Res earc her Published by CQ Press, a Division of SAGE CQ www.cqresearcher.com Career Colleges Do they take advantage of low-income students?

eak job prospects have propelled hundreds of thousands of Americans to take out stu - dent loans to train for careers in health care, W computer technology, business administration and food service at for-profit schools known as career colleges. Enrollments at these alternatives to traditional schools have more than tripled since 2000. But a recent government investigation ex - posed deception in recruitment and admissions at several schools, while congressional hearings have questioned the high levels of debt Aja Holmes, an online student at the University of and low graduation rates among career schools’ disproportionately Phoenix from Raleigh, N.C., is among hundreds of thousands of working Americans seeking to better minority and low-income students. To protect students and weed themselves through coursework at career colleges. out low-quality career schools, the Department of Education has proposed tighter regulations for federal financial aid. But the in - I dustry has launched an intensive lobbying campaign against the new N THIS REPORT S requirements, arguing they will block more than a million students THE ISSUES ...... 3 I from desperately needed educational and career opportunities. BACKGROUND ...... 10 D CHRONOLOGY ...... 11 E CURRENT SITUATION ...... 16 CQ Researcher • Jan. 7, 2011 • www.cqresearcher.com AT ISSUE ...... 17 Volume 21, Number 1 • Pages 1-24 OUTLOOK ...... 19 RECIPIENT OF SOCIETY OF PROFESSIONAL JOURNALISTS AWARD FOR EXCELLENCE N AMERICAN BAR ASSOCIATION SILVER GAVEL AWARD BIBLIOGRAPHY ...... 22 THE NEXT STEP ...... 23 CAREER COLLEGES CQ Re search er

Jan. 7, 2011 THE ISSUES The Next Congress Volume 21, Number 1 18 Career schools are hoping • Is deception pervasive for regulatory relief. MANAGING EDITOR: Thomas J. Billitteri 3 at career colleges? [email protected] • Do career colleges pro - ASSISTANT MANAGING EDITOR: Kathy Koch vide a quality education? OUTLOOK [email protected] • Should the government CONTRIBUTING EDITOR: Thomas J. Colin tighten financial-aid stan - 19 End of an Era? [email protected] dards at career colleges? Career colleges’ period of ASSOCIATE EDITOR: Kenneth Jost rapid expansion may be over. BACKGROUND STAFF WRITERS: Marcia Clemmitt, Peter Katel CONTRIBUTING WRITERS: Roland Flamini, Early Trade Schools SIDEBARS AND GRAPHICS Sarah Glazer, Alan Greenblatt, Reed Karaim, 10 Career colleges’ roots go Barbara Mantel, Tom Price, Jennifer Weeks back to colonial times. Enrollment Tripled at DESIGN /P RODUCTION EDITOR: Olu B. Davis 4 Career Colleges ASSISTANT EDITOR: Darrell Dela Rosa Government Money Total hit 1.8 million in 2008. 12 The GI Bill marked a turn - FACT-CHECKING: Michelle Harris ing point for career colleges. Students at Career 5 Colleges Incur More Debt Average exceeds $30,000. 13 Scandal In the 1950s, ’60s and Loan Defaults Highest in ’70s, many trade schools 9 Career Colleges were shut down. Rate exceeds 20 percent in A Division of SAGE some cases. 14 New Regulation PRESIDENT AND PUBLISHER: In 1992, Congress 11 Chronology John A. Jenkins strengthened oversight of Key events since 1841. DIRECTOR, REFERENCE SOLUTIONS: federal student aid. Todd Baldwin Overhaul of Accreditation Wall Street Era 12 System Sought 14 For-profit education went “Schools are a little afraid of Copyright © 2011 CQ Press, a Division of SAGE. “corporate” in the 1980s. measuring outcomes.” SAGE reserves all copyright and other rights herein, unless pre vi ous ly spec i fied in writing. No part of this For-Profits Seek Windfall publication may be reproduced electronically or 14 otherwise, without prior written permission. Un- CURRENT SITUATION From Military Benefits Veterans may have suffered au tho rized re pro duc tion or trans mis sion of SAGE copy - the industry’s worst excesses. right ed material is a violation of federal law car ry ing Shareholder Lawsuits civil fines of up to $100,000. 16 Several class-action suits have been filed against 17 At Issue CQ Press is a registered trademark of Congressional Would the gainful employment Quarterly Inc. career colleges. rule harm low-income students? CQ Researcher (ISSN 1056-2036) is printed on acid- Student and Whistle - free paper. Pub lished weekly, except: (May wk. 4) 18 blower Suits FOR FURTHER RESEARCH (July wks. 1, 2) (Aug. wks. 2, 3) (Nov. wk. 4) and Suits have been filed (Dec. wks. 4, 5), by CQ Press, a division of SAGE. against career schools in For More Information Annual full-service subscriptions start at $803. For pric - several states. 21 Organizations to contact. ing, call 1-800-834-9020. To purchase a CQ Researcher report in print or electronic format (PDF), visit www. State Investigations 22 Bibliography cqpress.com or call 866-427-7737. Single reports start 18 Florida and Kentucky have Selected sources used. at $15. Bulk purchase discounts and electronic-rights filed suits alleging misrep - licensing are also available. Pe ri od i cals post age paid The Next Step at Wash ing ton, D.C., and ad di tion al mailing of fic es. resentation against several 23 Additional articles . POST MAST ER: Send ad dress chang es to CQ Re search - schools. er , 2300 N St., N.W., Suite 800, Wash ing ton, DC 20037. 23 Citing CQ Researcher Cover: AP Photo/Jim R. Bounds Sample bibliography formats.

2 CQ Researcher Career Colleges BY BARBARA MANTEL

reer colleges had been treat - THE ISSUES ed with hostility earlier in the summer, Republicans refused n late September, about to invite industry witnesses 1,500 students, teachers this time around. 2 I and administrators from “In my 14 years, I haven’t for-profit colleges — every - been through a series of hear - thing from small trade schools ings that have been this one- for cosmetology to corporate- sided,” said Sen. Michael Enzi owned universities offering of Wyoming, the panel’s top

business degrees — rallied in e Republican, who walked out e r front of the U.S. Capitol, t after his opening statement. n u

many wearing T-shirts pro - o Sen. Richard Burr, R-N.C., R claiming, “My education. My charged Harkin with con - m

a 3

job. My choice.” d ducting a “witch hunt.” And A /

Arriving in buses paid for s Sen. John McCain, R-Ariz., ac - w

by the industry, they were e cused the chairman of going N

there to defend their schools g on “ad nauseam” about abus - r e

— better known as career b es at for-profits before he, too, m 4 colleges — which had come o left the room. o l

under attack in a series of B But Harkin defended the / s

Senate hearings. e process. “This committee’s on - g a

A selection of for-profit m going investigation has brought I

y

colleges was accused of en - t to light disturbing practices that t e

couraging prospective students G appear to be systemic to this to falsify financial-aid appli - For-profit schools train students — typically working industry and that raise serious cations and recruiting stu - adults — for careers in fields ranging from health care questions about the enormous dents with exaggerated to food service. Above, would-be chefs learn food taxpayer investment in these preparation at the Art Institute of New York City. Recent 5 promises of jobs and salaries. congressional hearings questioned the low graduation schools,” he said. At the same time, the indus - rates and high debt levels among the career-school For-profit higher education try as a whole was chastised industry’s disproportionately minority and low-income has been a rapidly growing for failing to graduate the ma - students. To protect students, the government has business, although 2010 saw a jority of its students and leav - proposed tighter student-aid regulations, but career slowdown under a cloud of schools say a million needy students would be penalized. ing dropouts and graduates congressional scrutiny, bad alike with crushing debt. For- press and new regulations. Be - profits deny the charges and say they career colleges and vocational schools tween 1998 and 2008, enrollment more are doing a public service by tailoring to show that a minimum percentage than tripled to nearly 2 million students. programs to the needs of low-income of former students are repaying stu - While about a fourth of those students working adults. dent loans and are not burdened with attend the thousands of small, privately - “All State does a great job of prepar - excessive debt. If they can’t, they risk owned career schools throughout the ing you to present yourself for a job,” losing eligibility to participate in federal nation, three-quarters are enrolled at said student Sarah Martin, 22, who rode student-aid programs. multistate institutions familiar from late one of six buses sent by All State Ca - The next day, at the third hearing night television advertising and highway reer School in Baltimore, where stu - on for-profit higher education in as billboards — such as DeVry University, dents can train to be pharmacy assis - many months, Republicans on the Sen - ITT Technical Institutes and the Universi - tants, truck drivers and air conditioning ate Health, Education, Labor and Pen - ty of Phoenix — and owned by 14 pub - technicians. “It’s up to you to take ad - sions Committee, chaired by Sen. Tom licly traded companies. 6 vantage of the situation.” 1 Harkin, D-Iowa, aligned themselves Wall Street analysts divide these The demonstrators — and their with the demonstrators and expressed dominant players into three groups: schools — were incensed by proposed their disgust with the hearings. Com - • “Online Schools” — the fastest- federal regulations that would require plaining that representatives from ca - growing, including companies such as

www.cqresearcher.com Jan. 7, 2011 3 CAREER COLLEGES

But while defenders say for-profits Enrollment Tripled at Career Colleges provide students with educational ac - The number of students at for-profit colleges reached 1.8 million in cess, critics ask, “Access to what?” “These programs overpromise, under-deliver 2008, more than triple the number from just a decade earlier. and load vulnerable students up with Enrollment at For-profit Colleges, 1998-2008 way too much debt,” said Chris Lind - strom, higher education program direc - 2,000,000 1,800,000 tor at the U.S. Public Interest Research w e

N Group (USPIRG), part of a coalition of 1,380,000 c

1,500,000 M 1,190,000 consumer, student and public-interest d i v

a groups supporting tighter regulation of

850,000 D 1,000,000 / 670,000 s 12 e the industry . 550,000 g a m

I At the end of October, the U.S. De -

500,000 y t t

e partment of Education released rules 0 G aimed at protecting prospective stu - 1998 2000 2002 2004 2006 2008 dents from aggressive or misleading Source: “Emerging Risk?: An Overview of Growth, Spending, Student Debt and recruiting, requiring accurate informa - Unanswered Questions in For-Profit Higher Education,” Senate Health, Education, tion about the effectiveness of career Labor and Pensions Committee, June 2010 college and vocational-training pro - grams and ensuring that only eligible Bridgepoint Education, the owner of more than 23 percent of all Title IV students and programs receive finan - Ashford University. funds. Their students also account for cial aid. 13 Although many of the rules, • “Bricks-and Clicks” — which offer 44 percent of loan defaults. Part of which take effect this July, apply to a mix of campus-based and online pro - the reason for the high default rate all of higher education, several will hit grams leading to associate, bachelor’s is that a large percentage of students the for-profit sector hardest. and advanced degrees; they include at for- profit institutions drop out with Some of the rules are: DeVry Inc. and Apollo Group, the parent debt but no degree. • Graduation-Rate and Job- of the University of Phoenix. Industry executives defend their Placement Disclosures: For-profit col - • “Vocationals” — which offer pri - record, saying those debt and default leges and for-profit and public vocational marily campus-based associate-degree numbers are a function of the students institutions will be required to provide and certificate programs and include they serve. “Kaplan has brought in - prospective students with a program’s such companies as Corinthian Colleges novation and excellence to a popula - graduation and job-placement rates. and ITT Educational Services. 7 tion of largely low-income students • Misrepresentation: The Educa - But they all have one thing in com - who don’t usually have access to ei - tion Department will have more power mon: They predominantly offer career ther,” Andy Rosen, chairman and CEO to crack down on institutions engaging programs in fields such as business, of Kaplan Inc., wrote to The New York in deceptive advertising, marketing and health care, technology, criminal justice Times in response to a critical news sales practices. and education. And they all rely heavily story. The Washington Post Co. owns • Incentive Compensation: Schools on federal student aid under Title IV Kaplan, which operates Kaplan College will no longer be able to base part of of the Higher Education Act, such as and the online Kaplan University. 10 admissions recruiters’ compensation on Pell grants and Stafford loans, for their For-profit institutions say they pro - their success in enrolling students and income. In fact, it accounts for nearly vide access to higher education to securing financial aid for them. 80 percent of the for-profit sector’s rev - working adults who are crowded out • High School Diploma: Institu - enue. 8 The aid levels are high because of oversubscribed community colleges tions will be required to verify a stu - some 95 percent of the students at ca - and neglected by traditional universi - dent’s high school diploma if the insti - reer colleges borrow to cover tuition, ties. Their students tend to be older tution or the Education Department a much higher percentage than at pub - — more than half are over age 25 — believes it might come from a diploma lic and private nonprofit colleges and and heavily minority. Blacks, Hispan - mill — an unaccredited institution that universities . 9 ics , Asian-Americans and American offers substandard or no coursework. As a result, while for-profits enroll Indians account for nearly 40 percent • Ability to Benefit: The Educa - close to 10 percent of all higher edu - of for-profit enrollment. Two-thirds tion Department will gain stronger over - cation students, those students receive are female. 11 sight over “ability-to-benefit” testing,

