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August 19, 2010
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August 19, 2010, 03:20 PM ET
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August 20, 2010
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August 20, 2010
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August 19 2010, 3:39 PM EST
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August 19, 2010
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August 19, 2010
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August 20, 2010 12:01 AM
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August 19, 2010
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August 19, 2010

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August 20, 2010
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ABC News.com
August 19, 2010 3:02 PM

America¶s for-profit colleges are under fire.

Enrollment is up at these schools, which include The University of Phoenix and DeVry University, but a
recent government undercover investigation of 15 for-profit schools found that all 15 of these institutions
engaged in deceptive practices and at four of them recruiters encouraged fraud.

³It was an outright lie, a bold face lie,´ said Melissa Dalmier, who was told that a University of Phoenix
associates degree would allow her to teach in Illinois.

ABC News and Chris Cuomo have been investigating The University of Phoenix, where a recruiter
encouraged our undercover producer to take out the maximum loan amount, and gave him incorrect
information about his ability to teach if he completed a University of Phoenix bachelor's degree

Check out Cuomo¶s report from ³GMA´ above and tune into Nightline tonight for the full story.
# $

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The Hill¶s Congress Blog
August 19, 2010
By John R. McKernan, Jr.
11 001

The Department of Education proposed new rules last week which, under the guise of ³avoiding wasteful
spending´ on higher education loans, will close the door to a better life for hundreds of thousands of
needy students. The rule mainly applies to proprietary colleges, also known as for-profit schools, and will
bar or limit many programs based on a complex formula that compares a student¶s debt to his or her
prospects in the current job market. According to the Department¶s own estimates, this proposed rule
would eliminate or put at risk 307,000 students who are currently enrolled in these programs.

As a former legislator and governor dedicated to education, and now as Chairman of Education
Management Corporation (EDMC), one of America¶s leading higher education companies, I fully endorse
President Obama¶s stated objective for America to have, by 2020, the highest proportion of college
graduates in the world, which translates into over 8 million additional graduates. I am also keenly aware
of the need to avoid waste of public resources. The proposed rule, however, is counterproductive.

The purpose of the Federal financial aid system is to help disadvantaged students achieve their highest
potential, including with a subsidized loan program. The proposed rule, however, hurts the very students
the system was created to assist by creating a formula that few non-profit private colleges could meet.
For example, it would reduce access to 4-year bachelor¶s degree programs because, under the proposed
formula the initial earnings will not justify the extra years beyond a two year degree, even though lifetime
earnings will be dramatically more. The hard times of the current economy are precisely when the
country needs to invest in education, not shut down access for needy students to bachelor¶s degree
programs that will substantially enhance their long-term career potential.

The premise of the new rule is that proprietary colleges have higher loan default rates than public and
nonprofit institutions. This sounds reasonable until another fact is added²proprietary schools educate a
high proportion of at-risk students, precisely the group of graduates which President Obama wishes to
expand. In the pool of at risk students, proprietary schools have comparable graduation and default rates
when compared to public and non-profit colleges.

In addition to discriminating against colleges that have a high proportion of needy students, the
Department¶s proposal flies in the face of congressional policy. Congress intended Title IV grants and
loans as a subsidy to those most in need, not as a break-even proposition. The intended beneficiaries of
these subsidized programs are minorities, single mothers and others who would otherwise be unable to
improve their position in life without higher education. Most take advantage of the opportunity and repay
their loans in full. Unfortunately, as anticipated in the program, some do not. The net annual cost of
defaults is more than worth the benefit to these students²about $1 billion out of $60 .6 billion in
outstanding loans.

The bias against proprietary education, explicit in the proposal, also misunderstands the differences in
education services being offered. Proprietary schools are innovators in adult education²offering rolling
enrollment calendars, flexible course schedules and focused course studies that enable a working adult
to improve his or her skills within an individualized schedule. Over the past two decades, proprietary
colleges have grown from serving just one percent to now serving nine percent of the more than 19.5
million students in higher education. There are literally millions of student success stories, of nurses,
healthcare technicians, computer programmers, graphic artists, chefs, and others who have bettered
their lives and the lives of their families.

