BMANE.FROSH WlLUAM D. GRUHN Attorney General Chief Consumer Protection Division ELIZABETHF. HARRIS ChiefDeputy Attorney General CAROLYNQUATTROCKI DeputyAttorney General Writer's Direct Dial No. STATE OF MARYLAND OFFICEOF THE ATTORNEY GENERAL CONSUMER PROTECTION DIVISION (410) 576-6585 February 18, 2020 TO: The Honorable Maggie Mclntosh, Chair Appropriations Committee FROM: Christopher J. Madaio, Assistant Attorney General - Consumer Protection Division RE: HouseBill 470- For-ProfitInstitutions ofHigher Education and Private Career Schools - lastrucdonal Speuding- Requirements - FAVORABLE The Consumer Protection Division of the Office of the Attorney General supports House Bill 470, sponsored by Delegates Hettleman, Acevero, Bridges, Crosby, D.M. Davis, Forbes, J. Lewis, Lopez, Mclntosh, Metzgar, Solomon, and Valentino-Smith, because it protectsMaryland students at for-profit institutions of higher education andprivate career schools by requiring that those schools spend at least 50% oftuition moneythat they collect onteaching students, or maketheir tuition less expensiveto reflect the amount the school is actually spending on instruction. One of the reasons that the unfair and deceptive recruitanent conduct discussedbelow occurs so often in the for-profit college industrybut not in public andnon-profit schools is becausethe graduatesof many (but not all) for-profit schools have dif&culty fmding jobs and have low earnings compared to graduatesof similar programs at other schools.' Attachedis a chartcomparing the earningsof graduates at some for-profit institutions currently operating in Maryland with the earnings of graduates at similar programsoffered at Marylandcommunity colleges. Duringthe ObamaAdministration, the Departmentof Educationmylemented the Gainful Employment Rule, which reqiured for-profit schools to provethat their programs were of sufiEicient quality to allow graduates to earn enough money to pay back the student loan debts mcurred to attend the program. When the initial round of data was released by the Obama Administration in 2017, over 800 programs failed the test and would have lost access to federal student loans and grants if they had failed a second year. 2 Secretary DeVos, however, has refused to enforce the Gainful Employment Rule and has announced that the Departmmt of Education is rescinding it, leaving students without protection from low-quality programs where graduates cannot findjobs that allow them to pay back fh.eir student loans. Our State should protect Maryland students by setting a standard that requires at least 50 cents of every dollar collected in tuidon revenue at for-profit schools be spent on instruction. Schools ah-eadyrqport thetotal amount ofmoney they spend oninstruction to the Department ofEducation andthat datais publicly ' The U.S. Department ofEducation publishes the median earnings ofgraduates on its College Scorecard website. See htt s://colleeescorecard.ed..eov/. 2htips://www.msidehi hered.com/news^OlT/Ol/lO/federal-data-show^yndred^-YOcaticmal-pro^rams^ new- >ainfal-em lo inent 200 Saint Paul Place *:* Baltimore, Maryland 21202-2021 Main Office (410) 576-6300 <* Main Office Toll Free (888) 743-0023 Consumer Complaints and Inquiries (410) 528-8662 .> Health Advocacy Unit/BilIing Complaints (410) 528-1840 HealthAdvocacy Unit Toll Free (877) 261-8807 <*Home Builders DivisionToll Free(877) 259-4525 <*Telephone for Deaf(410) 576-6372 www.marylandattorneygeneral.gov If a school fails to meet the 50% threshold, it must reduce its tuition for one year to an amount that complies withthe 50%requirement, In order to convince students to incur the significant amount of student loan debt it takes to pay for their programs, which oflten do not result in the same quality ofeducation andearnings potential as a similar (and often cheaper) program at a coinmunity college, many for-profit institutions ofhigher education treat the recruitmg of potential students as equivalent to a sales process, utilizing high pressure sales tactics, emotional appeals, andmaking unfair, deceptive, andabusive tactics. 