4 CQ Researcher which for-profit institutions use to qualify prospective students for federal Students at Career Colleges Incur More Debt financial aid when students lack a high Nearly all students pursuing a bachelor’s degree at for-profit school diploma or GED. colleges incur debt upon graduation, far more than their • Credit Hour: For the first time, the Education Department will define counterparts at public or private nonprofit colleges. The aver - a credit hour to eliminate some insti - age amount of debt for bachelor’s students at career colleges tutions’ practice of awarding a student exceeds $30,000 — more than the debt levels at traditional more credits — and by extension more schools. Similarly, nearly all students who receive associate federal student aid — than deserved. degrees at career colleges incur an average of $20,000 in debt, The department has delayed releasing one final rule, probably the most con - almost double the level at public colleges. tentious, until sometime early this year. As proposed, the “gainful employment” Average Debt at Graduation for Students by rule, effective July 2012, would elimi - Type of School and Degree, 2007-2008 nate federal student aid for for-profit and vocational programs in which high BA recipients AA recipients Certificate recipients proportions of former students are not Type of % with Amount % with Amount % with Amount repaying their loans and whose grad - school debt of debt debt of debt debt of debt uates end up with debt far too high for the salaries they earn. Public 62% $20,200 38% $10,350 32% $9,200 In addition to organizing Septem - Nonprofit 72% $27,650 71% $19,300 52% $15,250 ber’s rally at the Capitol, the for-profit industry has lobbied fiercely against For-profit 96% $33,050 98% $19,700 90% $11,500 the rule behind the scenes and in the Source: “Higher Education Reform Forum,” Institute for College Access & Success, media, calling it discriminatory against October 2010 the low-income and minority students it serves and a product of an unfair $12 an hour while making student safe harbors, which allow such pay - and biased rule-making process. loan payments of $600 a month. “It’s ments as long as they aren’t based As the debate continues, here are really frustrating when you’re trying “solely” on enrollment or financial-aid some of the questions being asked: to better yourself and you wind up numbers. According to the department’s back at square one,” West said. inspector general, “Proprietary institu - Is deception pervasive at career A Corinthian spokesperson told tions are making full use of the safe colleges? The Times that it bars recruiters from harbors . . . to drive enrollment.” 15 Jeffrey West was making $8 an hour making promises about pay and that “That creates an incentive for ad - at a pet store near Philadelphia when most graduates see a significant in - missions officers at those schools to he took out $30,000 in student loans crease in earnings. 14 mislead applicants because their liveli - to pay for a nine-month training pro - Critics of the for-profit industry say hood depends on students signing on gram in auto-body refinishing and up - hard-sell tactics are the inevitable re - the bottom line,” says David Hawkins, holstering at WyoTech, a chain of trade sult of a loosening of regulations. In director of public policy and research schools owned by publicly traded 1992, in response to reports of abu - at the National Association for College Corinthian Colleges Inc. The tuition sive recruiting practices, Congress Admission Counseling, in Arlington, seemed high to him, he said, but the banned schools participating in fed - Va. The association encourages fixed school’s recruiter told him the program eral student-aid programs from pay - salaries for its membership, which ex - had a job-placement rate of 90 percent. ing commissions, bonuses or other in - cludes counselors from the for-profit “That was one of the key factors that centive payments to employees based sector. Many of these students, says caused me to go there,” West told The on the number of students they en - Hawkins, are unsophisticated con - New York Times. “They said I would rolled or the amount of financial aid sumers, often the first in their family be earning $50,000 to $70,000 a year.” they secured. to pursue coursework beyond high But 14 months after graduating, West A decade later, the Department of school. “We’ve seen this abuse hap - couldn’t find an automotive job and Education under President George W. pen in a rather spectacular way,” he was weatherizing foreclosed houses for Bush carved out exceptions, called says, pointing to lawsuits by former

www.cqresearcher.com Jan. 7, 2011 5 CAREER COLLEGES

students and employees of for-profit pensation. “The actions described in the partment of Education certainly can. colleges as well as federal and state GAO report at two of our colleges are “We did refer all of these cases to the investigations. simply unacceptable and contrary to our department,” says Kutz, “and whether One of the biggest investigations standards and values in every way,” the they use that to enhance their over - was conducted last year by the U.S. company says. sight or not, I don’t know.” Government Accountability Office “We took the GAO findings very se - One week after the August Senate (GAO), the investigative arm of Con - riously,” says Manny Rivera, executive hearing, Secretary of Education Arne gress, which released a report at director of public affairs at Apollo Group. Duncan wrote Sen. Harkin that the de - Harkin’s August Senate hearing. Teams Like Kaplan, it no longer ties com - partment is examining the GAO’s find - of undercover applicants visited 15 pensation to enrollment numbers. “We ings and would refer for criminal prose - campuses of 12 for-profit institutions. also put in place new ethics and com - cution any individuals who committed The GAO found fraud at four campuses pliance measures for our admissions fraud. Duncan also said the department when its “students” were encouraged advisers, and we are implementing a is hiring more than 60 additional over - by college personnel to falsify their fed - new digital call-monitoring system . . . sight staff and will develop its own eral financial aid forms to qualify for to ensure that our counselors are not undercover program. 18 loans and grants. providing any false or misleading in - Harris Miller, president of the As - The GAO also found deceptive or formation to prospective students.” sociation of Private Sector Colleges questionable recruitment practices at In December, the GAO revised its re - and Universities, favors stepped-up all 15 locations. College representa - port, altering some of the language tran - enforcement by accreditors, states and tives misled applicants about program scribed from the undercover videotapes. the federal government. “Every ad - duration and costs, gave deceptive in - Most changes were minor, but a few did missions officer should assume that formation about graduation rates and soften the appearance of wrongdoing. the person in the seat opposite you accreditation or exaggerated potential Nevertheless the GAO said nothing has is an undercover mystery shopper,” salaries and job prospects. A beauty changed in its overall message or with says Miller. school, for instance, told an under - any of its findings. But industry repre - Even more than mystery shoppers, cover applicant that barbers earn as sentatives cried foul, and some have the Department of Education’s elimi - much as $250,000 a year. In addition, asked for the report to be withdrawn. nation of the safe harbors, announced many admissions staff pressured appli - Three of the schools in the GAO in October and effective this July, will cants to sign enrollment contracts before report are accredited by the Accredit - have the most impact on deceptive allowing them to speak to financial -aid ing Commission of Career Schools and practices, says Hawkins. “The statute’s representatives. 16 Colleges (ACCSC), which has strict stan - teeth have been reinserted,” he says. “I can’t project to the population of dards for admissions and recruitment. “There isn’t much nuance anymore. colleges out there, but it would be ACCSC’s executive director, Michale You cannot pay people for recruiting.” hard to say that these are the only 15 McComis, says on-site evaluations and locations doing these kinds of things,” student surveys show that the prob - Do career colleges provide a says Gregory Kutz, managing director lems identified in the GAO investiga - quality education? of forensic audits and special investi - tion “are not widespread amongst our “Earn your degree on your terms.” 19 gations at the GAO. “The admissions accredited institutions.” That philosophy is stated prominently process is a sales process. They are Still, ACCSC created a task force to on the website of the University of trying to make money and get peo - evaluate institutions’ recruiting, adver - Phoenix, which, like most career colleges, ple enrolled, and some are more ag - tising and admissions practices, and promotes its flexible scheduling, small gressive than others.” on-site evaluation teams will look more classes, hands-on learning, online student Schools cited in the report include closely at those practices during their community and faculty drawn from the branches of the University of Phoenix, normal accreditation reviews. real world as the best model for teach - Kaplan College, Everest College, owned But the GAO’s Kutz says the ACCSC ing working adults. by Corinthian Colleges, and Education on-site efforts are likely to fall flat. “Given this situation, for-profit in - Management’s Argosy University. 17 “What are the accrediting agencies stitutions ought to be — in theory at The response to the GAO report was going to see?” he says. “They’re going least — places where quality learning immediate. Kaplan suspended enrollment to get a dog-and-pony show.” takes place,” wrote Kevin Kinser, a se - at two campuses, started retraining all Kutz says the accreditors are not nior researcher at the Institute for Glob - of its admissions and financial-aid teams equipped to go undercover, and the al Education Policy Studies at the Uni - and eliminated enrollment-based com - accreditors agree. However, the De - versity at Albany, part of the State

6 CQ Researcher University of New York. “The evidence you don’t go into the classroom and of the things counselors said to me all that it does, however, is sparse.” Ac - see whether the syllabus is being taught, across the country is that they often cording to Kinser, there are few as - if you don’t know what is going on saw comparable education at commu - sessments of intellectual development in the admissions office, if you have nity colleges at radically less cost than among students at career colleges, and no investigative tools, I can sell you at the proprietary schools.” almost nothing is known about what the Brooklyn Bridge,” he says. Because no independent data are goes on in the classroom except what Without accreditation from a gov - available to assess student learning, other is in faculty training manuals and what ernment-recognized agency, a post - student outcomes are used as proxies. campus administrators claim. 20 secondary school cannot enroll stu - One metric that stands out is the trans - But Sylvia Manning, president of the dents with federal financial aid. Schools fer rate from for-profit schools, which at Higher Learning Commission, one of six also must be approved by the state in 18 percent, is less than half that at tra - regional accreditors and the accreditor of which they operate, and certified by ditional colleges and universities. 22 The a growing number of for-profit institu - the Department of Education that they rate is relatively low because students at tions, disagrees. Manning says that while are administratively and financially re - career colleges often find that tradition - her agency relies on self-reports from in - sponsible institutions. 21 al schools will not accept their credits. stitutions it accredits, With a 3.9 grade- whether for-profit, point average and an as - public or private sociate degree from Ever - nonprofit, it doesn’t est College, a multistate r

leave it at that. e for-profit institution, m l

“We demand that E Chelsi Miller was ac -

n

they have stated a cepted to the University h t

learning objectives a of Utah’s pre-med pro - n o

for every course and J gram. But the university / s

that they collect data w would not accept any of e N

on that,” says Man - her Everest credits. Miller g r

ning. “And then we e said Everest misled her b

push them further m when it suggested her o o by asking them to l credits would transfer. “I B / figure out what it is s feel as if I had been sold e g

in the teaching or a a college experience from m I curriculum that is a used-car salesman,” said y t delivering less than t Miller, who has filed a e perfect results.” G class-action lawsuit accus - An academic counselor advises a Navy enlisted man at Camp Lejeune, Newly accredited in - North Carolina. Career colleges have wide appeal for military service ing Corinthian Colleges, stitutions are visited personnel, but some have complained they were misled Everest’s owner, of fraud. after five years and about the education they would receive. The company disputes then every 10 years the charges. 23 after that, although the addition of a Arnold Mitchem, president of the Everest is accredited by the Ac - new program or location will trigger Council for Opportunity in Education, crediting Council for Independent Col - a fresh review. a nonprofit group that helps low-income leges and Schools, a national body. “That process has become an exer - students enter and graduate from col - Most for-profit schools are nationally cise in futility,” says Barmak Nassirian, lege, says many of the guidance coun - accredited, but that process historical - an associate executive director at the selors with whom his organization ly has been considered less rigorous American Association of Collegiate works no longer recommend for-profit and prestigious than accreditation Registrars and Admissions Officers, schools to their students. from the six regional organizations that whose members are mostly from public “Enough students they had coun - accredit most traditional schools. But and private nonprofit institutions. The seled had come back and said they more proprietary institutions are gain - problem, he says, is that the accredi - were not getting the education that had ing regional accreditation by offering tation process is based on an assumption been promised and that they needed bachelor’s and graduate degree pro - of good faith, an assumption Nassirian to get a job,” says Mitchem. He also grams or by purchasing regionally ac - questions when profits are at stake. “If cites the cost of for-profit schools. “One credited nonprofit schools.