Finally, the desired outcome of the rule appears to be for students to migrate from proprietary programs
to public colleges which have with lower tuitions and lower student debt. However, instead of avoiding
³wasteful spending,´ this would dramatically increase taxpayer costs. There is a reason why public
colleges have lower tuition, at least for the time being,²they are heavily subsidized by taxpayers. The
taxpayer subsidy of public colleges to provide education is approximately double the total cost of grants
and loans to students at proprietary colleges. Each student compelled to transfer from a proprietary
institution to a public college will cost taxpayers approximately an extra $4,000 per student per year.

As a former congressman and governor, I strongly believe that all public programs should be reviewed
periodically to make sure that they are meeting our public goals. If there are wasteful programs in higher
education, there are much better ways of providing oversight than a broad, formulaic approach that will
impact immediately over 300,000 students. What the department has proposed is a dramatic change in
policy. As a former lawmaker, I know that a major policy change like this should be handled on the floors
of Congress through the legislative process, including hearings, fact-finding analysis and open debate²
not a regulatory rewriting of an important pillar of higher education for needy students.
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The Hill (Blog)
August 19, 2010, 03:20 PM ET
By Mike Lillis



11 0

The U.S. Chamber of Commerce this week is slamming a new White House proposal designed to ensure
that career college students are trained for jobs lucrative enough to pay back their federal loans ² an
issue for the healthcare industry, because a huge percentage of medical professionals are trained at for-
profit institutions.

"This ill-conceived regulation will work against job creation, only resulting in jobs lost and fewer
Americans getting the post-secondary education and training they need to secure work in today¶s
economy," Thomas Donohue, the Chamber's president and CEO, wrote in a letter to the Department of
Education (DOE) Wednesday.

Issued last month, the DOE proposal ² dubbed the "gainful employment" rule ² is a response to
allegations that some for-profit colleges have exaggerated the earning potential of their programs, leaving
graduates struggling to pay bills when they enter the work force.

"Some of them are saddling students with debt they cannot afford in exchange for degrees and
certificates they cannot use," Secretary of Education Arne Duncan said when the proposal was released.

Loan defaults don't just harm students' credit ratings, they also affect taxpayers, who provided $24 billion
in federal tuition subsidies to for-profit colleges in the 2008-2009 school year.

The administration is proposing to gauge whether a program offers gainful employment based on two
separate measures: the debt-to-income ratio of the program, and the rate at which program enrollees
repay their loans on time ² regardless of whether they graduate or not.

Programs showing high debt-to-earning ratios would be required to inform students and applicants of that
trend. Programs could also lose their eligibility for federal student aid programs.

The administration estimates that, if the thresholds remain unchanged, percent of career college
programs could no longer offer their students federal aid, while percent would be forced to inform
students of high debt-to-income ratios.

In its letter to the DOE, the U.S. Chamber said the proposal sets "arbitrary" benchmarks that would have
a "lethal" effect on programs that cater disproportionately to low-income students.

"This rule would implement sweeping change with dramatic consequences to students without an
adequate and informed assessment of its full impact," Donohue wrote.

The change is one of 14 new rules proposed by the Department of Education since June. Taken
together, the changes are designed to rein in the for-profit education sector amid reports that aggressive
recruiting, shady marketing practices ² even fraud ² are common within the industry.
The changes would likely have an effect on the healthcare sector. Indeed, 42 percent of the health
professionals receiving health degrees and certificates requiring two years of schooling or less came out
of for-profits institutions, according to the latest survey from the National Center for Education Statistics.

The DOE is accepting public comments on the proposal through Sept. 9, with the final rule scheduled for
release by Nov. 1.
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Inside Higher Ed.com
August 20, 2010
By Jennifer Epstein

When Michael Clifford and his team stepped in to rescue struggling nonprofit Myers University in 2008,
the investor who had helped to transform nearly dead colleges into two publicly traded companies with
tens of thousands of students was heralded as the 160-year-old institution¶s savior.

Myers was deeply in debt, placed on probation by its regional accreditor and struggling to attract
students. Clifford¶s Significant Partners LLC bought the institution for $5.25 million and infused millions
more into its operations, renaming it Chancellor University and promising rapid growth.

The gambit seemed even more promising after Jack Welch, the former chief executive officer of General
Electric and a one-time skeptic of for-profit higher education, bought a minority stake in Chancellor last
summer at Clifford¶s persuasion. His $2 million went toward creating the university¶s M.B.A. program and
the Jack Welch Management Institute.