3 Inthese cases, the schools prioritize the quest for profit byturning their admission departments into high-pressure boiler room style recruitment call centers. Ouroffice has investigated schools thatdeceived students aboutthe accurate cost ofthe school, guaranteed that credits would transfer when that was-not always true, misrepresented thenumber ofstudents who gotjobs in their field ofstudy, and pressured students into enrolling, even ifthe school didn't offer the program that fhe student wanted to study. ColoradoTechnical University and American Intercontinental University admissions reps told state attorneys general that "we werenever supposedto take 'no' for an answer.No matter whatthey really wanted, we hadto drive them into a program we offered." . Brightwood College's Director ofAdmissions atthe Beltsville campus told his admissions reps to "operate atfall speed"to getnew applications with "no exceptions" and thatthey should have no more "low dial days." . The Dream Center schools (under the brand of Art lastitute) deceived students about the loss of accreditation, (making a degree from some programs worthless) and misappropriated $13 million offederal student loan money that the schoolshould have distributed to students. FTT Tech trained its recruiters to use the "pain funnel" to inflict emotional pain upon potential students to pressure fhem into enrolling. CorinthianColleges liedto potential students abouttheir job placementrate, whichis thepercent of students who get a job related to their field of study. ThisbiU protects Maryland consumers becauseit will require somefor-profit schools to spendmore money on instiiiction, thereby increasmg the quality of their programs and reducing the mceDtive to use deceptive marketing tactics to recruit students. The Consumer Protection Division urges the Committee to give HB 470 a favorablereport. ec: Members, Appropriations Committee 3 Attachedto thistestimony are 21 pressreleases from state and federal law enforcement agencies describing lawsuits or settlements relatedto unfair, deceptive, andabusive recruiting practices. MedianAnnual Median Earnings of Graduates Name of School Program Description Credential Level Fortis College-Landover Allied Healthand MedicalAssisting Services. UndergraduateCertfficati $9, 500 $19, 600 $9,446 $20,000 Fortis Instltute-Baltimors Allied Health and MedicalAssisting Services. Undergraduate Certlfieati Fords Institute-Towson Allied Health and MedicalAssishng Services. Associate's Degree $18,011 $22,800 Associate's Degree $13,MO $60,800 Montgomery College Allied Health and MedicalAssisting Services. Fortis Institute-BalUmore Allied HealthDiagnosUc, Intervention, gndTr^tmer Undergraduate Certificat. $20,000 $41,300 ;Prince"George7sCommunity C Allied Health Diagnostic,InterwnUon, andTreati Associate's Degree $11,500 $58, 2001 NorthAmerican Trade Schools ConstructionTrades, General. UndergraduateCertificate < $10,258 $21, 500 $14, 200 Fortis Insfrtute-Baltimore Cosmetologyand Related Personal Grooming Services. UndergraduateCertificate ( $13,724 $12, 122 $20, 200 Fortis Coltege-Landover Dental SupportServices and Allied Professions. Undergraduate Certificab $13, 000 . $22, 800 Fortls Institute-Towson Dental SupportServices and Allied Professions. Undergraduate Certificat $32, 489 . $47,100 Fortls Coltege-Landover DentalSupport Services and AIKed Prpfeastons. Associate's Degree $64, 800 CCBC DentalSupport Services and Alfled Professions. Associate's Degree $18.000 $38,400 North American Trade Schools Ground Transportation. Undeisraduate Certiflrate ( $3, 166 Hageratown Community Collei Ground Transportation. Undeigraduate Certfflci $4,750 $44, 000 Fortis College-Landover Health and Medical AdroinistraUve Services. Undergraduate Certificati $13, 875 $24,300 Fortis Institute-Baltimore Health and Medical Administrative Services. UndeigraduateCertificati $9,500 $22,000 Fortls InsUtuta-Towson HsaKhand MedicalAdministratwe Services. Undergtaduate Certificat $11,704 $23, 000 Anne Anindd Community Coll Health and NledicalAdmintettaUve Services. UndergraduateCertifio $9,375 $29, 300 NorthAmerican Trade Schools Heating,Air Conditioning, Ventilation and Refrieeration I UndergraduateCertificate i $10,072 $26, 100 ForBsInsfltute-Towson RegisteredNursing, Nursrng Administnatton, NursinE Associate's Degree $30,500 $51,300 CairollCounty Community Col Registered Nursing, Nursing Administration, Nui Associate's Degree $15,700 $56,000 BRIAN E. FROSH MEDIACONTACTS: ATTORNEY GENERAL PMSSi^OAG.STATE.MD.US 410-576-7009 PRESS RELEASE Career Education Corporation to Stop Collecting on Loans, Change Practices in Agreement with Maryland, 48 Other Attorneys General Settlement Will Bring $493. 7MSlwn in Nationwide DebtRelief for CEC Students BALTIMOIiE, MD (January 3, 2019) - Maryland Attorney General Brian E. Frosh today announced a seftlemert with for-profit education company Career Education Corporation (CEC) m which CECwiU forgo coUecting more fhan $8. 5 miUion in debts owedby 2,784 Maryland students. The settlement also mandates IfaatCEC significantly refonn its recruiting and emolfanent practices andmake a $5 million payment to the settling states. Maryland wiUreceive $264^85. 7'! offhispayment, withthe rest distributed to theother settling states,fhe National Association OfAttorneys General Financial Services and Consumer Protection Fund, andthe State Center. Illinois-based CEC currently operates online courses tfarou^i American Intercontinental