October 16, 2007

U. of California Ends Deal That Paid It for Referring Students to For-Profit College

The University of California has decided to cancel an arrangement with Capella University in which the Minneapolis-based for-profit institution had agreed to pay $500 per student transfer from UC’s Berkeley and Irvine campuses.

The University of California said in a written statement that it was ending the five-year-old relationship, two weeks after it was publicly revealed by The Chronicle, because outsiders were “misconstruing this as somehow being, if not illegal, unethical.”

Under the arrangement, Capella paid Irvine $500 for every continuing-education student referred to it. Capella paid at least $12,000 to Irvine under the program. No money was paid to Berkeley during the three years of that relationship, other than an initial $5,000 set-up fee, a university spokesman, Chris Harrington, said.

Both campuses are ending the arrangement, and officials on the Irvine campus said they would donate their $12,000 in earnings to a scholarship fund for needy students.

The U.S. Education Department, without commenting on the specifics of UC’s relationship with Capella, said it considered such arrangements legal. But critics, including U.S. Rep. Thomas E. Petri, a Wisconsin Republican and former vice chairman of the House of Representatives education committee, said the payments appeared to violate the spirit, if not the letter, of a general federal ban on paying per-student recruitment incentives. —Paul Basken

Comments

1. Capella University claims to have “alliances” with 25% of all community colleges in the country. How many of those schools are currently accepting kickbacks from Capella?

   Capella University has also just been found in violation, on ten counts, of violating the Family Educational Rights and Privacy Act (FERPA) by the United States Department of Education (USDE). As with the Capella – UC kickback scam, Capella’s president, Michael Offerman, was also personally involved in that matter.

   When one considers that Capella University’s financial aid director, Timothy Lehmann, was recently fired for accepting kickbacks from the student loan industry, along with the fact that Capella University has been the subject of an audit by the USDE Office of the Inspector General for failing to return nearly one million taxpayer dollars, there is certainly a significant problem with ethics at the school involving some of Capella’s highest officials.

   — Student    Oct 16, 07:50 PM    #

2. Paying for a student inquiry is legal and in a business sense, very responsible behavior. University’s practice of spending fixed amounts of money on advertising and marketing is contrary to the current trend of “Performance Based Advertising.” The Internet is especially oriented to this form of advertising as the advertiser only pays for qualified responses. For-profit school’s have been especially successful in this market. The so called “lead generation” method of recruiting has been a key component to their rapid rise in enrollment. An article called For-Profit’s Insatiable Demand for New Students at EDUInsight.com offers more insight into this practice. http://www.eduinsight.com/recruiting_students/

   — Mark Shay    Oct 17, 07:36 AM    #

3. If it is not illegal per government rules and UCI is only cancelling the agreement because they want to stop the perception of illegal activity than why is this even a story?

   — luscious    Oct 19, 03:53 PM    #

Previous: Woolly Bully: Student Sues College for Failing to Protect Him From Tormentor
Next: Federal Agents Raid 2 Campuses of For-Profit College in Florida