But the condition of the Cleveland university has in some ways only gotten worse since Clifford, Welch
and other investors got involved.

Chancellor¶s enrollment has fluctuated between 400 and 600 since the fall of 2008; it has yet to see the
exponential growth Clifford promised, and it is operating on an annual budget deficit. Rather than
improving in the eyes of the Higher Learning Commission of the North Central Association of Colleges
and Schools (HLC), its accreditor, Chancellor slipped from probation to ³show cause´ status in February.
(This is the final chance for the university to provide evidence to persuade the HLC not to end its
accreditation.) In April, Bloomberg reported that Chancellor ³explicitly focused recruiting efforts on local
[homeless] shelters´ after hearing that the University of Phoenix was doing the same in Cleveland.

And Clifford, who has built a reputation for infusing cash into indebted nonprofit colleges and growing
their enrollments and their profits rapidly, has backed away. Though he¶s still an investor, he has left
Chancellor¶s board and isn¶t involved with its operations. He says he has ³the utmost confidence in the
leadership team.´

That leadership team, though, has been spinning through a revolving door. Bob Daugherty, a Cleveland
investor, has been president since early this summer. Bob Barker, who spent 20 years as an executive at
the University of Phoenix before becoming a for-profit education entrepreneur, was Chancellor¶s CEO for
about six months earlier this year. George Kidd, a former president of nonprofit Tiffin University, was
president of the university until last year. Other top administrators haven¶t stayed long either.

Barker says he left for ³personal reasons´ that ³had nothing to do with the business.´ At the time of his
departure, he ³saw things growing and building´ at Chancellor. ³I didn¶t see a sense of falling apart.´

The university¶s fall from probation to show cause status with the HLC was the result of ³bad
management,´ Daugherty says, but he is confident that the university is on the right track under his
leadership. ³A number of changes that have taken place in the past year both from a leadership
standpoint and from an institutional standpoint are putting Chancellor in a better position."

Chancellor plans to move from its downtown location to "a brand-new building that will be easier for our
students to get to, modern, safer, and a great learning environment," Daugherty says. Significant's
purchase price of the university included a $2.25 million mortgage note on its current building owed to the
Cleveland-Cuyahoga County Port Authority later this month. Rather than paying it off in its entirety and
staying in the building, Chancellor has offered payments totaling $500,000 by the end of the year, and an
additional $250,000 to be repaid in the next five years. The agency is expected to approve the offer.

As the for-profit sector faces closer scrutiny by the federal government and accreditors, Daugherty is
quick to say that he and his colleagues are ³strong advocates of integrity.´ Other institutions, he adds,
³some bad actors in the postsecondary sector, need to be ± quite frankly ± better regulated.´

Bloomberg's report about the university recruiting homeless students was, says Barker, "a total
misrepresentation of what actually happened ... the person leading it genuinely wanted to help students."
Clifford defends the practice of seeking out students who are living in shelters or who are imprisoned.
"Obama said he wants everyone to have a college education. Does that mean everyone except those
who are down and out in homeless shelters and prisons?" Nonetheless, Chancellor has ended its
recruitment at shelters.

Even if Chancellor¶s worst days are behind it, they may have done irreparable damage to the institution.
While it¶s still accredited, the university is required to disclose to current and prospective students that it¶s
in danger of losing its accreditation in the coming year. Students usually don¶t understand or ask about
accreditation, but hearing about the university¶s tenuous status isn¶t likely to convince indecisive students
to enroll.

C. Todd Jones, president of the Association of Independent Colleges and Universities of Ohio, says
members of his group of nonprofit institutions ³continue to have to compete very actively to attract
students´ who are drawn to lower sticker prices at the state¶s public institutions. Part of Chancellor¶s
growth strategy was to build up its on-the-ground enrollment of low-income, minority students and
Cleveland professionals seeking further education. ³I¶ve never understood how Chancellor thought they¶d
grow locally, even with tuition cuts,´ he says.

In the spring of 2009, Shaun Redgate, who was then the university's chief operating officer but has since
left the institution, told Crain's Cleveland Business that the institution was on track for a fall 2010
enrollment of 1,050, the enrollment needed to break even. Chancellor, it now seems, will fall short.

According to HLC data, Chancellor¶s enrollment totaled 422 students this spring. In an interview,
Daugherty cited the spring enrollment as about 600. In the fall of 2009, the university reported 512 full-
time and part-time students to the U.S. Department of Education. Retention, Daugherty says, is
³improving,´ though he declined to provide statistics.

