
Harvard University have found that "Generation X" professors value efficiency over "face time" and
believe that quality is more important than quantity in academic work.
The Collaborative on Academic Careers in Higher Education, a long-term project run by Harvard's
Graduate School of Education, conducted interviews with 12 professors born between 1964 and 1980
on three campuses in the mid-Atlantic: a liberal-arts college, a private master's-degree-granting
university, and a large public institution. Neither the interview subjects nor the institutions are named
in the report.
The Generation X professors said they did not want to be holed up in their campus offices until11
p.m. , and talked about the "diminishing returns" of working too many hours. The professors perceive
their attitudes to be different from those of older faculty members, who they see as being completely
devoted to their jobs and unable to say no to more work.
"My biggest concern ... is that I want to be able to be good at my job but work 8:00 to 6:00 five days a
week," one Gen X faculty member told the interviewers. "I want to succeed, but I don't want to work
18 hours a day."
The report, "New Challenges, New Priorities: The Experience of Generation X Faculty," is to be
posted today on the project's Web site.
Inside Higher Ed
You Say You Want a Revolution?
March 4, 2010
By Jeff Abernathy
It seems everybody is talking revolution in higher ed these days.
How many times have I read in the higher ed news of the coming revolution in classroom instruction,
in the major, in the tenure system, in governance?
Google "higher education revolution" and you find radical reform rising in every direction. Many are
sparked by the billions state systems are losing as our economy lurches out of the tank, others by the
increasing commodification of the college degree. Some promise to "transform" the American
university as they have transformed-- egad!-- the American newspaper. New models of for-profit
education promise a revolution in the higher education business model that is already threatening the
viability of traditional colleges across the country.
But I can't help wondering if we've spirited all our revolutionary rhetoric for another day at the office.
We tend to talk ourselves right past revolutions in higher education. Our burning impulse to revitalize
learning often concludes with a return to the status quo: we end up arguing, say, over our respective
roles in shared governance, or over the turf we'd have to give up for genuine improvement in learning.
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We can do better.
At a recent conference, I had a glimpse into how the real transformation might unfold. The Teagle
Foundation brought together professors, administrators and researchers from across the country to
discuss with its board members key questions the foundation has been addressing in recent years:
How might we make systematic improvements in student learning?
What evidence is there that we're using what we know about student learning to reform
academe?
These, of course, were the very same questions asked by the ill-fated Spellings Commission. Teagle
has found success by engaging the strengths of the academy -- and especially the talents and
creativity of faculty--by supporting liberal arts college in piloting solutions to the challenges before
academe. In doing so, they have started transformative efforts that will deepen student learning while
also balancing resources.
With the public university system in crisis -- Clark Kerr's master plan for California has been set adrift
along with the strategies for renewal in state after state-- a focus on liberal arts colleges could seem
to some like a boutique project. The Teagle Foundation's great insight has been that the nation's
liberal arts colleges remain a bellwether for the health of the academy and that small colleges have a
great opportunity to model what the 21st century higher education might become.
Teagle has funded dozens of collaborative efforts at liberal arts colleges over the past six years
supporting faculty-driven, ground-up assessment projects of student learning outcomes at colleges
and universities across the country.
The work that colleges are doing in these Teagle pilots tests the basic assumptions of a college
education. Some have examined the meaning and value of general education, exploring radical
revision of the ways in which general education might come to be embedded in helping students to
think about the ways they will live their lives. One project brought four colleges together to assess
how effectively undergraduate students acquire and refine the spiritual values that lie at the heart of
their institutional missions. Another explores effective models of community-based learning efforts at
three prominent colleges.
Such work aims to deepen student learning and growth at colleges across the country. As
importantly, it will help small colleges to think about ways to distinguish themselves in a landscape
that increasingly sees no difference between a liberal arts college degree and a degree from, say, the
University of Phoenix. Liberal arts colleges must, to use Robert Zemsky's phrase, be "market-smart
and mission-centered," and the pilots that Teagle has funded in recent years point us toward
solutions to drifting missions and to struggling finances alike.
At Augustana College, we are taking seriously the Teagle Foundation's charge to find ways to use
what we know about student learning for reform. Working in a Teagle-funded collaborative of seven
colleges across the Midwest-- Alma, Augustana, Illinois Wesleyan, Luther, Gustavus Adolphus,
Washington and Jefferson, and Wittenberg-- over the past five years, we have begun to question the
1 00-year-old credit model system that is at the heart of the American baccalaureate. Our consortium
of colleges has begun to ask whether we can still justify the existence of a system that was brought
into being mostly to serve the needs of our business offices.
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Will federal pressure for transferability of credit only make more secure a system that is now straining
under the weight of new understanding of learning and the new pedagogies that follow? In an era
when we ask faculty to be deeply engaged with students through interdisciplinary education,
undergraduate research, international study, and other high impact practices, can we continue to
justify a credit system that has remained unchanged for a century? We are questioning whether the
course unit as now constituted- that three- or four-hour sl iver of a college degree or the correlating
seat time - is the best means of measuring student learning.
My colleagues at Augustana and I have begun other pilots that will explore the other hard questions
before our college, and all colleges: how will we make better use of vital resources while
demonstrating the value of a liberal education to parents, employers, and graduate schools?
We have developed a series of experiments that may answer the question. Our faculty have created
a senior capstone program -- Senior Inquiry -- by using a backward design model to re-envision
nearly every major on campus, ensuring that all Augustana students will have the sort of hands-on,
experiential learning opportunity that will demonstrate their skills to employers and graduate schools
alike (even as it provides us with a great chance to evaluate all they have done in four years here).
We have redefined scholarship in the Boyer model , embracing the scholarship of teaching and
learning. We are piloting new partnerships with universities, community colleges and high schools; we
are asking how technology might deepen the advantages of traditional classroom learning models.
And we have built our newest program-- Augie Choice-- around the idea that experiential learning--
through research, international study and internships -- ought to be the heart of a liberal arts
education.
We don't yet know where all of these experiments will lead us. But, in our 150th year at Augustana,
we have learned from the Teagle Foundation that pilots may help us to ensure that we will thrive for
the next 150 years.
That, I'm certain, is revolution enough.
Jeff Abernathy is vice president and dean of the college at Augustana College, in Illinois. This
summer, he will become president of Alma College, in Michigan.
Medical Schools Expand -- and Contract
March 4, 2010
In the span of a week in September 2008, the "rubber band" that held together the University of Utah
School of Medicine broke.
First, the federal government cut $10 million in Medicaid funding to the university's hospital. Then,
days later, the state Legislature eliminated $2.5 mill ion in support. In all , the medical school lost 40
percent of its education budget nearly instantly, with no revenue-creating solution in sight.
"We were a rubber band stretched to the extreme," says David Bjorkman, the school' s dean. "We
were already spending every dollar we had, maximally cross-subsidizing with clinical revenue from
our health system." After months of lobbying and left with no other choice, the school shrunk the size
of its fall 2009 entering class to 82 from 102. While the rest of the university raised tuition by 1 0
percent, medical school tuition went up 15 percent.
17
Though Utah's medical school has seen more dramatic cuts than most, the economic realities of a
prolonged recession are forcing medical schools across the United States to reduce the number of
seats available for new students or to curtail expansion efforts initiated during better economic times,
even as demand far outstrips supply in many experts' projections on the size of the future physician
work force.
State higher education budget cuts mean that Indiana University School of Medicine's entering class
this fall will be 13 percent smaller than last fall' s. One scenario for higher education cuts in Nevada
would include shutting down the University of Nevada School of Medicine, the state's only medical
school. Development of a new medical school at the University of California at Merced has stalled.
And more cuts could be on the way.
Edward S. Salsberg, director of the Association of American Medical Colleges' Center for Workforce
Studies, says he has seen some evidence of medical schools taking in fewer first-year students or
slowing their planned growth rates. "It's up to the individual schools to make decisions that work for
them," he says. Public medical schools "have to go to their state legislatures to get support and we
know state budgets aren't in good condition in most states."
For the medical establishment, tight budgets and enrollment cuts couldn't have come at a worse time.
The Council on Graduate Medical Education estimated in 2005 that the United States would face a
shortage of 85,000 to 96,000 physicians by 2020 unless medical schools were able to increase the
number of new M.D.'s they graduate each year by several thousand. Other groups, too, project a
physician shortage or at least the need to draw physicians to underserved regions and toward
practicing high-demand specialties such as internal medicine and geriatrics.
In June 2006, the AAMC responded by undertaking an effort to expand medical school enrollments
by 30 percent nationwide by 2015 (after initially suggesting 15 percent growth). To meet the goal,
U.S. medical schools would need to enroll 21,434 first year students in 2015 --nearly 5,000 more
than they did in 2002, when first-year enrollments totaled 16,488.
The AAMC envisioned that the creation of new medical schools and the expansion of existing ones
would provide additional slots that, in all , would total close to 20,000 across all four years of traditional
allopathic medical school.
Universities and hospital systems heeded the call. Dozens initiated or stepped up efforts to expand
their medical schools, adding seats to their first-year classes and opening branch campuses to
broaden their geographical reach. Others began laying the groundwork for new medical schools that
would at once build institutional prestige and contribute to the larger national goal.
By last fall, enrollments had grown 11 .5 percent over 2002 levels, with 18,390 students in the entering
class. Close to 200 of those seats were in medical schools that opened in 2009: Commonwealth
Medical College in Scranton, Pa. ; Florida International University College of Medicine in Miami ; Texas
Tech University Health Sciences Center's PaulL. Foster School of Medicine in El Paso; and the
University of Central Florida College of Medicine in Orlando.
Before the AAMC began its expansion efforts, it estimated that medical schools would add 919 new
first-year seats between the fall of 2005 and the fall of 2010. Instead, between the creation of new
schools and the expansion of existing ones, close to 1 ,400 spots were created by the fall of 2009.
"We're encouraged that schools and communities are listening to our recommendations," Salsberg
says. "We're encouraged because we do think the goal is happening."
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But economic realities are clearly having an effect on just how quickly medical schools are being
created and expanding. And even in good economic times, it might be a stretch to add 3,000 seats in
half a dozen years.
Even if expansion continues at its current rate for the next six entering classes, U.S. medical schools
won't reach the goal on time, Salsberg says. "We don't think that we' ll make it by 2015," he says. "We
recommended, but it' s up to the schools to make the expansion happen .... We're making progress,
just not as much as we would have liked. "
Salsberg anticipates that there will be 20 or 21 percent more first-year seats in American medical
schools in 2014 than there were in 2002. The degree to which future enrollment cuts may erode those
numbers -- even with growth elsewhere - is unclear.
Sharp Declines for the Hoosiers
The Indiana University School of Medicine had plotted expansion by the AAMC book. After a work
force study of the state' s physicians "confirmed that the 30 percent national estimate was true in
Indiana as well ," says Peter Nalin, interim executive associate dean for educational affairs, the school
set its sights on expanding its entering class size with the goal of growing enrollment 30 percent by
2013.
"The rationale has always been that there is a need for family physicians, primary care physicians,
physicians in underserved areas," he says. "We need to respond to an aging population and
increasing demand for health care overall in society."
To expand the first-year class from 280 students in the fall of 2006 to 364 in 2013, administrators
planned to add 14 more seats to each of the school's entering classes. Through August 2009, the
plan was right on track, with 322 students starting at the medical school. The school was promised $5
million in state appropriations to pay for the expansion
When the state whittled that $5 million down to $3 million in its October estimate of the 2010 budget,
the medical school responded by extending its expansion plan to reach the 30 percent goal. The
school would've added six new seats in 2010 and eventually reached the goal of 364 first-year seats
by 2015.
Then the budget picture got worse.
In December, Gov. Mitch Daniels cut funding to the state's public colleges and universities by $150
million, more than a third of which would be taken from Indiana University's state appropriations. By
then, Michael McRobbie, the university's president, had already made one-time cuts of $79 million
and recurring cuts totaling $98 million annually.
With what amounted to a $59 million hole in state funding, McRobbie decided to trim $7 million from
the medical school's budget, a choice that a spokesman told the Indianapolis Star was simply part of
distributing the pain throughout the university. "Every single school and every department, even the
president's office, is cutting a proportional amount of their budget," the spokesman said. "No one was
excluded. Not one dean has been spared the pain of having to cut something. "
Daniels' office issued a statement deflecting blame. "The university made the decision about how to
implement the reduction. We don't have any comment about why IU decided this was the best
direction to take among the many areas it likely reviewed."
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On its own, the $7 million in cuts might have slowed or even stopped the medical school' s expansion
effort. But, when coupled with the realization that the $5 million that had dwindled to $3 million would
not materialize at all , the blow was even blunter, Nalin says. In all , the school's state funding would be
$12 million below what administrators had projected for the 2010-11 academic year.
So, not only did the medical school lose its funding for future expansion but it also lost the financial
capacity to sustain the growth that had taken place in the last few years. The class that enters in
August will probably total 280, Nalin says, the same that it was in pre-expansion 2006. "Our goal is
ultimately to respond to that target of 30 percent-- it remains our vision of where we'd like to be," he
says. "However, we must roll it back based on the current financial situation and hope that we'll
eventually be able to achieve that 30 percent."
Nalin says the school hopes to restart its expansion efforts (which, at first, would be efforts to restore
classes to the size they reached last fall) in the next year or two. In a worst-case scenario, he'd like to
see class size expand again by 2014. Any growth, though, depends on the state. "We respect the fact
that if there aren't state revenues then appropriated monies can't be realized. But we hope those
revenues will return."
New Medical Schools
In raw numbers, the greatest contribution to the expansion is coming from new medical schools.
Schools that were already building their facilities or applying for accreditation by the Liaison
Committee on Medical Education have not lost momentum.
Besides the four medical schools that took their first students last fall , eight more have already started
the official accreditation process. Virginia Tech's Carilion School of Medicine is screening applicants
this spring and will open in the fall with 42 first-year students. The Hofstra University School of
Medicine, which is affiliated with the North Shore-Long Island Jewish Health System, aims to open in
2012.
Candice Chen, co-principal investigator of the Medical Education Futures Study at the George
Washington University School of Public Health and Health Services, says she hasn't seen state cuts
and lagging philanthropy doing too much damage-- so far, anyway. "We haven't seen a slowdown in
new schools saying 'We were getting close to opening but now we're not,' " she says. "You never
know if there would've been more right now if the economy was doing better."
But some medical schools that were early on in the planning stages have put their plans on hold until
local economies and state budgets loosen up a bit.
The University of California at Merced, which opened in 2005, was well on its way to planning a
medical school. A consultant had conducted a feasibility study, the UC Board of Regents had
approved the continuation of the planning process, and the university' s chancellor had appointed a
vice provost for health sciences to oversee the school' s development. Administrators predicted that
the school could take its first students in the fall of 2013.
All of that progress had happened by mid-Sept. 2008. Then the financial sky fell , across the nation
and in California. Since then, says Patti lstas, a spokeswoman for Merced, the ambitions have
become far less grandiose and immediate. "All these changes in the economy and the state budget
have slowed things down," she says. "We're still in the infancy stages. It's too early to pinpoint when
the school might be able to open. "
20
Though Merced is "still hoping to open a fully accredited school of our own," the university focused on
"lots of concurrent activities while waiting for the funding to be allocated, " says lstas.
A team at Merced is working to create a branch campus of another UC medical school-- possibly
Davis or San Francisco- that could provide basic science instruction for the first two years of medical
school. Faculty and administrators are also building up the university's health-related research
operations that could provide some of the foundation needed to fund and operate a medical school.
The economy has touched those efforts, too, though, lstas says. "It has slowed things down."
More than 300 miles to the south, in Riverside, a new UC medical school has already applied for
accreditation by the LCME and plans to enroll 50 first-year students in the fall of 2012. The difference
between the two projects: the timing.
Riverside was ahead of Merced in first considering its medical school --faculty started debating the
possibility of establishing a school in 2003 -- and continued to be ahead of Merced as the planning
process progressed. Perhaps fortuitously (as lstas puts it, "timing is everything"), Riverside got final
approval by the UC Board of Regents in July 2008, just before most people came to see just what a
bad state the economy was in.
