Twelve Senators say Corinthian should stop enrolling students

A dozen U.S. senators, all Democrats, are pushing Corinthian Colleges Inc. to stop accepting new students in a letter to the Department of Education.

Corinthian owns the Everest College, Heald College and WyoTech schools and has about 75,000 students. Its Milwaukee campus closed after less than two years of opening with drop out rates of more than 50% and job placement rates of less than 6%.

The Education Department this week worked out a deal with Corinthian that gives it $16 million in federal student aid funds to keep the company running as it figures out a plan to sell or close many schools over the next six months. Corinthian, which has more than 100 campuses, said it will look for new owners for most of its schools and hopes to have sales agreements in place within about six months.

Santa Ana, California-based Corinthian had warned last week that it could go out of business after U.S. regulators limited its access to federal funds. The government is scrutinizing the company over allegations that it altered grades, student attendance records and falsified job placement data used in ads.

In the letter addressed to Education Department head Arne Duncan Thursday, the 12 senators said students need to be protected from the company. Iowa Senator Tom Harkin, who is also the chairman of the Senate Health, Education, Labor, and Pensions Committee, was one of the politicians who signed the letter.

"Corinthian has shown itself to be one of the worst actors in the for-profit college industry," the letter said.

Representatives from Corinthian and the Education Department did not immediately respond to a request for comment.

The letter also wants the Education Department to make sure the company explains to students its plans and to stop any for-profit education company that's under investigation from purchasing from or taking on students from Corinthian.

The entire letter is linked here.

New Federal Oversight Proposed for For-Profit Colleges

Three Congressional lawmakers are pushing for a new federal committee that would coordinate the government’s oversight of for-profit colleges.

Senators Dick Durbin of Illinois and Tom Harkin of Iowa, both Democrats, plan to introduce legislation Thursday that would create a committee comprising representatives from nine federal agencies that oversee for-profit colleges.

The committee would be tasked with improving the coordination among the various federal and state regulators that are investigating for-profit institutions. It would also publish an annual “warning list” of colleges that have been found guilty of illegal activity or institutions for which the committee otherwise has “sufficient evidence” of widespread abuses.

Representative Elijah Cummings, a Maryland Democrat, plans to introduce an identical proposal in the House, but both bills are likely to face fierce opposition from Republicans, who have been critical of the Obama administration’s efforts to more tightly regulate the for-profit industry.

Devry University accused of violating federal laws

A lawsuit filed this month in San Diego, Calif. alleges DeVry University Inc. leadership in the city bribed students and sought ways to work around federal laws meant to regulate for-profit colleges.

Attorneys for Karinna Topete, a former manager at DeVry in California, claim she witnessed school officials violating internal company policies, as well as state and federal laws and regulations and that she was a victim of sexual harassment.

The lawsuit argues the DeVry campus' leadership would issue bonuses to admissions counselors who exceeded enrollment quotas, and that officials would "bribe" students -- in one instance, providing gift cards -- in exchange for positive performance reviews from students, according to court documents.

For-profit colleges have been increasingly regulated by the Obama administration in an attempt to reform the "bad actors."

 Recent investigations by the U.S. Senate and Government Accountability Office found widespread deceptive recruiting practices by many of the largest for-profit schools. In 2012, Sen. Tom Harkin (D-Iowa) listed DeVry along with other schools as companies that had "very serious shortcomings in the past" but are making improvements.

Topete alleges DeVry officials sought to evade federal regulations by sending admissions employees to community college transfer fairs to pressure enrolled students to sign up for classes at the for-profit institute. She also claims in the lawsuit that the DeVry Director of Admissions ordered her not to provide "informational materials or referrals to persons of Iraqi national origin or Middle-Eastern appearance."

According to the U.S. Department of Education, DeVry received just shy of $1.3 billion in taxpayer dollars through federal student aid in 2010-11, the most recent year data is available.

