• October 2, 2014

Online and For-Profit Colleges Face Beefed-Up Aid Audits From Education Dept.

The U.S. Department of Education plans to increase its scrutiny of how colleges award federal grants and loans to their students, and a department official told The Chronicle it will pay particular attention to for-profit colleges owned by publicly traded companies and on all institutions with large distance-education programs.

The department, which has been beefing up the compliance-office staffing in its Office of Federal Student Aid, expects to conduct about 300 program reviews of student-aid operations next year, in contrast to about 200 this year. Program reviews are audit-like examinations of student-aid operations designed to ensure that students receive only the grants and loans they are entitled to and that institutions make refunds in accordance with the law in cases where students withdraw.

With the focus on the nation's deficit, the Obama administration wants to be sure the billions of dollars in new federal funds for student-aid programs are serving students, said James Kvaal, deputy under secretary of education, speaking on Friday at a meeting of the Association of Private Sector Colleges and Universities. "People are taking the budget very, very seriously."

Mr. Kvaal said the administration also wanted to protect Pell Grants from cuts. Some members of Congress have proposed reducing federal spending to 2008 levels. "The White House is calling that 'economic unilateral disarmament,'" Mr. Kvaal said.

That was welcome news to people in the audience, many of them operators of for-profit colleges. About 30 percent of all Pell Grant funds now go to students in the for-profit sector. Mr. Kvaal said colleges that educate such needy students with good programs are performing "a service to those students and a service to the country." But he said then, and at several other times during his talk, that the department remained very concerned about for-profit colleges that rely on "deceptive and high-pressure sales tactics" to enroll students or leave them with unreasonable levels of student debt.

He said the department's proposed "gainful employment" rule, aimed at curbing such abuses, was designed not as an attack on the for-profit industry but as a means to deal with some of the "worst-performing programs."

For-profit colleges have undertaken a vast lobbying and public-relations campaign that assails the rule as an ill-conceived approach that will hurt students and their own companies. At the session on Friday, Mr. Kvaal said that the proposal, as released in July, "was not perfect" and that the department would consider the criticisms, including more than 90,000 comments pro and con, before issuing a final version of the rule in early 2011.

Comments

1. cwinton - December 10, 2010 at 04:30 pm

"For-profit colleges have undertaken a vast lobbying and public-relations campaign that assails the rule as an ill-conceived approach that will hurt students and their own companies." Considering the debt nightmare being visited on so many of their students, I think their only concern is for the welfare of their overpaid executives.

2. director19 - December 10, 2010 at 04:51 pm

It is time for the DOE to apply the same rules across the board. Most Colleges & Universities couln't pass the "stink test" either.

The bureaucrats have messed it up opnce again. All the Ivy League brainiacs are clueless!

3. mgre6660 - December 10, 2010 at 05:01 pm

How dare those for-profit colleges mount a vast lobbying and public relations campaign to defend themselves against short-seller Steve Eisman? Why, their inconvenient desire to survive might reduce his profits! Cwinton, if you are really concerned about student debt, you need to look at four-year private non-profit schools, where students take on more debt than at for-profits. And if you are REALLY concerned about consumer debt, you might reflect on the fact that the average debt taken on by a student who gets a four-year degree at a for-profit is $24,000, and the average cost of a new car is $28,000. Why are you not out denouncing auto dealers as well? Or is there something uniquely awful about education-related debt?

4. bronwyns - December 10, 2010 at 05:16 pm

I'm getting sick of this too. Most public institutions have similar, if not worse tactics. I praise The Chronicle for printing all of the news about this issue, not just the news that paints the for-profits as evil. In case you missed it:

http://chronicle.com/blogs/ticker/for-profit-colleges-call-on-gao-to-release-full-videotapes-from-its-investigation/28992

I'm seriously beginning to wonder if our government does not want for-profit institutions, because they really do not want an educated public.

5. mikpap - December 10, 2010 at 06:10 pm

Couldn't agree more with you guys. This is all a biased witch hunt. Only the real purpose and source remain to be seen. Trying to fix our deficit by managing Pell Grants and student aid is like trying to make an elephant heavier by throwing fleas on it.

6. willynilly - December 10, 2010 at 06:20 pm

GOOD. It's way overdue. For the first time "real audits" will be done. You will be shocked at what is revealed and, as a result, there will be extensive public pressure to go back and do multi-year re-audits in most of these huckster institutions.

7. forp5955 - December 10, 2010 at 08:00 pm

It is the ONLINE programs at these schools which must me audited. The problem is that the schools prep for audits and alter records. Education Management Corportation's South University reports (to NCES) a 26% retention rate for first time, full time, first year students. The problem is that a miniscule number of students are first time, full time or first year.

