Thursday, December 23, 2010

Kaplan accused of deceptive registration leaving students deeply in debt

Managers at Kaplan--the highly profitable educational arm of the Washington Post Co.-- have for years pressured academic advisors to use guerrilla registration to boost enrollment numbers, according to former employees, offering accounts consistent with dozens of complaints filed by former students with the Florida Attorney General's Office and reviewed by The Huffington Post.

Guerrilla registration has been part of a concerted effort by the university to keep students enrolled as long as possible in order to harvest more of the federal financial aid dollars that make up nearly all of the company's higher education revenues, according to former Kaplan academic advisor Sheldon Cobbler, who described the practice in detail.

Most advisors had access to a company database that allowed them to view students' e-mail correspondence without their knowledge, said Cobbler, who worked at Kaplan's Fort Lauderdale, Fla., corporate office from 2007 through July of this year. The advisors routinely searched through students' e-mails to look up their user names and passwords for Kaplan's enrollment system, and then they used that information to sign in using multiple student identities, enrolling them in classes they never intended to join, he said.

"The company didn't want students to withdraw," Cobbler said. "They wanted them to stay in class by any means."

The entire Huffington Post expose is linked here.

Monday, December 20, 2010

Free market fundamentalists have been wrong about everything

Nobel Prize winning economist Paul Krugman writes in today's Times:

Free-market fundamentalists have been wrong about everything — yet they now dominate the political scene more thoroughly than ever.

The column is linked here.

Thursday, December 16, 2010

Tax deal saves bailed out CEOs millions

Jamie Dimon, chairman and CEO of JPMorgan Chase & Co., praised the President's agreement with Republicans to extend the Bush tax cuts.

"If we're going to strengthen our economy and grow jobs, this type of outreach - and cooperation between the administration, Congress, and the private sector - are critical," says Dimon.

It is no wonder Dimon liked the tax bill which extended the Bush era high income tax cuts for another two years. Dimon's compensation over the last three years has averaged $21,991,394 a year. The tax deal agreed to between President Obama and the Republicans will give Dimon and extra $1,179,000 next year, according to an analysis by Citizens for Tax Justice.

The bank Dimon heads was also the beneficiary of the giant Wall-Street bailout of 2007 and 2008. JPMorgan Chase & Co, along with other Wall Street banks, also poured millions of dollars into a lobbying campaign to water down the financial reforms Congress considered earlier this year.

Tuesday, December 14, 2010

College, Jobs and Inequality

In an editorial today the New York Times writes that a college education is not a cure-all for joblessness and income inequality, although it does correlate with higher incomes and lower unemployment.

Searching for solace in bleak unemployment numbers, policy makers and commentators often cite the relatively low joblessness among college graduates, which is currently 5.1 percent compared with 10 percent for high school graduates and an overall jobless rate of 9.8 percent. Ben Bernanke, the chairman of the Federal Reserve, cited the data recently on “60 Minutes” to make the point that “educational differences” are a root cause of income inequality.

A college education is better than no college education and correlates with higher pay. But as a cure for unemployment or as a way to narrow the chasm between the rich and everyone else, “more college” is a too-easy answer. Over the past year, for example, the unemployment rate for college grads under age 25 has averaged 9.2 percent, up from 8.8 percent a year earlier and 5.8 percent in the first year of the recession that began in December 2007. That means recent grads have about the same level of unemployment as the general population. It also suggests that many employed recent grads may be doing work that doesn’t require a college degree.

Even more disturbing, there is no guarantee that unemployed or underemployed college grads will move into much better jobs as conditions improve. Early bouts of joblessness, or starting in a lower-level job with lower pay, can mean lower levels of career attainment and earnings over a lifetime.Graduates who have been out of work or underemployed in the downturn may also find themselves at a competitive disadvantage with freshly minted college graduates as the economy improves.

