Tag Archives: for-profit

Opinion Piece in The Hill: Hearing or head hunting?

Today, my opinion piece was published on The Hill’s Congress blog. The piece argues that as our Senator, Tom Harkin (D-IA) should look across the national landscape to find ways to increase the number of students in higher education and to encourage education paths for those Americans who will not be able to receive at a traditional non-profit school or public college or university, rather than go after for-profit colleges and universities. See below for an excerpt:

Sen. Tom Harkin (D-Iowa), as chairman of the Senate Committee on Health, Education, Labor & Pensions (HELP), has scheduled a hearing entitled Bridgepoint Education, Inc.: A Case study in For-Profit Education and Oversight. The premise for his hearings has been to investigate the Department of Education. However, it appears that this is a subterfuge for portraying the for-profit sector in the worst possible light in order to restrict students’ access to career-oriented colleges.

In a press release announcing this Thursday’s upcoming hearing, Chairman Harkin noted that the lone target of his “case study” [Bridgepoint Education] was singled-out because more than 60% of their bachelor’s degree students had withdrawn before finishing their degrees.

Click here to read the full piece.

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Improving Regulation and Regulatory Review – Executive Order: Part 1

 

 

This past week, President Obama issued the executive order – Improving Regulation and Regulatory Overview.  The actions by President Obama are a very positive sign, especially in light of the newly introduced regulations of the Department of Education this past year.  Those regulations in the areas of “new programs” and “gainful employment” have the potential to be very costly to higher education, and many of us have believed that they did not strike the right balance between protecting consumers of education with assuring consumers access to education.  President Obama had called for an approach that would “strike the right balance” in his Wall Street Journal op-ed, explaining the rationale for his action

The Department of Education’s gainful employment rule and its approval process for new programs have the potential to impact negatively both higher education and the broader economic recovery.  They can do so by slowing the growth of new programs with a “chilling effect” on new programs that comes from the additional, imposed processes associated with adding new programs.  They can also slow growth in higher education by imposing additional risk to the potential yield from new educational programs due to threats from the gainful employment rule.  Their impact may well limit innovation and growth in new jobs in this very large sector of our economy.

But perhaps the more significant potential impact of regulations like the ones the Department of Education chose to implement is on the slowed growth in human capital that comes from limiting job-related training and education for industry sectors where the value of human capital is increasingly critical.  U. S. productivity matters, and one way we increase our productivity is through education that improves the quality of our labor supply.

I applaud the direction that President Obama has announced, and I look forward to its effect throughout government, including the Department of Education.

Be sure to check back on Monday, as I will post Part 2 of this blog on an exciting new issue that I hope to blog about more in the future.

GAO Revises Report on For-Profits

Yesterday there were a number of news articles on the Government Accountability Office’s revisions to its report on recruiting practices of the for-profit education sector. The controversial report was the basis for an August hearing of the Senate Committee on Health, Education, Labor and Pensions Committee hearing held by Senator Harkin (D-IA).

 

In a letter Tuesday, Senator Mike Enzi (R-WY) asked the GAO to withdraw the testimony made regarding the report and explain why the changes were made. The Washington Post detailed significant changes to the GAO report in an article published today.  The reported changes raise serious questions about the validity of the GAO’s study and offers insight into Senator Enzi’s request to withdraw the testimony.

Here are excerpts from the Washington Post article:

The revised report, posted Nov. 30 on the GAO Web site, changed some key passages. In one anecdote cited as an example of deceptive marketing, the GAO originally reported: “Undercover applicant was told that he could earn up to $100 an hour as a massage therapist. While this may be possible, according to the [Bureau of Labor Statistics] 90 percent of all massage therapists in California make less than $34 per hour.”

 

The revised version states: “While one school representative indicated to the undercover applicant that he could earn up to $30 an hour as a massage therapist, another representative told the applicant that the school’s massage instructors and directors can earn $150-$200 an hour. While this may be possible, according to the BLS, 90 percent of all massage therapists in California make less than $34 per hour.”

 

In another example, the report originally stated that a college representative “told the undercover applicant that by the time the college would be required by [the] Education [Department] to verify any information about the applicant, the applicant would have already graduated from the 7-month program.”

 

The revised version states that “the undercover applicant suggested” that possibility and the “representative acknowledged this was true.”

 

There were several other significant edits to the examples detailed in the report.

New York Times on Loan Repayment

The recently released data from the Department of Education demonstrate what many people have repeatedly said; for-profit schools are disproportionately educating Americans from the working class with lower incomes, and lower income students have higher default rates on their loans than students from higher income families.  The data include loan repayment rates and loan default rates.  Repayment rate is calculated as the 2009 institutional repayment rate of students from the prior 3.5 fiscal years.  Yesterday’s New York Times education supplement summarized the Department’s data for the 2007-2008 loan repayment rates for large colleges and universities.  The focus was on large schools from three sectors: (a) for-profit, publicly traded; (b) private, nonprofit; and (c) public.