Before the end of 2008, Riverside secured some state funding, as well as the support of several
foundations and local medical centers. Development continued and fortune continued to be in the
school' s favor. Construction began on a new health science building and the university made plans to
renovate existing instructional buildings.
In December, President Obama signed an appropriations bill for the U.S. Department of Health and
Human Services that included an earmark of $4 million to support construction at Riverside.
G. Richard Olds, who became the school's founding dean in February. "I wouldn't have taken this job
if I thought this wasn't going to happen, " he says. "When no new programs were being added to the
UC budget, the president still put our medical school into the budget. It was a bold thing to do and
makes it clear that UC is serious about starting this medical school."
Cutting Class Size, But Not Budgets
Though the Pritzker School of Medicine at the University of Chicago isn't facing big budget cuts, its
leaders decided more than two years ago that the best way to serve students and the community was
to shrink its enrollment. After welcoming entering classes of 104 students for more than three
decades, Pritzker had a first-year class of just 88 in the fall of 2009.
The 15 percent drop in class size is an effort "to more powerfully fund each of the students who enroll
here," says Holly Humphrey, the school' s dean. The goal, she says, is to produce better-trained
doctors who won't face financial barriers in choosing to practice in underserved areas or low-paying--
but high need --fields.
"Without any new big donations, we became convinced that reducing class size would be the best
way to ... increase supervision and feedback, redirect learning and impact performance in a way that
would truly benefit our students, " she says.
One new program funded by the savings that came with the enrollment cut is Repayment for
Education to Alumni in Community Health (REACH), an effort to attract Pritzker graduates who have
just completed their residencies to work in the underserved South Side of Chicago. In addition to their
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salaries, graduates in the program will be paid $40,000 a year for up to four years to help ease the
burden of loan repayments. By reducing the debt burden on alumni , Humphrey says, Chicago hopes
to see more graduates take jobs that strategically target areas in need of more physicians.
The average American medical student graduates with $140,000 in debt, but Humphrey hopes that
by reducing class size, Pritzker will put its graduates well below that average. "One of the questions
that isn't often asked about expanding medical school class size is whether you're also expanding
financial aid dollars," she says. "And the answer is often No."
Though this year' s first-year class has 16 fewer students than last year' s, the class is still receiving
the same total dollar amount in institutional aid. "We're taking the same number of scholarship dollars
and applying it to a smaller group, Humphrey says. "Short of getting a philanthropist to underwrite a
big chunk of aid -- without considering whether or not you can sustain that over time -- this was the
best way for us to try to reduce debt for the largest number of our students."
After announcing the class size reduction, Humphrey says, the school got "lots of questions--
medicine and health care in general are accustomed to growing, expanding and getting bigger, so
why on earth would we make something smaller rather than bigger?" Her answer: the changes make
sense for the school and students, even if they may on the surface seem to run contrary to AAMC' s
goal and the needs of the nation.
And, if Pritzker can figure out ways to cut costs or boost revenues, "we will expand the class as
quickly as we can," Humphrey says. "But that's going to take us a few years to figure out."
- Jennifer Epstein
'Harnessing America's Wasted Talent'
March 4, 201 0
Peter P. Smith's career in and out of higher education has not followed the straight and narrow.
Amid forays into politics (as a member of Congress and lieutenant governor of Vermont) and
international affairs (at UNESCO), Smith has been a higher education innovator, helping to found the
statewide Community College of Vermont in 1970 and serving for 10 years as founding president of
California State University's Monterey Bay campus, beginning in 1995.
In those jobs and his current one, as senior vice president for academic strategies and development
at Kaplan Higher Education, Smith has pushed existing colleges and universities to better serve the
adults and other students who have been least well served by traditional higher education. In his new
book, Harnessing America's Wasted Talent: A New Ecology of Learning (Jessey-Bass), he argues
that the country needs to reach deeper into its population than it historically has to produce a
sufficient number of educated and skilled workers, and that the thousands of current colleges cannot
do that job.
He responded via e-mail to questions about the book ..
Q. You write that only a third of American ninth graders even take a shot at college, and that
the country can't continue to function effectively, let alone compete economically and
internationally, unless those in the "middle third"-- that is, those who finish high school but
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do not experience college-- get some postsecondary training. What have been the biggest
factors preventing them from doing so until now?
A. The middle third also includes people who have some college experience, but no certificate or
degree. I think of this phenomenon as a "failure to thrive" educationally. Many of the reasons
described in the book - mode of teaching and learning, lack of recognition of transfer credit and
learning done outside of school - contribute.
There is a huge expectations gap. Like the student named Bob, whom I mentioned in the book,
people have been acculturated to believe that college is not for them, an expectation that is reinforced
throughout high school. This ties directly to the lack of personalization and customization in the
traditional model. The real low-hanging fruit here are the estimated one million high school graduates
every year who are qualified but simply don't go to college. So, we have to work on how we offer
post-secondary education to capture this audience. We also have to work on communicating to the
public that people have potential and capacity, and that college is for them.
Q. You argue that the existing higher education system (or, more accurately, "non-system," as
you point out) won't be able to educate that middle third-- that it is both "maxed out" in terms
of capacity and incapable of changing (or unwilling to change) the nature of teaching and
learning to accommodate the different needs of today's learners. Why do the students you're
most worried about hit a "dead end" in our current education system?
A. There is a long list of reasons why students hit a dead end, some of which colleges and
universities cannot control. For example, when I was at California State University, Monterey Bay, we
had to work very hard to keep first-generation Latino students in school because cultural norms called
for them to live at home and work rather than attending college.
The metaphor that I would use to describe this challenge is swimming under water. The longer you
are under water, the more it hurts. And, if your goal is to swim to the other end of the pool , but you
have never known anyone who did it, it is easier to simply climb out of the water and walk away. On
the other hand, if you believe you are meant to swim, it is easier to fight through the pain and reach
your goal.
With first-generation learners, it is critical to connect with them personally, customize the learning to
their needs, offer unwavering support, and respect their personal story and the learning that comes
with it.
Q. An underlying theme of your book is that higher education has essentially failed to
innovate sufficiently. Yet your own career path-- starting two different (and, at their time,
innovative) types of institutions, and now working at a third that is part of a emerging sector
trying new approaches --would seem to challenge that view. How do those square?
A. In the first two cases, I watched as the rest of the field either ignored or explained their success as
an exception. I am frankly astonished that there has never (to my knowledge, anyway) been a
replication of the Community College of Vermont model. Cal State Monterey Bay is a terrific institution
that incorporates several core "best practices" in its operations. But that institution is still subject to
the same constraints that I described in the book. For example, with the current budget crisis in
California, each CSU has faced employee furloughs and student body caps, leaving thousands
without access to higher education. One reason that I chose to come to Kaplan Higher Education
after my time at UNESCO is to experience a culture without these types of constraints.
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At Kaplan Higher Education, we do have some fairly traditional practices, but we also have the
capacity to innovate, develop, and continuously improve. For instance, if we want to implement
diagnostics in the post-enrollment process, we can do so and then evaluate, refine, and improve our
processes. The traditional model lacks this type of nimbleness and flexibility. Without the constraints
inherent in the traditional model , we can model emerging best practices, help define them and, in
effect, help lead the change we seek.
Q. Define the "personal learning" that you think is undervalued/under-recognized by the
current higher education system. And do the current mechanisms that exist to account for
knowledge gained outside the classroom (the Council for Adult and Experiential Learning's
prior learning assessments, and the American Council on Education's military credit system,
for instance) not get at this issue?
A. Students are rarely asked, in depth, what they want from their college education and are almost
never engaged in an ongoing conversation about it with someone who can affect their higher
education experience. Until institutions personally connect the learner with the curriculum and the
college experience, the learner is vulnerable. And the "at risk" learner is always more vulnerable.
Additionally, the older one becomes the more experience one has to compare with what they are
being taught. So, to fail to integrate someone's experience into the curriculum both trivializes and
frustrates them. That's why starting with the assessment of prior learning is such an educationally
important thing to do.
As one of the founding board members of CAEL, I agree wholeheartedly that its prior learning
assessment and other approaches like the ACE military credit system are central to the issue. What
people involved in both of these efforts, and others like them, will tell you is that the credits awarded
are often honored "in the breach. " That's a nice way of saying that they are not honored by other
institutions and, in some cases, by other departments in the institution that awarded them. The
biggest pain point for most of these approaches is that the credit will be included in a transcript, but
not counted towards the degree.
What I am calling for in the book is the mainstreaming of these concepts and the development of a
market that honors credit awarded by accredited institutions as progress towards a degree at other
institutions.
Q. How much is this a credentialing problem? Are we as a society basically under
credentialing (failing to give credentials for knowledge, etc., that isn't now recognized) or over
credentialing (is there too much emphasis, by employers, etc., on credentials, rather than on
the underlying knowledge that Americans have)?
A. Credentialing is part of the problem, but only part of it. As a society, we fail to recognize what
people know. So, if a soldier returning from active duty service has not only courses but also
experiences, why shouldn't those things be acknowledged and included in his degree plan?
Also, as educators, we do not adequately value reflection on the part of the learner. I view reflection
as the process through which the learner distinguishes between their broad experience (in a course
or in life) and what they learned because of it. This is where and when learning is real ized. Employers
want accurate information about the qualifications of people wishing to advance in or enter a
profession. So, while a credential might well be the exponent of that, the learning outcome and a
validated third-party guarantee that the learning occurred will be increasingly important.
24
Q. What are the developments (you call them "game changers") that make you believe the
time is right to create an alternate path to a postsecondary education for these students?
A. You see evidence every day. When AARP solicits proposals for a learning platform for its
members, the balance has shifted. When the Peer-to-Peer University moves into its second "term,"
the balance has shifted. When Straighterline is recognized for its courseware alone, the balance has
shifted. When the global OpencourseWare Consortium gets three million hits a month, the balance
has shifted.
In the book, I devoted a chapter to the "End of Scarcity" and its impact on higher education. It is
difficult to overestimate the significance of this trend. Colleges are built and organized around scarcity
-the expertise of faculty is in short supply, classrooms and labs are limited because they are
expensive, and the authority to offer a course of study is limited. Additionally, reputation is built
around who you exclude as much as it is who you include and who succeeds. In fact, the whole
concept of meritocracy is built on the notion of scarcity because there is not enough room "at the top"
for everyone.
Put this set of assumptions, and the practices that are in place because of them, up against the
current reality. Excellent content is increasingly commodified and available. Time and place are no
longer determinants of when a person can learn. And in the ultimate reversal, the educational
challenge vis a vis the workforce can no longer winnow people out and validate merit. Instead,
employers must help create merit because there are now more jobs that require higher education
than there are people qualified for them. And this is projected to be the case for years to come.
Q. Explain the newfangled institution(s) that you envision-- Colleges for the 21st Century-- as
a potential environment for these students. Do any existing colleges and universities (like
your current employer) qualify? If so, which? If not, who would be likeliest to create them?
A. That is the big question. The reason I developed the characteristics of the Colleges for the 21st
Century (C21 C) and did not suggest a model is that I don't know what it will look like. As Justice
Potter Stewart said when discussing pornography, "I can't define it, but I know it when I see it. "
What won't change, however, are the elements in the higher education teaching-learning value
proposition, although they might be rearranged. At its heart lies the transfer of information, the impact
of that information on the receiver, and the assessment and reflection that assures the transfer is
complete and meets a high standard. All of these things are organized around the human, intellectual,
civic, and economic development of the learner. From a teaching-learning perspective, the focus will
increasingly be on learning outcomes, the standards they reflect, and the process by which they are
employed.
I believe that the services modeled by places like AcademyOne and its founder, David Moldoff, will
change the back office of higher education profoundly, transforming learner mobility from a risk factor
to a fact of life.
And I certainly hope (and expect) that when the list of C21 Cs is first published that Kaplan Higher
Education will be on it. And I believe that many in the market-driven sector will play roles in
developing the concept of the C21 C precisely because we are metric-driven laboratories of
innovation. Having said that, Burck Smith has proven with Straighterline that core change can come
from any direction, not just those in the academy. In a world where learner choice and control is a
driving force; where the learning platform, not the campus, is the basic architecture; and where the
network, not the faculty, defines the process, new organizational structures will develop.
25
-Doug Lederman
Washington Post
Area students will protest higher education tuition hikes
By Jenna Johnson and Daniel de Vise
Washington Post Staff Writer
Thursday, March 4, 201 0; 7:15 AM
Leaders of a California-born protest movement will try to spread their message across the nation
Thursday, with student rallies, panel discussions and other events to express opposition to budget
cuts and tuition hikes at public colleges and universities.
Organizers say they hope the events will dramatize the frustration that has been building as the
recession forces deep cuts in higher education budgets, especially in California, where the fiscal
situation is especially dire. Colleges there have raised tuition sharply, reduced enrollment and cut
faculty pay.
Students in California have declared Thursday as a Day of Action to Defend Public Education. Rallies
are planned for nearly every college and university campus in the state, in addition to several K-12
schools. Organizers said there would be events in 30 states.
"There are student activists all over the country who are looking to California as something to
emulate," said Doug Singsen, 32, a graduate student at the City University of New York who has
helped organize events outside of California. "We want this to be the beginning of a movement that
gets stronger."
At the University of Maryland in College Park, students plan to walk out of classes at noon, meet in
the student union and then march to an academic building. There they plan to occupy the building
while they talk about "hip-hop and education, race and gender in the classroom, the corporate
university, sports and education, and whatever else we want," according to an invitation on a
Facebook site created by organizers.
Organizer Bob Hayes said Maryland students are angry that their tuition dollars are going to pay for
development projects and the salaries of administrators, instead of better instruction.
We feel disconnected from our education," Hayes said. "We're being run by a Fortune 500 company
instead of by a university."
California has long been considered one of the top public higher education systems in the nation, but
drastic decreases in state funding have strained services, sparking protests.
At the University of California, Berkeley, students and faculty members plan to strike today and will
form picket lines at 7 a.m. Unlike picket lines during past protests, when students just walked around
in circles with their signs, the plan is to link arms and aggressively hinder people from entering
campus buildings, said Callie Maidhof, a Berkeley graduate student who is serving as the
movement's spokeswoman.
26
At noon the crowd plans to rally on campus and march five miles to Oakland. Some Oakland teachers
plan to bring their classes to the march, even if that means organizing a ''field trip or impromptu tours
of the neighborhood," Maidhof said. "There's really been a dedication at Berkeley for us to come out
of our ivory tower and go to Oakland," Maidhof said.
Last week a riot erupted at the Berkeley as more than 200 people set fires, shattered windows and
clashed with the six police agencies that were called in. On Monday five students were arrested in
Sacramento for refusing to leave a state assemblyman's office because he wouldn't sign a letter
promising increased financial support. Wednesday morning students broke into the Humanities
building at California State University, Fullerton and barricaded themselves inside for several hours.
Please follow the Post's Education coverage on Facebook. Twitter or our Education and Higher
Education pages. Bookmark them!
Tuition crunch
HOUSTON CHRONCLE
Tuition increases threaten affordable public higher education
March 3, 2010, 7:50PM
The Texas Legislature's ill-considered deregulation of state university tuition in 2003 was a blunder
that just keeps on taking from the state's students and their families.
Because Texas lawmakers subsequently have failed to adequately fund higher education, regents at
the University of Houston and other state systems are caught in a fiscal squeeze. They must choose
between damaging academic quality with layoffs and program cuts or passing along the pain to
students. One exception: Texas Tech imposed a tuition freeze this past year. But for the most part it
is the students who are paying more to shore up Lone Star universities.
Last month University of Houston System regents approved tuition increases, including nearly 4
percent at the central campus, 16.5 percent at its law school , 4.5 percent at UH-Ciear Lake and more
than 5 percent at UH-Downtown. The bill for a 12-hour semester for a resident undergraduate at the
main campus is now $3,483, and at UH-Downtown $2,205.
The current cost of a year of UH law school for residents, just over $21 ,000, will rise above $26,000.
The UH System will raise more than $8 million in additional tuition revenue.