Senators Take on For-Profit Marketing Budgets

Submitted by Paul Fain on April 19, 2012 - 3:00am

WASHINGTON -- Two Senate Democrats have found a new way to try to hit for-profit colleges where it hurts, by proposing a ban on the use of revenue from federal financial aid for advertising, marketing and recruitment.

The proposed legislation is unlikely to go anywhere this year, and will draw little support from Republicans. But the approach is novel, and could be part of the longer-term debate on Capitol Hill about the regulation of for-profit institutions.

The bill is also notable because it is the first legislative salvo against for-profits from Sen. Tom Harkin, the Iowa Democrat who has led a lengthy pursuit of the industry. And the legislation applies to both nonprofits and for-profits, a development applauded by for-profits, which otherwise criticized the bill.

Sen. Kay Hagan of North Carolina joined Harkin in sponsoring the legislation, which would apply to all colleges that receive federal aid under Title IV of the Higher Education Act. However, the senators clearly took aim at for-profits, which generally spend much more on marketing to prospective students. Nonprofit colleges, particularly two-year institutions, often complain that for-profits use advertising to lure students who would otherwise attend community colleges.

“We need to make sure that federal education dollars are spent on just that: education,” Harkin said.
Among a group of 15 of the largest publicly traded for-profits, the average company in 2009 spent 23 percent of its budget on advertising, marketing and recruitment, according to research from the Senate Health, Education, Labor and Pensions Committee. By comparison, nonprofit institutions on average spend less than 1 percent of their budgets on marketing, according to the committee.
Some for-profits spend big on “deceptive marketing and recruitment efforts,” Hagan said, noting in a written statement that she is “especially troubled by the tactics some for-profits have employed in targeting active-duty service members and veterans.”

The legislation would include in its ban on marketing expenditures the use of revenue from the Post-9/11 G.I. Bill and tuition benefits for service members. Currently, those military aid programs do not count as federal dollars under the 90/10 rule, which prohibits for-profits from drawing more than 90 percent of their revenue from federal aid such as Pell Grants and federal student loans.

Protecting veterans and members of the military from aggressive student recruiting is a popular cause that some Republican lawmakers support. But this bill did not include a Republican co-sponsor.
The legislation would not lead to changes in spending by most nonprofit institutions, observers said, because few are both heavily dependent on revenue from federal financial aid while also toting proportionally large marketing budgets.

Terry W. Hartle, senior vice president for government and public affairs at the American Council on Education, said the bill’s “goals are laudable.” The council fully supports efforts to crack down on “deceptive or high-pressure recruiting tactics.”

Even so, putting the legislation into action would be “extraordinarily difficult," Hartle said, because there is no easy way to determine what, exactly, constitutes marketing at nonprofit colleges. And while details were vague for how colleges would comply with the rules, Hartle said that added administrative burdens could also be problematic.

“Implementation is never as easy or simple as the legislative branch would assume,” he said.
Banned under the bill’s language would be the use of federal aid revenue for all “advertising and promotion activities” as well as “efforts to identify and attract prospective students, either directly or through a contractor or third party.”

Sen. Hagan said “there would be a certification process that would have to be signed” for colleges to continue accepting federal financial aid from their students.

Steve Gunderson, CEO of the Association of Private Sector Colleges and Universities, the primary for-profit trade group, said in a written statement that the legislation was burdensome and “another attempt by some policy makers to try and put private sector colleges and universities out of business.”

The bill also “reflects a fundamental misunderstanding of the students we serve and the public service we provide,” because of the large numbers of adult and nontraditional students who attend for-profits and “can’t be reached through a high school guidance counselor.”

A spokesman for the Apollo Group criticized “misleading rhetoric” from the two senators, who singled out Apollo for employing more than 8,000 student recruiters in 2010. But he said it was “encouraging to see that this legislation is focused on all schools.”

Senator Harkin, however, focused his comments squarely on for-profits, which he said have “dismal graduation rates” and spend “staggering” amounts of money on advertising and recruiting. However, he stressed that the legislation would not prohibit college ad buys.