www.cqresearcher.com Jan. 7, 2011 7 CAREER COLLEGES

The problem for students like Miller For instance, at schools where 34 to is that many traditional colleges and Career Colleges Getting 66 percent of incoming freshmen have universities won’t accept credits from More Federal Loans income low enough to qualify for nationally accredited schools. “Often federal Pell grants, 21 percent of stu - those courses are found lacking in The share of Pell grants and dents at for-profit four-year colleges some way or another,” said Suzanne other federal student aid graduate within six years. But at pri - Wayment, associate director of admis - awarded to for-profit colleges vate nonprofit and public colleges, sions at the University of Utah. For in - has significantly increased over 45 percent and 41 percent graduate, 26 stance, she said, an algebra textbook the past decade — more than respectively. used by a nationally accredited school doubling for federal loans and Yet, no matter what type of college may be at an introductory level, while or university is scrutinized, none is jumping 80 percent for Pell the university requires a more ad - graduating a large majority of its stu - vanced text . 24 grants. For-profit schools are dents. “If we want to a have a con - “My experience is that they [tradi - not only enrolling more versation about outcomes, then let’s tional schools] don’t even look at the students but are receiving more talk about higher education writ larger,” coursework,” says McComis of the Ac - federal money per student. says McComis. “To single out one par - crediting Commission of Career Schools ticular sector is not necessarily helpful and Colleges, a national organization. For-profit Colleges’ Share of to that conversation.” He says a blanket policy of rejecting Pell Grants and credits from nationally accredited Federal Loans, 1999-2009 Should the government restrict schools is improper. “The level of scruti - student aid to career and trade ny that we put our degrees through schools? 23.6% 23.5% is equal to what you would find at 25% Any day now the Department of most colleges and universities out there,” Education could release the much - 20 says McComis. anticipated final version of a regula - 13.1% Besides transfer rates, another yard - 15 11.3% tion that would restrict federal student stick used to judge educational qual - 10 aid at career colleges and trade schools. ity is the number of students who “While career colleges play a vital role graduate. There the picture for career 5 in training our work force to be glob - colleges is mixed, according to re - 0 ally competitive, some of them are Pell grants Federal loans cently released data. saddling students with debt they can - Students enrolled at for-profit two- Source: “Emerging 1999-2000 not afford in exchange for degrees and year colleges graduated with associ - Risk?: An Overview 2008-2009 certificates they cannot use,” Educa - ate degrees at a higher rate than stu - of Growth, Spending, tion Secretary Duncan said when the dents at community colleges, but at Student Debt and Unanswered department first proposed the gainful- four-year schools they did much Questions in For-Profit Higher Educa - employment rule last July. 27 worse. Only 16 percent of students at tion,” Senate Health, Education, Labor The department was scheduled and Pensions Committee, June 2010 for-profit institutions got a bachelor’s to publish the final rule last Octo - degree within six years, compared ber, but furious lobbying by the for- with roughly 60 percent at tradition - schools with similar demographics, profit sector caused it to reconsider. al schools. 25 of which there are relatively few,” “Through this proposed regulation, Miller of the Association of Pri - says Miller. the department will be making law vate Sector Colleges and Universities “What we found in our research that shuts out the very students who says that’s not a fair comparison. It is that that is not the case,” says have the most to gain through their doesn’t reflect the fact that for-profit Mamie Lynch, a policy analyst at the access to the programs offered by ca - schools serve students who are more Education Trust, an advocacy and re - reer colleges,” said Washington lawyer at risk of dropping out because, for search organization in Washington. Lanny Davis, spokesman for the Coali - instance, they come from low-income “When we compare similar institu - tion for Educational Success, a group backgrounds and often work full time tions with similar admissions policies representing career colleges . 28 or are single parents, he says. “In and similar students, the for-profits To qualify for federal student aid, four-year programs we do dramatically have lower graduation rates than the the Higher Education Act for decades better when you look at traditional public and nonprofits do,” she says. has required that career colleges and

8 CQ Researcher vocational-training programs prepare students for gainful employment in Loan Defaults Highest at Career Colleges recognized occupations. But gainful More than 20 percent of the students at for-profit schools defaulted employment has never been defined. on their loans three years after leaving school — a far higher level Now the department is attempting to do just that and has ignited a con - than for students at public or non-profit schools. Default levels for tentious debate. career college students two years after leaving school were also The proposed rule is complicated. substantially higher than public or private nonprofit schools. A program would be fully eligible for federal student aid if at least 45 per - Federal Loan Default Rates by Type of School cent of its former students — whether graduates or dropouts — are repay - Two years after Three years after ing the principal on their federal stu - Type of School leaving school leaving school dent loans. Even if a program’s re - Public 6.0% 9.7% payment rate is lower than that, it could still be eligible if its graduates Nonprofit 4.0% 6.5% have a debt-to-earnings ratio of less For-profit 11.6% 21.2% than 20 percent of discretionary in - come or 8 percent of total income. Source: “Higher Education Reform Forum,” Institute for College Access and Success, (Discretionary income is defined as October 2010 income above 150 percent of the pover - ty level.) Jonathan Guryan, a professor of would be worried that their programs A program would be ineligible for human development and social poli - would fail, too.” After all, a closed pro - student financial aid if its repayment cy at Northwestern University in Chica - gram would be ineligible “at least in rate is less than 35 percent and its go, says the department is much too part because of the characteristics and graduates have a debt-to-earnings ratio optimistic. Guryan researched and choices of the students it served,” ac - above 30 percent of discretionary in - wrote the industry study and says only cording to Guryan. 32 come and 12 percent of total income. a quarter of affected students have rea - But critics of the industry say poor Programs between these two poles sonable alternatives. “That’s partially results for schools that serve at-risk would be on a restricted list. They because many community colleges are students are not inevitable and that could still enroll students with fed - at capacity and partially because there schools could raise repayment rates eral financial aid but would not be are not other for-profits nearby with and lower debt levels for their stu - able to expand, and they would have similar programs,” he says. dents more than the industry assumes to warn students about the high debt But Pauline Abernathy, vice pres - is possible. burdens they are likely to carry in ident of the nonprofit Institute for For instance, a recent study ana - relation to the salaries they are likely College Access and Success in Oak - lyzed the experience of a small group to earn. 29 land, Calif., says the remaining for- of historically black colleges and uni - The industry says the consequences profit schools will fill the void. “The versities in Texas, which 11 years ago for the students it serves would be industry has demonstrated it can and faced critically high student-loan de - enormous. An industry-commissioned will rapidly expand capacity,” says fault rates. Over three years, the schools analysis estimates that between 1 and Abernathy. “Keep in mind also that managed to more than halve default 2 million fewer students would enter at least seven of the 14 publicly trad - rates by improving student retention postsecondary schooling over the next ed colleges have more than 50 per - and graduation, offering better loan 10 years as a result of the rule. 30 cent of their students in exclusively counseling, partnering with outside The Department of Education dis - online curriculums, so proximity and financial-aid experts and improving agrees. It estimates that the vast ma - physical space are not necessarily financial-aid packaging. 33 jority of students at for-profit schools even issues.” The for-profit higher education that could be deemed ineligible Guryan, however, says such ex - sector’s objections to the proposed would be able to transfer to anoth - pansion may not make sense. “It’s hard gainful employment rule go beyond er program or school. Future stu - to imagine that for-profit schools would the rule’s projected unintended con - dents would attend the remaining create new programs to serve those sequences. The industry also says the eligible schools. 31 students,” he says. “Presumably they caps on debt-to-earnings ratios are

www.cqresearcher.com Jan. 7, 2011 9 CAREER COLLEGES

arbitrary; the process For-profits respond - for devising the rule ed to demand from all was biased; and the sectors of the economy. statutory authority By the mid-1800s, “a

of the Department m host of successful for- o c

of Education to . profit agricultural e g

make such a sweep - e schools sprang up” to l l o

ing change is c satisfy farmers’ desire for n a

nonexistent. l courses in the “rapidly p “They simply a developing science of k .

n 36

were unwilling to o agriculture.” Propri - t y

let this proposal go a etary schools also of - d /

through the sun - / fered training in teach - : p t

shine of a legislative t ing, medicine, law and h 37 debate,” says Miller An undercover Government Accountability Office investigation at accounting. of the Association of 15 campuses of 12 career colleges found deceptive or questionable The most direct an - Private Sector Col - recruitment practices at all 15 locations. In response, Kaplan College tecedents to the for- leges and Universi - suspended enrollment at its two campuses visited by the GAO and started profit sector of today retraining its admissions and financial-aid teams and eliminated ties. When asked if enrollment-based compensation. Kaplan and a few other for-profit were the private busi - a lawsuit is possible, companies also have taken steps to improve student outcomes. Kaplan, for ness colleges of the 19th Miller says, “All op - example, lets students enroll in classes for several weeks to test out a century, wrote Kinser. tions are on the program and withdraw during that period without any tuition obligation. Established by entre - table.” preneurs, these schools While the industry is hoping the taught penmanship, arithmetic and department withdraws the gainful em - bookkeeping. By the early 1850s, as ployment rule or makes significant BACKGROUND many as 20 such schools were in op - changes, groups like Abernathy’s are eration, mainly in the East but also hoping the department makes it in New Orleans and St. Louis. 38 One stronger. For example, programs that Early Trade Schools of them, Duff’s Mercantile College in are restricted can remain so indefi - Pittsburgh, is the oldest private career nitely, and simply not allowing them hile career colleges and uni - school in continual operation in the to grow is not much punishment, W versities have seen record United States, although today it is a says Abernathy. growth in the past two decades, they branch of the Everest Institute . 39 “Some of these schools went are far from a new development. In Over the next 40 years, the growth through such rapid growth earlier fact, their roots extend back to colo - of for-profit business schools was “re - that limiting the number of students nial times. markable,” and they “held a virtual mo - to the level of the year before The first college planned for the nopoly on business education,” ac - would still be an enormous num - colonies, the College at Henrico, was cording to Kinser. By 1890, at least ber of students.” a corporate venture proposed in 1617 250 for-profit business schools were A few for-profit companies have “as part of a revenue-generating operating, enrolling more than 81,000 already taken action to improve stu - scheme for the cash-strapped Virginia students, a little more than half of the dent outcomes. Kaplan is allowing Company,” although it never enrolled enrollment at the country’s traditional students to enroll in classes for sev - any students. 34 colleges and universities. “The for- eral weeks to test out a program and It didn’t take long for others to profit business college of this time was withdraw during that time without be established. As the colonies ex - clearly a significant institutional pres - any tuition obligation. And the Uni - panded and commerce grew, mer - ence,” Kinser wrote. 40 versity of Phoenix is requiring stu - chants demanded that employees But the environment changed in dents who enter with fewer than 24 know subjects such as navigation, the early 20th century as public and credits to take a free, three-week, non- surveying and accounting, which tra - nonprofit universities “grew in scale credit orientation. ditional colleges did not teach. So and scope, offering both general edu - entrepreneurs established for-profit cation and specific technical training.” 41 schools to meet the demand. 35 Continued on p. 12