When it comes to income inequality, college-educated workers make more than noncollege-educated ones. But higher pay for college grads cannot explain the profound inequality in the United States. The latest installment of the groundbreaking work on income inequality by the economists Thomas Piketty and Emmanuel Saez shows that the richest 1 percent of American households — those making more than $370,000 a year — received 21 percent of total income in 2008. That was slightly below the highs of the bubble years but still among the highest percentages since the Roaring Twenties.

The top 10 percent — those making more than $110,000 — received 48 percent of total income, leaving 52 percent for the bottom 90 percent. Where are college-educated workers? Their median pay has basically stagnated for the past 10 years, at roughly $72,000 a year for men and $52,000 a year for women.

A big reason for the huge gains at the top is the outsize pay of executives, bankers and traders. Lower on the income ladder, workers have not fared well, in part because health care has consumed an ever-larger share of compensation and bargaining power has diminished with the decline in labor unions.

College is still the path to higher-paying professions. But without a concerted effort to develop new industries, the weakened economy will be hard pressed to create enough better-paid positions to absorb all graduates.

And to combat inequality, the drive for more college and more jobs must coincide with efforts to preserve and improve the policies, programs and institutions that have fostered shared prosperity and broad opportunity — Social Security, Medicare, public schools, progressive taxation, unions, affirmative action, regulation of financial markets and enforcement of labor laws.

College is not a cure-all, but it will certainly take the best and brightest minds to confront those challenges.

Monday, December 13, 2010

New House education chair opposes for-profit regulations

The incoming Republican chairman of the House of Representatives education committee said that he would oppose any bill tightening rules on for-profit schools, and hoped the Education Department would ease a planned rule that could cost some schools critical federal funding.

The schools have been in a battle with the department and Democratic Senator Tom Harkin, who had reiterated on Thursday that legislation might be needed next year to rein in the schools, under fire for high student loan default rates and low graduation percentages.

"I would push back really hard against a bill that might come out of Chairman Harkin's committee," said Representative John Kline, a Minnesota Republican who takes over the Education and Labor Committee next month.

Asked if such a bill could succeed, Kline told Reuters: "I don't think so."

The industry is fighting the Education Department's plan for a rule that would bar federal loans to students in programs where fewer than 35 percent of former students are paying back loans or are capable of doing so. A final rule on repayment rates is due out early next year.

Asked if the final version of the rule would be eased, Kline said, "I certainly hope so."

For-profit education stocks include Corinthian Colleges, Strayer Education and ITT Education.

Friday, December 10, 2010

For-Profit Colleges Face Beefed-Up Aid Audits From Education Dept.

The U.S. Department of Education plans to increase its scrutiny of how colleges award federal grants and loans to their students, and a department official told The Chronicle it will pay particular attention to for-profit colleges owned by publicly traded companies and on all institutions with large distance-education programs.

The department, which has been beefing up the compliance-office staffing in its Office of Federal Student Aid, expects to conduct about 300 program reviews of student-aid operations next year, in contrast to about 200 this year. Program reviews are audit-like examinations of student-aid operations designed to ensure that students receive only the grants and loans they are entitled to and that institutions make refunds in accordance with the law in cases where students withdraw.

With the focus on the nation's deficit, the Obama administration wants to be sure the billions of dollars in new federal funds for student-aid programs are serving students, said James Kvaal, deputy under secretary of education, speaking on Friday at a meeting of the Association of Private Sector Colleges and Universities. "People are taking the budget very, very seriously."

Mr. Kvaal said the administration also wanted to protect Pell Grants from cuts. Some members of Congress have proposed reducing federal spending to 2008 levels. "The White House is calling that 'economic unilateral disarmament,'" Mr. Kvaal said.

That was welcome news to people in the audience, many of them operators of for-profit colleges. About 30 percent of all Pell Grant funds now go to students in the for-profit sector. Mr. Kvaal said colleges that educate such needy students with good programs are performing "a service to those students and a service to the country." But he said then, and at several other times during his talk, that the department remained very concerned about for-profit colleges that rely on "deceptive and high-pressure sales tactics" to enroll students or leave them with unreasonable levels of student debt.