These for-profit colleges find every possible way of discluding bas statistics from their cohorts. I doubt any audit will be truely accurate.

8. bmorinaka - December 10, 2010 at 08:57 pm

"Audits From Education Dept" = job security for those in government

9. lindalll - December 11, 2010 at 12:50 pm

Low completion rates are not exclusive to community colleges. See this April, 2010 article from the Christian Science Monitor and note that only 25% of their students finish a two year program in less than three years and note other factors which prevent students from completing their programs:
http://www.csmonitor.com/Commentary/the-monitors-view/2010/0426/Raise-the-community-college-graduation-rate

10. cigarcubano - December 13, 2010 at 06:55 am

The For-Profit sector is making money and why not it is the best scheme every created. A business that will always have guarantee cash flow because of the federal government. What people don't understand about this industry is that it is a FAKE. Similar to the Soviets parade of arms back in the day where have or most of the equipment was not working, these schools do the same. They say they prepare students for a better life, the reality, the push students through so that they can collect on the money. They have no interest in the education of anybody. I know, as a academic person I must keep my attrition numbers down. This means allowing students to come to class 2 hours late (as per our own catalog). This means giving out a standardize test that has been used for 4 or 5 years straight. I have no academic freedom and I cant truly test if my students have learned. In the end, the students walk away thinking they learned something (have of them are never there) but the reality is when they attempt to apply those skills in the workforce, it shows there. Now they have 20k in debt for a program they could have done at a local community college. The worst part, they went to my type of school because admissions tells them that at a community college they make you take those useless classes like English Comp etc...
For-profits are a scheme, wake up all of you!!! It is only hurting our country!!

11. lgarmose - December 13, 2010 at 08:46 am

Yes, for-profits are in it to make money for a few. Yes, for-profits charge the full cost of education and then some. Yes, students leave the institutions with a high debt load. Yes, the students may have difficulty applying the skills to their career track. Are the schools fake? Some are, some aren't. Some have high levels of credibility with industry AND other educational institutions. They are like any other company or many educational institutions...there are good apples AND bad apples in the same barrel.

If we really want to dig into the issue, equitably, let's add private non-profits to the list AND let's add publics to the list, as well. Certainly, top administrators in these institutions may not be getting as rich as their brothers in the private, for-profit, but, in all truthfulness, isn't that more related to the salary caps placed on them by government and Boards, rather than their basic charitable nature?

It's possible to have accumulated a considerable chunk of debt if you were educated at a private, non-profit, as well. It's also, possible that the cost of running a public institution with a heavy athletic commitment could be just as obscene, comparatively speaking.

From my way of thinking, the average salary of key careers that are the end-product of an institution's program ought to be the basis for the tuition. If first year salary as a RN is only $28,000/ year, then the college ought not charge tuition greater than that amount. If a first year mechanical engineer can average $45,000, then the cost of his/her education should not exceed that, etc. If a nurse assistant begins his/her career at $18,000, that should be the total cost of the training program.

Personally, having been a student, I never, particularly liked subsidizing the football, the theater arts, or even some State agencies with my tuition! Just charge me what it takes to make my education useful and productive..no more, no less and make it realistic enough to be repaid within 5-10 years of graduating in my chosen field.

Just something to think about!

12. gplm2000 - December 13, 2010 at 09:56 am

Good comments cigarcubano! Having taught for many years at for-profits, your take is correct and accurate. The degrees at for-profits are not worth the paper they are printed on (or that you printout). Enforcement of standards are balanced against making the customer happy--a business does not want to lose a customer, especially one that has a rich Uncle paying the bill.

Today's for-profits came about because of the civil rights push to force a college education on everyone. Just like with affordable housing, Uncle guaranteed the loans and the banks did the marketing. Now we have a lot of whiners about the process that government created and sustains today.

13. drchu - December 13, 2010 at 01:18 pm

They should look at the practice of signing students up for longer programs just to qualify for aid when the student really only wants a short-term certificate.

14. chryssajones - December 13, 2010 at 02:02 pm

For-profit educational institutions have, by definition, a fiduciary responsibility to their stockholders, not to their students. Non-profit institutions, on the other hand, have a social responsibility to their communities.

As a taxpayer, I don't think that federal education dollars should be funding private investors when there are plenty of quality, non-profit educational alternatives.