10 CQ Researcher Chronology

students at for-profit institutions. ministration, then tightened by 1800s For-profit busi - Obama administration. ness colleges flourish 1976 U.S. professor John Sperling founds 2002 1841 University of Phoenix. Department of Education creates Duff Mercantile College established “safe harbors,” exceptions to HEA in Pittsburgh. • that allow colleges to pay recruiters bonuses based on success in en - 1850 rolling students. At least 20 for-profit business 1990s Congress tight - schools teach penmanship, arith - ens regulations; number of for- 2005 metic and bookkeeping. profit colleges offering online Congress repeals “50 percent rule,” courses grows. allowing schools to have an un - 1890 limited number of students and At least 250 for-profit business 1991 courses online and still be eligible schools operating enroll more than Senate Permanent Subcommittee to participate in federal student-aid half the number of students at - on Investigations releases highly programs. . . . For-profit Bridge - tending traditional colleges. critical report on federal student- point Education buys small reli - aid program and for-profit career gious college, transforms it into • schools. . . . DeVry Inc. offers online university with tens of stock to the public. thousands of students. 1900s-1970s 1992 2008 Criticism of trade schools dimin - Congress reauthorizes HEA, banning Enrollment at for-profit schools ishes as they receive access to incentive payments to admissions of - climbs from under 600,000 to federal student aid; University ficers based on enrollment, limiting nearly 1.8 million in 10 years. of Phoenix is founded. to 85 percent the amount of revenue for-profits can get from federal stu - 2009 1910 dent aid and excluding from student In 10 years Congress almost triples Flexner Report castigates for-profit aid schools with more than 50 per - the amount of money allocated to medical schools. cent of courses online. Pell grants, and the number of grant recipients nearly doubles; 1931 1993 percentage of Pell grant funding Inventor Dr. Herman DeVry estab - Number of for-profit schools ap - going to for-profit schools nearly lishes DeForest Training School to proved by key accrediting agency doubles as well. prepare students for technical work drops more than 20 percent over in electronics, motion pictures, radio three years. 2010 and later, television; renamed DeVry Senate education committee holds Technical Institute in 1953. 1994 three hearings critical of for-profit Apollo Group, parent of University higher education industry. . . . 1944 of Phoenix, goes public. Undercover federal investigators GI Bill lets for-profit schools enroll visit 15 for-profit campuses and veterans using federal tuition aid. 1998 find fraud at four and deceptive Congress raises to 90 percent the practices at all 15. . . . Department 1965 amount of revenue for-profits can of Education establishes new student - Landmark Higher Education Act get from federal student aid. aid rules to protect borrowers and increases access to college for taxpayers, and delays final “gainful low-income students. • employment” rule that could re - duce the number of for- profit pro - 1972 grams able to enroll students with Reauthorized Higher Education Act 2000s-Present federal financial aid. . . . Florida (HEA) allows federal tuition subsi - For-profit regulations are loos - attorney general investigates eight dies, like Pell grants, to be used by ened by George W. Bush ad - for-profit schools.

www.cqresearcher.com Jan. 7, 2011 11 CAREER COLLEGES

Overhaul of Accreditation System Sought “Schools are a little afraid of measuring outcomes because the results . . . may be unfavorable.”

ichard Vedder is a distinguished professor of economics What good is the accreditation report if it is not public? All the at Ohio University and was a member of a government public knows is if the school is accredited or not. They don’t know R commission that in 2006 called for a major overhaul of any of the details. higher education accreditation. He is also director of the Center for CQ: How do accrediting bodies measure the quality of edu - College Affordability and Productivity in Washington, D.C., a non - cation at, say, the University of Phoenix or Harvard? profit research center that recently released a report critical of the RV: They look at inputs, things like the percentage of faculty current system of accreditation. CQ Researcher author Barbara who have Ph.Ds, the number of books in the library, the teaching Mantel interviewed Professor Vedder. loads of faculty. CQ: Students who receive federal loans and grants must at - CQ: You’re critical of that method. Don’t these measures tend an accredited college or university, whether for-profit, not-for- tell us something about the quality of the education? profit or public, because the federal government wants to assure RV: I couldn’t care less how many books are in the library. quality. Do the various private accrediting bodies do a good job First of all, how many students read books in libraries anymore? assuring the quality of the education offered in the United States? I’m not saying that inputs are irrelevant, and one thing that is RV: I don’t think they do a terribly good job. Not all ac - nice about inputs is that they are easy to measure. But outcomes crediting agencies are equal, but on the whole, I don’t know of — how much students know, for instance — can be measured. a major institution that has ever lost accreditation or come close And it’s outcomes that we care about. to losing accreditation because of the poor quality of the gradu - CQ: So why aren’t outcomes measured? ates or deficiencies in instruction. There have been minor excep - RV: I think schools are a little afraid of measuring outcomes tions to this among small institutions. because the results sometimes may be unfavorable to them and CQ: You say one of the problems with accreditation is that could hurt them in terms of their reputation and accreditation. it relies on colleges self-reporting, and the reporting is secret. Since no one is forcing them to measure outcomes, they stay RV: Colleges fill out questionnaires and write reports, and an away from things that may impose some risk. The accreditors accreditation team will come in and look around. And the final are the natural people to enforce this, and I think they are reports from the accrediting agencies are largely confidential. generally negligent in this.

Continued from p. 10 turned to existing private accrediting For the first time, for-profit programs Government Money agencies, which set quality standards had significant competition. In addi - for their members. It made a list of tion, the quality of course work came orld War II and the GI Bill, which agencies it recognized as reliable, whose under attack. W provided education benefits to member schools could participate in In 1910, Abraham Flexner, a re - veterans, marked a turning point for the GI Bill. searcher at the Carnegie Foundation the proprietary sector. Previously, fed - “Otherwise, the problem of ‘fly-by- for the Advancement of Teaching, is - eral legislation had focused on sup - night’ schools would simply be trans - sued a report skewering U.S. medical porting public education and “treated ferred to ‘fly-by-night’ accreditors,” wrote schools, many of which were for-profit the for-profit sector as an afterthought,” Mark Pelish, executive vice president institutions. “Flexner criticized these according to Kinser, and the first of legislative and regulatory affairs at schools as a loose and lax appren - drafts of the GI Bill did the same. But the for-profit Corinthian Colleges. Ac - ticeship system that lacked defined after considerable congressional de - cording to Pelish, this created tension standards or goals beyond the gener - bate, the final legislation in 1944 al - between accreditors and the govern - ation of financial gain,” according to lowed for-profit institutions to became ment that continues to this day: “In - Medicine.Net.com. Many medical eligible to participate fully in the vet - stitutional autonomy, on the one hand, schools closed or were reformed as a erans’ benefits. 44 and government demands for ac - result, and historians view the report as Veterans took advantage of the bill countability for effective use of tax - a watershed event for medical edu ca - in unprecedented numbers. To ensure payer funds, on the other, are com - tion. 42 It also led to calls for greater that the funds were spent on quality peting, if not wholly inconsistent, regulation and oversight of the entire programs without dictating education - concepts,” he wrote. 45 proprietary sector. 43 al content, the federal government In 1972, Congress reauthorized the

12 CQ Researcher CQ: What measures of outcomes national commission to decide on this? should accrediting bodies use to as - Nothing is perfect, but it would be a step sure quality, then? in the right direction. RV: Accreditors do look at dropout CQ: Given the differences in the stu - rates and how long it takes to grad - dent populations at each school, is it fair uate. Those are OK measures, but let to judge educational quality with tests me mention three or four more that I like this at graduation? r e

think are important. First, do the se - d RV: You do have to take into account d

niors who graduate know more than e the knowledge and abilities of students V

they did as freshmen? Second, are d coming in. You have to measure the r a

graduates succeeding in their post- h value added at the institution, so you c i

graduate life? Do they succeed in R might have to test students at the begin -

y

graduate school, do they succeed fi - s ning and end. And that’s no big deal. e t nancially? Third, are your graduates r We test them in the beginning anyway. u o

better critical thinkers than when they C Most have to take an SAT test. entered college? Prof. Richard Vedder, Director, Center for CQ: What are the chances that stan - CQ: Compared to measuring the College Affordability and Productivity. dardized tests in different disciplines to number of books in the library, mea - measure what graduates have learned suring such outcomes seems extraordinarily difficult. would actually be adopted? RV: There are tests out there. For instance, we give CPA [Cer - RV: It’s fiercely resisted by the universities. But I think there is tified Public Accountant] exams at the occupational level. Why growing pressure for something like this to happen. I wouldn’t rule can’t we systemize this? Why can’t the accrediting agencies get it out. I think in five years or so, it will be politically feasible. together as a group and insist on this [and] perhaps create a

Higher Education Act, which “solidi - dogged the sector.” Government in - panding Americans’ access to higher fied the federal government’s com - vestigations in the wake of the GI Bill education, the program had “failed, mitment to student choice in post - resulted in the closure of many fraud - particularly in the area of proprietary secondary education, with obvious ulent institutions in the 1950s, while schools, to insure that federal dollars benefits to the for-profit sector,” wrote large numbers of correspondence are providing quality, and not merely Kinser. 46 The act significantly increased schools closed in the ’60s and ’70s. quantity, in education.” the amount and types of student aid “Investigations of student loan abuse As a result, taxpayers suffer, and available, including Pell grants, and of the for-profit sector reached its students, “victimized by unscrupulous made several types of for-profit schools height in the late 1980s,” according profiteers and their fraudulent schools,” and their students eligible to receive to Kinser, “and again large numbers receive “neither the training nor the it. As a result, “mom-and-pop” schools of for-profit schools did not survive skills they hoped to acquire,” and, in - offering vocational training in fields the scrutiny.” 48 stead, are burdened with “debts they such as truck driving and cosmetol - Sen. Sam Nunn, D-Ga., chairman cannot repay.” The subcommittee ogy proliferated. 47 of the Senate Permanent Subcommit - blamed everyone involved in over - tee on Investigations, held a series of sight: the states, which license hearings beginning in 1989 that cul - schools, the private agencies that ac - Scandal minated in a 1991 report. The sub - credit them, and the Department of committee found that the federal guar - Education, which manages the student - he opening of federal aid to anteed student loan program was aid program. The subcommittee “T for-profit higher education was “plagued by fraud and abuse at every called for a comprehensive and in - not a smooth transition,” wrote Kinser, level” and had become “inefficient, in - tensive effort at reform. 49 One year and “scandal, fraud, and abuse effective, and far too costly.” While ex - later, Congress complied.

www.cqresearcher.com Jan. 7, 2011 13 CAREER COLLEGES

For-Profit Schools Seek Windfall From Military Benefits “Congress may have subjected veterans to the worst excesses of the for-profit industry.”

