Washington
Any thoughts that the U.S. Department of Education planned only to tweak existing regulations that affect for-profit colleges and other higher-education sectors were dashed on Monday when the agency released a draft of proposed revisions to a panel of negotiators.
Many people in higher education, especially those in the for-profit sector, were taken aback at the substantial changes proposed, with some calling the move "aggressive" and "surprisingly strong."
The panel, whose members include federal officials and representatives of institutions and associations affected by the regulations, has been charged with re-examining 14 rules in a process known as negotiated rule-making.
Among the department's proposed changes are eliminating the 12 "safe harbors" adopted in 2002 to clarify a ban on incentive compensation for student recruiters. The safe harbors specify types of compensation plans that do not violate the ban.
Other proposed changes deal with assuring the integrity of "ability to benefit" testing procedures, defining a high-school diploma, and determining how institutions ensure gainful employment for their students.
Ripples in the Markets
By far, the most significant change to come from the department is the proposal to eliminate the safe harbors.
Consumer advocates and admissions officers from traditional colleges have urged the department to do away with the safe harbors, arguing that the exemptions, which allow colleges to pay enrollment-based commissions under certain circumstances, encourage recruiters to sign up unqualified students.
Officials of for-profit colleges and lobbyists favor keeping the safe harbors, saying they provide much-needed clarity on whether specific types of payments are in compliance with the law.
Trace A. Urdan, an education-industry analyst with Signal Hill, an investment firm, said the for-profit sector was not expecting such a strong move from the department on incentive compensation.
As a result, he says, stock trades were off on Tuesday for some for-profit education companies. Bridgepoint Education, which runs Ashford University and the University of the Rockies, was affected the most, with a 4.2 percent drop in its share price. Other companies were off between 2 and 4 percent.
Mr. Urdan said there was talk that perhaps the department's strong move was part of a negotiating tactic.
"Most industry folks don't believe that the safe harbors will entirely go away," he said.
Options on Gainful-Employment Rule
Another area of concern was the department's consideration of changes in a rule that requires for-profit institutions to show that a percentage of their graduates find "gainful employment."
Mr. Urdan said he found those potential changes more disturbing, and he characterized it as "overreaching" of the department to get involved in how colleges price various programs.
The department decided not to provide draft regulatory language on gainful employment at this time. However, department officials are considering two options for determining whether institutions are complying with that rule.
One would require a college to show a "reasonable relationship" between the price a student is charged for a specific program and the "value added," which the department suggests could be defined as the difference between the salaries in that field earned by the average graduate of the program and the average high-school graduate. Another option would be to look at whether a student's starting annual income was adequate to cover student-loan obligations for the program "while still having an adequate amount available to meet living expenses."
Mr. Urdan said that the department should not be inserting itself into the business of setting prices. Instead, he said, that is the role of the market.
"I don't know where this will end up," he said. "I continue to feel this is a real overreaching by the department and goes beyond the intent of Congress. Price controls were discussed and rejected."
Validating High-School Diplomas
In another area, the department's suggestion that institutions be required to keep listings of high schools in three categories related to the established validity of their diplomas also did not go over well.
Harris N. Miller, president and chief executive of the Career College Association, which represents about 1,400 institutions, most of them operated for profit, said the onus should be on the federal government, not the institutions. The government, he said, is the one entity that can keep a list of legitimate schools.
The department also proposed new measures regarding the administration of "ability to benefit" tests. Students who do not have a high-school diploma or a GED, and have not completed high school through home schooling, have to pass an ability-to-benefit test to qualify for federal student aid.
The department has proposed requiring publishers of ability-to-benefit tests to establish a process to identify and follow up on test-score irregularities. A test publisher would be required to decertify test administrators if it determined that test had been administered improperly. Last summer the Government Accountability Office said in a report that officials administering such a test at one college had given out answers and changed answers for students.
David S. Baime, vice president for government relations at the American Association of Community Colleges, said the proposed changes on ability-to-benefit testing seem to address the egregious abuses and violations that have occurred in the past.
"We are hopeful that these changes, if implemented, will have teeth," he said.
The negotiating panel met last month for the first of three sessions and will begin its next weeklong session on Monday. A final decision on any revisions in the rules is not expected until next year.