The action provoked a letter to UH Chancellor Renu Khator from Houston state Sen. John Whitmire,
a UH graduate and lawyer. He was most concerned about the UH-Downtown increase, since it is a
gateway for working, older students who may not qualify for student assistance.
"Chancellor, how many of the students at UH-Downtown have you or the Regents met with
personally?" asked Whitmire in his letter. "I know them well, they are my constituents and I know that
many of them are struggling to get by even at current tuition rates."
Whitmire's sentiments were seconded by UH regent and law school graduate Nandita Berry, the lone
trustee to vote against the tuition hike.
27
Chancellor Khator did not answer Whitmire's letter, but a request by the Chronicle brought a response
issued by the UH administration. According to the statement, the university leaders share Whitmire's
concern about families and students, and the board of regents "is committed to meeting its
responsibilities to provide quality higher education in this community. " The statement points out that
UH guarantees free tuition and mandatory fees for four years to incoming in-state freshmen whose
families make below $45,000.
The UH administration and Whitmire are in agreement that state universities desperately need more
funding from the Legislature to reduce their dependence on tuition for revenue.
Right now both universities and their students are victims of state government's misplaced spending
priorities. Until lawmakers increase higher-education funding, continuing tuition raises will restrict
access to our institutions of higher learning at a t ime when our economy demands a highly educated
work force.
Voters should support state legislators on the ballot this year who back affordable higher education
for our young people and older working students.
28
From:
Sent:
To:
Cc:
Subject:
Woodward, Jennifer
Friday, August 20,2010 2:17PM
Kvaal, James; Shireman, Robert
Wolff, Russell
Publicly traded schools continue to fall in the market today, but report another quarter of
historically large profit-making
http://www.marketwatch.com/storv/corinthian-falls-again-on-regulatory-outlook-201 0-08-20?siteid=yhoof
By Steve Gelsi, MarketWatch
NEW YORK (MarketWatch)- Corinthian Colleges Inc. shares fell as much as 18% Friday, retreating as the
company missed Wall Street targets and said it didn't yet know the impact of possible changes in the regulatory
landscape for private-education firms.
U.S. regulators have been taking a closer look at for-profit educators because of claims that the institutions have been
preying on low-income students, setting them up with loans they cannot pay back.
Educating Tomorrow's Ethical Leaders
"We are actively monitoring proposed changes in federal regulation and congressional actions which pertain to private
sector education," the Santa Ana, Calif.-based company said. "Given the information currently available, we are unable to
gauge the full impact of these proposals on our students and the company."
Corinthian Colleges (COCO 4.55, -0.86, -15.83%) dropped 15% to $4.59 at midday, after having set a 52-week low at
$4.42 on an intraday basis. The company's shares plunged 22% on Monday on fresh concerns about tighter regulations
on student loans. See: For-profit education stocks plunge.
Shares of other private-education firms also fell to close out the week, but more modestly.
DeVry Inc. (DV 37.35, -1.47, -3.79%) lost 5.5.%, while ITT Educational Services Inc. (ESI 51.80, -2.00, -3.72%) skidded
5% and Career Education Corp. (CECO 17.53, -0.76, -4.16%) gave up 3.4%. Shares of Washington Post Co. (WPO
345.00, -0.61, -0.18%) , the parent of Kaplan Inc. , fell1 %.
Also Friday, Corinthian Colleges reported a profit of $33.9 million, or 38 cents a share, for the fourth quarter ended June
30, up 46% from $23.2 million, or 26 cents, earned in the same period during fiscal 2009.
4.55, -0.86, -15.83%
t -1.47, -3.79%
.80, -2.00, -3.72%
17.53, -0.76,-4.16%
40.73, +0.14, +0.34%
Quarterly revenue increased to $482.7 million, up from the prior year's $353.5 million.
Analysts had expected a profit of39 cents a share, on revenue pegged at $477.3 million, according to a survey of
estimates by FactSet Research.
For the first quarter of fiscal 2011 , the company said it expects earnings of 38 cents to 41 cents a share, below the Wall
Street consensus target of 44 cents a share.
The company said it's "in the process of reducing the risk profile of our student population" to lessen prospects for defaults
on student loans.
As of Sept. 1 , the company said it will no longer serve new students enrolled in the federal Ability to Benefit
program, known as ATB, at its Everest and WyoTech campuses.
At the end of fiscal 2010, ATB students represented 15% of the company's total student population, down from 24% at the
same point in the prior year.
"ATB students drop out at a higher rate, are more challenging to assist with career placement, and default on their loans
at a higher rate than high-school graduates," the company said. "Although serving ATB students has historically been a
part of Corinthian's mission ... we will no longer be able to serve these students" at two campuses.
On the regulatory front, Corinthian said it has formally responded to proposed rules from the Department of Education
on incentive compensation for admissions representatives, misrepresentation, and gainful employment disclosures.
29
Corinthian also plans to file a written response by Sept. 9 to a second notice of proposed rule making that focuses
exclusively on gainful employment.
It's also responding to a request for information from the Senate Health, Education, Labor and Pensions Committee,
which sent queries to 30 private-sector education companies including Corinthian.
The committee, chaired by Sen. Tom Harkin (D., Iowa), has requested that a portion of the information be provided by
Aug. 26 and the remainder by Sept. 16.
The panel has been looking into federal oversight of for-profit colleges and universities, including student default rates and
the proportion of money that private-education providers spend on education as opposed to recruitment, marketing and
administration.
Steve Gelsi is a reporter for MarketWatch in New York.
From: Woodward, Jennifer
Sent: Thursday, August 19, 2010 6:25 PM
To: McDade, John
Subject: RE: Near And Dear To Your Heart
Thanks, I had the perfect vacation! It's very hard to come back to DC heat, rain, and humidity, and lots and lots of work.
Everywhere I went in Seattle, it smelled like sage (this lovely dry air scent), and here, it smells like a sewer!
I did read the GAO report on the plane and have been trying to get caught back up. I just read the transcript for the ABC segment.
You should see what UOP is saying to try to get an absolution. What a joke!
Hope you are doing well. We have GOT to find time to get together.
From: McDade, John
Sent: Thursday, August 19, 2010 10:44 AM
To: Woodward, Jennifer
Subject: Near And Dear To Your Heart
F
I hope you enjoyed Seattle, and had a relaxing time. In D.C., all you missed was oppressive heat and blackouts. I've had
3 so far that have lasted more than 6 hours.
Definitely check out the GAO hearing on incentive compensation:
Here is the link:
http://www.c-spanvideo.org/videolibrary/event.php?id=185756
Definitely worth your while to watch the whole thing.
Check out today's article (below) about an ABC investigation of one of the post-secondary educational institutions near
and dear to your heart.
Talk later,
30
YF w
+++++++++++++++++++++++++++++++++++++++++
http://abcnews.go.com/Thelaw/profit-education-abc-news-undercover-investigate-recruiters-university/story?id=11411379
ABC News Investigates For-Profit Education:
Recruiters at the University of Phoenix
ABC News Gets Answers for Student Who Claims She Was Duped by Onli ne School
By CHRIS CUOMO, GERRY WAGSCHAL and LAUREN PEARLE
Aug. 19, 2010-
Ads for online schools are all over the Internet, plastered on billboards in subway cars and on television. The
University of Phoenix, with nearly 500,000 students, is the biggest for-profit college. But some former students
said they were duped into paying big bucks and going deeply in debt by slick and misleading recruiters.
"I don't want anyone else to be sucked in, " said Melissa Dalmier, 30, ofNoble, Ill.
The mother of three had big dreams to be an elementary school teacher, so when she saw ads for the University
of Phoenix pop-up on her computer, she e-mailed them for more information. A few minutes later, Dalmier said
she got a call from one of the school's recruiters, who she said told her that enrolling in the associate's degree in
education program at the University of Phoenix would put her on the fast-track to reaching her dream.
"[The recruiter said] they had an agreement with Illinois State Board of Education and that as soon as I finished
their program I'd be ready to start working," she recalled.
Within 15 minutes, Dalmier was enrolled. Since she didn't have enough money to pay for tuition, she said the
recruiter helped her get federal student aid. In total , she took out about $8,000 in federally-guaranteed student
loans.
But just a few months after Dalmier started, she said she learned the horrible truth: the degree program she was
enrolled in would not qualify her to become a public school teacher upon graduation in lllinois.
"It was an outright lie. A bold faced lie," she said.
Watch more of the undercover investigation tonight on "World News" at 6:30p.m. ET and later on
"Nightline" at 11:35 p.m. ET
It's not the first time that the controversial school , which obtains almost 90 percent of its revenues from students
paying tuition from federal aid, has come under fire for its recruiting methods.
The University ofPhoenix was one of 15 for-profit schools whose aggressive recruiting practices were the
subject of hearings held by Sen. Tom Harkin, D-Iowa. The Government Accountability Office sent
investigators to for-profit schools across the country and found that all of them were misleading potential
students.
In 2004, the University of Phoenix paid nearly $10 million to the Department of Education to settle allegations
that it had violated rules about its recruiting practices. The school did not admit any wrongdoing.
"I think maybe the whole orchard is contaminated," Harkin said. "There's a systemic problem with the system
itself that needs to be addressed."
31
University of Phoenix Recruiter's False Promise
ABC News wanted to know firsthand whether what Dalmier said happened to her, would happen to us, so we
sent one of our producers undercover to meet with a University of Phoenix recruiter.
Our producer told the recruiter, who was working out of an office in Houston, Texas, that he aspired to be a
teacher and planned to li ve in either Texas or New York. The recruiter told him to enroll in the Bachelor's of
Science in Education program, and with that degree and some student teaching, he would be set.
Produce: I just want to understand clearly. I can go to University of Phoenix, do my bachelor's degree, and
100 percent for sure I can go back to e.ither Texas, or New York and I can sit for those exams and once I .finish
those exams .. .I can teach.
Recruiter: Then you can become a teacher. Yes. That is true. What's your e-mail address?
Despite her assurances, the recruiter's claim was not true. Even with successful completion of the required
certification testing, a degree from the University of Phoenix does not guarantee a teaching certificate in either
of those states.
When we confronted Dr. William Pepicello, president of the University ofPhoenix, about the recruiter's false
promise, he said it was "indefensible."
"It's wrong. Can we do better? Absolutely. Do we train our people to give that kind of misadvice? Absolutely
not. And we can do better, we will do better, you know, we already have some initiatives that we talked about
that we're putting in place because at the end of the day, we have to get it right."
But this was not the first time that the university's recruiting practices have come under scrutiny. In December
2009, after two former employees came forward and accused the university of violating federal financial aid
regulations with its recruiting practices, without admitting wrongdoing the school agreed to pay $67.5 million to
resolve the accusations. The two whistleblowers received $19 million in the settlement.
When asked if the 2009 settlement was a sign that "we got caught, " Pepicello disagreed.
"No, I wouldn't say it's proof that we got caught. I mean, it's certainly proof that we weren't doing as well as we
could. We could do better," he said.
Recruiter Tells Student to Borrow to the Max
The recruiter also told our undercover producer he could take out as much as $35,000 in federal financial aid to
pay for school. She also said that there might even be some money left over after tuition was paid.
Recruiter: I tell students to take out the max and whatever you don't need or you don't use then use it [for
whatever]. But it's easier to take out more than you need and send back the excess versus you didn't take out
enough.
Produce: What are the kinds of things though? I mean in terms of like that I could use it for? I mean, what if I
just. .. because you're going to have to have money to walk around.
Recruiter: They don't care. Right. They don't. They just tell you use it for educational purposes.
Produce: And they don't .. . They don't what?
Recruiter: No one follows up. No one says, What happened to this money? You received a check for $562,
where did you spend it?
Producer: It's your business.
The university president said that there was no excuse for a recruiter to push someone to borrow to the max.
'It's absolutely indefensible. It is not the way that I intend to run this university, " Pepicello said.
For-Ptofit Universities Contributing to Financial Crisis?
32
Experts say recruiters who are misleading students may only be the tip of the iceberg. Students who have
attended for-profit schools are defaulting on their loans at an alarming rate, which experts say may be
contributing to the next big financial crisis.
At the University of Phoenix's headquarters, the loan repayment rate was 44 percent, according to data from
2009 provided by the Department of Education; students at their Nellis Air Force location had a repayment rate
of36 percent. At the headquarters of Brown Mackie College, another for-profit school , the repayment rate was
27 percent. Harris Miller, who heads the for-profit industry's lobby group, told Chris Cuomo that default rates at
for profit schools are comparable to other schools which service similar student populations.
Recruiters from for-profit schools obtained $24 billion in student loan and grant money for the 2008-2009
school year, according to Government Accountability Office and Senate reports.
"These schools are marketing machines masquerading as universities," said Steve Eisman, a renowned hedge
fund investor who predicted the last big mortgage crisis. "I thought there would never again be an opportunity
to be involved in the short side as an industry as social destructive and morally bankrupt as the sub-prime
mortgage industry ... Unfortunately, I was wrong."
Though for-profits get the lion's share of their tuition from financial aid, the default rates on loans for students
who attended for profit schools are alarming. About 50 percent of the students at for-profits drop out, according
to Eisman, so schools need to keep adding new students, and have to try to recruit just about anyone-- even
those most vulnerable in society, he says.
University of Phoenix Recruiter Goes to Homeless Shelter
Benson Rawlins was considered homeless last year when he met two recruiters from the University of Phoenix,
who gave three seminars at Y-Haven, a shelter for transitional men in Cleveland, Ohio, or in effect, a homeless
shelter.
Rawlins doesn't have aGED, but said the recruiters had no qualms trying to sell him an expensive associate's
degree.
"It seems like it is just too much all about money," he said, "Instead of helping someone get an education."
The university told ABC News it does not tolerate recruitment at facilities like Y-Haven.
"We can assure you that anyone who participated in the recruitment of residents from homeless facilities in
Cleveland no longer works for the University, " said Alex Clark, a spokesperson for the University of Phoenix.
"Any such activity is strictly forbidden by our Code of Business Conduct and Ethics, and employees who
violate this policy face disciplinary action up to and including termination."
Harris Miller said even though the schools serve an important role by providing higher education to students
who wouldn't ordinarily get one, many schools' recruiting practices need to be changed.
Miller claimed that universities began to change even before the GAO's report on their misleading practices,
including changing how recruiters are compensated (so they do not receive bonuses or prizes for recruiting
students), offering "test drive" programs to help people figure out if higher education is for them and focusing
more on consumer protection.
When asked why for-profit universities don't return money back to those who have been misled by their
solicitations, Miller said: "There are other countries in the world like Canada which have a different system and
it's something we're going to look at."
But Miller admitted that the industry has no plan in place to pay back those who are carrying a debt from for-
profit schools.
Whatever the industry's plans for future, Dalmier said it won't help heal what happened.
"If they tell you something, investigate it before you enroll in their program. You really need to find out the
truth and how to further your passion or your dream," she said. "That way, you don't end up like me."
33
After ABC News' interview with Pepicello, the University of Phoenix offered Dalmier a scholarship for a
bachelor's degree of her choosing. Dalmier said she is considering their proposal.
Pepicello also said he plans to change the school's recruiting practices, especially the current model of
compensation, and will be offering students a "test drive."
Click HERE to read a letter to ABC News from William Pepicello.
34
From:
Sent:
To:
Subject:
Attachments:
July 25, 201 0
Woodward, Jennifer
Monday, July 26, 2010 10:24 AM
Dannenberg, Michael ; Kvaal, James; Shireman, Robert
FW: At 90% of revenue from Uncle Sam--what about separation of church and state.?
image001 .gif; image002.jpg
Why Do You Think They're Called For-Profit Colleges?
Michael Morgenstern for The Chronicle
I
Michael Morgenstern for The Chronicle
By Kevin Carey
Michael Clifford believes that education is the only path to world peace. He never went to college, but
sometimes he calls himself "Doctor." Jerry Falwell is one ofllis heroes. Clifford has made millions of
dollars from government programs but doesn't seem to see the windfall that way. Improbably, he has
come to symbolize the contradictions at the heart of the growing national debate over for-profit
higher education.