“There’s nothing wrong with advertising and marketing,” he said. “You just won’t be allowed to use taxpayers’ dollars to do so.”

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.

NPR correspondent predicts defeat of for-profit college regulations

On Friday, Cokie Roberts, senior news analyst at NPR, predicted that Democratic lawmakers, in particular, will be reluctant to aggressively regulate for-profit colleges because of their ties to the Washington Post, one of the nation’s most powerful newspapers. The Washington Post Co. owns Kaplan University, among other for-profits.

“But I have to tell you, the biggest objection to [regulation] has come from the fact that The Washington Post would go out of business if Kaplan went out of business – yes, I see Peter Smith waiving,” Roberts said with a chuckle. “Because The Washington Post money all comes from Kaplan and the Democrats don’t want The Washington Post to go out of business, so I think there are a lot of forces militating against those rules at the moment.”

While the Post maintains the independence of its newsroom, its editorial page has argued against new rules such as the "gainful employment" regulation proposed by the U.S. Department of Education.

The gainful employment rule is a quality measure that restricts federal financial aid to those for-profits that have a student repayment rate of 45% or better in an effort to ensure that the education students pay for results in employment with adequate compensation.

Currently, many for-profit colleges such as Everest College, do not meet this standard. As a result, students who are frequently paying $20,000 to $70,000 for their educations graduate with debts they have no possibility of repaying.

Iowa Senator Tom Harkin and Milwaukee Congresswoman Gwen Moore are among those who support the gainful employment regulation

Hearing on for-profit colleges reveals partisan split

Last week a Senate Committee chaired by Senator Tom Harkin (D, Iowa) held its third hearing on the plight of students enrolled at for-profit colleges. In refuting a Republican colleague's defense of for-profit colleges Harkin noted that only 16% of two year college students take out loans while an incredible 95% of those attending for-profit colleges do.

Inside Higher Education reports that:

he increasing divisiveness of the debate over the federal government’s role in the oversight of for-profit colleges (and the growing likelihood that nonprofit higher education will get roped into the scuffle) was on full display Thursday as a Senate committee convened for its third hearing examining the sector.

Framing his concerns about the sector’s $24 billion stake in the federal financial aid program and what he called "misleading, deceptive, overly aggressive or fraudulent" practices that lead students to enroll at for-profit colleges, Senator Tom Harkin (D-Iowa), chairman of the Health, Education, Labor and Pensions Committee, singled out the institutions for scrutiny. “They figured out how to be profitable even when the students are not successful,” he said. “There’s irrefutable evidence now that something’s gone wrong with this industry. I’m not saying that everybody’s bad in the industry, I’m just saying that the system has gone wrong.”

Harkin reiterated his pledge to sponsor legislation relating to for-profit colleges early next year. But he conceded the need for further investigation and more hearings, because “I don’t know exactly what needs to be done.” He also announced that the next hearing on the sector would be in early December and focus in part on the increasing share of funding going to for-profit colleges from the tuition assistance programs for veterans, active duty military and their families.

At the start of the hearing – which was devoid of the startling revelations that some in the sector and investors had feared -- Harkin unveiled a report analyzing some of the data submitted to the committee by 30 for-profit colleges as part of his staff’s investigation of the sector. The report focuses entirely on the for-profit sector and does not include data on nonprofit colleges and universities as a basis for comparison.

That, said Senator Michael B. Enzi (R-Wyo.), was problematic. “I agree there is clearly a problem in higher education -- now you’ll notice I didn’t limit that comment to for-profit schools,” he said. “It’s naïve to think these problems are limited to just the for-profit sector. We’ve been looking at this in a vacuum.”

Harkin countered: “The point is that only 16 percent of community college students borrow money; 95 percent of [students at] the for-profits borrow money and they borrow money at a higher amount than they do at the community colleges.” Tuition for for-profit programs can be significantly higher than for comparable programs at community colleges, he said, pointing to findings from the Government Accountability Office’s August report on the sector. To him, the examination was not one done in a vacuum but one focused on the most pressing area of concern.