He said the department's proposed "gainful employment" rule, aimed at curbing such abuses, was designed not as an attack on the for-profit industry but as a means to deal with some of the "worst-performing programs."

For-profit colleges have undertaken a vast lobbying and public-relations campaign that assails the rule as an ill-conceived approach that will hurt students and their own companies. At the session on Friday, Mr. Kvaal said that the proposal, as released in July, "was not perfect" and that the department would consider the criticisms, including more than 90,000 comments pro and con, before issuing a final version of the rule in early 2011.

By Goldie Blumenstyk , Chronicle of Higher Education

Wednesday, December 8, 2010

How Much Evidence of Career College Abuses Do They Need?

Stephen Burd writes in High Ed Watch:

As we wrote last week, the incoming Republican leaders of the House of Representatives have assured for-profit college lobbyists that they plan to go to bat for the industry in the next Congress. But these leaders -- such as the soon-to-be House Speaker John Boehner (R-OH) and House education committee chairman John Kline (R-MN) -- have also made clear that their willingness to do so could be tempered by further revelations of abuses in the sector.

“I get told every time I’m around Boehner or Kline or whoever that ‘we’re going to make certain all sectors get a fair treatment if we’re back in control, but we will not give you cover if you’re doing the wrong thing,’” Bruce Leftwich, a top lobbyist with the group formerly known as the Career College Association, said during a post-election wrap-up the organization held with its members.

The question we have at Higher Ed Watch is how much evidence of abuses do they need?

Just consider what we have learned over the last several weeks from reports in The New York Times and BusinessWeek about The Washington Post’s Kaplan Inc :

According to BusinessWeek, Kaplan’s recruiters use the company’s online Concord Law School as a selling point to attract students -- telling them that once they earn their bachelor’s degree, they can pursue a career in law at Concord. However, these enrollment counselors, the article states, typically leave out one pertinent detail: that Concord graduates are only eligible to take the bar exam in California since the school is not accredited by the American Bar Association.

When asked about this omission, a company spokeswoman said that it would be inappropriate for undergraduate admissions advisers to provide details about the law school's programs. “It isn’t their job,” the magazine paraphrased her as saying, adding that those who specifically seek out more information about Concord are referred to the law school’s staff.

In a front-page article last week, The New York Times reported that it had talked to “dozens of current and former Kaplan employees” who raised serious concerns about the company’s recruiting practices. Many of these individuals said that Kaplan specifically targeted financially needy students “whose chances of succeeding were low” so that the schools could get access to their federal financial aid. These current and former employees specifically cited a training manual that was “used by recruiters in Pittsburgh whose ‘profile’ of Kaplan students listed markers like low self-esteem, reliance on public assistance, being fired, laid off, incarcerated, or physically or mentally abused,” the newspaper wrote. A Kaplan spokeswoman acknowledged that the manual exists but said that it hadn’t been used since 2006.

According to The New York Times, one major area of concern is how the company markets its criminal justice program. “Students who were recruited were led to believe that they could get into the C.I.A. or F.B.I. or Border Patrol or crime-scene investigation when they graduated, and earn $40-$50,000,” a former Kaplan instructor and administrator, who is involved a lawsuit against the company, stated. “But those jobs all require advanced training.” Most graduates end up working as security guards, earning $8 to $9-an-hour -- jobs they could have gotten without

Kaplan’s expensive training programs, she said. [Meanwhile, an undercover, hidden-camera investigation by ABC News revealed last week that Remington College, a privately-held chain of for-profit schools, had enrolled people with prior felony convictions into its criminal justice program, even though former felons are generally barred from working in law enforcement, including as security guards.]