eterans and active-duty soldiers have been celebrating public or nonprofit programs, and a lack of needed services,” a bill passed by Congress in 2008 that provides mili - said the report, issued by the Health, Education, Labor and V tary personnel with expanded educational benefits, but Pensions Committee. 3 for-profit schools, known as career colleges, have been reap - Four of the five for-profit companies receiving the most post- ing some of the measure’s biggest rewards. 9/11 GI Bill funding, according to the committee report, have The post-9/11 GI Bill is aimed at giving those serving in loan repayment rates of only 31 to 37 percent. The same four have Iraq and Afghanistan the same leg up as previous generations at least one campus with a student default rate above 24 percent of military personnel. It makes almost all service members el - over three years. 4 igible to receive up to three years of benefits at an average of Critics of the industry also point out that course credits are $458 per credit hour and allows them to transfer unused ben - sometimes not transferable to traditional schools, and employ - efits to spouses and children. ers are sometimes skeptical about the value of online degrees. But in the year since payouts began in July 2009, career col - Service members and their educational benefits appeal to leges have grabbed an outsize share of the funds. Of the $1.75 bil - for-profit schools for several reasons. The funds are not loans lion in benefits paid, $640 million, or 36.5 percent, has gone to for- that have to be repaid, so they help improve the records of profit schools despite their enrolling only 23.3 percent of military for-profit schools worried about high student-loan default rates. beneficiaries and 11 percent of all higher education students. 1 In addition, the money can help for-profit schools escape a key The companies whose schools received the most money were regulation — the so-called “90/10” rule — that requires that no ITT Educational Services ($79 million), the Apollo Group ($76 mil - more than 90 percent of a school’s revenues come from federal lion) , Education Management Corp. ($60 million), Career Educa - financial aid authorized under Title IV of the Higher Education tion Corp. ($58 million), and DeVry Inc. ($48 million). 2 Act. Because the military educational benefits are not Title IV Now a Senate committee report issued in December has money, they are effectively not considered federal student aid. raised serious questions about the flow of money to for-profit Veterans interviewed by committee staff “tell compelling sto - schools. “Congress may have unintentionally subjected this new ries of being misled by recruiters,” the report said. One veter - generation of veterans to the worst excesses of the for-profit an enrolled in an associate degree program at a for-profit school industry: manipulative and misleading marketing campaigns, after being told he could finish in less than two years and then educational programs far more expensive than comparable transfer to a traditional college for a bachelor’s degree. But after

• Excluded from the student-aid mission of Career Schools and Colleges New Regulation programs schools with half or more of Technology succeeded NATTS; it of their curricula in correspondent was independent of any trade asso - n 1992, Congress reauthorized the courses; ciation activities. 53 I Higher Education Act, strengthen - • Excluded schools that had filed ing the Department of Education’s for bankruptcy; and oversight of the federal student-aid • Required accreditors of vocational Wall Street Era program. education institutions to create standards Amendments to the act: of student achievement as measured by he for-profit higher education sec - • Banned schools participating in program completion, job placement and T tor was “reborn” in the 1980s and the program from making incentive state licensure examination pass rates. 52 ’90s, according to Sarah Turner, a pro - payments, including commissions The impact was immediate. Ex - fessor of economics and education at and bonuses, to individuals based pelled from the federal student fi - the University of Virginia. During that on their success in enrolling stu - nancial aid programs, many for-profits time, a new breed of “corporate” for- dents or securing financial aid for were no longer viable businesses, lost profit institutions emerged, including them; 50 their accreditation and shut their doors. the University of Phoenix and ITT Tech, • Required that for-profit schools For example, the number of schools “operating with the institutional controls receive no more than 85 percent of accredited by the National Association of large corporations,” wrote Turner. 54 their revenue from federal student-aid of Trade and Technical Schools (NATTS) The development of the World Wide programs (in 1998, Congress raised the dropped from 1,257 in 1990 to 968 in Web for commercial purposes al - limit to 90 percent); 51 1993. That year, the Accrediting Com - lowed these universities and schools

14 CQ Researcher using $25,000 in GI Bill benefits supplemented with $22,000 in They are scrutinizing dropout rates and will soon demand that col - loans and his own money, he was told by the local community leges receiving such funds maintain minimum graduation rates. 9 college that it would not accept his academic credits . 5 Still, Sen. Thomas Carper, D-Del., has asked the Govern - But the Association of Private Sector Colleges and Universi - ment Accountability Office, Congress’ investigative agency, to ties, a trade group for for-profit schools, said the Senate com - examine the Defense Department’s ability to guard against waste mittee report is looking at the issue “from the wrong side of the of educational benefits and ensure that taxpayer money is buy - telescope.” According to the association’s president, Harris Miller, ing quality education for military personnel. 10 the ability of for-profit schools to expand capacity to take in members of the armed forces and its veterans is “a testament to — Barbara Mantel our sector’s dedication to educating those who have chosen ser - vice to our country. ” 6 1 “Benefiting Whom? For-Profit Education Companies and the Growth of The association offered its own anecdotes, including that of Military Educational Benefits,” U.S. Senate Health, Education, Labor and Pen - sions Committee, Dec. 8, 2010, p. 4, www.nacacnet.org/LegislativeAction/ Marine Corps veteran Will Sampson, a graduate of ECPI Col - LegislativeNews/Documents/HELPMilEdReport.PDF. lege of Technology and currently the chief information officer 2 Ibid. , pp. 19-20. of a bank. “Without the choice of a school with flexible hours, 3 Ibid. , p. 1. I would have missed out on a great education and on the op - 4 Ibid. , p. 2. portunities which led to my current career,” Sampson said. 7 5 Ibid. , p. 9. Robert Songer, a retired Marine colonel and lead education 6 “APSCU Criticizes HELP Committee Report on Military Students,” Associa - tion of Private Sector Colleges and Universities, Dec. 9, 2010, www.apscu adviser at Camp Lejeune in North Carolina, told The New York now.com/2010/12/apscu-criticizes-help-committee-report.html. Times that he is not opposed to for-profit schools but said that 7 Ibid. some of them hounded active-duty personnel and often enrolled 8 Eric Lipton, “Profits and Scrutiny for Colleges Courting Veterans,” The New Marines in classes of limited educational value. The soldiers “are York Times , Dec. 8, 2010, www.nytimes.com/2010/12/09/education/09colleges. html. very easy targets, especially because many of them have never 9 Ibid. 8 had anyone in their families go to college,” Songer said. 10 John Lauerman, “For-Profit Colleges Scam Military for $521 Million, Report The Department of Defense and the Department of Veterans Af - Says,” Bloomberg, Dec. 9, 2010, www.bloomberg.com/news/2010-12-09/for- fairs are tightening their oversight of military educational benefits. profit-colleges-scam-military-for-521-million-senate-com.

to expand into multi-state institutions under the Bush administration became as a result, “it became more difficult offering bachelor’s and graduate de - much friendlier for career colleges and for [the Department of] Education to grees increasingly online. For-profit universities. prove a school violated the incentive higher education moved from Main In November 2002, the Depart - compensation ban, and schools ulti - Street to Wall Street, wrote Kinser, al - ment of Education published regula - mately paid smaller penalties.” 58 though plenty of individually run op - tions that allowed 12 exceptions — In 2005, Congress repealed the “50 per - erations remain. 55 The Apollo Group, or safe harbors — to the statutory cent rule,” and schools no longer were University of Phoenix’s parent com - prohibition against incentive com - limited to offering half or fewer of pany, went public in 1994, its stock pensation. Perhaps the most impor - their courses online and having half trading on the NASDAQ exchange. tant exception was one allowing ad - or fewer of their students enrolled as DeVry Inc., the parent company of justments to employee compensation distance learners. As a result, the trend DeVry Institutes of Technology, went that are not based “solely” on the toward online education at for-profit public in 1991. number of students recruited, enrolled schools has accelerated. Enrollment at for-profit higher-learning or awarded financial aid. 57 In other According to a Senate committee institutions has grown steadily over the words, incentive payments could now report, out of the 14 publicly traded past two decades, from slightly more be paid based partially, even mostly, for-profit schools, four have more than 300,000 students in 1986 to about on enrollment figures or procurement than 98 percent of their students en - 2 million today, for about an 11 per - of financial aid. rolled as online learners, while three cent market share. 56 Some of the most In addition, according to the GAO, have more than 50 percent of their rapid growth has occurred since 2002, the Department of Education changed students in exclusively online curric - when the regulatory environment its enforcement policy in 2002, and, ula. Some for-profit companies have

www.cqresearcher.com Jan. 7, 2011 15 CAREER COLLEGES

grown their online will become chairman of businesses by pur - the House Committee on chasing “small region - Education and Labor this ally accredited bricks- month. 61 For now, how - and-mortar schools” ever, the GAO is sticking and transforming them by the report’s overall con - into “huge entities with clusions and its findings primarily virtual curric - of financial fraud at four ula, while also avoid - institutions and deceptive ing the time and cost or questionable recruiting of earning regional ac - practices at all 15 cam - creditation,” according puses it visited. to the report. 59 Not only have stock With the rapid growth prices slid, but several law in the for- profit industry firms have begun investi - and its growing share gating for-profit companies, of federal student aid, and several class-action the Obama administra - lawsuits have since been tion and Congress have filed in which the GAO re - once again begun to port is referenced. o scrutinize the sector. In n For instance, an investor a i l

2010, the Senate hear - g in Capella Education Co. u P

ings, the GAO under - has alleged that between l l i

cover investigation and B mid-February and mid - / e

new Department of Ed - g August 2010, Capella failed a m

ucation regulations, in - I to disclose that it engaged

y t

cluding elimination of the t in “improper and decep - e

12 safe harbors, have put G tive recruiting and finan - the proprietary higher President Obama announces his plan to spend $12 billion over cial aid lending practices education sector on the the next decade improving the nation’s burgeoning community and, due to the govern - colleges, during a visit to Macomb Community College in Warren, defensive. Enrollment of Mich., on July 14, 2009. Many high school guidance counselors ment’s scrutiny into the for- new students has shrunk, say community colleges provide comparable education at profit education sector, stock prices have fallen significantly lower cost than for-profit schools. the company would be and the industry is in unable to continue these the process of adjusting to a new reg - traded for-profit colleges declined practices in the future.” 62 Similar share - ulatory and political environment. 13.8 percent, representing a $4.3 bil - holder suits have been filed against lion loss in the value of the sector,” the Washington Post Co., owner of according to the Coalition for Educa - Kaplan, as well as against Corinthian tional Success. 60 Colleges, Education Management and Davis, the coalition spokesman and the Apollo Group, owner of the Uni - CURRENT a former aide to President Bill Clin - versity of Phoenix. ton, has called for the GAO to with - Shareholders in these suits in - SITUATION draw the report, which he calls “de - clude individuals — sometimes the fective and deceptive,” after the agency same individuals — as well as in - made 16 revisions in December, some stitutions. For instance, Great Britain’s Shareholder Lawsuits of which softened the appearance of Mineworkers’ Pension Scheme, the wrongdoing among for-profit admis - Amalgamated Bank and the Oregon nvestors reacted swiftly to the GAO’s sions officers. Public Employees Retirement Fund are I August report on its undercover in - And in late December, six House suing Apollo and were appointed the vestigation. Republicans asked the GAO to reex - lead plaintiffs in a consolidated class- “In the days following the report, amine the report. The group includes action lawsuit in November. 63 A motion the market capitalization of publicly U.S. Rep. John Kline, R-Minn., who Continued on p. 18

16 CQ Researcher At Issue:

Wouyes ld the gainful employment rule harm low-income students?

