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.

Divided Congress and Future of Education Reform

Following the recent midterm elections, it was apparent that there would be new challenges passing legislation due to the shift in Congressional leadership. Yesterday, The Associated Press published a story about the new difficulties arising from a divided Congress in passing education reform initiatives such as reauthorizing the Elementary and Secondary Education Act, revamping No Child Left Behind and in higher education, saving federal financial aid. See below for an excerpt from yesterday’s piece:

Although higher education is expected to take a backseat to K-12 policy during the next Congress, two significant issues loom: the fate of federal student aid programs and Democratic-led efforts to crack down on for-profit colleges.

The Pell Grant program, a lifeline for low- and middle-income families trying to afford college, has enjoyed bipartisan support over the years. But with Republicans running on a call to cut spending, federal grants and loans subsidizing higher education record could be on the table.

For-profit colleges are fighting a proposed Department of Education rule that would cut off federal aid to college vocational programs with high student-debt levels and poor loan repayment rates.

As leadership in Congress shifts, one thing remains certain: we cannot deny the merits of Pell Grants for students who need aid to attend college or the merits of for-profit colleges for those who seek to become career-ready during their higher education. I encourage members of Congress to explore the data on how their decisions will affect individual student populations before moving forward with any policy changes – each legislative decision will no doubt have a great impact on the educational future of thousands of deserving students.

DOE: Transforming America’s Education Powered by Technology

In furthering the importance of digital learning during National Distance Learning Week, Education Secretary Arne Duncan released a letter on the Department of Education’s “Transforming America’s Education Powered by Technology” initiative. The letter states:

Education is vital to America’s individual and collective economic growth and prosperity, and is necessary for our democracy to work. Once the global leader in college completion rates among young people, the United States currently ranks ninth out of 36 developed nations. President Obama has articulated a bold vision for the United States to lead the world in the proportion of college graduates by 2020, thereby regaining our leadership and ensuring America’s ability to compete in a global economy. To achieve this aggressive goal, we need to leverage the innovation and ingenuity this nation is known for to create programs and projects that every school can implement to succeed.

In light of the letter and the report, it is interesting to observe how many of the for-profit universities have become so sophisticated in their use of digital technology in order to educate larger numbers of students in increasingly sophisticated ways.  Indeed, they have the capital to make major advances in the use of digital technology in the near term as traditional universities continue to struggle with dismal prospects from states’ funding and still-devalued endowments.

What students should see is Secretary Duncan and the Department working to support the for-profit sector and this level of innovation and ingenuity from them.  Instead, we have watched the Department’s formulation of a set of rules, including the Gainful Employment rule, that have had the effect of limiting the education market’s innovation. The role of the for-profit sector of the higher education industry is not inimical to the goals of President Obama; it is a vehicle for realizing his goals of access, for implementing digital technology,  for enlarging access to higher education via online learning, and for increasing the adaptability of education to students’ capabilities to learn.

Distance Learning a Necessity for Education

Welcome to National Distance Learning Week. In education, distance learning is becoming an increasingly important tool for the effective teaching of students of all backgrounds and levels. Without technology, many students and teachers would be unable to adequately communicate due to barriers in both schedule and geographic location.

In fact, distance learning has become so important that the U.S. Distance Learning Association released a white paper today to recognize how broadband Internet access has enabled education to enter a new stage. The white paper argues that without broadband Internet access, many students would be less engaged or unable to reach their goals in school. See below for a quote from USDLA’s press release:

“In order for 21st century distance learning opportunities to continue to flourish and allow more consumers immediate availability to convenient and affordable education, immediate access to affordable broadband must continue to grow,” said Dr. John G. Flores, Executive Director of the USDLA.  “This paper highlights the measures we believe need to be taken in order to advance online learning and opportunity; and broadband access is a huge component of that need.”

 

Distance learning and higher education are inextricably linked. Without the Internet, many for-profit and not-for-profit programs would not exist. Therefore, we should recognize the impact that distance learning has on the higher education students in our country and work to make these programs even better in the future.

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.

Sticking to the Facts on For-Profits

On October 25, Lanny Davis penned an interesting piece on Huffington Post. See below for the comment I posted in response:

Mr. Davis addresses the issues with facts, and he makes a great point. The Department of Education’s approach seems to picture for-profit institutions as somehow unworthy of public support, perhaps because they are for-profit entities. In the process of doing so, the Department has failed to propose a rule that will effectively lower student debt rates while assuring access to higher education for working class students.

The facts, as Mr. Davis makes clear, picture for-profit institutions rather differently than recent media attention. As schools of choice for minority and working class students, for-profit colleges and universities have loan repayment rates that are expected for students from these backgrounds. For-profit institutions are less demanding on our tax dollars than traditional four-year schools when all sources of public funding, including loans, are taken into account, and their graduation rates are better than traditional community colleges’ rates.

For-profit schools are very market focused. They understand that they have to be innovative, offer convenient class locations and provide schedules that correspond to working adults’ needs. And their market orientation has led them to provide educational opportunity for students who otherwise would not attend traditional colleges and universities.

Like Mr. Davis, I encourage the Department to work toward lowering student loan rates, but at the same time, let us acknowledge that for-profit scshools are playing a critical role for students in the higher education industry.

White House Initiative on Educational Excellence for Hispanics

On Tuesday, President Obama announced the White House Initiative on Educational Excellence for Hispanics.  In attendance were some of my fellow board members from the National Society of Hispanic MBAs (NSHMBA) – Mark Ponce and Charlie Garcia – along with the CEO, Manuel Gonzalez.

