• October 25, 2014

For-Profit Sector's Stocks Rise on News of Shireman's Planned Departure

A Departure For-Profit Colleges May Welcome 1

U.S. Department of Education

Robert Shireman, who will leave his post in the Education Department this summer, pleased some student and consumer groups with his achievements but failed to win over the for-profit sector.

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close A Departure For-Profit Colleges May Welcome 1

U.S. Department of Education

Robert Shireman, who will leave his post in the Education Department this summer, pleased some student and consumer groups with his achievements but failed to win over the for-profit sector.

Robert M. Shireman, deputy under secretary of education, is leaving Washington this summer, having achieved a goal he set almost 20 years ago: moving the bank-based federal student-loan program to direct lending by the government.

Mr. Shireman, who confirmed his departure in a conversation on Monday, hails from California and had made it clear from the start that he would be in Washington only briefly.

His departure after a year and a half on the job comes as a disappointment, but not a surprise, to the consumer advocates and student groups who were his biggest allies during the fight to end the bank-based program and redirect the savings to student aid and colleges.

But for-profit colleges, which have lately been the target of the Education Department's increased scrutiny (see related article), aren't sad to see him go. Stocks of for-profit companies soared Monday on news that Mr. Shireman was stepping down, with some analysts speculating that his departure could make it easier for for-profit colleges to beat back an Education Department proposal that would cut off federal student aid to for-profit programs whose graduates carry high debt-to-income loads. The controversial "gainful employment" proposal would require that a program's students do not take on loan payments that exceed 8 percent of graduates' expected earnings based on a 10-year repayment plan.

Data provided to The Chronicle by analysts with the Signal Hill Capital Group, Alexandra Chan and Trace A. Urdan, showed that in the hour between publication of the news of Mr. Shireman's impending departure and the 4 p.m. close of trading on Monday, shares of Corinthian Colleges Inc. rose more by more 12 percent. Share prices of Career Education Corporation rose by 9 percent, of Apollo Group Inc. by 7.3 percent, and of ITT Educational Services by 7.2 percent (below).

Although Mr. Shireman was not the sole author of the gainful-employment proposal, many for-profit colleges view him as the driving force behind the plan.

The sector's mistrust of him deepened last month, when Mr. Shireman gave a speech that likened for-profit colleges and their accreditors to the Wall Street firms and rating agencies responsible for the financial meltdown. (Mr. Shireman has insisted his comments weren't meant as an attack on for-profit colleges, but Harris N. Miller, president of the Career College Association, which represents more than 1,400 colleges, most of them for-profit, said staff members who attended the speech viewed it as "a slap at the sector.")

With the department expected to issue proposed new rules in the coming weeks, for-profit colleges have been frantically lobbying the Education Department and the Office of Management and Budget, pushing an alternative that would require for-profit programs to provide prospective students with more information about their graduates' debt levels and salaries. Now, with Mr. Shireman leaving, some for-profit college leaders and lobbyists hope the department will soften its stance.

But Mr. Miller, the chief lobbyist for for-profit colleges, isn't breathing a sigh of relief yet.

"This is not just about Bob Shireman; this is about the department," he said. "He may be the instigator, but at the end of the day, it's the entire department."

Direct-Loan Legacy

However the fight over gainful employment turns out, Mr. Shireman will probably be best remembered for taking on a different powerful lobby: the student-loan industry. Though the industry spent millions on lobbying and campaign contributions fighting a bill to end the bank-based program, Mr. Shireman and Congressional Democrats prevailed, passing the measure this spring.

For Mr. Shireman, the bill's enactment completed a project he began in the early 1990s as an aide to Sen. Paul M. Simon, Democrat of Illinois, and continued as a senior education-policy adviser in the Clinton administration.

But it was the strides he made in simplifying the Free Application for Federal Student Aid that Mr. Shireman cites as his proudest accomplishment. For years, student-aid experts had advocated for allowing Fafsa filers to import information from their income-tax returns electronically, saying it would save applicants time and frustration while reducing the transcription errors that can occur when parents and students copy information from their tax forms onto the Fafsa. But the Internal Revenue Service had long been reluctant to take on the additional workload. During his first year in Washington, Mr. Shireman brokered an agreement between the Education Department and the IRS that allowed the agencies to share some information.

"It was kind of quiet and behind the scenes and difficult and complicated, but the team got it done," Mr. Shireman said in an interview on Monday. "Because it wasn't fighting special interests, it didn't get major press attention. But when I've been out at colleges and in the community, they notice, and that feels great."

Still, Mr. Shireman didn't achieve everything he'd hoped to during his time in Washington. While ending the bank-based student-loan program freed up billions of dollars in subsidies to lenders that could be redirected to student aid and community colleges, delays in passing the student-loan measure (HR 4872) meant that there was much less money for the programs than originally projected. In the end, Congress rejected the president's plan to make Pell Grants an entitlement and index the maximum award to the Consumer Price Index plus one percentage point, instead providing a slight bump in the maximum award, followed by an inflationary increase. On Monday, Mr. Shireman said his biggest disappointment was not getting a full Pell entitlement.