HARRY C. ALFORD MICHELLE ASHA COOPER , PH.D. CO-FOUNDER , P RESIDENT /CEO, PRESIDENT , I NSTITUTE FOR HIGHER NATIONAL BLACK CHAMBER OF EDUCATION POLICY COMMERCE WRITTEN FOR CQ RESEARCHER , JANUARY 2011 WRITTEN FOR CQ RESEARCHER , JANUARY 2011

t is no secret that the recession has been especially diffi - he Obama administration has proposed regulations that re - cult for black Americans. The latest figures from the U.S. quire career education programs to “prepare students for i Department of Labor show that while unemployment t gainful employment in a recognized occupation” or risk among whites is about 8.8 percent, that number is nearly double losing access to federal student aid. The regulations target pro - for blacks, hovering at around 15.8 percent. grams at for-profit institutions and vocational schools — one of The approach to black unemployment that could have the the fastest-growing sectors among higher-education institutions. most significant impact is getting a college degree. That appears In addition to increased enrollment growth, students at for-profit to be the ticket to greater quality of life and economic success. institutions, in particular, represent 26 percent of student loan A degree can be the great equalizer. volume and 43 percent of all loan defaulters. Unfortunately, the Department of Education’s proposed gain - From a student perspective, these regulations will likely be ful employment rule will disproportionately harm low-income beneficial, as they would provide information that would en - and minority populations by discriminating against students able them to be more informed consumers. Given the cost of who must borrow tuition to attend career colleges. Without an education, students should have an understanding of the financial aid, access to higher education will be limited for educational quality, career outcomes and debt levels associated thousands ofy such studentse. s with programs nof study at particuo lar institutions. Such informa - The numbers tell the tale. Over 50 percent of students at - tion could balance or even counter aggressive or misleading tending career-oriented colleges are minority students, com - recruiting practices employed by some institutions. pared to approximately 34 percent at public four-year institu - Although the gainful employment provisions seem quite ap - tions and 32 percent at private, not-for-profit schools. propriate and logical, they have received sharp criticism. Op - Because of the income gap, minority students need greater ponents have argued that they will deny students access to financial aid than their white counterparts. This isn’t a give- higher education because they unfairly regulate a sector of away. This is the most basic investment in our most important higher education that enrolls large proportions of students natural resource: our young students. from low-income and minority backgrounds. Given the attrac - Recent news stories and hearings on Capitol Hill have unfair - tiveness of these programs to these communities, we need to ly criticized career colleges. But with community colleges under - be even more vigilant in our efforts to ensure that these stu - funded and overflowing, career colleges are providing a unique dents make informed decisions about their education, assume and important opportunity for minority students who may not reasonable levels of student debt and ultimately graduate with have other options. To make matters worse, the data being re - degrees and credentials that have real labor market value. lied on by the opposition aren’t fully accurate. The federal Gov - On Feb. 24, 2009, President Obama declared that “by 2020 ernment Accountability Office was recently forced to correct a America will once again have the highest proportion of col - study prepared for an August Senate hearing that contained in - lege graduates in the world.” To reach this goal, a number of correct and biased information on for-profit recruiting practices. reforms will be needed, and the gainful employment provision Career colleges offer everything from certificates of comple - is simply an attempt to ensure that higher education remains tion to Ph.D. degrees that are accredited by the same agencies accountable, affordable and effective in serving all students, as not-for-profit colleges and universities. They represent a so - particularly those who are most vulnerable. lution to our education challenges, not the problem. As we think about these provisions and others to come, President Obama has said he wants the United States to we must place students and their interests at the center. We have the highest percentage of college graduates in the world must recognize that, for students interested in specific, career- by 2020. This is an admirable goal, and we share his vision. oriented fields, it is unethical to encourage and persuade them But taking away financial aid and the opportunity to train for to enroll, matriculate and pay for an education of limited a secure future is not the right strategy. value — this is true for career-education programs in both the Private-sector schools are helping to put people to work — for-profit and nonprofit sectors. By centralizing the needs of and their efforts should be recognized by allowing students at students — instead of institutions — we will come much closer these sno chools to receive the financial aid they so rightly deserve. to an ideal higher-education system, one that achieves quality and increases degree completion. www.cqresearcher.com Jan. 7, 2011 17 CAREER COLLEGES

Continued from p. 16 “I think there is so much potential Everest Institute, Kaplan Inc., Med - filed by Oregon’s attorney general for conflict when you mix profit and Vance Institute, Keiser University, claims that Apollo “concocted a scheme education,” says Estes. “Profit is win - Sanford Brown College and Concorde to fraudulently inflate revenues and ning over education as a priority.” Career College. boost profitability by exploiting well- In mid-December, the Colorado According to Shannon Knowles, a intentioned and often lower-income Commission of Higher Education spokesperson for the attorney general, students.” 64 voted 7-3 to place Westwood Col - the most complaints are against Kaplan, “Companies that cook their books lege’s Colorado campuses on pro - at 52; Everest, 56; and University of will have to answer to Oregon in court,” bation with the state’s regulatory Phoenix, 20. “To date, subpoenas have said Attorney General John Kroger. 65 agency, and Texas and Wisconsin of - been served and the investigations are “Apollo Group takes its disclosure ficials have ordered Westwood to ongoing,” says Knowles. obligations very seriously and intends close its online operations in their Apollo Group, the owner of the to defend this lawsuit vigorously,” ac - states. Texas regulators say they in - University of Phoenix, has said in re - cording to the company. tend to close the school’s ground sponse to the Florida investigation that campuses as well. 66 it supports efforts to enhance ac - Westwood has sued Estes’ law countability within higher education Student, Whistleblower firm, calling it “predatory” and alleg - and will continue to be a leader in Suits ing that it has defamed the school improving student outcomes. Kaplan through a website and derogatory says it intends to cooperate fully with ormer students and employees Twitter messages. the Florida inquiry as does Corinthi - F have also filed complaints, in Cal - Kaplan University is facing a law - an Colleges, the parent of Everest In - ifornia, Colorado, Texas, Arkansas, Wis - suit from three former employees — stitute. “We don’t have anything to consin and Utah. Westwood College, a former course developer, former hide,” said Kent Jenkins, a Corinthian which has a total of roughly 40,000 professor and former dean. They al - spokesman. “Anytime someone wants graduates and current students taking lege that Kaplan ran high-pressure to come and look at our records, we’ll courses online or at campuses in six “boiler room” call centers to recruit open them up.” 67 states, is facing four class-action law - students, encouraged students to take Kentucky Attorney General Jack suits, all brought by Jillian Estes. out more debt than was needed to Conway has also opened an investi - “More than 1,000 students have cover college costs, and pressured gation. Conway issued subpoenas to contacted us concerning problems professors to inflate grades or risk los - six unidentified for-profit colleges, seek - with Westwood,” says Estes, “and that ing their jobs. ing information about student-loan de - number is growing every day.” The Kaplan denies the allegations “in fault rates, advertising claims, recruit - most common complaint, she says, is their entirety,” according to a spokesper - ment practices and claims about job the inability to transfer credits. “Stu - son, “and we are awaiting a decision placement and transferability of cred - dents tell us that the school has told on our motion to dismiss it.” Kaplan its. “The information we’ve obtained them that they can transfer anywhere calls the three former disgruntled em - so far about the business practices em - with these credits, but when they try ployees “serial plaintiffs” whose alle - ployed by some of these proprietary to use their credits, they realize that gations have been dismissed in court colleges is troubling,” Conway said in isn’t the case.” in the past. a statement. 68 Westwood is accredited by two na - tional bodies, although one, the Ac - crediting Commission of Career Schools State Investigations The Next Congress and Colleges, placed Westwood’s Den - ver North campus on probation last lorida Attorney General Bill Mc - or-profit schools are hoping to get August. Many regionally accredited F Collum began an investigation last F regulatory relief from the incoming schools will not accept credits from fall into eight for-profit schools for Congress, including the new Republican - schools that are nationally accredited. possible misrepresentation about fi - dominated House of Representatives. Rep. The next most common complaints, nancial aid, graduation rates and job Kline has criticized the Education De - says Estes, are misrepresentation of job prospects and for alleged unfair or de - partment’s proposed gainful-employment prospects and potential salaries and ceptive recruitment and enrollment rule that could take effect in July 2012, misinformation about the cost of edu - practices. The schools include Univer - saying it hinders an industry that is cation programs. sity of Phoenix, Argosy University, working well.

18 CQ Researcher “At the very least, you need to push 2008 and 18 percent in 2009, student tation for prospective students with this thing back,” Rep. Kline said in enrollment is expected to increase by fewer than 24 credits in an effort to December. The rule, he said, has been a more modest 8 percent annually attract students who will complete its getting “an enormous amount of push - over the next several years. 72 programs and repay their loans. back and getting it in a bipartisan To grow, institutions need to at - Kinser says it is possible that in way.” Kline said at least 80 members tract more new students than are leav - this new environment, the industry of Congress, including Democratic ing through graduating or dropping may consolidate as larger companies Reps. Alcee Hastings of Florida and out. But Corinthian Colleges, Strayer better able to adjust to the new rules Donald Payne and Robert Andrews, Education, DeVry and Capella Edu - take over smaller, less healthy ones. both of New Jersey, have voiced their cation are all expecting the number Sokol predicts that some publicly trad - opposition. 69 of new enrollees to shrink in 2010. ed companies may go private to re - But some analysts say the chances By far the largest decline is expect - duce scrutiny; a few for-profits may are slim that Kline could persuade the ed at the biggest for-profit institution. even convert to not-for-profit status; Education Department to water down The Apollo Group expects new en - and schools will continue to move its regulation. And the likelihood that rollment to have dropped 40 percent away from brick-and-mortar campus - congressional supporters could succeed in the quarter just ended. 73 es to less costly and more flexible on - in restricting funds for enforcing the New federal regulations that no line instruction. 74 rule or in passing more industry-friendly longer allow colleges to base a por - gainful employment legislation is re - tion of an admissions officer’s com - mote, according to The Chronicle of pensation on recruitment won’t go into Higher Education , “given opposition effect until July, but schools have al - Notes from Senate Democrats and the likeli - ready adapted. “Many institutions are 1 hood of a presidential veto.” 70 now changing their compensation plans John Lauerman, “For-Profit Colleges Singled At the same time, a Republican House for the admissions staff and no longer Out Unfairly, Republicans Say,” Bloomberg, Sept. 30, 2010, www.businessweek.com/news/ may make it more difficult for Sen. are tying bonuses or additional income 2010-09-30/for-profit-colleges-singled-out- Harkin to push through legislation, as to the number of students coming in unfairly-republicans-say.html . he has promised to do, to force the door,” says Kinser of the Univer - 2 “Senator Enzi: Narrow Focus on For-Profit changes in for-profit higher education, sity at Albany. Hearings Will Not Solve Problems Facing such as increasing accountability for ac - Less certain is the impact of the Today’s Higher Ed Students,” press release, creditors or limiting the amount of fed - proposed gainful employment rule, Sept. 30, 2010, http://help.senate.gov/newsroom/ eral student-aid for-profits spend on ad - which would bar from federal student- press/release/?id=12df9083-663c-44bb-a79f-06 vertising. Harkin might not get support aid programs those career schools that b79eceee85 . from fellow Democrats either. Many graduate students with high debt rel - 3 Lauren Smith, “The Bitter Battle Over For- House Democrats, according to The ative to income and whose former stu - Profit Colleges,” CQ Weekly , Nov. 1, 2010. 4 Chronicle , “have ties to for-profit col - dents have low student-loan repayment Tamar Lewin, “Rifts Show at Hearing on For- Profit Colleges,” The New York Times , Oct. 1, leges in their districts.” 71 rates. While many schools are waiting 2010, Section A, p. 15. to see what the rule looks like upon 5 “Statement of Chairman Tom Harkin (D-IA) its scheduled release early this year, At the HELP Committee Hearing: The Federal some, like Apollo, have already begun Investment in For-Profit Education: Are Stu - OUTLOOK to adjust. dents Succeeding?” Sept. 30, 2010, http://harkin. “Apollo made a decision in 2005 to senate.gov/press/release.cfm?i=328052 . focus on lower-quality students, stu - 6 “Emerging Risk?: An Overview of Growth, dents who didn’t necessarily have many Spending, Student Debt and Unanswered End of an Era? years of experience in higher educa - Questions in For-Profit Higher Education,” tion,” says Ariel Sokol, an analyst at Health, Education, Labor and Pensions Com - s for-profit colleges go through a UBS Securities, “and as a result, the mittee, U.S. Senate, June 24, 2010, p. 2, http:// harkin.senate.gov/documents/pdf/4c23515814 period of abrupt change wrought quality of the student body was dete - A dca.pdf . by new federal regulations, state scruti - riorating by certain metrics, like the 7 James Samford and Ashwin Shirvaikar, ny, lawsuits and negative publicity from default rate on student loans.” Faced “Educational Services Industry Model Update: headline-generating Senate hearings, with these statistics and the potential Online Penetration Accelerates as Total En - the industry’s recent rapid expansion for stricter regulation, Apollo introduced rollment Slows Down,” Citi Equities , Nov. 22, is ending. After growing 24 percent in in November a free three-week orien - 2010, pp. 4-5.