Until recently, for-profits were mostly mom-and-pop trade schools. Twenty years ago, a series of
high-profile Congressional hearings, led by Senator Sam Nunn, revealed widespread fraud in the
industry, and the resulting reforms almost wiped the schools out. But they hung on and returned with
a vengeance in the form of publicly traded giants like the University of Phoenix.
Entrepreneurs like Clifford, meanwhile, have been snapping up dying nonprofit colleges and quickly
turning them into money-making machines.
Most of that money comes from the federal government, in the form of Pell Grants and subsidized
student loans. Phoenix alone is on pace to reap $1-billion from Pell Grants this year, along with $4-
3s
billion from federal loans. A quarter of all federal aid goes to for-profits, while they enroll only 10
percent of students.
Unfortunately, a large and growing number of graduates of for-profit colleges are having trouble
paying those loans back. Horror stories of aggressive recruiters' inducing students to take out huge
loans for nearly worthless degrees are filling the news. The Obama administration, flush with victory
after vanquishing the student-loan industry this year, has proposed cutting off federal aid to for-
profits that saddle students with unmanageable debt. Congress has rolled out the 1V cameras for a
new round of hearings that are putting for-profits on the hot seat. One observer called the event "the
Nunn hearings on steroids."
I spoke with Michael Clifford recently as he was driving down the California coast to meet with a
higher-education charity he runs. He's an interesting man-sincere, optimistic, a true believer in
higher education and his role as a force for good. A musician and born-again Christian, he learned at
the knee of the University of Phoenix's founder, John Sperling. In 2004, Clifford led the sale of a
destitute Baptist institution called Grand Canyon University to investors. Six years later, enrollment
has increased substantially, much of it online. The ownership company started selling shares to the
public in 2008 and is worth nearly $1-billion today, making Clifford a wealthy man. He has since
repeated the formula elsewhere, partnering with notables like General Electric's former chief
executive, Jack Welch. Some of the colleges that Clifford has purchased have given him honorary
degrees (thus "Doctor" Michael Clifford).
Clifford will concede, in the abstract, to abuses in the for-profit industry. But he rejects the Obama
administration's proposal to cut off federal aid to for-profits at which student -debt payments after
graduation exceed a certain percentage of the graduates' income. In fact, he denies that colleges have
any responsibility whatsoever for how much students borrow and whether they can pay it back. He
won't even acknowledge that student borrowing is related to how much colleges charge.
36
From: Woodward, Jennifer
Sent: Saturday, November 21, 2009 3:21 PM
Shireman, Bob; Manheimer, Ann To:
Subject : FW: Neg article attacking ESI and APOL. .. APOL on defense
You may have also received this from Rob McArthur. It is really worth reading, especially for its 90:10
impli cations.
APOL took exception to being mentioned. (See comments after article and the author' s response.)
http :1 / i ndustty .bnet. com/techno) ogy/ 1 0004107/1 essons-not-leamed-at-itt -educational-services/
Lessons Not Learned at ITT Educational Services
By David Philli ps I Nov 18, 2009
ITT Educational Services reported that new student enroll ment increased 27.2 percent to 27,738 in its third
quarter. With private sector lending still in decline, the for-profit educator is increasingly funding growth
through an internal loan program. Despite more lending to sub-prime enrollees, few industry watchers seem
concerned that the emperor is wearing no clothes.
Growth metrics looked impressive at quarter ended September 30:
Total revenue per student increased 4.5 percent to $4,852 per student, helped by a five percent hike in
tuition fees implemented in March 2009. Looking to 2010, management expects to raise tuition another
4 - 5 percent.
The third quarter operating margin improved 437 basis points to 36.1 percent, or $122.7 million, helped
by lower advertising rates and more effective lead conversion rates (into enroll ed students).
" A great deal of intelli gence can be invested in ignorance when the need for ill usion is deep," said the great
20
1
h Century writer Saul Bellow. With a 10 percent unemployment rate in this country, the for-profit education
industry is a playground for those in need of dreams. Do not be mislead by ITT' s numbers, as the trail of money
starts and ends back at ITT itself. Federa1 1oan programs are falli ng short, so the company is dipping into its
own coffers to help students cover this widening tuition gap. Up to 65 percent of its students need private
37
lending, and analysts estimate that $100 million to $120 million in loans and scholarship assistance will need to
come from ITT's internal lending program.
Per risk sharing arrangements with third-party lenders, ITT also guarantees repayment of student loans,
coll ateralized with company funds. At September 30, $52 million in student borrowings was outstanding.
If a student does not have a high school diploma or recognized equivalent, such as aGED, she can still qualify
for Title IV student financial aid programs if she demonstrates the ability to benefit from the training being
offered: eligibility is based on successfully passing a federally approved ability-to-benefit (ATB) test. The
company admitted on its conference call with analysts that none of its students have historically qualified for
federal aid through ATB testing!
Common sense dictates that students who cannot pass an ATB test - and lower wage earners- would be
more likely to withdraw from school and default on their loans. Yet, ITT claims its persistence rate (continued
enrollment) climbed 110 basis points in the quarter to 73.6 percent. (The company does not disclose how many
enrolled students fall into these categories.)
When during the semester a student drops out and how much of federal aid is left on the balance sheet- and
for how long- has been the subject of many a shareholder lawsuit and SEC investigation. For example, rival
Apollo Group, the for-profit owner of The University of Phoenix, blithely dropped a comment deep in its
Form 8-K regulatory filing for results of operations for its year-ended August 2009 that the SEC had
commenced "an informal inquiry into the Company' s revenue recognition practices. "
Similarly, it is also tough to get a handle on the true health ofiTT' s balance sheet, as management has
historically given out little information on the size or ' quality' of loans made from its internal lending program.
What ITT did say in its third-quarter quarterly filing with the SEC is that bad debt increased 180 basis points in
the quarter to 6.8 percent. What is telling, too, is that expected charge offs from defaults increased in the first
nine-months of2009 to $56 million, up from $29.4 million last year. In my opinion, the school ' s default rate is
likely much higher- I stress, however, that it's just my own opinion. The company, nonetheless, has most
Wall Street analysts ' gaga' over its guidance of $235 million in free cash flow for 2009 - more than enough to
cover pledges on internal and third-party student defaults.
Why no one seems to care what really makes ITT' s balance sheet tick is probably a consequence of those that
are mostly affected: a reported 79,200 students on 113 campuses are pursuing their dreams of learning a new
trade or graduating with a higher degree to get better jobs and higher salaries after graduation. Sadly,
unemployed and low-income laborers who go back to school with such dreams soon find out that the average
starting salary for newly employed 2008 ITT graduates as of April 30, 2009 was $32,800- probably less than
one-half of what they will end up owing in tuition loans. Tough lessons to learn.
Tags: Student, Loan Program, Balance Sheets, Revenue Recognition, Operational Accounting, Financial
Services, Financial Statements, Financial Accounting, Finance, David Phillips
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38

1 OQ_ Detective
11/19/09 1 Report as spam
APOLLO DEMANDS PUBLIC RETRACTION
Hi David,
I hope this message finds you well.
I wanted to send you a quick note on your article, titled ?Lessons Not Learned at ITT Educational
Services,? which posted today on BNET. I want to assure you that the company did it?s due diligence in
announcing to our stakeholders the informal SEC inquiry. In addition to a mention of available
information in our 8-K filing, under the balded heading ?Securities and Exchange Commission Informal
Inquiry,? the company also disclosed the SEC informal inquiry in the 1 0-K Annual Report Filing, as
well as through a the company?s FY2009 Earning?s press release. Furthermore, the matter was
discussed extensively during the company?s earning?s call?a transcript of which can be found here:
http :1 lwww .a poll ogrp. edu!Investor/Transcri pts/ APOL-Transcript -0409. pdf
We request an immediate correction to your statement, highlighted below, which alleges that Apollo
Group ?blithely dropped a comment deep in its Form 8-K? about this matter.
Please let me know once a correction has been made.
Best regards,
Manny Rivera
Director, Public Affairs
2
1 OQ_ Detective
11/19/09 I Report as spam
PHILLIPS' PUBLIC RESPONSE TO APOLLO PR DEPARTMENT
Mr. Rivera:
My article never makes the accusation that Apollo Group was less than due diligent in informing
investors about the SEC's lNFORMAL inquiry. That said, if you wish to squabble over the intent-
power - of the English written word, Jet's first find common ground in some of your statements:
#1. " .. .In addition to a mention of available information in our 8-K filing, under the BOLDED
HEADING "Securities and Exchange Commission Informal Inquiry." I had to dig down to page six [out
of 12] to find mention of the aforementioned reference."
39

#2. "the company also disclosed the SEC informal inquiry in the 10-K Annual Report Filing." Yes, on
PAGE 133! How many investors actually make it that far in thei r reading of a 1 0-K --or any book for
that matter?
#3. I am curious, though -- How come I could not find a SEPARATE press release in your online
Investor/News Release secti on on SEC concerns?
Again, I have no argument with Apollo-- nor was this posti ng about Apollo.
Have a nice d a y ~ David Phillips
3
Geoffrey James, Sales Machine
1 1 /19/09 I Reported as spam
RE: Lessons Not Learned at I TT Educational Services
From a sales and marketing viewpoint, the comment from Apollo is beyond hi lari ous. The mention of
Apollo was in passing, so the WORST possible thing that Apoll o could do was to post a public
comment, thereby calli ng everyone' s attention to it.
I don't know who Manny Rivera is, but the idea that he's fronting for a company that purports to teach
people about business suggest an organizational inability to discern business ineptitude. Make me
wonder if their teachers are similarly ham-handed.
Robert MacArthur
Alternative Research Service, Inc.
Rmacarthur@altresearch.com
203-244-5174
This material has been prepared by Alternative Research Services Inc., a Connecticut-registered Investment
Adviser, employing appropriate expertise, and in the belief that it is fair and not misleading. The information
upon which this material is based was obtained from sources believed to be reliable, but has not been
independently verified. We do not guarantee its accuracy. This information is not to be used as the primary basis
of investment decisions. Copying, faxing, replicating, or quoting from this report without the express written
consent of Alternative Research Services Inc. is forbidden. This is not an offer or solicitation of an offer to buy
or sell any security or investment. Any opinion or estimates constitute our best, and are subject to change
without notice. This material is intended for use only by professional or institutional investors and not the
general investing public. The firm does not make a market or hold positions in the securities mentioned herein,
nor does the firm maintain any investment banking relationships in such securities.
40
From:
Sent:
To:
Cc:
Subject:
Bob and Ann:
Woodward, Jennifer
Monday, October 05, 2009 2:32 PM
Shireman, Bob; Manheimer, Ann
Wolff, Russell
Follow up to Hendow Article in the Arizona Republic
Included below are a few interesting comments to the Arizona Republic article from yesterday. Following the long
comment from Stephen G. , there are comments both pro and con, and a few that are authored by Apollo personnel-Terri
Bishop, perhaps? Interestingly, there are now more than four pages of comments on the newspaper's website, the
majority of which are unfavorable to Apollo and for-profit institutions, in general.
Jennifer
**************************************
Please let me introduce myself. My name is Stephen G. I am currently a Doctoral of Organizational Management in Leadership
student with the University of Phoenix. I am also a 2008 University of Phoenix graduate with a Master of Business Administration
and specialization in Public Administration and a former Online Academic Counselor located at the main campus in Phoenix, AZ.
BACKGROUND HISTORY
On April 10, 2009, I resigned from my position after three years with Apollo Group, Inc. In March Of 2009, I filed an age
discrimination charge with the EEOC and the Arizona Attorney General's Office. After filing the charge, my work environment
immediately turned hostile and efforts were being made to terminate my employment. Prior to going to the EEOC, I informed my
manager that I needed a day off. I informed him via email that I was going to go to the EEOC to file a charge. Within 2 days after
filing my charge with the EEOC, I was immediately put on a performance plan.
In essence, this was a form of retal iation for going to the EEOC and filing a charge. Once I was placed on the performance plan,
I immediately informed my attorney. During this time frame, my attorney was negotiating with the University of Phoenix legal
counsel. While my attorney was negotiating the terms for a transfer to a different division, I continued to work in a hostile
environment.
I was continually harassed by my manager, James M. and senior manager, Jennifer B. The meetings were explained to me as a
requirement for the performance plan; however, I know the meetings were held as a method to make my work environment as
uncomfortable as possible in an effort to force me to resign. When I was placed on the performance plan, I was leading my team
and 3rd in the division in regards to performance numbers. How does that justify a performance plan? I was also explicitly told
not to communicate with any of my colleagues at any time regarding my performance plan or the charges I submitted to the
EEOC.
Furthermore, I later found out after I left the company that some of my colleagues were specifically told by management not to
communicate with me during or after work. If the organization found out that they were corresponding with me, they were
informed that they would lose their jobs. The reason for this was to prevent me from informing other colleagues of my situation
and charges to the EEOC in an attempt to beat down any support for my case. While I went to work and completed my duties, I
was told on a daily basis that my request was being considered and that I would be transferred soon. After 1 week, I still did not
receive the transfer that was promised and negotiated by my attorney and the University of Phoenix attorney.
In hindsight, (we) my attorney and I realized the delay in transfer was a stall tactic to allow my manager and senior manager to
41
enforce the performance plan within a two week period of time. If I did not perform according to the performance plan within
those 2 weeks, I would be terminated. As a result, I knew that the performance plan was unattainable and subjective to the
requirements of my manager and senior manager. Therefore, on the day that I was to receive the results of my performance
plan I decided to submit my resignation and leave under my own terms.
While I was leaving the facility, I decided to stop by and speak with Vice-President Nikki M. She was unaware of my resignation;
however, she did inform me that she was aware to get me transferred. After our brief meeting, she said I could go home and that
I could use my vacation until the transfer was completed. When my vacation had expired, I finally heard back from the human
resources department in a conference call with the Vice-President and the HR representative. In less than 30 seconds, they
informed me that the company was going to accept my resignation and the transfer was not going to be awarded.
Since my resignation at the University of Phoenix, I have decided to make it a life long crusade for me to inform the public about
the practices of this deceptive organization. As of today, I have gone to numerous lengths in speaking out against the
organization. I have posted on similar sites such as Rip Off Report, Complaints Board, and Facebook. Shortly after creating the
Facebook account, I was informed by Facebook that my account would be terminated for violating policy. Ironically, I wrote
Facebook for an explanation and they failed to respond.
As of today, I continue to get inquiries through different emails and websites about my experiences as a student and employee
with the University of Phoenix. I intend to convince as many students and employees not to attend and/or work for Apollo Group,
Inc. and its institutions in an effort to compensate for the financial , educational , and personal damage the institution has caused
me.
Today, I have changed the minds of over 100 students and 20 to 30 potential employees from attending or working at the
organization. Based on those numbers alone, I would propose that I have eliminated about $3, 600, 000 from its revenue base.
A far cry from my humble $35, 000 a year academic counseling position. So maybe it wasn't in the best interest of Apollo Group,
Inc. to accept my resignation? Or at least, I'm going to think that wayl
I'm not stopping at those numbers either. I have made this a life ambition and will continue to encourage individuals both
students and employees to become active in speaking out against the organization. My personal advice is that if you are an
employee and feel as though you have an issue, go to the EEOC, make a charge, be strong, and stand firm. If you are a student
and feel the you have been wronged, write your Legislator's and the Department of Education. If you are a potential student
gathering information, I would suggest that you attend elsewhere. GOOD LUCK.
The following is my account of the operations at Apollo Group, Inc:
HOW APOLLO GROUP, INC. OPERATES FROM AN INTERNAL VIEW
My intent with this report is to offer current or prospective students some insight to the University of Phoenix and its parent
group, Apollo Group, Inc. The bottom line with Apollo Group and its educational institutions (AXIA, University of Phoenix, and
Western International University) is the bottom line. The company's mission is to profit at the expense of those who cannot
attend elsewhere. Ask yourself, why is it so easy to get into the University of Phoenix, Axia College, or Western International
University? The answer: Apollo Group makes it easy for the student to start quickly by maintaining an open enrollment policy.