Comments
1. willynilly - December 02, 2009 at 09:45 am
Finally some sanity applied to the unconscionable loopholes previously created for the for-profit sector, given their handsome campaign donations to certain key members of Congress The pay-off scam to for-profit student recruiters and the laughable "Ability to Benefit" tests conducted by this sector have cost the taxpayers millions, if not billions, of dollars all wasted on students who didn't have a prayer of succeeding - while denying dollar access to those deserving students who were capable of succeeding. Any state or fed audit official, who ever stepped into the student records office of a for-profit school, and had an IQ of at least 60, had to see clearly that their "Ability To Benefit" tests were frauds. Of course their Associations will scream to high heaven. Any organization who has been given a "cash cow" will scream and scream and lobby and lobby when there is serious talk about taking their cash cows away. Let them scream.
2. bry3bob - December 02, 2009 at 11:16 am
I responded to the ED's negotiated rule-making news at theCCAP blog.
3. rdittben - December 02, 2009 at 12:22 pm
Before those of us in the public sector scream too loudly and point fingers at the for-profit sector, we would do well to examine our own short comings. Among them are the abysmal statistics within our sector on student success and retention for BA degree oriented students. Also, the public sector spends significant special and designated public funds to recruit students as well. What public university and college does not have staff assigned for this purpose? The University of Phoenix, for example, does a much better job in reaching out to diverse populations than a majority of the public universities of this country. Are they, and others in the for-profit sector, picking up the diversity ball that the public sector is not carrying? The University of Phoenix has as its mission the increase of the American middle class. Its two-year college, Axia College, is meeting needs that community colleges do not meet in carrying out this mission. DOE oversight of federal funds spent on the for-profit sector is an appropriate federal duty. And, so is the oversight of billions more in federal funds spent on the public sector. If you look at the total amount of all public funds spent on producing a college graduate between the for-profit sector and the public sector, the public sector's criticism of the for-profit sector should fall silent.
Richard Dittbenner, J.D.
Higher Education Communication and Crisis Management Consultant
4. lomalinda - December 02, 2009 at 01:10 pm
"The University of Phoenix has as its mission the increase of the American middle class", I am sorry, but their mission is to make money - recall, for profit.
5. minnesotan - December 02, 2009 at 01:29 pm
"Are they, and others in the for-profit sector, picking up the diversity ball that the public sector is not carrying?"
You can't throw a stick in a public university hallway without hitting two administrators blathering on about diversity. Find a new bandwagon - this one's full!
As for our poor completion rates, who said everyone deserved, needed, or wanted to go to college? Higher learning should b for the people who 1) appreciate it, and 2) are qualified to receive it.
6. willynilly - December 02, 2009 at 01:41 pm
Attorney Dittbenner - To write that complete drivel, as a defense of the for-profit sector, allows one to reach a rather reliable conclusion - that being that your current consulting gig is with the for-profit sector.
7. julialowder - December 02, 2009 at 02:46 pm
Its too bad that for-profit is synnonomous with fraudulent to a lot of you. Should for-profit education go away completely? How come for-profit education is not OK but for-profit health care is just fine? Seems like for-profits only have only 3% of the students out there - drop in the bucket compared to the public sector. Don't be so quick to point your finger - the American College System has failed us on so many levels that throwing stones at for-profit seems rather useless.
8. sunking_2007 - December 02, 2009 at 02:52 pm
To for-profits Title IV funds is like free money. Why would they want to give it up? Given the bad press, so-so graduation rates etc, they would do anything to protect these funds to them. The worst part about these abuses is that not qualified students enroll take out loans and drop out. They still need to pay the money back while these for-profits reap the rewards and keep these funds on the balance sheets (the latest University of Phoenix SEC scandal). For profits can exits, but no access to the Title IV funds since there are too many abuses. After that Pepicello (Prez of of University of Phoenix), Stallard (Prez of Strayer University) and others would be cleaning up their acts fast!!
9. mveljkov - December 02, 2009 at 03:14 pm
Title IV funds is free money to any institution that qualifies, regardless if the org is private or public. The issue here is not access to Title IV money but how we define higher education. Maybe if the public and for profit worked together, a new and interesting model could be created.
10. kenhogan - December 02, 2009 at 06:19 pm
Are we not all in this field to educate and help people to have better lives? Regardless, if we call our money non-profit or profit is this not about the students? We all make money one way or the other, so stop pontificating about who is better and get back to the basics. It seems that most people are loosing site on the big picture, students! So, get back the fundamental reason why we are in education and educate students.