In the fall of 2008, just as the for-profit team took charge of the university, Chancellor reported a total
enrollment of 422. The year before, it was 570, and in the fall of 2006, it was 942. ³They¶re totally focused
on quality,´ says Clifford. ³They¶re not concerned about making money, they¶re not concerned about going
public. It¶s about the students having a superior experience.´

That¶s not quite what Clifford told The Wall Street Journal in June of 2009. He said then that he hoped the
university would have 800 students that fall and 5,000 by the fall of 2011, and that he would eventually be
able to take the company public.

His vision may have changed since then ± and he says he does not speak for the management of the
institution -- but Clifford still insists that he and his fellow investors did the right thing. ³It¶s in better shape
than when we stepped in,´ he says. ³The easiest thing would¶ve been to close it down and walk away, but
we responded and put tens of millions of dollars into it.´

(And, at the same time, Clifford says the Welch M.B.A. program has had "thousands of applicants from
around the world" but has intentionally limited its growth.)
Still, Chancellor is struggling. Daugherty says the university has 38 new students who¶ve enrolled for fall
classes. The university must submit a show cause report to the HLC by Dec. 1 illustrating that it:

h ³Operates with integrity to ensure the fulfillment of its mission through structures and
processes that involve the board, administration, faculty, staff and students.´
h Plans and allocates resources responsibly ³to fulfill its mission, improve the quality of its
education, and respond to future challenges and opportunities.´
h Shows evidence of student learning and effective teaching.

An HLC evaluation team will visit Chancellor¶s campus in early January to validate the claims the
university makes in its report, and to ensure that the concerns identified by HLC¶s board in issuing the
show cause order have been sufficiently addressed. If the agency isn¶t satisfied, it will pull accreditation.

John Hausaman, an HLC spokesman, said the agency and Sylvia Manning, who became its president in
July 2008, had no further comments on Chancellor¶s status.

Though Chancellor could continue to operate if it were to lose HLC¶s imprimatur, its credits would no
longer be transferrable to other institutions. It would also lose its eligibility to participate in the federal
financial aid program.

The Ohio Board of Regents, which authorizes private institutions¶ degree-granting powers, placed
Chancellor on three-year ³provisional´ status last fall, requiring it to submit annual progress reports each
September. Michael Chaney, the board¶s chief communications officer, says that Chancellor submitted
part of its 2010 report in July and has requested an extension until Oct. 1 to fill in the gaps. Even if the
report is up to snuff, Chancellor¶s authorization is ³contingent on their maintaining their regional
accreditation,´ Chaney says.

Daugherty says he is confident the university will show evidence to HLC that its governance, finances and
student outcomes are all in good shape. ³I expect we will be reaccredited this winter,´ he says. ³We don¶t
want to be de minimis, we want to be the summa cum laude example.´

With Clifford¶s active role in the institution diminished, Daugherty says the focus is on having ³the
standards that you would expect from a guy like Jack Welch are now permeating our institution.´ Welch¶s
assistant said he was on vacation and authorized Daugherty to speak on his behalf.

Welch¶s involvement, though, appears limited to the M.B.A. program. ³He has read and reviewed every
piece in the M.B.A. program,´ says Daugherty, who declined to say whether Welch had invested more
than his initial $2 million share, which bought him a 12 percent ownership stake. In several interviews,
Welch has characterized his decision to invest in the university despite his initial skepticism about for-
profit higher education as being about building his ³legacy.´

Even as observers eye Chancellor with skepticism, Daugherty says the institution is finally on the track to
sustained and sustainable growth, as well as survival. ³We¶re not here to make a quick buck,´ he says.
³We¶re here to be here for a very long time.´
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Cross Cut.com (Seattle Daily Newspaper)
August 20, 2010
By Ronald Holden

Disillusioned students are speaking out against for-profit schools offering advanced degrees in culinary
arts and other disciplines, and lawmakers are taking on the Wall Street bankers who are profiting.

Peter Lamb, a successful entrepreneur who has opened half a dozen Seattle restaurants, stands outside
his latest, Belltown's Branzino, making sure the sidewalk tables are properly set. "I never hire cooks. I hire
dishwashers, train them, and promote them," he says.