The entire article is linked.

For-Profit Colleges Step Up Lobbying Against New Rules

The New York Times' Tamar Lewin reports:

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 Hill, executives at the colleges have provided employees with “personalized” letters to send to Washington and urged students to speak out against the proposals.

So far, the department has received about 45,000 letters on the proposed “gainful employment” regulations, in the comment period that ends Thursday.

Last week, John Sperling, the founder of the nation’s largest for-profit college, the University of Phoenix, e-mailed every member of Congress, seeking help opposing the regulations, and attached a sample letter to be sent to Education Secretary Arne Duncan, asking him to withdraw them.

Donald Graham, the chairman and chief executive of The Washington Post Company, which gets most of its revenue from its Kaplan education business, visited Senator Tom Harkin, Democrat of Iowa, whose Health, Education, Labor and Pensions Committee is holding hearings on the for-profit education industry.

Under the proposed regulations, announced July 23, for-profit education programs would qualify for federal student aid only if enough former students were repaying their student loans, or if graduates generally earned enough to repay their debts.

Many for-profit colleges have urged students, professors and administrators to send in criticisms of the proposals.

The Education Management Corporation (owned by Goldman Sachs), the second-largest for-profit company, hired DCI Group, a public relations firm, to contact its employees for information that would be used to create a personalized letter, which would then be delivered back to the employee for signature, along with a stamped, addressed envelope.

“EDMC believes it is important, that during this public-comment period on the proposed Federal Gainful Employment Rule, that our students, faculty and staff have the opportunity to voice their opinion, if they choose to do so,” said Jacquelyn Muller, a spokeswoman for the company.

EDMC also has a Web site, the Higher Education Action Center, guiding students or employees to oppose the regulations, offering “pre-crafted” letters. Argosy, a unit of EDMC, said last month in an e-mail soliciting more comments that more than 2,000 people had used the site in 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.

For-profit colleges and the threat of a new bubble

In an op ed in the LA Times Senator Tom Harkin warns that massive defaults will result from for-profit colleges manipulating students into taking out loans that they cannot afford.

Harkin writes:

Haven't we heard this story before? It features a high-pressure sales force persuading consumers in search of the American dream to go deep into debt to purchase a product of often dubious value. Default rates are sky high. Taxpayer money is squandered. Top executives walk away with fortunes.

This sounds like a description of the subprime mortgage industry, which came crashing down two years ago. But what I just described is the reality at many for-profit colleges.

...serious questions have been raised about some of the major players in this rapidly growing industry. Critics charge that many for-profit colleges employ overly aggressive recruiting tactics targeting low-income students. Students take on excessive debt, and though dropout rates are not available, there is reason to believe that they are very high.

Critics say that the entire business model, especially in the case of publicly traded companies, is premised on a college's ability to churn through many thousands of students, whose federal Pell grants of up to $5,550 and Stafford loans are paid to the school, with no accountability for student learning or graduation. Even good actors in this industry are lured into the vortex of bad practices in order to compete and meet investors' expectations.

The entire article is linked.

For-Profit Colleges: Educators or Predators?

Time Magazine's Elizabeth Dias reports:

When Yasmine Issa found herself, at 24, unemployed and a recently divorced mother of twins, she turned to the Sanford-Brown Institute, a for-profit, or proprietary, college in White Plains, N.Y., that offered an ultrasound sonography program and promised her job-placement opportunities. But a completed program and $15,000 in federal loans later, Issa missed the catch: the program was not accredited. "I was somebody no one wanted to hire," she says.

