Inspector General Warns Accreditor Over Online College, Raising Fears Among For-Profit Institutions

December 17, 2009

The inspector general of the U.S. Education Department has issued a harsh assessment of the Higher Learning Commission of the North Central Association of Colleges and Schools, one of the nation's six regional accreditors, recommending that the secretary of education consider limiting, suspending, or terminating the organization's status.

The unusual action is in response to the Office of Inspector General's examination of the commission's standards for measuring credit hours and program length. The office completed similar reports for two other regional accreditors in recent weeks but has not recommended that the secretary consider taking any action against either of those groups.

In a heavily redacted memorandum released on Thursday, Wanda A. Scott, an assistant inspector general, questioned the Higher Learning Commission's decision to approve accreditation of American InterContinental University, a for-profit college owned by the Career Education Corporation.

"This action by HLC is not in the best interest of students, and calls into question whether the accrediting decisions made by HLC should be relied upon by the Department of Education when assisting students to obtain quality education through the Title IV programs," Ms. Scott wrote to Daniel T. Madzelan, acting assistant secretary for postsecondary education. (Title IV is the section of the Higher Education Act that governs the federal student-aid programs.)

In response, Sylvia Manning, president of the Higher Learning Commission, said the inspector general's case against her organization was "flimsy" because it was based on one issue raised in accrediting just one institution.

While the department removed much of the substance of the memo in the version it released, the issue that the inspector general is concerned with is whether American InterContinental is ensuring that students who take courses outside of a traditional classroom setting are appropriately earning the degrees the college awards to them, Ms. Manning said. It's a difficult issue, she added, because it's hard to apply the common definition of a credit hour to the online setting.

The Higher Learning Commission was aware of problems with how the university measured credit hours and program length, but in May it granted American InterContinental initial accreditation, with some limitations. "Our decision was, We'll bring them into the tent, and we'll make them shape up," Ms. Manning said.

But the inspector general disagreed, and asked the Education Department in August to conduct a review, she said. The department has not released the findings of that review, she said. Instead, Ms. Manning said, the memo released today was sent to the news media and to Congressional offices several months after the inspector general's initial investigation, in a way that she said seems "designed to raise the most alarm."

A Scare for Accreditors

Belle S. Wheelan, president of the Southern Association of Colleges and Schools' Commission on Colleges, said the call for action by the inspector general's office was "scary," because it was based on the review of just one institution. The Southern Association had previously accredited American InterContinental, before the institution decided to seek approval from the Higher Learning Commission after 2007. Although the Southern Association had placed American InterContinental on probation from 2005 to 2007, the institution left the association's oversight in "good standing," Ms. Wheelan said.

News of the report also sent shock waves through the for-profit higher-education sector. Nearly all of the major for-profit companies whose institutions seek regional accreditation do so through the Higher Learning Commission, and all of them, like American InterContinental, operate extensive distance-learning programs.

Among many officials in the for-profit sector, the Higher Learning Commission has been seen as a friendly venue. The officials say this is not because it has lax standards but because it has taken a more flexible approach in its assessment of programs.

Career Education's stock price plunged by nearly 20 percent on Thursday as reports of the inspector general's action spread. Several Wall Street analysts warned that regulatory pressure on the companies, which is already rising as a result of negotiations over regulations for use of federal student aid, was likely to persist.

It "suggests a whole new level of hostility on the part of OIG to what and how the for-profit schools operate, particularly online," said Trace A. Urdan, an education-industry analyst with Signal Hill, an investment bank. Mr. Urdan has been critical of some of the Education Department's recent overtures aimed at reining in some of the sector's practices.

Jeffrey M. Silber, an analyst with BMO Capital Markets, called the report one part of a "double whammy" for the sector, coming one day after a member of Congress called for hearings on the "conduct of for-profit educational institutions in the United States." That request, in a letter from Rep. Elijah E. Cummings, Democrat of Maryland, to the chairmen of two U.S. House of Representatives committees, came because of news reports questioning student-recruiting tactics in the for-profit sector.

Jeff Leshay, senior vice president for public relations and corporate communications at American InterContinental, said that while officials there are concerned with the inspector general's report, they are working hard to respond to the educational concerns raised by both the accreditor and the inspector general.

"We firmly believe that the decision by the [Higher Learning Commission] was entirely appropriate and entirely supported by the facts," Mr. Leshay said.

Goldie Blumenstyk contributed to this article.