"A kid can come to work for me tomorrow as a dishwasher, and after two years, he's a $13- or $14-an-
hour line cook. That same kid, if he goes to culinary school, graduates two years later, $50,000 in debt,
and he's lucky to get a job for $9 an hour."

And still, culinary students keep coming. They come from middle-class suburbs, from broken marriages,
from minimum-wage jobs, or straight out of high school. They come because they think it's glamorous to
work in a professional kitchen. They come with the hope of a better life, because they dream of the Food
Network, of being a Top Chef. Some sign up for the culinary programs at community colleges; many more
enroll in expensive private academies, institutes and cooking schools.

Why? Because there's no formal apprenticeship system in this country for a trade like restaurant chef,
where the traditional career path was to start at the restaurant's back door, in the dish pit ² the way they
do at Lamb's establishments. It used to be, if you kept showing up, you'd get moved up after a few
months to busser, or to a prep station, earning your stripes by doing every dirty job. Most restaurants
these days feed their staff, but few pay more than minimum wage, and a share of tips for kitchen staff is
iffy at best.

And so they come to the institutes, despite the lousy odds, despite the astonishingly high prices, akin to a
year at Harvard. The primary reason they can do it: the ready availability of student loans for tuition.

Back in December, a for-profit school in Portland, the Western Culinary Institute, was the target of a
lawsuit claiming, among other things, that graduates could not find work in the field after they had spent
$20,000 to $40,000 in tuition, or that they made no more money after attending the school than before.

The case, which the school has declined to discuss, could cover as many as 2,000 former students. It's
been certified as a class-action lawsuit and is working its way through the Oregon courts. The suit is a
warning shot indicating skirmishes to come between the well-connected industry of for-profit schools and
disillusioned students. One such conflict has escalated to an all-out war between the federal government
and Wall Street bankers.

Here in Seattle, in a little-noticed development at the end of July, the American Federation of Teachers
lost an election to represent the faculty at the Art Institute of Seattle. Teachers had complained that the
school was putting more emphasis on recruiting students than on teaching them properly. The high cost
of tuition was another concern, the union said: An "associate degree" in photography or culinary arts
costs close to $60,000; a bachelor's degree in fashion design costs more than $80,000.

Only the Seattlepi.com covered the issue. Although the school gave in to the faculty's request for updated
computer equipment; the AFT blamed the unexpected outcome on aggressive union-busting by the Art
Institute's parent company, Education Management Corporation (EDMC). The Art Institute's director of
communications, Mark Livingston, declined to comment.

As it turns out, EDMC's largest shareholder, holding 38 percent of its stock, is none other than Goldman
Sachs, the Wall Street firm that recently agreed to pay $550 million to settle civil-fraud charges related to
the subprime mortgage meltdown. According to Bloomberg News, Goldman Sachs is heavily invested in
this controversial for-profit education industry, and now finds itself under attack not only from Congress
and the Obama administration but from dissatisfied students as well.

Most students take out loans to pay their tuition, resulting in high levels of debt. For the past couple of
decades, student loan debt has been "guaranteed" by a variety of government agencies, just like
mortgages, resulting in a wave of subprime loans that students may never be able to pay back. A full-time
restaurant cook (a rarity in a turbulent industry) is lucky to make $20,000 a year, which makes paying
back $50,000 worth of student loans within 10 years of graduation virtually impossible.

Bloomberg News explains further:

A proposed government crackdown may have a disproportionate effect on EDMC. The U.S. Department
of Education may restrict taxpayer-funded grants and loans to for-profit colleges like EDMC that offer
$50,000 associate's and $100,000 bachelor's degrees in such low-paying fields as cooking, art and
design.

"Government grants and loans to students, combined with booming enrollment, have made for-profit
colleges a rewarding investment," the article continues. According to Bloomberg and the Education
Department, EDMC receives over 80 percent of its revenue from federal financial-aid programs, programs
that prop up the entire for-profit college industry to the tune of over $25 billion a year.
/
  
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The Jackson Sun Online
August 20,2010

Over the last few days, several reports have pointed the spotlight on some of higher education's dirty little
secrets. Among the disturbing reports was one from the federal government about institutions whose
students default on their federally guaranteed student loans. When people do not pay their guaranteed
student loans, we taxpayers pick up the tab. Only 36 percent of people who attended for-profit colleges
appear to be repaying their loans.