The New York Times article also reported that for several years, one Kaplan campus in Broomall, PA, aggressively recruited students into its surgical-technology program even though the school knew full well that it didn’t have enough placement opportunities at hospitals to provide them with the hands-on training that was required of them to earn their degrees. One student, a single mother with four kids, said she was “in limbo for more than a year” after she completed her courses, waiting for the school to place her. She was finally “given one short placement,” which was “not enough to graduate.” According to the newspaper, she is now $14,000 in debt but without a degree. The school’s former director of education, who has filed a False Claims lawsuit against the company, said that the student’s experience was common. In his complaint, he stated, “that although the school had not had enough placement opportunities for the surgical-technology program since 2002, it kept enrolling new students, taking their federal student aid, leaving them stranded without a placement and then dropping them from the program, which was phased out in 2007,” the newspaper reported.

Although these news accounts focus on Kaplan, it’s pretty clear that the alleged abuses described in these articles are not isolated to one company’s institutions. In fact, according to the recent undercover investigation by the Government Accountability Office (GAO), they appear to be fairly widespread at the nation’s largest for-profit higher education corporations.

In August, the GAO revealed that it had found (and secretly recorded) “fraudulent, deceptive, or otherwise questionable marketing practices” at every single one of the 15 for-profit schools it visited. These campuses included ones owned by Alta Colleges, the Apollo Group, Corinthian Colleges, Education Management Corporation, as well as Kaplan.

Meanwhile, in the three hearings it has held this year on for-profit higher education, the Senate Health, Education, Labor and Pensions Committee has heard troubling testimony from several of its witnesses. These include:

Yasmine Issa, a single mother who completed a training program in ultrasound technology at Career Education Corporation’s Sanford Brown University only to find out later that the program was not accredited. Recruiters, who had stressed the school’s accreditation to Issa, apparently had forgotten to mention that the sonography program lacked the necessary specialized accreditation. As a result, Issa, who paid $32,000 for the program (including $15,000 in federal loans), wasn’t eligible to sit for the licensing exam or to find work as a sonographer.

Joshua Pruyn, a former admissions director at Alta’s Westwood College, testified that the schools’ recruiters regularly misled prospective students about the total cost of their programs (which he said was $75,000 for a bachelor’s degree.) Often they would tell students the per-term cost (around $4,800) without making clear that there were five terms a year, he said. He also told the Senate committee that recruiters were directed to deceive students about the institutional private loans it was providing them. According to his testimony, enrollment counselors were to refer to the high interest loans as “student supplemental funding,” without revealing their terms or conditions. Far from discouraging the deceit, he said, his corporate bosses rewarded it. “The most appalling example,” he stated, “was when the assistant director of admissions on my team was presented with a “Best Liar” award at a team celebration.”

Kathleen Bittel, who was a career service advisor in the online division of EDMC’s Art Institute of Pittsburgh when she testified. As we reported, she told the committee of the tricks that EDMC has allegedly used to inflate its official job placement numbers. She revealed that graduates had to work at their jobs for only one day to be considered successfully placed. In addition, she said that employees were pressured to inflate the schools’ job placement numbers by counting students who were clearly not working in the field in which they had trained. “Employees were expected to convince graduates that skills they used in jobs such as working as waiters, payroll clerks, retail sales, and gas station attendants were actually related to their course of study in areas like graphic design and residential planning,” she stated.

At Higher Ed Watch, we do not understand how any member of Congress -- Democrat or Republican -- could hear these allegations without taking pause, let alone how they could rush to the industry’s defense. If these schools did not shower lawmakers with campaign contributions and spend millions of dollars each year on high-powered Washington lobbyists, would there even be a question of whether more scrutiny was warranted?

Suggested Reading
Three Steps House Repubs May Take to Shield For-Profit Colleges
Breaking News: A Key Witness at Senate Hearing Will Reveal How For-Profit Colleges Cook the Books on Job Placements
Heads Will Roll at For-Profit Colleges -- But Not the Right Ones
A Long Overdue Examination of For-Profit Higher Education

Kaplan Will Eliminate 770 Positions

Kaplan Higher Education announced Tuesday that it is eliminating 770 positions, about 5 percent of its work force.