15. reformhigheredu - December 13, 2010 at 04:23 pm

I agree with the statements that private, non-profits should be closely examined as well. I work at a private non-profit that is an exact replica of Southeastern University in D.C. or even worse (Kevin Carey exposed the fraud that is Middle States in accrediting that university for years). The non-profit institution where I work operates as a for-profit. Because they serve minorities, the government coddles them. They committed fraud with government grant money but the government is so dumb they keep throwing money at them. Underachieving students are passed along with A's in the name of retention and for the sake of reporting high graduation rates (high graduation rates is not an indicator of learning). Many underachieving students proudly state they are only at the school for the financial aid money. Why doesn't the DOE ask for statistics such as the percentage of students at a school that receive all A's throughout their years of study at that school? Also, all tests are take home or open book. These low, lax standards have an impact on our society. I would like for the DOE and the government in general to stop being cowards and crack down on these corrupt "higher education" institutions.

16. whm3113 - December 13, 2010 at 04:31 pm

Realities:

1. Students attending career schools have often been unsuccessful in other higher education institutions.

2. Programs at career schools are often geared to teach the type of skills that previously would have been taught in on-the-job training.

3. The student who enroll in these programs are often out of better options.


If we make career schools obsolete we will not run out of medical assistants, medical billing specialists, locksmiths, office assistants, etc. The industries looking for these employees will revert to training employees in the basic skills.

I understand of the needs of the low income community for employment oriented education. I also understand that, by having low income students borrow larges sums of money for skills that don't require a formal education we are setting these individuals up for failure.

As for the cost of a traditional liberal arts education, trying to tie the major to the student's future income is same as saying that a liberal arts education has no intrinsic value.

17. doctorthomas - December 13, 2010 at 04:33 pm

chryssajones,
Every (publicly traded) business has a fiduciary responsibility to their stockholders, but, they cannot survive unless they create a commodity that is needed and worth the cost.
GM just completed an IPO - are you saying they will cut the quality of the parts used in their cars to ensure a greater profit margin for their stockholders? They tried that in the 1980's and had to be bailed out in 2009. Do you really think people in the for-profits don't know this?

Compare the average debt for a four-year student at a for-profit with the average debt of a student attending ONE YEAR at Duquesne University in my hometown, or four-years at Pitt or Penn State.

Look at Arizona State next; one of the hardest partying universities in the country. Then try having a weekend kegger with your online classmates. The fact is that most for-profit students are older than traditional students and serious about learning skills to succeed. They already "know themselves" and don't need the fascist hegemony of tenured faculty to tell them how they should think or to find their soulmate in the dormitories.

By comparison, traditional universities are only good at the hard sciences because they use YOUR tax money to buy the big ticket tools. For the arts, humanities, and service-related occupations, they are being surpassed by for-profits in innovation, especially online.

18. edkerr - December 14, 2010 at 11:06 am

I look forward to the increased scrutiny being paid to online and for-profit colleges. I teach at a for-profit that has both online and on-ground components. Our institution does an excellent job of educating students and providing value. I welcome the opportunity to demonstrate the quality of our school.

These audits are a start. We have a long way to go to get our post-secondary school systems back on track toward providing a solid education and value to all students. By identifying and weeding-out the offenders, we make the entire system stronger.

These audits should be extended to all schools. For too long, schools have lacked any sense of accountability to the students. That applies equally to non-profits and public schools as well.

We need to improve and strengthen our schools in order to better serve our students.

19. whitehat - December 14, 2010 at 11:34 am

Nice comments edkerr. I agree that any standards, if they are truly in the interest of protecting and serving the student and the taxpayer, should be applied to ALL institutions. If you looked at the DoE data on repayment rates for 2009, you would have seen that most community colleges, almost all medical schools, many state university systems, and some ivy leagues could not have passed that test IF it was applied to them.

I have taught at for profits and I have been in administration at them and I work VERY HARD to make sure my programs and delivery are great. Our students do get jobs and do pay back their loans. My institution passes all the proposed standards. I am not worried about the regulations changing.

Another commenter said that there are some bad apples in with the good. This is true. But find ALL the bad apples, not just the ones in the for profit barrel.

BTW - anyone read the re-issue of the GAO report? Thanks GAO for waiting 4 months to actually tell people the truth about your investigations.

20. fiscalsense - December 15, 2010 at 04:35 pm

A high Cost of attendance, where cost of attendance includes (in addition to tuition and books) room and board, transportation, access and personal expenses, transportation cost, etc. translates into excessive, dishonest, and often frivolous borrowing. Reduce Cost of attendance to direct cost only (tuition, books and fees) for online and you will significantly reduce the overborrowing, refund-seeking problem and greatly improve student and taxpayer return on investment. Instead of borrowing say $70-80K for a bachelor's degree (or more for Master's), the student will borrow half as much (or less). When students receive $6000+ per term in refund checks (where the refunds are 2-3 times the tuition) to attend one online class at a time while working full time, and then are essentially told not to worry about paying back the full loan amounts because they can enter the income based repayment plan, something is wrong. This goes for any college, non-profit and for-profit alike.

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