What the data appear to disclose is a relatively lower institutional repayment rate by students from for-profit schools that are publicly traded.  Upon closer analysis, however, the data really disclose what many have said; the for-profit schools are disproportionately educating Americans from the working classes who qualify for Pell grants at much higher rates.  The average percentage of students from large public schools who qualify for Pell grants is 21%.  By contrast, the percentage is double for large for-profit schools; 42% of their students qualify for Pell grants.  The for-profit sector is serving substantially higher proportions of students from lower income families.

The data do demonstrate higher default rates and lower loan repayment rates from the for-profit sector.  But what lies beneath this superficial observation is instructive as policy decisions are made by the Department of Education.  In order to understand the data better, a more narrow comparison of more similar large institutions across the three sectors was used.   This comparison looked only at institutions with somewhat comparable Pell grant qualification rates between 20% and 39%.  The analysis does not include for-profit schools with much higher Pell eligibility and apparently concomitant poorer loan repayment behavior nor does it include private and public schools with much lower Pell eligibility.  That approach does show a higher loan default rate and a lower loan repayment rate in the for-profit sector.  The default rate was 7% for students from for-profit schools; whereas it was 4% for students from the other two sectors.  The loan repayment rate of 41% for this slice of for-profit schools was lower than the 56% and 57% rates respectively for private, nonprofit and public schools.  Of course, even in this slice of large schools, we do not have comparable institutions in terms of student income; the for-profit sector had a much higher Pell-eligibility average of 37% compared to an average of 28% among private, nonprofit schools and 25% among public schools.  .

While the analysis of this narrower slice of schools still shows more problematic repayment behavior among students in for-profit schools, it also suggests that students may be behaving in ways that are driven more by their income than by the type of school they attend.  In order to pursue the question of why loan repayment rates differ using the same public data, another analysis was completed.  The private, non-profit schools and the public schools were split into two groups – those schools within the same 20-39% slice of Pell-eligibility and those schools with Pell-eligibility rates below 20%.  For the large public schools, the loan repayment rate was substantially higher (68% versus 57%) for those schools with lower percentages of Pell-eligible students, and the loan default rate of 2% was half of the 4% rate for those public schools with higher Pell-eligible rates.  The same relative comparisons were evident for the private, non-profit sector.

For at least this group of large schools, the New York Times data demonstrate what we would expect; students from lower incomes – whether in for-profit schools or more traditional schools – have a harder time repaying their student loans, and disproportionately, for-profit schools are educating a higher percentage of students with lower incomes.

New Study: Career Colleges Outrank Community Colleges

Yesterday, Norton Norris, Inc. released a survey of 332 career college students who have attended community colleges in the past. The study was of particular interest to me because of my family’s long-time involvement with and support of community colleges; my wife spent 35 years as faculty member and administrator, and both she and my son have Associate’s degrees.  The Norton Norris survey found that career colleges ranked higher on 13 out of 14 aspects of its study, including job placement services and flexibility of class schedules.

What I found most interesting was the study’s break-down of the costs of education between the for-profit sector and the publicly funded community college.  There was a significant difference between career and community colleges with career colleges’ costing about $25,000 more per student graduate. The study makes the following observations.  Community colleges only graduate 20.3% of their enrolled students, compared to 58.2% at private sector schools.  Community colleges do not assist most students with job placement and community colleges are not more accessible to students; overcrowding and scheduling continue to be major concerns.

Traditional community colleges do provide a low price option for someone to take a single course or a few courses, and this is part of their mission and a source of the higher cost per graduating student.  But the outcomes of the study are noteworthy, especially in light of the very high cost-per-graduate difference.  It is also worth noting, in light of the recent GAO report on for-profit colleges and universities, that the Norton Norris study found some less-than admirable practices from traditional community colleges.  Community colleges are also guilty of withholding important information from prospective students, such as graduation rates. Moreover, like their career college counterpart, community colleges also advertise relatively widely today, and they use the public’s tax dollars to do so.   While no misleading practice by career colleges or community colleges is acceptable, the study paints a much more positive picture of the for-profit career college than information the public has recently received from many media.

Click here to view one video that was produced as a result of the study.

My Words in The Hill

On Tuesday, a letter to the editor I submitted to The Hill was published in response to an August 19th opinion piece by former Governor McKernan (R-ME). The op-ed asked the Department of Education to refrain from discriminating against for-profit colleges and re-think their proposed gainful employment rule. See below for my letter:

Critics of private sector education have been working overtime over the past few months. And despite some bad behavior from a few for-profit providers, there is substantial misunderstanding of this sector of higher education and the real consequences of the Department of Education’s proposed actions.

