The millions in salaries and bonuses going to executives at for-profit college companies came under scrutiny Monday as the ranking Democrat on a House of Representatives oversight committee issued a demand to the chief executives of 13 higher-education companies to provide documents on pay details so the committee can "investigate how the structure of your executive-compensation packages affects the performance of students educated with taxpayer funds."
In letters sent and made public Monday, Rep. Elijah E. Cummings, who serves on the House Oversight and Government Reform Committee, demanded salary information from the CEO's and other senior executives to determine if the pay is "appropriately tied" to the students' outcomes.
"The American taxpayers fund these schools through billions of dollars in tuition assistance, but there is little evidence that lavish executive pay is linked to the well-being of the students they are supposed to educate," said Mr. Cummings in a news release Monday. "When compared to public and nonprofit schools, for-profit companies spend a smaller percentage of their funds on student education, reserving more for marketing, advertising, recruitment, and other noneducation expenses," said Mr. Cummings, in the release
In each individualized letter, Representative Cummings, from Maryland, noted the high proportion of revenues coming to the company via federal aid, the rate at which students default on their federal loans, and the share of operating expense the company puts to educational costs.
The letter to President and CEO Andrew S. Clark of Bridgepoint Education, for example, says the company in 2010 received more than 85 percent of revenues—more than $713-million—from federal student-aid programs, spent 38 percent of expenses toward education, and recorded a loan-default rate of 19.8 percent for students three years after leaving college, while paying Mr. Clark $2.2-million in salary, stock options, and bonuses. Bridgepoint owns Ashford University and the University of the Rockies.
Mr. Cummings said at least two of the executives who are the focus of the investigation, Daniel M. Hamburger of DeVry Inc. and Kevin M. Modany of ITT Educational Services, were paid in excess of $6-million in salary, stock, and bonuses in 2010.
In addition to Bridgepoint, DeVry, and ITT, Representative Cummings is seeking unredacted copies of compensation agreements by December 23 from the Apollo Group, parent of the University of Phoenix; Capella Education; Career Education Corporation; Corinthian Colleges; Education Management Corporation; Grand Canyon Education; Kaplan; Lincoln Education; Strayer Education; and Universal Technical Institute.
This is hardly the first time the committee has taken on the issue of executive pay. As Mr. Cummings noted in his letter, the committee in November held hearings over pay to the chief executives of Fannie Mae and Freddie Mac, which serve the mortgage market.
The interim president of the Association of Private Sector Colleges and Universities, Brian Moran, called the investigation “just more politics” and questioned its focus. “Rather than singling out one sector, we hope that Representative Cummings evaluates all areas of higher education so that the true beneficiary is the student,” Mr. Moran said in a news release. He also noted that the investigation ignores the high pay going to coaches in big-time college sports.