www.cqresearcher.com Jan. 7, 2011 19 CAREER COLLEGES

8 “Emerging Risk?: An Overview of Growth, fore the Committee on Health, Education, The Education Trust, Nov. 23, 2010, p. 3, Spending, Student Debt and Unanswered Labor, and Pensions, U.S. Senate,” June 24, www.edtrust.org/dc/Subprime . Questions in For-Profit Higher Education,” op. 2010, p. 8, www2.ed.gov/about/offices/list/oig/ 27 “Department of Education Established New cit. , p. 4. auditrpts/stmt06242010.pdf . Student Aid Rules to Protect Borrowers and 9 “The Return on the Federal Investment in 16 “For-profit Colleges: Undercover Testing Finds Taxpayers,” Department of Education, Oct. 28, For-Profit Education: Debt Without a Diploma,” Colleges Encouraged Fraud and Engaged in 2010, www.ed.gov/news/press-releases/depart Health, Education, Labor and Pensions Com - Deceptive and Questionable Marketing Practices,” ment-education-establishes-new-student-aid- mittee, U.S. Senate, Sept. 30, 2010, p. 6, http:// GAO, Aug. 4, 2010, www.gao.gov/new.items/ rules-protect-borrowers-and-tax . help.senate.gov/imo/media/doc/Education%20 d10948t.pdf . 28 Lanny Davis, “Time for a Re-Do on ‘Gainful Report.pdf . 17 John Lauerman, “For-Proft Colleges Misled Employment,’ ” The Huffington Post , Nov. 18, 10 Andy Rosen, “For-Profit Colleges,” letter to Students, Witnesses Say,” Bloomberg, Aug 4, 2010, www.huffingtonpost.com/lanny-davis/time- the editor, The New York Times , Nov. 16, 2010, 2010, www.bloomberg.com/news/2010-08- for-a-redo-on-gainfu_b_785121.html . www.nytimes.com/2010/11/17/opinion/l17kap 04/for-profit-colleges-boiler-room-recruiting- 29 “Frequently Asked Questions, Program In - lan.html . described-at-senate-hearing.html . tegrity: Gainful Employment Notice of Pro - 11 Daniel L. Bennett, et al. , “For-Profit Higher 18 Department of Education, www2.ed.gov/ posed Rulemaking,” Department of Education, Education: Growth, Innovation and Regulation,” policy/highered/guid/secletter/100817.html . www2.ed.gov/policy/highered/reg/hearulemak July 2010, pp. 10,12, www.centerforcollege 19 “About University of Phoenix,” www. ing/2009/ge-faq.pdf . affordability.org/uploads/ForProfit_HigherEd.pdf . phoenix.edu/about_us/about_university_of_ 30 Charles River Associates, letter to Tony 12 Tamar Lewin, “With Possible Cuts in Feder - phoenix.html . Miller, Deputy Education Secretary, Nov. 22, al Aid on the Horizon, For-Profit Colleges Are 20 Kevin Kinser, From Main Street to Wall 2010, p. 1. in a Fight,” The New York Times , June 6, 2010, Street: The Transformation of For-Profit High - 31 “Frequently Asked Questions,” op. cit. Section A, p. 21, www.nytimes.com/2010/06/06/ er Education (2006), p. 95. 32 Jonathan Guryan and Mathew Thompson, education/06gain.html?_r=1&scp=1&sq=With+Po 21 Statement of Kathleen S. Tighe, op. cit. , p. 4. “The Availability of Alternative Programs for ssible+Cuts+in+Federal+Aid+on+the+Horizon& 22 Pauline Abernathy and Debbie Cochrane, Students Displaced by Gainful Employment: st=nyt . “Higher Education Reform Forum — American Testing Assumptions Crucial to Estimates of the 13 “Department of Education Establishes Enterprise Institute, Oct. 5-6, 2010,” The Insti - Impact of Gainful Employment on Students,” New Student Aid Rules to Protect Taxpay - tute for College Access & Success, Slide 14. Charles River Associates, Nov. 22, 2010, p. 3. ers,” U.S. Dept. of Education, Oct. 28, 2010, 23 Mary Beth Marklein, “As for-profit colleges 33 Erin Dillion and Robin V. Smiles, “Lower - www.ed.gov/news/press-releases/department- rise, students question value,” USA Today , ing Student Loan Default Rates: What One education-establishes-new-student-aid-rules- Sept. 29, 2010, p. 1A, www.usatoday.com/print Consortium of Historically Black institutions protect-borrowers-and-tax. . edition/news/20100929/1aforprofit29_cv.art.htm . Did to Succeed,” Feb. 2010, Education Sector , 14 Peter S. Goodman, “In Hard Times, Lured 24 Ibid. p. 5, www.educationsector.org/sites/default/ Into Trade School and Debt,” The New York 25 Alexandria Walton Radford, et al. , “Persis - files/publications/Default_Rates_HBCU.pdf. Times , March 13, 2010, http://community.ny tence and Attainment of 2003-04 Beginning 34 Kinser, op. cit. , p. 13. times.com/comments/www.nytimes.com/2010 Postsecondary Students: After 6 Years,” Insti - 35 Bennett, et al. , op. cit. , p. 9. /03/14/business/14schools.html?scp=2&sq=In% tute of Education Sciences, U.S. Department 36 Ibid. 20Hard%20Times,%20Lured%20Into%20Trade% of Education, December 2010, p. 7, http://nces. 37 David W. Breneman, et al. , Earnings from 20School%20and%20Debt&st=cse . ed.gov/pubsearch/pubsinfo.asp?pubid=2011151 . Learning: The Rise of For-Profit Universities 15 “Statement of Kathleen S. Tighe, Inspector 26 “Subprime Opportunity: The Unfulfilled (2006), p. 5. General, U.S. Department of Education, Be - Promise of For-Profit Colleges and Universities,” 38 Kinser, op. cit. , p. 17. 39 “Timeline of Events — 1841,” Imagine Amer - ica Foundation, www.imagine-america.org/ About the Author includes/1841.htm . 40 Kinser, op. cit. , p. 18. Barbara Mantel is a freelance writer in New York City 41 Breneman, et al. , op. cit. , p. 51. whose work has appeared in The New York Times , the Jour - 42 “Flexner Report . . . Birth of Modern Med - nal of Child and Adolescent Psychopharmacology and Mamm ical Education,” MedicineNet.com , www.medic Magazine. She is a former correspondent and senior pro - inenet.com/script/main/art.asp?articlekey=8795 . ducer for National Public Radio and has won several jour - 43 Breneman, et al. , op. cit. , p. 5. nalism awards, including the National Press Club’s Best Con - 44 Kinser, op. cit. , p. 20. 45 sumer Journalism Award and the Front Page Award from Guilbert C. Hentschke, For-Profit Colleges the Newswomen’s Club of New York for her April 18, 2008, and Universities: Their Markets, Regulation, Performance, and Place in Higher Education CQ Researcher report “Public Defenders.” She holds a B.A. (2010), pp. 92-93. in history and economics from the University of Virginia and 46 Kinser, op. cit. , p. 21. an M.A. in economics from Northwestern University. 47 Breneman, et al. , op. cit. , p. 51. 48 Kinser, op. cit. , p. 21.