Companies that operate colleges as a business aim to increase profitability, as any company should. For-
profit colleges target adults. These corporate colleges provide a product that allows working adults to
complete a college education while continuing their jobs. They do not have to quit their job in order to fit
school into their busy work and family schedule. In our rapidly changing economy, college education has
become as important as a high school education was 40 years ago. Adult learning programs are a
valuable resource for individuals and for the nation.

In the early 1990s, I taught at a Baptist university and seminary in Minnesota that was feeling the decline
in giving from the denomination. The president's plan was to cut the budget of the seminary by the
amount of the decline in church giving. In the financial challenge I conceived a model to provide
education to people in ministry who lived far away from the seminary and could not resign their churches
to pursue a seminary education.

The model combined the fledgling Internet and intensive on-campus classes several times a year. It was
a simple model to understand and to implement. It saved the seminary's bacon as we reached hundreds
of people in full-time ministry around the country who wanted to further their education. I should have
patented the idea, because hundreds of schools all over the country adopted the model for academic
programs as wide ranging as nursing, business and education.

I am not the least bit upset about not making any money personally off the model, but I do get upset with
schools that abuse the model. Distance education and intensive modular classes can be perfectly
legitimate educational experiences. The New Testament has been a highly successful and effective form
of distance education conceived by the apostles to teach Christians all over the world about Jesus Christ.

There is a difference between providing courses and providing an education. A school's first concern
must always be the education of the students. Before giving any school money to acquire a degree, find
out who the teachers will be. Find out how many students will be in the class. The quality of a distance
class depends on a limited number of students that the teacher will have to interact with by e-mail, chat
rooms, Skype or other means.

Finally, the federal government has begun to wonder if a high rate of student defaults on loans suggests a
low quality of education. It's something to ponder if you pay tuition or taxes.
c


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Color Lines Magazine Online
August 19 2010, 3:39 PM EST
By Julianne Hing

For-profit schools are trying their mightiest to lay low these days, but the federal government isn¶t going to
have any of that. Last Friday the Department of Education released the loan repayment numbers for
8,000 American colleges and universities which showed that for-profit school graduates face massive
amounts of debt that far outstrip the debt of their nonprofit and public school peers. Higher numbers of
students who go to for-profit schools end up being unable to repay their loans, too.

The DOE data showed that students at for-profit schools are two times more likely to take on debt for an
associate¶s degree and that their debt is more than double that owed by students at nonprofit and public
schools. But it¶s not just about the amount of debt students graduate with, another indicator of a school¶s
performance is a graduate¶s ability to pay back their loans. For example, the University of Phoenix, which
is by far the biggest player in the for-profit school arena, had almost 350,000 students start repayment in
2009 on their loans with almost $5 billion in outstanding loans. But according to the DOE, just forty-four
percent of their students are able to repay their loans. Only 38 percent of graduates from the for-profit
school DeVry University are able to pay back their loans; students leave there with an average of $12,00
of federal student loan debt.

Congress has been positioning itself to take up for-profit school regulation for months and may soon act
on it. At a series of Senate hearings this summer, congressional leaders have discussed several
measures to reign in the for-profit schools industry, which include evaluating the legitimacy of schools¶
accredidation programs and ending for-profit schools¶ practices of paying admissions officers (who are in
actuality just sales reps) commission. According to other proposed regulations being floated around right
now, higher education institutions could lose their eligibility for federal student aid money if they send off
their graduates with crushing amounts of debt that they¶re unable to repay.

This rule is aimed primarily at for-profit schools, which often depend on federal student loans and grants
for the majority of their revenue. In 2008, for-profit schools made $3.2 billion every year in Pell Grants, the
federal money designated for low-income students. Students from for-profit schools are more likely to
depend on financial aid to get through school, are more likely to graduate with tens of thousands of
dollars worth of debt, and are more likely to eventually default on their loans.

Recently, a federal investigation led by the Government Accountability Office found for-profit schools
engaging in fraud to lure students in the door and help students falsify financial aid forms to get federal
aid. For-profit schools saw their stock plummet this week after the numbers were announced.