11. allens - December 02, 2009 at 08:05 pm
Exactly why should a "gainful-employment" test not be applied to non-profit colleges receiving federal money? College administrators, faculty members, etcetera for non-profit institutions, indeed, have even _more_ incentive to get students to sign up for courses that don't benefit them - no money is going outside the institution. (And there are colleges and universities out there for which tuition does indeed pay for money spent on the students; Rutgers is one of them, for instance. There's a reason the Admissions VP there is called the VP of Enrollment Management.) And if the reason otherwise is that some courses are "liberal arts"/diversity/whatever in origin and thus not expected to get the students back money from employment, it'd be nice if this was made clear to students, no matter the college/university (for-profit or non-profit).
12. witten426 - December 03, 2009 at 10:08 am
yes, for profit education should go away.
13. justincase - December 03, 2009 at 03:58 pm
The statement that "The University of Phoenix has as its mission the increase of the American middle class" is akin to the statement by Lloyd Blankfein of Goldman Sachs that he's "doing God's work." Yea, right. In my opinion, the University of Phoenix is a student loan scam. Frankly, I'm surprised that they haven't been prosecuted under RICO as yet.
Below is a comment that I made on a related article. I think that it tells the story-
For-profit "universities" pose a clear ethical dilemma. Since their intent is to profit maximize, they will tend to engage in the following practices-
-Treat students as "customers" and seek to maximize their "customer" base regardless of "customer" qualifications
-Lower educational standards to minimize costs and maximize enrollment. Rigor is antithetical to this process.
-Spend an inordinate amount of "university" resources on marketing to attract more "customers"
-Seek to provide their educational services at the lowest possible cost including unconscionably low faculty salaries, the use of rented facilities, etc.
-Leverage the demonstrated value of a real university education to their benefit without providing the infrastructure of a real university
-Use federal student grant and loan programs as a stable and primary source of revenue thereby shifting default risk to the taxpayer much like the banking industry's foray into subprime mortgage lending.
-Provide excessive rewards to executives in the form of stock options.
I challenge anyone who views the student as "customer" to indicate this in YOUR vita, as in, for example, "I was a CUSTOMER at the University of Pennsylvania from 1975 to 1979." A great method for insuring the performance of for-profit educational enterprises is to have the federal government require that the organization co-sign each of their government guaranteed student loans. I wonder how many would survive if this were the case? What will happen to the value of these degrees when the "university" goes bankrupt?
One could go on forever about this, but I think that the following links tell the story of for-profit "university" education efforts in the case of the University of Phoenix, the largest player in the field. Below is a link to a recent GAO report on default problems in proprietary schools.
http://www.gao.gov/new.items/d09600.pdf
Also, this link reveals what it's like to apply for a teaching position at UOP-
http://www.epinions.com/review/educ-Colleges_and_Universities-All-University_of_Phoenix/content_182477753988
Here's a great link containing an overview of the situation.
http://www.nextstudent.com/student-loan-blog/blogs/sample_weblog/archive/2009/10/29/24092.aspx
It appears that the University of Phoenix has the unenviable distinction of having been sued by all possible stakeholders- students, employees, investors, and the federal government.
Need anyone say more?
14. dseymour - December 03, 2009 at 04:14 pm
justincase,
Your obsession with the word "customer" diminishes your other arguments. The definition of customer is "someone who uses or benefits from your output." As such, the traditional language of "teaching and learning" just needs to be reversed--"learning and teaching." As a professor, you need to appreciate what the student needs to learn in order to be successful in his or her next endeavor whether that is the next class or a job. The word "customer" is a red herring and unnecessary. Call the "customer" a "student" and get on with creating learning environments that work for them and improves their lives.
15. varnerhall - December 03, 2009 at 05:07 pm
Having worked at a for-profit, I wish the Dept of Ed could impact the 6-figure bonuses paid to campus presidents who meet their extraordinarily constrained budgets. In order to meet these thin budgets, administrative positions are often left unfilled (in an already thinly-staffed environment), and minimal items needed to support student learning are often unfulfilled (e.g. instructors have to bring their own markers, medical equipment needed for instruction are not purchased, etc.).