The Department of Education’s proposed gainful employment rule endeavors to curb rampant student debt; actually it has the potential to limit educational opportunities for thousands of students across the country. In his opinion piece “Don’t discriminate against proprietary colleges”, Governor McKernan notes that the purpose of federal student aid is to provide access by helping disadvantaged students reach their potential. Unfortunately, the gainful employment rule will achieve just the opposite – limiting access.

Whereas private sector schools provide low-income and non-traditional students with educational access and opportunity, the gainful employment rule moves to strip that opportunity from some of the most vulnerable students.

The gainful employment rule has the potential to hurt the very students it was written to help, as Governor McKernan notes. Instead of helping, it undermines the true congressional intention of Title IV grants and loans. As a vehicle to enable opportunity in education, Title IV’s purpose is undermined as the gainful employment rule strips away access and becomes fundamentally altered if implemented as currently written.

Instead of imposing a one-size-fits-all solution to combat student debt, the Department of Education and Congress should strive to hear from those most affected by the proposed rule. I fear that the most vulnerable student will be the real losers.

Keep the Data Coming

The release of the Apollo Group’s study, Higher Education at a Crossroads, is another example of much-needed data in the for-profit education debate. While this study was commissioned by a private sector school, it should not be discounted, and it deserves attention along with what was reported here in a Chronicle of Higher Education article – about Apollo and about for-profit education in general. In this debate, all data should be welcomed and it should be evaluated on the usual issues, e.g., its methodology.

Private sector schools play an important role in our education system today.  They do so by providing non-traditional students access to college degrees. This study’s findings are quite startling and they have very significant policy implications.  While I have long argued that private sector schools are essential to meeting President Obama’s goal for college graduates, the study estimates that meeting the goal without proprietary colleges would cost taxpayers more than $800-billion over the next 10 years.  As anyone in a public college or university knows all too well, there is not enough public funding for our existing, public colleges and universities, much less an expansion of this enormity.

If the Department of Education moves forward with the gainful employment rule as proposed, the educational future of our students will be jeopardized. I encourage the Department to take another look at how the rule will affect thousands of students that attend private sector institutions.

College Complexities

In previous blogs, I have observed how complex the challenges of higher education really are.  The news from three recent, separate sources, when considered together, confirm its complexity and also once again raise concerns about the capacity of U. S. higher education to respond to our growing needs for sophisticated human capital as a foundation of our economic competitiveness.

On Sunday West Virginia Governor Joe Manchin called on state governors to focus this year on higher education productivity – e.g., enrollment, persistence, and graduation.  Governor Manchin is the new Chair of the National Governor’s Association.

And just five days earlier, the Wall Street Journal reported that low and moderate income students are less likely today to enroll in college, underlining the Governor’s call for a focus on productivity.  The Wall Street Journal summarized a report to Congress from the Advisory Committee on Financial Assistance; compared with 1992, the percentage of low income students who enroll in college has fallen 14 percentage points with only 40% enrolling by 2004.  For moderate income students, the burden of college expense had gone from 22% of family income to 26% of family income in the same period.

Monday’s Chronicle of Higher Education added a third, but inter-related piece of news with its report by Goldie Blumenstyk.  Median family income of students in for-profit colleges is just $24,300, 60% of family income of public college and university students.

If we are to raise U. S. competitiveness and increase higher education productivity as called for by Governor Manchin, we must turn around the decline in enrollment among the lowest income group, and we must assure support for students from low income backgrounds who are increasingly choosing for-profit schools for their education.

Lowering Default Rates

Despite the overtly negative tone of The Chronicle of Higher Education’s story, “Business Is Up in Keeping Default Rates Down,” two things are clear:

  • For-profits are committed to lowering default rates: “Default management has become a flourishing practice and business in its own right, and colleges are seeking help on that front with increasing urgency.”
  • For-profit colleges serve a large majority of at-risk students: “Most for-profit colleges enroll more low-income and working-adult students than higher education does as a whole, and college leaders in that sector say that is a major reason for their high default rates.”

While the story seems to advocate a “misalignment in interests” between the students and the school in managing loan defaults, the article misses the point by targeting assumed motivation rather than positive outcome. Truly, default management is in the same interest as the students, the school, and the government.

“Mr. Hawn, of ECMC, says the practical realities of default-management protect against abuse, as does the ethos of the industry …Colleges aren’t looking to cut corners either, Mr. Hawn ads.  “So far I’ve not run into any school that’s saying, ‘Dave, just focus on the easiest thing,’ he says.”