But back to that DOE data. It shows that across the board, from private universities on down to public
schools, higher education is getting more expensive for all students. Unsurprisingly, the wealthy don¶t feel
the pinch as much. Students at top-tier schools were both more able to already afford their elite schools¶
tuition, and also able to graduate with very little debt because of generous financial aid packages. At tony
Princeton University for example, just 22 percent of students leave with an average of $5,667 in debt.
Two out of five students in Princeton¶s freshman class can already afford to pay the full cost of tuition, a
whopping $52,180 for the 2010-2011 academic year.

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Loan Repayment Data Damaging to For-Profit Higher Education Sector
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On Friday, the U.S. Department of Education released data on student loan repayment rates at colleges
and universities across the country, reports the New York Times.

Although the department issued no comparison of rates by sector, the Institute for College Access and
Success analyzed the data and found that in 2009, repayment rates were 54 percent at public colleges
and universities, 56 percent at private nonprofit institutions, and 36 percent at for-profit colleges.

Shares at several of the top publicly traded schools plummeted on Monday, following the release of the
data. Strayer Education fell 18 percent to $163.26 and Capella Education dropped 13 percent to $60.94,
as investors thought their repayment rates would be 45 percent or higher, Trace Urdan, analyst at Signal
Hill, told USA Today.

The startlingly low repayment rates at for-profit schools are a significant factor in proposed regulations
that would restrict eligibility for colleges to participate in federal financial aid programs. Under the
proposed "gainful employment" rule, programs with loan repayment rates under 35 percent would be
ineligible to participate in the federal aid programs, unless they have one of the acceptable debt-to-
income ratios; programs with rates between 35 and 45 percent would face some restrictions. The
regulations are expected to be completed by November 1 and will go into effect in July 2011.

The Department of Education cautioned that the data released on Friday was based on an institution's
overall repayment rate, but the regulations would determine eligibility program by program, reports the
New York Times.

The for-profit higher education sector has recently come under fire after a government report showed that
their recruiters engaged in deceptive and unethical practices to entice students to enroll and obtain
federal financial aid. On the same day that it released the loan repayment data, the department
announced that it would develop a program to ramp up oversight of institutions to ensure that they are
complying with existing financial aid regulations. Education Secretary Arne Duncan vowed to expand the
department's enforcement staff, conduct undercover investigations and increase the number of program
reviews.




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3
The Journal of American Enterprise Institute (The Enterprise Blog)
August 19, 2010
By Mark Schneider

While for-profit educational institutions have come under intense scrutiny from the Senate for their
recruiting practices and the amount of money they spend on advertising, private not-for-profit and public
institutions have so far escaped such scrutiny. One reason is that the Congress has legislative authority
to regulate ³career colleges´ and this has been interpreted to cover all for-profits, even if many now offer a
wide range of majors not tied specifically to careers, and even as many public institutions, especially
community colleges, are becoming ever more career-oriented.

Setting that issue aside, when comparisons are made of the costs of recruiting and advertising practices,
one large expense incurred by the private not-for-profits is usually left out of the calculation: ³institutional
aid,´ the discounts that students get from the posted tuition (or ³sticker price´) a campus nominally
charges (institutional aid by publics is relatively small since they don¶t have large endowments and their
tuition is relatively low). There have long been fights over the disclosure of the details of how these
institutional grants are awarded and to whom, but colleges do report to the Department of Education the
percent of students who receive institutional grants and the average award. For students, the problem is
evident: while averages are reported, a prospective student has no way of knowing what students like her
receive. This information asymmetry clearly works to the advantage of the colleges, who use institutional
aid to create an arcane system of differential pricing and yield management that would make airlines
proud. But with available data we can revisit the costs that not-for-profits spend on recruiting students.

Let¶s begin with estimates from the National Association for College Admission Counseling (NACAC)
estimates what it calls ³costs to recruit.´ According to its 2009 report, these costs for private and for public
colleges are:

However, this estimate for private colleges and universities is far too low, since it does not include
institutional aid²a major recruiting tool.

For the 900 or so four-year, degree-granting, private not-for-profit institutions that reported data to the
Integrated Postsecondary Education Data System (IPEDS), over the last five years 77 percent of
students, on average, received aid from the college they attended. Moreover, the average level of this aid
has increased dramatically: from around $8,000 per student in Academic Year 2003-2004 to over
$10,000 in 2007-2008, the last year for which IPEDS data are currently available.

Depending on how you consider institutional aid²particularly how much of this aid you count as recruiting
expenses²the costs to recruit in private not-for-profits could be quite steep²the $3,000 counted by
NACAC plus the $10,000 per student in institutional aid.