Issa testified on Thursday before the Senate Health, Education, Labor and Pensions Committee as part of a new investigation into federal investment in higher education. Congress last instituted reforms in the for-profit education sector two decades ago, but federal aid to students at for-profit schools has rapidly increased, approaching $24 billion last year, with an additional $36 billion Pell Grant boost approved in March. A report released late last week by chairman Senator Tom Harkin found that up to 90% of for-profit schools' revenue comes from Washington and that for-profit students are graduating with more debt than students at public or private nonprofit universities. With 96% of proprietary students taking out loans, and nearly half of them defaulting, taxpayers foot the bill. (See pictures of the college dorm's evolution.)

At current increasing enrollment and loan rates, testified Steve Eisman (famous for waging war against the subprime-mortgage market in 2008), there could be $330 billion in defaults in the coming decade. "The taxpayers are being taken for a ride on this," Senator Harkin told TIME.
"Taxpayers, I think rightfully, are saying, 'Yes, you can take my tax dollars to help educate kids; that's good for us and our country.' But I don't know that the taxpayers want their money to go to institutions to pay the shareholders huge profits."

Government money, lightly supervised institutions, unchecked supervising bodies and debt-trapped students — it all sounds similar to the subprime-mortgage collapse that is still fresh in America's mind. "The analogies are unbelievable," said Barmak Nassirian of the American Association of Collegiate Registrars and Admissions Officers, linking the for-profit education boom to the savings-and-loan crisis of the 1980s, the dotcom boom of the '90s and the recent mortgage bubble, which was helped along by lax credit-rating agencies and loose regulation. (Comment on this story.)

For-profit school leaders deny the parallel. "It's silly and simplistic," responds Harris Miller, CEO and president of the Career College Association. "The analogy between the [for-profit college] accrediting bodies and the [credit] rating service is absolute nonsense." Corinthian Colleges Inc. downplays default numbers and cites an Office of Management and Budget figure showing that loan-repayment rates have actually risen in the past decade.

Apollo Group, the University of Phoenix umbrella, cautions that federal student and default data itself is unreliable and can't be used in its current state to guide regulation. "The federal government's Integrated Postsecondary Education Data System does a poor job of capturing the nation's next-generation learners, who comprise the majority of the university's student body," Apollo Group spokesman Manny Rivera said. (See TIME's special report on paying for college.)

The House's proposed accountability rules only start to address limited Department of Education graduation data and unreliable self-reported school figures. Moreover, Harkin's findings indicate that there is no information available on how private schools spend Higher Education Act student-assistance dollars. While Congress is seeking to create a Consumer Financial Protection Bureau (CFPB) to oversee private student loans, the CFPB would not have jurisdiction over the loans that for-profit colleges make or over Sallie Mae, the largest private student lender.

Other for-profit industry ties to Washington remain murky. Last month, House Republicans nominated the only for-profit members — Keiser University chancellor Arthur Keiser and University of Phoenix president William Pepicello — to the Secretary of Education's accreditation advisory committee, the National Advisory Committee on Institutional Quality and Integrity. While direct political contributions from the Career College Association, Apollo Group and Corinthian Colleges Inc. have totaled only $923,000 since 2006, their lobby maintains a strong presence.

Issa's story parallels hundreds of others that Senator Harkin's office received recently. The refrain is usually the same: after being lured by aggressive recruitment and advertising strategies, low-income students leave proprietary schools unemployed and trapped in debt.

Deanne Loonin, director of the National Consumer Law Center's Student Loan Borrower Assistance Project, has seen for-profit student clients seeking help with loan defaults for nearly 20 years. Not one client, she claims, got a job in his or her anticipated field. "The schools are playing the role of the brokers who are pushing the products on the vulnerable population," Loonin remarked.

The Health, Education, Labor and Pensions Committee appears divided on the next steps as it awaits July's for-profit-education hearing. Ranking member Senator Michael Enzi disavowed the partisan nature of Harkin's report. But for Senator Al Franken the solution is simple: "Well, we have a job here," he said at the committee hearings, "and part of it is to look out for Ms. Issa, look out for the taxpayer, and I'll be damned if I'm going to be a Senator and not do that job." For-profit education may again face tougher regulations and oversight from Washington.

— With reporting by Katy Steinmetz