Once the student is enrolled, the company keeps the student in attendance by using sales strategies (promise of a better job),
scare tactics (collections), unearned grades (A's), and financial hooks or gimmicks (Title IV misappropriations). These practices
generate the billions of dollars in revenue for the organization which more than 70% of that revenue comes from Title IV funding.
As a student, I was not aware of these strategies. I began my education with the University of Phoenix by entrusting those within
the organization and believed everything I was told. When I became an employee on January 29, 2007, I was thrilled to be in a
position of helping fellow students. However, I quickly became disenchanted with the organization. Within the first 6 months of
42
my employment, I was witness to students receiving grades by faculty that were unearned, employees given preferential
treatment based on their religion, employees unjustly promoted to positions above colleagues with better qualifications, age
discrimination, and substandard business ethics.
I put together the following statistics for the audience to consider in forming their own opinion about the intentions of Apollo
Group. As an Online Academic Counselor, I was assigned a student load of approximately 400 students. Of which, 300 to 350 of
those students would be active at any given time. During my tenure, I held a retention percentage between 60 to 65 %. On
average, the cost of tuition is $2, 000 per class taking into consideration the cost of attendance for all the institutions under the
Apollo Group umbrella. Using my highest retention percentage as a peak indicator, 65 % of 400 equals 260 active students. 260
active students paying roughly $2, 000 a class generates approximately $520, 000 in tuition for a 6 week block. The University of
Phoenix refers to classes taken in blocks with blocks being 5, 6, or 9 weeks in duration depending upon the institution. For this
illustration, I use the 6 week block which coincides with the length of graduate courses.
Using the 6 week length of time for classes results in 8.66 blocks in one academic year. Using 8.66 times $520, 000 equals $4,
506, 666 annual dollars from 1 online academic counselor. In my division, the Online Southeast Division had 8 academic
counseling teams during the time of my employment. Each of those teams had a minimum of 8 academic counselors resulting in
approximately 64 academic counselors; however, this number wil l vary from time to time due to turnover and growth factors.
Using these numbers an overal l projection of annual retention revenue can be generated for the Online Southeast Division and
that figure is $288, 426, 666.
Staggering? These figures are for only 1 division. There are 8 divisions that comprise University of Phoenix Online (Southeast,
Northeast, Midwest, Mountain, Southwest, West, Military, and International). Using the dollar figures as an average from the
Online Southeast Division, the total revenue generated for all divisions with the University of Phoenix complex would exceed $2,
307, 413, 333. YES! Over 2 billion dollars and this does not include ground campus revenue. These dollars are the ONLY
concern by Apollo Group Inc. and its management.
SALES, SALES, SALES
I think the foll owing might be of interest to many of the readers, but about a month (March, 2009) prior to resigning I attended
our division awards ceremony. During the ceremony, the Vice-President, Nikki M., of the Online Southeast Division, spoke on
the growth of student enrollments for the division. This is a subtle way of referring to the monetary growth for the company.
During the ceremony, the management team gave out awards and distributed them to enrollment, finance, and academic
counselors. (At the time of this original report, Ms. M. was still employed with the University of Phoenix; however, I now
understand that she resigned shortly after I filed my EEOC charge. She is now employed by Grand Canyon University along with
a number of other former Apollo Group employees. I find this to be a little queer!]
Prior to the ceremonies, I had decided to take note of how the ceremony broke down in regard to the award distribution. After
the awards were distributed, I calculated that approximately 100 awards were distributed. The breakdown of the award
distribution was as follows: 70% Enrollment Counselors/Managers, 20% Academic Counselors/Managers and the remaining
10% to Finance Counselors/Managers. The results of this breakdown clearly suggest that the emphasis of the Apollo Group
institutions is primarily focused on enrollment (or the proper term: sales). The reader may also find it interesting that the awards
were titled Platinum, Gold, Silver, and Bronze. As a former sales representative who attended sales conventions and award
ceremonies in the past, I felt as though I had gone back in time to a place I had been before.
THE DEPARTMENT OF EDUCATION AND THE POLITICS
Due to the enormous revenue generated by this organization, the company has become so powerful that it can manipulate
political entities. One such entity is the Department of Education. If the Department of Education decided to perform due
diligence and complete a rigorous audit of the companies accounting practices and uses of TITLE IV funding, the Department of
43
Education would have no other choice than to strip the organization of TITLE IV funding. In 2008, the Department of Education
could have used the organizations latest legal issue regarding religious discrimination (preference to Mormon's) as a basis to
eliminate TITLE IV funding; however, as usual this body of government choose to look the other way. Furthermore, the
organization continues to walk a thin line in complying with TITLE IV funding in addition to other compliance issues such as
FERPA (Federal Education Rights Privacy Act) and DNC (Do not call) violations. Due to these ongoing compliance issues, the
Department of Education should strip the university of its accreditation and Title IV funding; however, the Department of
Education much like many of its other political counterparts choose to ignore the problem through oversight rather than
enforcement.
So why does the Department of Education stand idly by and let the organization do as it pleases? There are three reasons for
the Department of Education's a Hands Offa policy as it relates to Apollo Group, Inc and the University of Phoenix. Those
reasons are as follows: 1) The power struggle between government entities and corporate America. The financial wealth of the
organization has become so massive and powerful that it can and does influence the political institution that governs its
behavior. 2) The power of money extends to its lobbyists, shareholders, and the political influence of those shareholders. Those
politically influential shareholders have a self-interest in the financial well-being of Apollo Group, Inc. The list of shareholders
includes politicians as well. Thus, those individuals will use that power to prevent any financial harm to the organization because
it will impact their financial stake in the organization as well. 3) Due to the company being the largest private educational
institution, the company has the largest number of students that could be negatively impacted. If the Department of Education
decided to stop TITLE IV funding, chaos would ensue due to the mass exodus of students to other institutions. In addition, how
does the Department of Education manage the funds previously and currently distributed to existing students? Again, in the final
conclusion the Department of Education prefers to monitor the situation rather than enforce.
THE QUESTION OF ACCREDITATION
Apollo Group, Inc. educational institutions are not accredited at the same levels of other prestigious institutions for certain
disciplines such as business degrees. The university misleads students into believing that its MBA degree and other business
degrees are on PAR with other institutions such as Harvard and other prestigious educational institutions. For this practice
alone, the University should be chastised by the Department of Education for using substandard business practices in the
recruitment of its business students. This does not only apply to business students, but students in other programs such as
Nursing, Counseling, and Education. Remember, INTEL dropped their affiliation with the university for some of these reasons
and more.
Alii can say is BUYER BEWARE.
HOW TO GET OUT AFTER YOU GET IN!
# 1: Ignore your financial , academic, and enrollment counselors. These individuals are trained and coached in sales strategies to
discourage students from dropping out or transferring. Also, do not fall for the Financial Aid/Student Loan/Return to Lender scare
tactic. These are strategies used to put fear into students in order to keep them in class and not to leave the institution. [I was
forced to use this strategy with my students on a regular basis.] Another tactic is the two week break tactic. Counselor's are
trained and coached to keep students from not taking a break longer than two weeks. If a student takes a break longer than two
weeks, the student is considered a t-drop [UOPX terminology] student which affects the performance matrix of the counselors.
The performance matrix is a measure or device in which counselors are evaluated for raises. The matrix can be manipulated in
several ways and often times done so by management. The intent of the matrix is to force a sales-based, pay for performance
strategy at the university. The performance pay structure travels a thin line in being compliant with the Department of Education
requirements for paying counselors. Again, the Department of Education has turned its head away from discouraging this
practice and forcing the university to use another pay structure.
#2: Make sure your account is paid in ful l at the time you take your last class. DO NOT spend your financial aid money if you
44
know that you wi ll be leaving the school. If you have funds on account or received an excess check, DO NOT spend these funds
either. THIS IS THE HOOK. If you do not have the ability to pay this back at the time that you quit, you wi ll not be able to obtain
financial aid at another institution or have your transcripts sent to another institution for evaluation to be admitted. If you owe
money to any institution at Apollo Group, be prepared for a tumultuous journey of leaving the institution. You will continue to be
harassed by all your counselors and at some point the collections department.
#3: Demand an Official Withdrawal Form and make sure to get confirmation that it has been submitted to University Services by
any of your counselors. DO NOT violate any student code of conduct policy. Violating this code could prevent you from being
accepted as a potential transfer student at another institution.
#4: DO NOT let them intimidate you.
SOLUTIONS
DO NOT refer people to the institution. Prevent them from attending out of their best interest.
Trust me when I say look for other institutions. Today, many traditional schools including junior colleges offer online classes that
are convenient for all learners. In the past, Apollo Group, Inc. had a monopoly on the industry resulting in its rapid growth over
the last 20 years. In addition, beware of other similar online institutions such as Grand Canyon University, Kaplan University,
The Art Institute, and South University with the later two belonging to EDMC. EDMC current president is Todd Nelson. Mr.
Nelson is the former president of Apollo Group, Inc. I recommend googling Todd Nelson, University of Phoenix, and learn the
history of his administration and the legal battles incurred under his administration prior to attending or working for any institution
under the EDMC umbrella. Also, I would recommend googling Brian Mueller, University of Phoenix, and Grand Canyon
University too. Mr. Mueller replaced Mr. Nelson at Apollo Group, Inc. and recently left Apollo Group, Inc. to become the
President of Grand Canyon University.
If you want a quality education from a respectable institution, search out those institutions that were brick and mortar schools
that now have established online classes. A few examples of these types of schools to consider would be University of Texas,
University ofTennessee, and the University of Nebraska-Omaha. You may need to meet a more stringent entrance requirement
and be required to take a graduate entrance exam, but in the long-run you will definitely receive a better ROI (return on
investment) on your education and institution.
++++++++++++++++++++++++++++++++++++

ArizonaWatchDog45

Oct-04 @ 7:49 PM

Re1;1ort abuse

0
C}
'

3
, , . ~ ...
.D
Hello Wally.
First, I would argue with you that most employees are happy at the university. The university has one of the highest turnover rates in
the industry. The recession has forced many to stay to earn a living and live with conditions still employed at the institution. I still have
45
several friends that work there and most of them say that they would leave but can't due to the economy. Its not the job, work
environment, or benefits that is keeping them at the school. Its the economy. Many of us will forgo our integrety and values to maintain
a living.
Second, The university's problems are not in the past. The problems still exist today.
Third, I was like many students I counseled as an Academic Counselor. I was enamored with the possibility of getting my graduate
degree and failed to investigate the school prior to starting. Like many students, I was very successful in the classroom which distracted
me from looking deeper into the accrediting issues of the business programs. I did not realize this until I actually became an employee:
however, by that time I was almost done with my program. I continued with the OM program simply due to financial reasons and the
tuition waiver benefit. I continued to overlook the obstacles of the accreditation. I acknowledge this was a failure on my part However, I
have made plans to transfer to Boston University Online to finish my OM after I finish my current block of classes. I, too, am a victim of
the Title IV strategies used by the school.
Four, I have counseled almost 900 students during my tenure at the school. I can say with great confidence that the majority of those
students will not end up in the same situation as yourself. In all honesty, the types of students that enter and complete the program
actually diminish the quality of the degree not me.
Finally, if you have to rationalize the value of your own degree that is completely your right. However, the reality is that a UOPX degree
DOES NOT stand on its own merits in comparison to an ASU degree for example. Heck, I learned more in my Bachelor's degree
program from a small, private college in the midwest than I did in my Master's program at the University of Phoenix. I looked at the
program simply as review material.
As far as taking a positive step about the university, why should I? People like you are the reason in which our economy is in the
situation it is by allowing corporate America to run amuk. You claim that individuals need to take accountability for their education and
make it work for them. I am making the institution that provides that education to take accountabl ility for its actions. Until people like me
continue to take a stand, confront, and conquer those corporate evils than individuals such as yourself will continue to be puppets and
not free individuals.
+++++++++++++++++++++++++++++++++++++++++++++++
It's about time, I spent 2 years with University Of Phoenix in Arizona I did "Student Support" and Apollo Group "Corporate
Support" I always wondered when these practices would catch up to them, I'm glad someone stepped forward the other
counselors didn't care they were making money they would pawn students off on us in "Technical Support" to do thei r "walk to
classes" as they were called for first start days.
Some of the people I spoke to I felt horrible for because they really shouldn't of been attending classes online they were
struggling from what a lot told me didn't have much money to begin with but were assured they would do fine in class. It was
known enrollment counselors made more depending on how many students they enrolled so they would concentrate on that and
not even how their students were doing.
Pretty much as long as they could get them approved for a student loan regardless of other requirements they were allowed to
attend classes. I stayed for 2 years before I couldn't take it any more and up and quit.
+++++++++++++++++++++++++++++++++
46
Lynnaz77
Oct-05@ 7:52AM
Report abuse
EDMC, Education Management Corp., operates the exact same way. I am amazed these schools are allow to operate this way.
I won't discount the schools serve certain demographics in terms of helping them obtain a degree, but trying to enroll as many
people as possible? Even those who don't qualify? To me that is unethical and the schools owners should be ashamed of
themselves.
At the end of the day, guess where that $ goes. To the corporate shareholders. Not back into the schools.
It will be interesting to see how this plays out
+++++++++++++++++++++++++++++++
Also counselors had the highest roll over rate because if they did not meet enrollment quotas they would be let go, Us in IT were given
a 7 minute average handle time to get students off the phone. I spoke to students who said their enrollment counselor or academic
counselor hadn't spoken to them since they were enrolled and they didn't even take the time to explain how posti ng and assignments
worked.
They would call us in IT and just transfer them over to us, I had 1 actually say he wanted to go to lunch and transfered a student directly
to me for a walk to class which was not my j ob.
The online studies are great for some people but their are some it is great they are trying to better themselfs but they should have some
sort of trial for them to go through before enrolling to see if it is something for them because the counselors are trained to be
misleading.
+++++++++++++++++++++++++++++++
The UPX meets the same requirments as every other school , they do not enroll people that do not qualify because they would lose their
accredidation which means they would lose their business ..
With over 500,000 gradutates I am fairly sure they are not that desperate for enrollments, also the guy who claimed to work in IT has
not clue what he is saying as well becuase if we did fire you over lack of enrollments we would lose our accredidation as well. .
Now of course at a for profit university enrollments are important and as in "every" other business, those who perform the best do make
more, but it is because they perform on many levels. One of them is in the area of responisble borrowing. Unlike the rumor police who
sound smart but really are only speaking with a lack of knowledge. Traditional schools avg around 5- 10% of students not taking out
the max when it comes to student loans, which is what leads to debt issues once they graduate, and the UPX is at 33% which kind of
debunks the whole we are trying to gouge or students notion ..
47
Listen we are a billion dollar company about to open campus's all over the world, we have over 600,000 students in class right now and
have had endorsements from many areas including the white house, senators, and other prestigous people. There is no way we would
be this big and successful if all we were doing was trying to hurt people, that is just stupid. Now there are over 16,000 employees and
just like companies with 10 people, there can be bad apples, but only the ignorant would think with such a limited mind ..
++++++++++++++++++++++
This is a crock ... attorney's seek out employees or former employees to file what is called a 'Key Tam' case (sue the king) and
then the goverment takes the case over the conduits that sued originally (former employees) get a mil or two for their trouble.
Lets be real about this ... Education sales positions are just that 'sales' ... and sales are performance based positions. The
goverment is well aware of this and they are the ones who provide the titleV funding ... and it is their agency 'The US Dept of ED'
that allows these colleges to function!
All this madness about people going into debt .. . EDUCATION costs ... it is a debt! This is not Baracket Science!
If the goverment wants the 'sales' aspect out of education then they need to do it and quit 'pretending' like they don't support it.
I've been in this industry alooong time and University of Phoenix is not doing ANYTHING that EVERY OTHER private FOR
PROFIT school is doing!
If this planet wants people to make informed, solid education decisions then how about high school counselors do SOMETHING
other than just making class schedules and making sure that the top 10% of a graduating class gets to college! I'm jest saying!