In order to achieve the President’s national goals for college graduation, it will be essential that we improve the education pipeline for Hispanic students, including a focus on readiness for college.  Too many Hispanic students do not complete high school with the mathematics, science and English classes that they will need for college readiness.  Too many postpone college because they need to earn an income, or their family doesn’t see the value of higher education.  Too many of those who do attend will choose a local community college without ever achieving an associate’s degree or without ever transferring to an institution with a four-year degree.

There are many reasons to support President Obama’s Initiative on Educational Excellence for Hispanics.  We cannot exist as a republic without informed citizen participation, and that requires education, including higher education.  We cannot expect to have a quality labor force for global competition without educating the fastest growing segment of that labor force.  And we cannot expect to have equity of opportunity when one group of our citizens disproportionately is not so well educated.

I applaud the President for his Initiative, and I applaud the diverse set of schools – both traditional and for-profit – that have made it part of their mission to assure that Hispanics have educational opportunity.

Department of Education Meetings with Stakeholders

Yesterday, the Department of Education announced in the Federal Register that it would hold meetings with individuals who filed comments on the gainful employment rule. Presentations will allow stakeholders to express their views but offer no new comments. With so many negative comments having been filed against this rule, it is encouraging that the Department of Education is taking the time to listen to those who dissented to the rule. The Federal Register states:

On July 26, 2010, the Department published a notice of proposed rulemaking (NPRM) in the Federal Register proposing regulations for determining whether a postsecondary educational program provides training that leads to gainful employment in a recognized occupation and the conditions under which such a program would remain eligible for the student financial assistance programs authorized under title IV of the Higher Education Act of 1965, as amended (HEA). Comments on the Department’s proposed regulations were due on September 9, 2010. The Department received over 90,000 comments from a wide range of stakeholders, including for-profit universities and colleges, community colleges, students, higher education associations, members of Congress, financial analysts, economists, and college and university faculty.

The Department appreciates the tremendous feedback, both positive and negative, that it received on the proposed regulations. The response from so many individuals and entities demonstrates how important the issues relating to gainful employment and this rulemaking are. To better understand parties’ comments and have an opportunity to interact with commenters, the Department will hold four public meeting sessions over the course of two days. During this time, commenters who have timely submitted comments on the NPRM may orally present their comments to a panel of Department representatives. Commenters also may have an opportunity to respond to questions from the Department about their comments.

Why are Short-Sellers Talking to the Department of Education?

On October 16, Fortune published an article about short-sellers in the for-profit education debate. The article discusses the roles that all parties – short-sellers, community college officials and third parties – have played in the lawsuit between Keiser University and Florida State College. With access to private emails, Fortune summarized the issues:

In the litigation, filed earlier this month, a privately held for-profit school called Keiser University sued a competing nonprofit public institution, Florida State College, for spreading “injurious falsehoods” about Keiser. In its formal complaint, Keiser — which is based in Fort Lauderdale and has 21,000 students seeking degrees ranging up to doctorates — claims FSC and two of its administrators aimed to “derail” the for-profit education sector through a “false and misleading campaign.” That campaign, according to the complaint, was executed in part through a “conspiracy” with both advocacy groups and short-sellers like Eisman, who famously made a hedge-fund fortune by anticipating the housing-market crash in 2008 and betting against subprime mortgages. Along with FSC, the two administrators — CEO Steven Wallace and vice president Susan Lehr — are named as defendants in the suit. Eisman and two other institutional investors, Gilchrist Berg and Antal Desai, are cited only as “co-conspirators.”

One of the more interesting aspects of this case – and the Fortune article – is this – Why are short-sellers and representatives of the Department of Education talking with one another?

The Department of Education wrote the Gainful Employment rule as an attempt to decrease student debt.  Since its was released, there has been significant debate over whether the Gainful Employment rule is in fact a path to addressing the issue of student debt.  But whatever the rule’s merits, discussions between short-sellers and representatives of the Department of Education give an appearance of impropriety.  There is the appearance that information is being preemptively shared with short-sellers and some others who have vested interests in opposition to for-profit schools.  Addressing student debt constructively while assuring access to higher education are laudable goals; the appearance of impropriety tarnishes those efforts.  We should really be focusing on the future of our students – and their access to higher education along with their successful graduation.

Balanced Reporting in the For-Profit Sector

With so much negative coverage of private sector colleges and universities in the news, this blog has focused on a balanced view of access and success in higher education.  Some would say that the media’s reporting could hardly be called “fair.”  However, two media opinion pieces this week bring some balance to the issues.  Of particular note is the recognition of several themes of this blog: (a) the need for more “seats” and the capacity of the private sector to provide increased access and (b) the biased focus of the Department of Education on only one sector of higher education while ignoring the need to improve public higher education.  See below for excerpts from these articles:

The Florida Times-Union: “For-profit, ‘career’ colleges play vital role in education

In a society where the haves and have-nots are on increasingly divergent trajectories, education remains a critical path to equal opportunity.

 

The traditional model of higher education – nonprofit public and private universities and community colleges – is limited in its ability to support this pathway.

 

In fact, the overcrowding problem is so acute at some community colleges that many students have stopped making progress toward a degree simply because they cannot get access to necessary courses.


Milwaukee Journal-Sentinel: A well-laid plan to cripple needed for-profit colleges

Let’s be clear. We agree with the concern the department is trying to address. The idea is that students should graduate with jobs that pay enough to enable them to repay their loans. We’re committed to students’ successes, so we would like to be part of any solution that helps further their success.

 

So what has gone awry?

 

The Department of Education proposed a rule based on anecdotal information from 16 unnamed for-profit colleges that no one is allowed to examine for accuracy. Worse, the “study” does nothing to compare graduation outcomes or debt levels of our students with public or non-profit institutions serving similar student populations.