20 CQ Researcher 49 “Abuses in Federal Student Aid Programs,” Permanent Subcommittee on Investigations, U.S. Senate, 1991, pp. 33-34, www.eric.ed.gov: FOR MORE INFORMATION 80/PDFS/ED332631.pdf . 50 Apollo Group , 4025 S. Riverpoint Parkway, Phoenix, AZ 85040 ; (480) 966-5394 ; “Higher Education: Information on Incen - www.apollogrp.edu . Through its subsidiaries, the largest for-profit provider of tive Compensation Violations,” Goverment Ac - higher education services, targeting working adults. countability Office, Feb. 23, 2010, p. 1, www.gao. gov/new.items/d10370r.pdf . Association of Private Sector Colleges and Universities , 1101 Connecticut 51 “The Return on the Federal Investment in Ave., NW, Suite 900, Washington, DC 20036 ; (202) 336-6700 ; www.career.org . A For-Profit Education: Debt Without a Diploma,” membership organization of accredited, private, postsecondary schools, institutes, op. cit. , p. 9. colleges and universities providing career-specific educational programs. 52 Hentschke, op. cit. , p. 115. 53 Ibid. , pp. 115-116. Coalition for Educational Success , (240) 223-1962 ; www.ed-success.org . An ad - 54 Breneman, et al. , op. cit. , p. 51. vocacy group for many of the leading career colleges, serving more than 350,000 55 Kinser, op. cit. , p. 5. students at 478 campuses. 56 Bennett, et al. , op. cit ., p. 10. 57 GAO, op. cit. , p. 3. Council for Opportunity in Education , 1025 Vermont Ave., NW, Suite 900, 58 “Higher Education: Stronger Federal Over - Washington, DC, 20005 ; (202) 347-7430 ; www.coenet.us . A nonprofit dedicated to sight Needed to Enforce Ban on Incentive furthering the expansion of college opportunities for low-income, first-generation students and students with disabilities. Payments to School Recruiters,” GAO, Oct. 7, 2010, www.gao.gov/products/GAO-11-10 . Education Trust , 1250 H St., NW, Suite 700, Washington, DC 20005 ; (202) 293- 59 “Emerging Risk?: An Overview of Growth, 1217 ; www.edtrust.org . A nonprofit promoting high academic achievement for all Spending, Student Debt and Unanswered students — especially low-income and minority — at all levels. Questions in For-Profit Higher Education,” op. cit. , p. 2. Institute for Access and Success , 405 14th St., 11th Floor, Oakland, CA 94612 ; 60 “Significantly Revised Report On For-Profit (510) 318-7900 ; www.ticas.org . A nonprofit working to make higher education more Colleges Seriously Undermines Credibility Of available and affordable for people of all backgrounds. GAO Findings,” press release, Coalition For Ed - ucational Success, Dec. 8, 2010, http://ed-suc National Association for College Admission Counseling , 1050 North Highland cess.org/press-release-report-on-for-profit-colleg St., Suite 400, Arlington, VA, 22201 ; (703) 836-2222 ; www.nacacnet.org . A member - es-undermines-credibility-of-gao-findings.php . ship organization of college counseling and enrollment professionals from around 61 John Hechinger, “Lawmakers Call for In - the world. quiry on GAO Report on For-Profit Colleges,” Bloomberg, Dec. 22, 2010, www.bloomberg. Office of Postsecondary Education , Department of Education, 1990 K St., NW, com/news/2010-12-22/for-profit-colleges-report - Washington, DC 20006 ; (202) 401-2000 ; www2.ed.gov/about/offices/list/ope . For - by-ga0-should-be-reexamined-six-lawmakers- mulates federal postsecondary education policy and administers programs de - say.html . signed to increase access to quality postsecondary education. 62 “Robbins Geller Rudman & Dowd LLP Files Class Action Suit against Capella Education Protect Students and Taxpayers , http://protectstudentsandtaxpayers.org . A web - site created by a coalition of nonprofits promoting strong and effective student-aid Company,” Business Wire , Nov. 5, 2010. regulations. www.marketwatch.com/story/robbins-geller- rudman-dowd-llp-files-class-action-suit-against- capella-education-company-2010-11-05 . Oct. 18, 2010, www.doj.state.or.us/releases/2010/ sidering-measures-to-block-for-profit-college- 63 Judge G. Murray Snow, “Order Consolidat - rel101810.shtml . rule.html . ing Cases, Appointing Lead Plaintiff, and Ap - 66 “Westwood College on Probation by Col - 70 “Kelly Field, “For-Profit Colleges Hope for proving Lead Plaintiffs’ Selection of Counsel,” orado Commission,” Dec. 15, 2010, www.west Republican Gains,” The Chronicle of Higher In the U.S. District Court for the District of woodsuit.com . Education , Oct. 31, 2010, http://chronicle.com/ Arizona, Nov. 23, 2010. 67 Matt Coleman, “8 schools face probe on fraud,” article/For-Profit-Colleges-Hope-for/125193 /. 64 Brian Burnsed, “Online Universities: Gov - Florida Times-Union , Nov. 15, 2010, p. B-1. 71 Ibid. ernment Cracks Down On For-Profit Schools, 68 Sophia Pearson, “Kentucky Probes Prac - 72 Samford and Shirvaikar, op. cit. , p. 2. USNEWS.com, Nov. 2, 2010, www.usnews. tices at Six For-Profit Colleges,” Bloomberg, 73 Goldie Blumenstyk, “As For-Profit Colleges’ com/education/online-education/articles/2010/ Dec. 16, 2010, www.bloomberg.com/apps/ Enrollment Growth Slows, Analysts See Signs 11/02/online-universities-government-cracks- news?pid=newsarchive&sid=aoXuR8XqgpzQ . of an Industry Reset,” The Chronicle of Higher down-on-for-profit-schools.html . 69 John Lauerman, “Representative Kline Eyes Education , Nov. 11, 2010, http://chronicle. com/ 65 “Oregon Sues to Recover $10 Million Con - Way to Stop Rule Restricting For-Profit Col - article/For-Profit-Colleges-May-Be-at/125379 /. nected to MIsleading Filings By University of leges,” Bloomberg, Dec. 17, 2010, www. 74 Ariel Sokol, “Postsecondary Education Ini - Phoenix,” Oregon Department of Justice, bloomberg.com/news/2010-12-16/kline-con tiation,” UBS Investment Research, pp. 20-21.

www.cqresearcher.com Jan. 7, 2011 21 Bibliography Selected Sources

Books Reports and Studies

Breneman , David W. , Brian Pusser and Sarah E. Turner , “Emerging Risk?: An Overview of Growth, Spending, eds., Earnings from Learning: The Rise of For-Profit Student Debt and Unanswered Questions in For-Profit Universities , State University of New York Press , 2006 . Higher Education,” Health, Education, Labor and Pen - Contributors, including professors of education at the Uni - sions Committee, U.S. Senate , June 24, 2010 , http://harkin. versity of Virginia, dissect the mixing of profit and acade - senate.gov/documents/pdf/4c23515814dca.pdf . mia and the appeal of for-profit colleges to investors. The report examines the scope of federal investment in for-profit schools and how they use those taxpayer dollars. Hentschke , Guilbert C. , Vincent M. Lechuga and William G. Tierney , eds., For-Profit Colleges and Universities: “For-Profit Colleges: Undercover Testing Finds Colleges Their Markets, Regulation, Performance, and Place in Encouraged Fraud and Engaged in Deceptive and Ques - Higher Education , Stylus Publishing , 2010 . tionable Marketing Practices,” U.S. Government Ac - Contributors, including scholars and for-profit executives, countability Office , Aug. 4, 2010 , www.gao.gov/products/ review the history, business strategies and management prac - GAO-10-948T . tices of for-profit higher education. Undercover tests at 15 for-profit colleges found fraud at four colleges and deceptive practices at all 15. Kinser , Kevin , From Main Street to Wall Street: The Transformation of For-Profit Higher Education , Wiley “The Return on the Federal Investment in For-Profit Periodicals , 2006 . Education: Debt Without a Diploma,” Health, Education, A professor at the University at Albany examines the history Labor and Pensions Committee, U.S. Senate , Sept. 30, of for-profit higher education and its current incarnation. 2010 , http://help.senate.gov/imo/media/doc/Education%20 Report.pdf . Articles The report describes high withdrawal rates, aggressive re - cruitment, high student-debt levels and record profits at for- Goodman , Peter S. , “In Hard Times, Lured Into Trade profit colleges. School and Debt,” The New York Times , March 13, 2010 , http://community.nytimes.com/comments/www.nytimes . Bennett , Daniel L. , Adam R. Lucchesi and Richard K. Enrollment at trade schools grows as unemployment per - Vedder , “For-Profit Higher Education: Growth, Innova - sists, but critics say students are saddled with high debt and tion and Regulation,” Center for College Affordability dubious job prospects. and Productivity , July 2010 , www.centerforcollegeafforda bility.org/uploads/ForProfit_HigherEd.pdf . Lauerman , John , “For-Profit Colleges Singled Out Un - The authors provide an overview of the for-profit sector, fairly, Republicans Say,” Bloomberg, Sept. 30, 2010 , www. examine its economics, discuss its differences from traditional businessweek.com/news/2010-09-30/for-profit-colleges- schools and assess the regulatory environment. singled-out-unfairly-republicans-say.html . Republican lawmakers accuse Democratic Sen. Tom Harkin Guryan , Jonathan , and Matthew Thompson , “Comment of Iowa of unfairly singling out for-profit colleges for scrutiny. on the proposed rule regarding Gainful Employment described in the NPRM released by the Department of Lewin , Tamar , “Scrutiny Takes Toll on For-Profit College Education on July 26, 2010,” Charles River Associates , Company,” The New York Times , Nov. 9, 2010 , www.ny Sept. 9, 2010 , http://higher-ed-data.com/assets/cra.pdf . times.com/2010/11/10/education/10kaplan.html?scp=1& The authors offer a critical assessment of the government’s sq=Scrutiny%20Takes%20Toll%20on%20For-profit%20Col proposed gainful employment rule. lege&st=cse . Kaplan, a for-profit education company owned by The Radford , Alexandria Walton , et al. , “Persistence and At - Washington Post , faces whistleblower lawsuits and an investi - tainment of 2003-04 Beginning Postsecondary Students: gation by the Florida attorney general. After 6 Years,” Institute of Education Sciences, U.S. De - partment of Education , December 2010 , http://nces.ed. Smith , Lauren , “The Bitter Battle Over For-Profit Colleges,” gov/pubsearch/pubsinfo.asp?pubid=2011151 . CQ Weekly , Nov. 1, 2010 . This report examines the rates at which students complet - Career colleges lobby against a proposed government rule ed degrees or certificates at different kinds of postsecondary that would reduce the number of institutions participating in institutions, including transfer and part-time students. federal student-aid programs.

22 CQ Researcher The Next Step: Additional Articles from Current Periodicals

Debt Marklein , Mary Beth , “Lawsuits Target For-Profit Colleges,” USA Today , Sept. 27, 2010 , p. 1A . Gilbertson , Dawn , “3 Arizona For-Profit Schools Fare Class-action lawsuits against for-profit colleges have been Well,” Arizona Republic , Aug. 17, 2010 , p. B6 . filed in Arkansas, California, Colorado and Utah alleging lies Three Arizona for-profit colleges have a 45-percent loan and misrepresentations. repayment rate among students, making them likely eligible for federal financial aid. Wiese , Kelly , “Defense Wins in Case Over Value of Tech Education,” Missouri Lawyers Media , May 31, 2010 . Korry , Elaine , and Liz Willen , “Colleges For Profit Under Former students of Sanford Brown College in North Kansas Scrutiny,” Fort Wayne (Indiana) Journal Gazette , June City have won their case against the school over claims of 21, 2010 , p. 4C . being misled about how much they could earn once trained. For-profit schools might be offering an alternative to tra - ditional colleges, but the choice often comes with high levels Legislation of student debt. Conda , Cesar , “New Federal Loan Regulations Could Shelly , Barbara , “The High Cost of Going Off to Career Threaten For-Profit Colleges,” The Washington Times , College,” Kansas City Star , Aug. 13, 2010 , p. A16 . Aug. 26, 2010 , p. B4 . More than 20 percent of student-loan borrowers that attend The Department of Education is considering tracking the po - career colleges go into default within three years of leaving tential salaries of for-profit college students in order to determine their programs. their likelihood of paying back government-sponsored loans.

Job Prospects Lewin , Tamar , “For-Profit Colleges Step Up Lobbying Against New Rules,” The New York Times , Sept. 8, 2010 , “Career Opportunities Abound in HVACR and Appliance p. A16 . Repair,” Boston Herald , Sept. 14, 2010 , p. K5 . For-profit colleges stepped up their lobbying efforts against pro - Many employers are seeking employees with a technical posed Education Department regulations that would cut off fi - education in appliance repair, according to the Department nancial aid to programs whose students take on too much debt. of Labor. Steffen , Jordan , “Colleges Run for Profit Face New Regu - Burnett , George , “Career Colleges Work As Stepping lations,” Los Angeles Times , Oct. 29, 2010 , p. A8 . Stones,” Denver Post , Jan. 24, 2010 , p. D4 . The Obama administration has proposed new regulations Westwood College makes no job guarantees to its students, that would prevent for-profit colleges from engaging in de - but over the past year 76 percent of graduates have landed ceptive enrollment tactics. jobs in their field of study after graduating. CITING CQ RESEARCHER Garrett , Joan , “For-Profit Colleges Lure Adults,” Chattanooga Sample formats for citing these reports in a bibliography (Tennessee) Times Free Press , April 19, 2010 , p. T1 . More and more adults are attending career colleges and include the ones listed below. Preferred styles and formats technical institutions in order to better their job prospects. vary, so please check with your instructor or professor. Legal Cases MLA STYLE Jost, Kenneth. “Rethinking the Death Penalty.” CQ Researcher “Suit Against Computer Trade School Is Settled,” Lewiston 16 Nov. 2001: 945-68. (Idaho) Morning Tribune , Dec. 22, 2009 . A judge has signed off on a settlement in which former APA S TYLE students sued a computer trade school over alleged unfair Jost, K. (2001, November 16). Rethinking the death penalty. business practices. CQ Researcher, 11 , 945-968. Danielson , Richard , “3 More Colleges in State Inquiry,” St. Petersburg Times , Nov. 28, 2010 , p. 1B . CHICAGO STYLE The Florida attorney general’s office is investigating three Jost, Kenneth. “Rethinking the Death Penalty.” CQ Researcher , for-profit colleges over allegations of misrepresentations re - November 16, 2001, 945-968. garding financial aid as well as enrollment.

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