I don't 'sale' education ... but I provide guidance and attempt to work for two ... the school I work for. .. and the prospective student
that I am providing guidance to. I do it ethically .. . for BOTH! (which may be why I don't make alot of money in an industry that I've
been in for years ... but the bottom line is this ... no one makes you unethical but YOU! If you can't or don't want to do the job
without crossing the line ... don't do the job!
I'm jest saying ...
++++++++++++++++++++++++++++++++++++++++++++
OHHH DANG, I read the headline incorrectly, I though it said "University of Phoenix may get close"-- I was already popping the
champagne that this embarrassment to education was finally closing ...
+++++++++++++++++++++++++++++++++++
I worked there and I hated every moment of it. It really was about the sale, not about the student... I had to get a "REG" to get
keep my job or I would have to be sent for re-training. Many of my co-workers talked about "college" but some had only a high
school degree. I made 200 calls a day to prospective students, but all I got were dead lists--who weren't interested .. or were
really dead--that's how old my lists were! Thank goodness I had a much better opportunity 6 months later --by leaving this call
center!
+++++++++++++++++++++++++++++++++++++++++++++
If you are still reading (smile), here's the article again and a link to the comments. You have to log in and create an
account (free) in order to access the comments.
Jennifer
Recruiter lawsuit may get closure
University of Phoenix case involves pay, perks
12 commentsby Dawn Gilbertson- Oct. 4, 2009 12:00 AM
The Arizona Republic
48
Six years ago, two University of Phoenix enrollment counselors filed a lawsuit accusing the for-profit school of illegally rewarding
them with fat raises and prizes based on the number of students they enrolled.
The whistle-blowers are long gone. The corporate executives in charge at the time are now at different schools. But the case
continues to dog the nation's largest private university.
A costly end appears to be in sight: University of Phoenix parent Apollo Group Inc. announced Wednesday that it was in
settlement talks to resolve the litigation before the scheduled March trial.
The Phoenix company did not disclose potential terms, but one Wall Street analyst estimates a settlement could run as high as
$250 million.
That is 25 times the record fine the University of Phoenix paid the U.S. Department of Education to settle similar charges in
2004.
But it is seen as a manageable price to pay to avoid a high-profile trial and the potential of a much larger payout given the size of
the school and allegations the practices have gone on for years and continue today.
A jury verdict with big damages could put a chill on for-profit schools' aggressive recruiting tactics and slow the industry's eye-
popping growth at a time when federal regulators also are increasing their scrutiny.
Patrick Burns, spokesman for the whistle-blower-advocacy group Taxpayers Against Fraud, said the University of Phoenix would
be "a fool" to go before a jury given the evidence in the case and national furor over big-business shenanigans.
"America is different than it was three or four years ago," he said. "We want to send a message to corporate America that we
feel we have been given the shaft."
Long-running battle
The University of Phoenix pioneered the for-profit education industry in 1976 and has grown non-stop since, becoming a stock-
market star along the way. It dominates the business, with 420,000 students and annual revenue approaching $4 billion. It is the
nation's largest recipient of federal financial aid by a wide margin - $3.2 billion in the 2007-08 school year.
The long-running legal battle over its compensation practices began quietly in 2003, when two enrollment counselors from the
University of Phoenix's San Jose campus filed the lawsuit in U.S. District Court in Sacramento on behalf of the federal
government.
They said the school has defrauded the government of billions of dollars of financial aid since 1997 because it pays recruiters
based on the number of students they sign up. The whistle-blowers said their pay and perks swelled when they enrolled a lot of
students.
Federal law bans schools from offering such incentives to prevent them from filling classes with unqualified students- students
who may not finish or be unable to pay off their loans.
The case was filed under seal, a common practice in whistle-blower actions. The government declined to join the case.
The University of Phoenix said it learned of the lawsuit in August 2003, by which time the allegations had sparked a U.S.
Department of Education review into its pay practices.
The school vigorously fought the charges from the start. Officials said the whistle-blowers were disgruntled former employees
trying to turn a routine regulatory matter into a federal case of fraud.
The school appeared headed for victory in 2004 when a federal judge in Sacramento dismissed the case, but the lawsuit was
reinstated two years later on appeal and has consumed both sides since.
There are more than 1 million documents on file, and the legal fees run into the multimillions. Apollo Group created an online
legal center, where it has posted updates on the case.
Two views
49
A review of documents shows the two sides' vastly different views of the University of Phoenix's recruiter pay practices and
perks and whether they violate the Higher Education Act and related Department of Education regulations on compensation for
schools receiving financial aid.
In the lawsuit, Julie Albertson and Mary Hendow describe a call-center culture with rich rewards for those who enroll the most
students.
The lawsuit says Albertson initially was worried about taking the job because she would make less than her previous job. She
said an enrollment manager told her she would get a big raise from her $32,000 starting salary if she enrolled 119 students in
the first eight months. She enrolled nearly 150 and saw her salary shoot to $88,000. By the end of her first year, she was up to
$90,640.
Hendow won "Sperling" trips, named after University of Phoenix founder John Sperling, to California resorts, a trip to Universal
Studios and a DVD player based on her high enrollments during specified contest periods.
One manager told enrollment counselors to "do whatever it takes to get the application," even if it meant disregarding potential
students' qualifications, the lawsuit says.
Hendow said three of four students she interviewed one day would not financially qualify, including a single mother on welfare.
Her supervisor's response, according to the lawsuit, "You're going to have to make a decision."
They said the school covered up its fraudulent practices in a number of ways, including code words for the number of
enrollments required to win a contest. Instead of saying 50 enrollments were needed, the lawsuit says a middle-aged manager
said, "You know how old I am."
"There's clear evidence that they knew what they were doing was wrong and did it nonetheless, essentially trying to pull the wool
over the Department of Education and by extension you and me, the taxpayers who are footing the bill for a university that has
abysmally low completion rates," said San Francisco lawyer Robert Nelson, the lead attorney for the enrollment counselors, in
an interview before the settlement talks were announced.
Their attorney denied requests to interview Albertson and Hendow.
Old allegations
The University of Phoenix sees a case of deja vu.
The whistle-blowers' claims are similar to those in a 2004 report of the school's recruiting practices by the U.S. Department of
Education. It led to a $9.8 million fine, a record amount.
The University of Phoenix did not admit wrongdoing in the settlement and was critical of the harsh tone of the report. It has
alleged close ties between department investigators and those involved in
the whistle-blower case that preceded it.
In its legal filings, the company has argued that Hendow and Albertson have been gone from the University of Phoenix for more
than four years, that it has an almost entirely new management team and, significantly, that it changed its compensation plan for
enrollment counselors in mid-2004.
Under that plan, the number of enrollments accounts for 32.5 percent of a recruiter's overall performance. The balance is based
on other factors including teamwork, work habits and student retention, the school says.
The whistle-blowers say such percentages are window dressing for regulators because in practice, enrollment is the overriding
factor in a review.
A former director of enrollment who left the school less than two years ago said in a deposition that a supervisor told him the
review "is really just al l about enrollment numbers and 'that was just the way it is.' "
An enrollment counselor from San Diego who was fired in 2007 says in a separate lawsuit against the University of Phoenix that
there was a lot of pressure to meet quotas. Documents in the case include a memo from his boss that says the team's budget
for the month was "48 lives."
50
"Some of you have reviews coming up and need January to be big. So let's do it and stop talking about it," she said in the
memo, asking them to schedule appointments with six potential new students every day.
Selling education
The University of Phoenix and other for-profit schools acknowledge that enrollment counselors' jobs are sales jobs.
In a deposition in another lawsuit, founder Sperling said he didn't have a problem with a manager's description that their main
goal is to get "butts in seats."
"They have other responsibilities as well, but their primary duty is to put butts in seats, and if they do not - if they do not reach a
particular minimum -that they are going to be discharged," he said.
University of Phoenix attorney Timothy Hatch, also interviewed before Wednesday's announcement of settlement talks, said
nothing in the law or Department of Education regulations prevents the school from adjusting salaries up or down based on
enrollments as long as they aren't based solely on the number of students enrolled.
"The University of Phoenix has never really come close to the line no matter how you define 'solely,' " he said.
Hatch said the whistle-blowers have no evidence to prove that the Universit y of Phoenix bases recruiters' salary changes solely
on enrollment, and calls their evidence not representative of the experience of the school's several thousand enrollment
counselors.
Nelson said the only thing they have to prove is that the University of Phoenix pays recruiters "directly or indirectly" based on the
number of students they enroll.
The "solely" standard that the school says it meets by a wide margin applies only to schools that pay recruiters salaries, Nelson
said. The University of Phoenix calls enrollment counselors' pay a salary, he said, but in reality it's a commission system based
on the number of students they enroll.
"When you have compensation jumps of 100 percent, 200 percent, 300 percent over the course of a year or two, that's not a
salary adjustment," Nelson said. "They can call it whatever they want."
Reach the reporter at dawn. gilbertson@arizonarepublic .com or 602-444-8617.
51
From: Yuan, Georgia
Sent: Tuesday, June 15, 2010 8:46AM
To: Shireman, Bob; Bergeron, David; Gomez, Gabriella; Kvaal , James
Subject: From Today's Chronicle- Veterans Use New Gl Bill Largely at For-Profit and 2-YR Colleges
Another reason to regulate
From Today's Chronicle of HE
June 2010
Veterans Use New GI Bill Largely at For-Profit and 2-Year Colleges Thomas Slusser for The
Chronicle By Michael Sewall
Washington
For-profit colleges and community colleges were the most popular choices of students who used
benefits from the Post-9/11 GI Bill this past academic the first in which the aid was
available. The attendance patterns were largely similar to those of students who recently
used aid under the previous version of the GI Bill.
Advocates of the Post -9/11 which was enacted in had said it could improve
veterans' ability to afford four-year institutions because of its increased benefits and new
allowances for housing and textbooks . But data from the Department of Veterans Affairs show
that for - profit and community colleges continue to dominate the list of the top institutions
where veterans use their education benefits.
Among the 15 institutions that enrolled more than students who used the new GI Bill's
benefits from October to seven were for-profits and five were community colleges. In
nine of the top 15 under the previous Montgomery GI as it was were for -
and three were community colleges.
A total of students used the new benefits in 2009-10. Veterans and college officials
say and support systems were significant factors in veterans'
college decisions.
The University of whose online-learning program has been particularly attractive to
topped the enrolling more than students who used the new benefits.
Phoenix operates a mi litary division with more than empl oyees who specificall y assist
and advise veterans. It also awarded 50 scholarships to veterans in the 2010 fiscal
worth and will increase the maximum amount to for next year.
Related ContentChart: Who Enrolls the Most Students With Post -9/11 GI Benefits Lamonte W.
a veteran who is a student at Tidewater Community in says he
returned to the which he attended in because of its low cost and welcoming
environment. He felt at home there in part because of the large veteran population and
because of the support veterans from "the provost on down."
which has four campuses near the large naval base in enrolled
students who used Post-9/11 GI benefits in the fourth-highest total.
Mr. served in the Air Force on active duty from 2007 to 2009. When he heard about
the expanded GI he applied for early exit from active duty and is now a member of the
Air Force Reserve.
52
Graduating from college was always a goal of hisJ he saysJ and his military experience helped
him focus on a plan. Mr. Mills now has his sights set on earning a law degree.
"I was going to apply to various other colleges and universities) but I was led back to TCCJ"
he says. "It feels like home. When I was gone for so longJ I wasn't certain if anyone would
remember me. But everyone did. They thanked me for serving."
Bigger Benefits
The Post -9/11 GI Bill offers benefits that weren't in the Montgomery GI BillJ an advantage
that its sponsors hoped would make four-year colleges more accessible to veterans. Under the
Montgomery billJ benefits are adjusted annuallyJ on the basis of average undergraduate
tuition. The new GI Bill gives veterans up to the full amount of tuition and fees at the
most-expensive public college in their states. And it provides a monthly housing allowance
and an annual stipend for textbooks.
The new bill also includes a "yellow ribbon'' programJ which seeks to help veterans attend
private collegesJ graduate schoolsJ and out-of- state public institutions. The federal
government matches the amount of financial aid pledged by participating colleges above the
base educational benefits for tuition and fees provided in the new GI Bill. More than 700
colleges and universities participated in the program in the past academic year.
The Post -9/11 bill also makes it easier to transfer benefits to a spouse or child.
Israel De La CruzJ who is on active duty in the ArmyJ transferred his benefits to his wifeJ
Venetia. She is pursuing a bachelor of science in human - services management at the University
of Phoenix.
"I wanted to take classes online so I could stay home with my kidsJ" says Ms. De La cruzJ who
lives with her husband and two children in Fort LewisJ Wash. "And we put our son's name on
the benefitsJ tooJ so he'll be able to use them."
The programs of seven of the top 15 colleges enrolling recipients of GI Bill aid are largely
online. And many of the 15 operate satellite campuses near military bases.
University of Maryland University CollegeJ which ranked thirdJ enrolled more than 3J000 GI
Bill recipients over the past academic yearJ on campuses near U.S. military bases in Europe
and AsiaJ in MarylandJ and online. It was one of 20 colleges to receive $100J000 grants last
year from the American Council on Education and the Walmart Foundation to increase programs
and services for veterans. Maryland has used the money to create an online classroom-
orientation program and a campus orientation for veteransJ as well as to conduct four open
houses specifically for veterans.
"We were military-friendly before it became a marketing termJ" says John F. Jones Jr.J the
university's vice president for Department of Defense relations. "We've always been so proud
of having a large military component among our student bodyJ and the new GI Bill has allowed
us to continue serving even more veterans."
Outreach by 4-Year Colleges
Although four-year public colleges are not enrolling as many veterans using GI Bill benefits
as are some for -profit and community collegesJ a number of them are also increasing efforts
to do soJ and to improve campus services for them.
Some institutions) such as San Diego State University and the University of Missouri at
ColumbiaJ have recently opened offices to provide veteran-specific services. Last month the
University of Utah opened the National Center for Veterans StudiesJ a joint effort of its
College of Law and College of Social and Behavioral Science that will conduct researchJ
provide outreach and vocational trainingJ and engage in nonpartisan advocacy for veterans.
53
As part of the centerJ the university also created a National Service AcademyJ which will
tailor some courses to veterans' talents and experiences. Hiram E. ChodoshJ dean of law at
UtahJ says veterans' drive to serve their country could be refocused to service in other
areasJ like health care and civil engineering.
"One of the ways we're trying to help veterans is by knowing we need veterans to help usJ" he
says. "They represent an incredibly untapped resource of talent and training."
Some public four-year universities are seeing more success than others in enrolling veterans.
Arizona State and Ohio State UniversitiesJ for exampleJ enrolled 716 and 548 studentsJ
respectivelyJ using Post -9/11 GI Bill benefits in the past academic year.
Both universities were cited by the online 2010 Guide to Military Friendly Schools as being
attractive to veterans because of their sheer size and their online programs. Both also offer
scholarships specifically for veterans. Campus officials say they have seen an increase in
the number of veterans and their family members using the Post-9/11 benefits compared with
those in the older GI Bill.
Charlene P. KamaniJ supervisor for veterans' benefits and certification at Arizona StateJ
says it enrolled about 60 percent more veterans across its campuses this past year than in
2008-9. The new lawJ she saysJ "offers them a greater ability to come here."
Further Expansion Sought
The Post -9/11 GI Bill took effect less than a year agoJ in August 2009J but a U.S. senator
already wants to expand its benefits.
Sen. Daniel K. AkakaJ a Hawaii Democrat and an Army veteranJ introduced legislation last
month that would make all members of the National Guard and Reserve programs eligible for the
new GI Bill benefits. His proposal would allow veterans to receive aid for a wider array of
educational programsJ including vocational and on-the-job trainingJ and would make it easier
for them to qualify for the housing and textbook allowances.
The bill would also base benefits on a national average of tuitionJ instead of on the highest
public - college tuition in each state.
"We are excited that there is again movement in making some legislative changes to the new GI
BillJ" says James SelbeJ assistant vice president for lifelong learning at the American
Council on Education.