It's unclear who will replace Mr. Shireman as the department's point person on higher-education issues. But whoever succeeds him is unlikely to have the opportunity to expand student aid that Mr. Shireman had. Even with cuts, the student-loan bill provided $43-billion for spending on education programs. That kind of money, says Thomas A. Butts, a former University of Michigan lobbyist and longtime direct-loan supporter, "is not likely to be around for awhile."

"Sometimes decades pass before an opportunity like the one that's just been enacted comes around," he said.

Comments

1. eelalien - May 18, 2010 at 05:38 am

We can all hope for the best, that the Dept. of Ed. will hold steady against what could be the next big bubble of unsupported debt: for-profit education's pushing students to take on more debt by taking advantage of the uncertain job market, and hawking costly degrees to students who will likely default. But given the Obama administration's truly unfortunate tendency to pander to big business, this all may end up very badly. (For a real eye-opener, watch PBS Frontline's recent "College, Inc." online)

2. pkuerbis - May 18, 2010 at 08:14 am

FYI. A Dean should stay ahead of the game.

Love

3. feudi - May 18, 2010 at 08:17 am

I worry too about the coming rash of loan defaults unless the job market improves very quickly, very soon...that seems unlikely. I know our nursing graduates are having tremendous difficulty finding jobs and this is in the middle of a supposed nursing shortage. No job, no income = loan defaults.

We may have turned student loans into the next FANNIE MAE or FREDDIE MAC. The feds have shown little ability to control these quasi-governmental businesses once it takes them over. We'll see if student loans become the next credit crisis and how the feds respond if loan defaults skyrocket in the next few years.

4. blue_state_academic - May 18, 2010 at 08:36 am

Bob Shireman wasn't the only one in ED looking to rein in the proprietary sector. So the exultation from that sector over his departure may be very short-lived.

5. prof_truthteller - May 18, 2010 at 11:42 am

The toxic combination of cuts to public education, the desperation of naive young adults seeking to build a future for themselves in an economy with fewer opportunities, and the rapacious stockholder's bottom line mentality of profit, profit, profit, will bear some very bitter fruit in decades to come if further regulation and oversight is not enacted. These companies are drooling at the opportunity to get in and make a killing on the new "education industry."

6. mike25 - May 18, 2010 at 11:46 am

The dichotomy that people create between for-profit and traditional universities is somewhat artificial or, at the very least, exaggerated. In reality, for-profit and traditional schools have many more commonalities than differences. In fact, one might argue that all schools are for-profit. I have four degrees, one from a Argosy University/Sarasota. My program was rigorous and well-respected and my experience was not any different than my traditional university experiences. I have had job offers from universities and other entities. Currently, I work as a school administrator. I believe my doctorate earns me approximately an extra 30,000 a year. Also, my dissertation yielded three publications and a book.

Without a doubt, for-profit education is expensive and a range of quality exits. However, the same is true for traditional institutions. In fact, I think that many of the criticisms heaped at for-profits are equally valid for most traditional schools. For example, currently my wife is pursuing an online master's degree from a Texas public university. While I have never taken an online course and have only limited experience with such programs, I find her program to be, well, pretty bad. Also, the program is pretty expensive. Lastly, in terms of cost, my friends who earned doctorates at traditional universities and I seem to have the same debt load--- about 40,000 dollars. So, again, maybe the problem is being framed incorrectly. These are not "for-profit" issues; they are higher education issues.

7. jbarman - May 18, 2010 at 01:15 pm

Mike25 - I agree.

Over 35 years, I have worked and taught for IHE's in most categories (private, public, profit, not-for-profit, on ground, online - and all combinations of these adjectives), and every one of them had to have more revenues than expenses. I have also found no correlation between category and academic quality.

My worst experience was teaching for a private, not-for-profit where 10-15% of my students plagiarized (from a few paragraphs to entire papers). After teaching there for a couple of years, and being told by administrators to give these students unlimited chances to re-submit, I quit.

My best experience has been my current employment: teaching and being an administrator at a regionally-accredited for-profit online institution. My faculty has nearly absolute autonomy over course requirements, degree construct, and expectations of students. Our programs are rigorous, and students respond accordingly.

And by the way, we are not a Title IV institution and hardly any of our students take out loans.

These experiences are of course anecdotal, and they do not add up to evidence; however, to dismiss a school's quality, outcomes, and motivations due to its "category" does not help to further the discussion.

8. jesor - May 18, 2010 at 02:15 pm

There's a massive difference between regionally accredited for profits and the nationally accredited for profit institutions. If DOE really wants to start making sure that the education that the federal government is paying for is actually a real education, it should start by thinning the herd on some of looser national accrediting agencies, and the regional accreditors need own up to their role as a measure of institutional quality.

9. notusip - May 20, 2010 at 03:33 pm

Do not confuse the regionally accredited for-profits such as U of Phoenix, Argosy, or Strayer U. with the for-profit career schools, which offer certificates or two-year degrees and are accredited by their own national agency. Their tuitions tend to be about halfway between those of community college and private schools. Students often wind up $20-30,000 in debt and qualified only for jobs that pay $10-12 an hour. The loan default level is significantly higher than for other forms of higher education, so taxpayers wind up being the ones that pay for the "education."

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