Jeff Conlon, president and CEO of Kaplan Higher Education, said: "Our enrollments have slowed recently, as they have at other proprietary schools. More importantly, we have made a strategic decision to become more selective in the students we enroll, focusing on students who are most likely to thrive in a rigorous academic environment and meet their financial obligations. These factors have led to a shift in our personnel

Friday, December 3, 2010

Republicans demand assistance for the rich; slam door on the unemployed

All indications are that the Obama administration will cave into Republican demands to extend the Bush era tax cuts for the rich, people making over $250,000 a year.
Not only only will this increase the deficit by $700 billion over the next decade, but it will do virtually nothing to promote economic growth since there is no evidence that high income tax cuts result in economic growth.
At the same time, the Republicans stopped Congress from extending unemployment benefits to 2 million Americans who have been unemployed for more than 26 weeks.
Not only is it cruel to deny financial support to American families who have lost their jobs, but it hurts the economy since unemployment benefits are a very effective form of promoting economic growth since the unemployed spend virtually every dollar they receive.
Rather than stand up for the nation's unemployed and for fiscal responsibility, President Obama has announced that he will freeze the pay of federal employees for two years. These public servants earn less than their private sector counterparts. More importantly freezing their pay has virtually no impact on the deficit since employee compensation is a very small component of federal expenditures. And it will actually weaken the economy since it will reduce spending at a time when the lack of demand threatens the very weak recovery.
In a little noticed blog a few weeks ago David Leonhardt, the New York Times economics reporter, asked: Why should we believe that extending the Bush tax cuts will provide a big lift to growth?

Those tax cuts passed in 2001 amid big promises about what they would do for the economy.

What followed?

The decade with the slowest average annual growth since World War II. Amazingly, that statement is true even if you forget about the Great Recession and simply look at 2001-7. (See chart above that is adjusted for inflation)

The competition for slowest growth is not even close, either. Growth from 2001 to 2007 averaged 2.39 percent a year (and growth from 2001 through the third quarter of 2010 averaged 1.66 percent). The decade with the second-worst showing for growth was 1971 to 1980 — the dreaded 1970s — but it still had 3.21 percent average growth.

The picture does not change if you instead look at five-year periods. Here’s a chart ranking five-year periods over the past 50 years, in descending order of average annual growth:

I mean this as a serious question, not a rhetorical one: Given this history, why should we believe that the Bush tax cuts were pro-growth?

Is there good evidence the tax cuts persuaded more people to join the work force (because they would be able to keep more of their income)? Not really. The labor-force participation rate fell in the years after 2001 and has never again approached its record in the year 2000.

Is there evidence that the tax cuts led to a lot of entrepreneurship and innovation? Again, no. The rate at which start-up businesses created jobs fell during the past decade.

The theory for why tax cuts should create growth and jobs is a strong one. When people are allowed to keep more of each dollar they earn, they are likely to work longer and harder. The uncertainty is the magnitude of this effect. With everything else that’s happening in a $15 trillion economy, how large of an effect on growth do tax cuts have?

Every available piece of evidence seems to suggest that the Bush tax cuts did little to lift growth. I have yet to hear a good argument to the contrary, but I’d be fascinated to see another blogger or an economist take a crack at it.
While no one has stepped up to answer Leonhardt's challenge, the Republican demand that the richest Americans be given a budget busting tax break has become a virtual certainty.

Wednesday, December 1, 2010

Corinthian College CEO replaced

Corinthian Colleges Inc., one of the country's biggest and most controversial for-profit higher education businesses and a company in the thick of the effort to challenge the Education Department's proposed new regulatory approach to the sector, has replaced its chief executive officer with its former leader.

Jack Massimino, who headed Corinthian from 2005 to 2009 and since has served as chairman of its board, announced on Tuesday that he would re-take the company's reins from Peter Waller, who succeeded him as CEO in July 2009.

Massimino insisted that despite a series of regulatory and legal difficulties for the company, Waller's departure had "nothing to do with the company, performance, compliance, anything.... Things happen, personalities are personalities." The board "concluded that a different management style was needed to guide the company at this time, and it asked for, and Peter tendered, his resignation. It does not signal broader problems at the company."