While the bill's prospects are unclearJ and its cost has not been estimatedJ the council
continues to focus on ways to improve how colleges serve veterans. Following up on the $2-
million in grants that the council and Walmart issued last year to 20 collegesJ the council
will identify colleges that used the money to create the best programs and will urge other
colleges to adopt the most -effective practices.
"There's a pretty large-scale effort nationwide in building the capacity to serve veteransJ"
Mr. Selbe says. "But there's still work to do within institutions to improve the veteran
experience of transitioning from service to school."
54
From:
Sent:
To:
Cc:
Subject:
Yuan, Georgia
Tuesday, April27, 2010 12:24 PM
Shireman, Bob; Bergeron, David
McFadden, Elizabeth
This article names the analyst
DeVry leads ed. stocks lower as Credit Suisse downgrades on regulatory, job market concerns
Associated Press
04/26/10 9:30 AM PDT
NEW YORK - DeVry led decliners in education stocks Monday after a Credit Suisse analyst said
the for-profit school could be hurt by proposed regulatory changes and an improving job
market that could slow enrollment.
The administration has pushed hard for gainful employment regulations, which stipulate that
graduates of schools must not spend more than 8 percent of their income on paying student
loans.
It's meant to help improve school quality- making sure students are qualified and the
courses help increase their incomes - as student loan defaults soar.
If schools failed to pass this test, the government could block their access to federal loans
for students, the bulk of their revenues.
In early April, the Education Department said schools with 50 percent graduation rates and 70
percent job placement rates would be exempt from a proposed rule linking graduates' incomes
to required debt payments.
Analyst Kelly Flynn, however, said Washington sources believe the more lenient proposal might
not wind up in a draft of the law that will be posted by mid-May or June.
Flynn downgraded DeVry and ITT Educational Services Inc. to "neutral" from "outperform,"
cutting target prices to $65 from $75 and $110 from $135, respectively.
Shares of DeVry Inc. fell $4.59, or 6.6 percent, to $64.87, while ITT stock dropped fell
$2.07, or 1.8 percent, to $109.71.
Shares of Apollo Group Inc., which runs the largest for -profit school, the University of
Phoenix, also slid 93 cents, or 1.5 percent, to $62.60, while Corinthian Colleges Inc. stock
fell 59 cents, or 3.3 percent, to $17.30. Career Education Corp. fell 61 cents, or 1.8
percent, to $33.49 and Strayer Education Inc. dropped $2.54, or 1 percent, to $250.49.
Meanwhile, Flynn cited DeVry's warning on slower enrollment growth in one of its divisions
and ITT's warning on higher advertising spending.
For-profit schools have seen big gains in enrollment because of the recession and high
unemployment. As the job market improves, people may not feel as much as a need to bolster
their resumes.
55
From:
Sent:
To:
Cc:
Subject:
Attachments:
FYI
Yuan, Georgia
Wednesday, April 21 , 201 o9:50AM
Jenkins, Harold; Finley, Steve; Shireman, Bob; Rose, Charlie; Bergeron, David; Madzelan,
Dan
McFadden, Elizabeth; Rogers, Margot; Kanter, Martha
Report on Gainful in Inside Higher Ed today
2010-04-21 Inside Higher Ed.doc
http://www.insidehighered.com/news/201 0/04/21/gainfui#Comments
Going Ahead With Gainful Employment
April 21, 2010
WASHINGTON- A long recession and a wavering job market have brought for-profit higher education institutions
into the public eye as never before. Big advertising budgets have given them name recognition. Dramatic enrollment
growth (fueled by increasing amounts of federal financial aid) and assurances to students that a degree or certificate
is the path to a comfortable job in a specific field have brought them scrutiny.
Many newspapers, websites and TV networks have told the tale of programs at for-profit institutions that don't
prepare students for the jobs they've been all but promised --and plunge them into debt in the process. While the
anecdotes are often true, they're only part of the story; plenty of for-profit colleges (the institutions themselves prefer
the term "private secto( or "market funded") do prepare students for good jobs and don't sink them in a pool of post-
graduation debt.
Title IV of the Higher Education Act of 1965 requires all for -profit offerings other than those clearly designated as
"liberal arts," and non-degree vocational programs at nonprofit institutions, to show that they prepare students for
"gainful employment in a recognized occupation." If they don't, they' re not supposed to be eligible for federal financial
aid dollars.
No one, the U.S. Department of Education has contended, seems to have a satisfactory way of determining which
programs meet that standard. "It's illuminating for us that when we ask institutions how they' re complying with this
current law. we have not received adequate answers," says Bob Shireman, deputy undersecretary of education. "And
this is the law."
Through a process of negotiated rule making that began last year after passage of the Higher Education Opportunity
Act in 2008, the department has sought to develop a formulaic solution to the dilemma, in the form of regulations that
define "gainful employment" using data on incomes and debt loads, as well as completion, job placement and loan
repayment rates.
In essence, this is a crude mechanism to assess the quality and value of vocational programs. The "good" programs
that help students get jobs without saddling them with debt could continue to exist and deliver Pell Grants and
subsidized loans to their students. The "bad" programs-- the ones found to lead graduates to jobs they could've
gotten without the educational experience or that don't pay well enough for borrowers to repay their loans -would be
identified and put under closer scrutiny.
Representatives of the for-profit sector have aggressively fought such an approach, but most analyses so far suggest
that the proposed regulations are unlikely to be a sector killer. The department has acknowledged the need for
nonprofit and for-profit vocational programs, and has estimated that just 6 to 8 percent of programs that qualify for
Title IV under gainful employment would potentially need to change under the proposed rules.
In research that's been circulated but not yet publicly released, the Career College Association, the trade group that
represents for-profit colleges and universities, has less-conservatively estimated that close to 20 percent of career
college programs and a third of the colleges' students would be affected. In what the department would consider a
positive outcome, some of the "bad" programs would shut down. while others would lower prices or work to improve
their completion and job placement rates.
Though some observers have suggested that rewriting federal financial aid policy would be a better way to address
these problems, the Obama administration's Education Department is seizing on the opportunity it has now, with
Democratic majorities in both houses of Congress, to effect change. The revision of the gainful employment rules
could be a once-in-an-administration (if not once-in-a-career) chance for Shireman- who has advocated for reform
and increased protections for borrowers since serving in the Clinton White House - and his staff to tackle what they
consider to be a major source of student debt.
Shireman himself does not put it that way. 'We have to do everything we can in the regulatory process, as well as in
the legislative process, to protect taxpayers and students, he says. "We have these regulatory opportunities so we
have to take them. "
He does acknowledge that he is unwilling to wait for the next renewal of the Higher Education Act, in 2013, when
lawmakers would be most likely to make major changes in the law. "We're not going to wait for a reauthorization to
ensure that federal funds are being used appropriately."
The department sent a version of the regulations to the White House Office of Management and Budget this month,
and, though it's still being revised, a final draft will be published by mid-June. Over the summer, there will be one last
chance for public input and, by Nov. 1, the regulations will be printed in the Federal Register, to go into effect on July
1, 2011 .
Defining Gainful Employment
The Education Department was slow to formulate a proposed definition of gainful employment. In November and
December, during the first two week-long rule making sessions, the discussion among negotiators focused on
whether the department had the statutory authority to establish a formulaic definition of gainful employment.
Many negotiators saw the department's suggestions - particularly one that sought to determine the value a credential
would add to a recent graduate's earning power, and to use that to determine an acceptable maximum tuition - as
price controls. The most vocal opponent was the lone negotiator representing for-profit institutions, Elaine Neely,
senior vice president of regulatory affairs at Kaplan Higher Education. In December, Neely said she was
"flabbergasted that (the department) would impose price controls when clearly Congress itself has not been able to
come to the decision to do that on higher education." By warning of a "slippery slope" toward price controls
throughout higher education, Neely was able to get many representatives of nonprofit institutions on board in
opposition to the proposal.
An idea that took up much less of the panel's time was the department's proposal to determine whether the starting
salary in the field for which a program prepared students was sufficient to pay the average annual debt obligation of
the program' s graduates. If the average debt load for a program's graduates was $9,000 on a 10-year loan with a 6.5
percent interest rate, students would have loan obligations of $1 ,250. With a debt-service-to-income ratio of 5
percent, the starting income in that field would have to be at least $25,000 to be considered "gainful employment."
By mid-January, as the department and negotiators prepared for the third and final round of rule making, this debt-
service ratio had become the department's preferred regulatory path. Based on a partial reading of a 2006 paper by
Sandy Baum, of the College Board, and Saul Schwartz, of Ontario's Carleton University, the department's ratio
became 8 percent. (While Baum and Schwartz' s paper discusses 8 percent as a generally accepted standard, most
likely derived from mortgage underwriting standards, the authors suggest that a ratio as high as 18 percent could be
appropriate for single people earning $150,000 annually.)
Under the proposal made in January, which remains the only complete definition made public by the department,
vocational programs would be eligible for Title IV funds if their graduates' median annual payments on a 1 0-year loan
were no more than 8 percent of the Bureau of Labor Statistics' 25th percentile of annual earnings for people in
occupations for which a given program prepared students.
Programs that exceed 8 percent could still be eligible for Title IV funds by producing what the department considers
good outcomes: by showing that its graduates' annual earnings are higher than the BLS's 25th percentile and keep
the debt-income ratio below 8 percent; by documenting that students have at least a 75 percent repayment rate on
federal loans; or by demonstrating a program completion rate of at least 70 percent and an in-field employment rate
of at least 70 percent.
In the third round of negotiations, debate was contentious and without resolution. Terry W. Hartle, senior vice
president for government and public affairs at the American Council on Education, said he worried about cost, privacy
and the potential for " unintended consequences." A former Bush administration Education Department official , Todd
Jones, president and general counsel of the Association of Independent Colleges and Universities of Ohio, said he
saw the proposal as ripe for lawsuits.
Department officials were unwilling to reconsider the approach entirely, though they were open to constructive
feedback. "We put things on the table partly because we think they're a good idea and partly to get input," Shireman
says.
The department started with its most extreme - but politically viable idea -- and was ready to negotiate, but many
negotiators seemed too intent on persuading officials to obliterate the proposals to make good, constructive
suggestions.
And, since the third round of negotiations ended in late January, the department has continued to discuss the
proposals with stakeholders and to get feedback. "We recognize that some people felt -even we felt- that there was
not enough discussion at negotiated rule making for whatever reasons," Shireman says. "So we continue to hear from
associations and institutions, getting input from them that continues to be helpful, to continue to hear what
suggestions they have about what the term gainful employment should mean."
Who Would Be Hit
In broad terms, the Department of Education' s goal is to determi ne which programs really are preparing students for
gainful employment and not sinking graduates into chasms of debt.
"There's a tremendous number of students graduating with incredibly high levels of debt, " says Rich Williams, higher
education associate at the U.S. Public Interest Research Group, who represented students on the negotiated rule
making panel. "And in some cases they're unable to enter the fields they studied at the levels they thought they'd be
qualified for."
Pauline Abernathy, vice president of the Institute for College Access and Success, anticipates the regulations "will
lead to programs that are currently leaving students in terrible debt either having to change the quality of their
programs or their cost structure." Before Shireman joined the Obama administration, he was TICAS's president.
But rt's unclear whether the department's proposed rules would really weed out those programs and would do so in a
way that kept all good programs up and running. '' I don't think you can draw a line that separates the wheat from the
chaff perfectly," says Mark Kantrowitz, publisher of Finaid.org. "The choices are tough -you either throw out the baby
with the bathwater or, because you want to keep the baby no matter what, you' re going to get some bathwater too. I
think that's a reality that everyone needs to come to terms with."
When applied to the existing landscape of vocational programs, the department's approach would seem to favor
programs at public institutions over private ones (either for-profit or nonprofit), those that required fewer credits
earned over more credits, and those in higher-paid fields like nursing and information technology over lower-paid
careers in the arts.
Because the rules would apply only to certificate programs at community colleges, state universities and private,
nonprofit institutions, they' re less likely to force any real change at non profits. Tuition on these programs at public
instit utions is so low that it's relatively rare for students to take out loans. If they do, they' re likely to be small. Even at
private nonprofits, where tuition is likely to be of a similar magnitude as at for-profit colleges, the fact that the rules
apply only to non-degree programs will keep many programs out of regulatory reach.
Shireman and other department officials have insisted in many instances that the department is not "out to get" for-
profit colleges and that it is not the department's intention to regulate the sector out of existence. "We have made it
quite clear that we are interested in improvement and outcomes all across the spectrum, all across the sectors," he
says.
Nonetheless, it seems clear that the gainful employment regulations will force the most change on for-profit
institutions, which will have to choose between lowering tuition, improving student outcomes or shutting down
programs that don't align with the rules. In the short run, at least, all of these options would hurt the institutions'
bottom lines.
Even if some programs end, says Abernathy, of TICAS, "there will be plenty of other for-profit programs that will be
very eager and capable of being able to meet that need, but that do so in a way where students and taxpayers are
better off."
For a field in which a for-profit institution offers multiple certificate and degree options, the ones that cost the least-
and often require the fewest credits - are the ones least likely to be regulated out of existence. If an institution offered
certificates, associate degrees and bachelor's degrees in, for example, culinary arts, t hat all led to the same Labor
Department-classified jobs and the same Bureau of Labor Statistics-reported 25th percentile of income, it's logical
that the 8 percent rule would make the preferred outcome a certificate and not a bachelor's degree.
Kantrowitz, of Finaid.org, says that though the department's existing proposals "really didn't consider the impact on
bachelor's and graduate degrees," he thinks the next draft of regulations will because the department hasn't shown
any indication of wanting to discourage students from pursuing longer programs. "Take an associate's degree versus
a bachelor's degree. Students are in school twice as long, paying twice the tuition, but they don't have twice the
income."
Though programs would have the option of collecting their own salary data rather than relying on the BLS numbers,
institutions often find it difficult to collect this information. As of now, observers say, few institutions have a
comprehensive view of their graduates' incomes.
Kantrowitz and others have suggested that the department use different labor data - in his own calculations,
Kantrowitz used federal Census data, which details age group and educational attainment but not field of employment
-- but the ideal data set does not exist.
Apollo Group, which owns the University of Phoenix and other institutions, said in a March 30 earnings call that it has
begun the process of analyzing its programs. B u ~ "given the number and range of disciplines offered by our
universities as well as the uncertainty regarding the implementation process of the draft proposal , our analysis is both
extensive and complex."
In mid-March, analysts at Morgan Stanley said they thought that Education Management Corp. (which runs the Art
Institutes and Argosy University, among others) and ITT Educational Services would need to undergo the most
widespread change to meet the regulations because of high tuition rates and, at Education Management, an
enrollment that leans heavily toward low-paying arts fields.
Two companies that would have very few endangered programs, according to Morgan Stanley: American Public
Education, Inc., which focuses on serving members of the military and public servants, who are less likely to take out
student loans; and Capella Education Company, whose programs have very low loan default rates and would be able
to qualify for Title IV funds under one of the alternative definitions of gainful employment.
Gregory W. Thom, Capella's vice president of government affairs and general counsel, agrees that his company
would probably have to make few changes to abide by the gainful employment regulation. "Capella is viewed by folks
within the department as a high quality institution, " he says. "We have a degree of comfort that however this plays
out, Capella would be fine and Capella would be in good shape. "
And yet, until the final regulations go into place and the institution can collect and calculate all the appropriate data,
Capella can't be sure that it's out of the woods. "There are so many moving parts, Thom says. "It's premature to
engage in speculation on how this is going to play out ... at Capella on a program-by-program basis."
A leader at another for-profit institution with low cohort default rates said he also thought his programs would meet at
least one of the gainful employment rules, but still worried that they might not. Insufficient data and a still -unclear
sense of the precise regulations the department wil l decide upon has left him feeling a bit uneasy about the
outcomes.
The Feedback
At every hint that the Department of Education is backing down from proposed regulations that would force some
programs offered at for-profit colleges to lower their prices, improve their outcomes or shut down, Wall Street analysts
and the for-profit institutions breathe a sigh of relief.
When Secretary of Education Ame Duncan testified before the House of Representatives' Education and Labor
Committee on March 3, and was questioned on the gainful employment regulations, his comments that the
department was "by no means wedded to any one direction" and "[didn't] want to be overly heavy-handed" were
perceived by for-profit boosters as signs that the department was open to scaling back the regulations.
Before and since, the Career College Association and lobbyists for for-profit institutions have pounded the halls of
Congress trying to get members to put pressure on the department. Some members of the Congressional Black
Caucus sent a letter to Duncan charging that the rules are discriminatory because for-profit institutions
disproportionately serve minority students. A bipartisan group of 18 House members wrote to Duncan asking that he
pull the plug on the department's approach altogether.
Last week, when a report from Credit Suisse cited someone "close" to the Office of Management and Budget as
saying that the department had decided to seemingly soften one of the alternative methods of qualifying for Title IV,
higher education stocks soared as the rumor spread. The source told the bank that the option to demonstrate a
program completion rate of at least 70 percent and an in-field employment rate of at least 70 percent had become a
50 percent completion rate and a 70 percent employment rate.
Though it is one of the possibilities the department is considering, the switch to a 50 percent completion rate is not
final. Officials submitted a draft to the OMS to begin the process leading to the publication of rules and the public
comment process, but are said to be continuing to analyze data and listen to feedback.
The for-profit institutions tout these small bits of news and others as indications that the department may be backing
away from its tough-line approach, but it is unclear whether any perceived motion on the department's part will
actually materialize as dramatic changes to the next draft of regulations.
Teddy Downey, of Washington Research Group, says he doubts the department would take any steps that would
dramatically lessen the reach of the regulations. In a e-mail message last week after the Credit Suisse rumor
circulated, he said he anticipates "a very low chance that this change will amount to a truly significant loophole."
In an interview, he went further. "I don't think the department would do anything it doesn't think will have the desired
effect. I think they have the data to support whatever they choose to do."
Kantrowitz, of Finaid.org, is skeptical of whether the department has the data, but he agrees that the department isn't
backing down on gainful employment. "They're not going to do anything that doesn't have teeth in it," he says. "It may
just be some kind of educated guess, but it's going to have teeth."
- Jennifer Epstein
Comments on Going Ahead With Gainful Employment
Schools do not give students their diplomas
Posted by LL , Concerned taxypayer on April21 , 2010 at 9:00am EDT
These schools are a waste of taxpayer dollars! Schools like these are not giving students their
diplomas. It is ridiculous and I applaud the Dept of Ed for finally taking a stand to regulate these institutions.
This is another example of private profits, public loss.
Unintended consequences
Posted by Concerned Educator on April21, 2010 at 9:30am EDT
The proposed regulations will decrease the likelihood that low-income, minority and difficult-to-serve
students will encounter general education coursework. (Accredited degree programs must have at least 33%
gen ed coursework. Certificate programs have no such requirement.) Is that a desirable outcome?
Does the Department intend to engage in social engineering, whereby the less well -to-do cannot pursue
careers in the arts? Selective institutions offer a limited number of seats. At least some passionate young
artists who lack the support and specialized knowledge required to attain one of those seats will be left out I
can think of few outcomes more depressing than eliminating support for young artists. Is starting salary the
most important measurement of success in artistic fields?
At my for-profit coll ege, we struggle mightily to help students who have been previously unsuccessful in
educational endeavors. It's difficult work, and not everyone makes it, but for the ones who do it's very
satisfying on graduation day - t o us, but apparently not to the Department. The proposed regulations
devalue the work of those of us who take on the tough cases.
I have a dream of opening a high-quality institution of higher education in the inner city. The proposed
regulations make unacceptably risky. Is that what we want? People say that community colleges already do
that. In my state the graduation rate at community colleges is 11%, up from 9% last year. Isn't it cynical to
suggest that students should simply accept that?
Some of our programs result in careers that don't yield high salaries until a few years after graduation. Do
we really want to get rid of those programs?
Few baccalaureate degree programs at non-profit institutions would meet the 8% standard. Why is that okay
for those graduates to have more debt but not for ours?
What is this really about?
Posted by NG on April 21, 2010 at 9:30am EDT
For profits have adapted and quickly changed majors/programs that are deemed to provide gainful
employement.
These schools( using the term loosely)do a better job of providing training to their communities then most
community colleges.
They don't have the heavy burden of unions and byrocracy hence they're flexible and can change their
programs they offer quickly to meet demand.
Because of the aging US population and its move away from manufacturing most of the new programs are
now in Healthcare. There is a shortage of healthcare professionals and these guys are filling a need by
providing a product thats needed in the marketplace today.
This intiative will do nothing t o change the landscape of Higher Ed.
From:
Sent:
To:
Subject:
FYI
From: JenkinsJ Harold
Yuan, Georgia
Monday, April 05, 2010 10:22 PM
Kanter, Martha; Shireman, Bob
FW: Brian Jones
Sent: MondayJ April 05J 2010 1:46 PM
To: YuanJ Georgia; RosenfeltJ Phil; MiceliJ Julie
Subject: Brian Jones
Here is an article from insidehighered.com about what former ED General Counsel Brian Jones
is doing these days.
For- ProfitJ for African-Americans?
April 2J 2010
For- profit higher education has had no difficulty attracting black students. When the
University of Phoenix announced its growth to 443J000 students in the fallJ it noted that
27.7 percent of its new students are African-American.
On ThursdayJ a new venture announced that it will seek to become a for-profit higher
education company focused on serving black students. Officials were vague about how they
would do soJ but acknowledged that they would be seeking one or more partnerships with
existing institutions that have accreditation. That has been a popular
approach<http://www.insidehighered.com/news/2010/03/17/dana> of late with investors who are
looking to move into new higher education markets -- since accreditation is easier to hold on
to (even with a change of ownership) than to earn from scratchJ and accreditation is required
for students to receive federal financial aid.
One source familiar with some of the exploratory discussions about Latimer EducationJ as the
new venture is calledJ said that the goal was to align with a privateJ financially challenged
historically black college. One of Latimer's founders confirmed that working with a black
college was one idea under considerationJ but he said that other ideas were as well.
Latimer's three co-founders are well connected in business and education circles: Scott R.
RoysterJ who spent much of his career as an executive with Radio OneJ a chain of black radio
stations; Brian W. JonesJ who was general counsel for the U.S. Education Department during
the George W. Bush administration and has also worked in the student l oan industry; and David
A. SutphenJ who is a partner in a communications firm and formerly held key positions on the
staffs of such prominent players in education policy making as the l ate Sen. Edward M.
Kennedy. Jones also spent several years prior to the launch of Latimer working for Dow
LohnesJ a Washington law firm that has been brokering partnerships between nonprofit colleges
and for-profit entities.
The Web site<http://www. latimereducation.com/our-mission.php> of Latimer is sparseJ and its
profile has been decidedly l ow until Thursday's announcement by
MaveronJ<http://www.maveron.com/> a Seattle venture capital firm co-founded by the chairman
of StarbucksJ that it was investing in the company. Maveron was an earl y investor in Capel la
Education and has been recently investing in other higher education businesses that focus on
providing educational content.
JonesJ in an interviewJ declined to discuss many details about the new ventureJ including the
degrees or programs it would offer. But he said it would probably have a campus and also
deliver education online. "We hope to create an institution that will cater to what are often
the unique needs and interests of the African-American community."
The founders saw the potential to make a niche in the for-profit sector by focusing on black
studentsJ he said. "I think the reason that the for -profits have done wellJ and it's not
unique to African-American studentsJ is that they serve nontraditional students wellJ" he
said. "They have been attentive to the needs of the market placeJ much more flexibility for
the unique needs of nontraditional students who work during the day or have other commitments
that make it difficult to attend a traditional institution." As for building on that recordJ
he saidJ "not to disparage anything the existing for-profits are doingJ" but that he believes
the right programming and services would attract more black students.
He said that the education programs would be "more culturally tailored or relevant to
African-Americans." HoweverJ Jones said that all students would be welcome. The new programsJ
he saidJ would let students "be able to leverage all the emerging technologies that deliver a
superb experience."
"The bottom line for us is that we are coming into this market because we have the
opportunity to transform the higher education experience for a great many African-Americans."
Michael L. LomaxJ president of the United Negro College FundJ said via e-mail that he was not
familiar with the new venture but was "not necessarily surprised" by it. "For-profit
education companies are targeting all segments of the marketJ including African-AmericansJ"
he said. "Competition is a reality of higher educationJ and no sector -- including HBCUs --
is immune. The fact is that there are increasing numbers of black Americans who are now and
will be in the future seeking post-baccalaureate degreesJ and new providers will aggressively
seek to serve them."
Some advocates for low-income studentsJ who are also critics of for-profit higher educationJ
were alarmed by Thursday's news.
Sara Goldrick-RabJ an assistant professor of educational policy studies and sociology at the
University of Wisconsin at Madison who studies student access to higher educationJ said she
was bothered by quotes in the Maveron press
release<http://www.businesswire.com/portal/site/home/permalink/?ndmViewid=news_view&newsid=20
100401005379&newslang=en> comparing the idea of a black for -profit college to black media
companies. Via e-mailJ she said: "ClearlyJ this is the 'business' of education and these
folks are making little effort to pretend like it's anything else."
Barmak NassirianJ associate executive director of the American Association of Collegiate
Registrars and Admissions OfficersJ said it was "no secret that the sector disproportionately
targets minority communitiesJ" and he said this should be cause for concern.
While he said that he does not know specific information about LatimerJ the for - profit sector
in general operates "in a free-for-all in which you grab as many warm bodies as possibleJ"
earn money from the student loans these students take out to pay for tuitionJ and "ship them
out the door."
He said that educators should be "all the more alarmed" if a for-profit is open about
planning to focus on black studentsJ many of whom are from low-income families. He also said
that educators and accreditors should be much more wary of the way for-profit entities
operate within or purchase nonprofit colleges -- and thus are able to use the nonprofit
colleges' accreditation.
2
"It's a form of body-snatching. turning the institutions essentially into zombies." he said.
It should be "glaringly obvious" that when a for-profit entity purchases a nonprofit entity.
the changes are so significant that there should be no assumption that the values or
priorities of the original institution matter anymore. But he said accreditors appear
''unequipped or unwilling" to challenge these arrangements.
- Scott Jaschik<mailto:scott.jaschik@insidehighered.com>
3
Further Complaint About Misconduct at The University of Phoenix
April 20
1
h 2010
I urge the Department of Education to stop the University of Phoenix from rewarding and
punishing enrollment counselors based on the number of students they enroll.
I urge the Department of Education to stop the University of Phoenix from retaliating
against employees who report misconduct.
The Misconduct Reported in 2008 and 2009 Continues
The enrollment misconduct at the University of Phoenix that Mike Reid and I reported to
the authorities in July 2008 and February 2009 continues. University ofPhoenix continues
to pressure and manipulate students into enrolling. HR and Compliance ignores my reports
of enrollment management misconduct at the Austin campus.
The University ofPhoenix chooses to pay its lobbyists in Washington to try to keep its
unethical but highly profitable enrollment practices rather than change. Thousands upon
thousands of more students will get hurt, costing taxpayers even more billions in wasted
student financial aid.
According to the OEDb' s Online College Rankings 2009- using data provided by the
College Navigator database of the Institute ofEducation Sciences- the University of
Phoenix ranked:
39th of 41 in desirability
37th of37 in graduation rates
35th of37 in retention rates
The regulators have a publi c and moral duty to stop for-profit universities from pressuring
and manipulating students into enrolling. The Department of Education should demand
that the University of Phoenix compensate the tens of thousands of students it has harmed.
These students are typicall y minority and low-income, without the resources to defend
themselves.
Punishing the Messengers
The company continues to retaliate against those reporting misconduct. The University
terminated complainant Mike Reid in 2009 for not meeting student enrollment targets.
They were subsequently forced into settling out of court with him.
Since first reporting the misconduct at the Austin campus, the University has persecuted
me. They have subjected me to hyper-scrutiny, retaliation, discrimination, and humiliation
- all designed to find cause to terminate me or get me to resign. While this response is not
surprising, what is worse is that the University has deliberately hurt my students to punish
me. To stop me from reaching my enrollment targets, management has withheld normal
support in enrolling them. The University harmed at least four of my students as a result.
Two of my students have threatened to sue the University.
If the authorities do not protect employees brave enough to report misconduct, then who
will? If errant companies are allowed to retaliate against whistle blowers, then who will
dare come forward in the future?
Wall Street Greed Spreads to Education
The University' s enrollment Performance Matrix continues to be a charade designed to
smokescreen the regulatory authorities. Remuneration based on number of enrollments is
the Trojan horse that is infecting higher education with the same greed for profit at any
cost that has hurt Wall Street. As on Wall Street, the for-profit universities make billions of
dollars at the expense of unsuspecting students and taxpayers.
The University still effectively rewards enrollment counselors solely based on their
number of enrollments. The changes made to the enrollment counselor Performance Matrix
since our earlier reports are cosmetic. The ' meets expectations' standards set for the other
matrix elements are near impossible to beat, meaning that counselors must meet or beat
enrollment numbers to receive salary increases.
The team performance whiteboards at the Austin campus still prominently display the
number of student enrollments and applications made by each counselor. The weekly
enrollment department and monthly campus meetings announce and praise the counselors
who top the enrollment numbers. If it looks like a duck, walks like a duck. ..
While salary decreases for not meeting enrollment targets were officially ended in late
2009, counselors are told they must come up with a written "action plan" to ' improve'
their performance before they are allowed to return to work.
The University of Phoenix typically raises the pressure on enrollment counselors before
their performance review period ends. Counselors often resort to pressuring and bullying
students into starting in order to try to meet their numbers to earn a salary raise or keep
their job.
The University recently reintroduced psychological sales coaching to train counselors to
help manipulate students into enrolling.
Management Misconduct is Perpetuated
Senior management at the Austin campus is on record admitting the University has long
prioritized pressuring students into school. The Austin Campus Director told me towards
the end of2009 that "our goal has always been to just get them in the door" and "we are
not going to change what has worked for us" .
Only those counselors who ' meets expectations'- effectively meet enrollment targets- are
eligible for applying for management positions or are chosen for the leadership
development programs, a precursor to management.
Management continues to favor those counselors willing to pressure students into starting,
while retaliating and discriminating against those who refuse. It does this by directing hot
leads, and enrollments from other sources, including departing counselors.
Management only promotes counselors who accept pressuring students into school -
ensuring that its unethical management practices perpetuate. The current acting Director of
Enrollment is the sister of the Director they fired following our first complaint.
An independent investigation ofthe Austin campus by the Texas Workforce Commission
this year found that "treatment of all employees was/is based of "favoritism". If you are a
friend, you get fair treatment, if not you are black listed."
The company ignores reported misconduct by Austin managers, including the falsifying of
student records and the retaliation against those for reporting the misconduct. I sent a
detailed 27-page history of misconduct at the Austin campus to HR. in October 2009. The
company terminated the Director of Enrollment before responding denying my allegations.
Hundreds of Thousands of Students Are Injured For Life
The University of Phoenix has never offered compensation to the huge number of students
it has harmed- financially and emotionally. All of these students suffer the humiliation of
failing school, leaving with many thousands of dollars of student loan debts. They have no
chance of getting additional student financial aid until they repay these loans, along with
penalties and interest. It is virtually impossible for the vast majority of these students to
pay off these loans. They are effectively condemned from ever pursuing further education
in their lifetime.
A Better Way
I believe that if the University ofPhoenix ended its predatory enrollment practices,
everybody would benefit:
Only students ready and able to go to college would enroll, dramatically increasing
retention and graduation rates.
Billions of dollars of taxpayer financial aid funds would no longer be wasted.
The University ofPhoenix would end up making bigger profits from significantly
higher retention and graduation rates and a better reputation.
I urge the regulatory authorities and legislators to take action to make this happen before
any more taxpayer dollars are wasted and innocent students are harmed.
Derek Hoggett
7812 Elkhorn Mountain Trl
Austin, Texas 78729
512 662 7835