There is another cost that these schools incur that is not often considered.

Across these not-for-profit colleges, more than 25 percent of students who enroll for a first year do not, on
average, return for as second. The amount of money each school spends on students who do not return
after year one can be quite high²and as the size of institutional grants grow, unless the retention rate
goes up (which it hasn¶t), the losses campuses incur will continue to grow. As is evident in the figure
below, the average not for-profit institution of higher education is now spending about $750,000 per year
on institutional grants to first-year students who do not return after a year. (The societal losses for first-
year attrition are even higher, since these students have also received federal grants and often state
grants, and they and their families have also incurred remaining tuition and related expenses.)

Our state of knowledge about what works to improve student success in college is pathetic and the
federal government, which makes a huge investment in student success, especially through Pell Grants,
has not stepped up to the plate on this (for example, the Institute for Education Sciences in the
Department of Education funds 16 R&D centers, only one of which has a focus on postsecondary
education).

But we do know that students, who spend an incredible amount of time applying for college, are often
unprepared for what happens when they enroll. Among the major reasons for student failure during the
first year are: having too much fun (but also its obverse, social isolation), poor academic preparation, and
running out of money (see here or here). While we don¶t know much about improving student success,
one strategy that seems successful, especially for low-income, first-generation students (both risk factors
for dropping out), is a combination of summer boot camp and ³university 101´²usually a semester-long
³frosh´ seminar that covers the basics of campus life and allows students to develop the skills and
friendships that are necessary for successfully negotiating campus life.

Seems like running these kinds of courses would be a wiser use of institutional money than burning
$750,000 per year on students who don¶t make it through their first year.
1    '
Record Net.com
August 20, 2010 12:01 AM
By Michelle Singeltary

The Obama administration wants for-profit career colleges to prepare students better for gainful
employment and to improve debt repayment rates. The government is threatening to pull access to
federal student aid for colleges that fail to show progress.

Under the administration's proposed rules, if a program graduated a large share of students with
excessive debt compared with potential earnings in their chosen field, it would be required to disclose this
to current and prospective students.

I love this idea, but why don't we take it further and require every college that receives federal financial
aid to discuss with incoming students who are applying for loans how much they can expect to earn in the
degree areas they are pursuing?

Career counselors or financial aid personnel would show students data on the average starting salary for
a field. Then the counselor would calculate - based on the amount the student planned to borrow - how
much projected monthly income would be needed to service the student loans.

This would be a reality check before any federal student check is cut. I would also require this for
students relying heavily on private loans. Is it too much to hope that many students and their families
would rethink the amount of debt they would be taking on at a particular school after considering - before
enrollment - how much they will earn?

Certainly there are problems in the for-profit career college sector. The Government Accountability Office
reported recently that in an investigation of 15 for-profit colleges, four allegedly encouraged fraudulent
practices and all 15 made deceptive or otherwise questionable statements to undercover applicants.

Students who attended for-profit colleges were more likely to default on federal student loans than were
students from more-traditional colleges, the GAO said last year.

"While career colleges play a vital role in training our work force to be globally competitive, some of them
are saddling students with debt they cannot afford in exchange for degrees and certificates they cannot
use," Education Secretary Arne Duncan said.

His department would define whether a program is preparing students for gainful employment by
measuring debt compared with potential income once they've completed their program and by measuring
the rate at which all enrollees, regardless of completion, repay their loans on time.
The Department of Education is asking for public comment on the proposed regulations by Sept. 9. Final
regulations are due by Nov. 1 and will take effect in July. To read more or comment, go to
protectstudentsandtaxpayers.org.

We know that for many, a college education is necessary. But in our zeal to make sure people get a
higher education, we've communicated that they need to get a degree even if it means decades of debt.
5!



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&
  
The Arizona Republic Online
August 19, 2010
By Dawn Gilbertson

The parent of Grand Canyon University has settled a whistle-blower lawsuit over recruiter-pay practices
for $5.2 million.

Phoenix-based Grand Canyon Education Inc. said Wednesday that the settlement was approved by the
U.S. District Court in Phoenix, where the case was filed under seal in 2007.

The company's stock rose nearly 11 percent, to $17.35, after it announced the settlement. Analysts
noted, however, that the company and its competitors in the for-profit education industry still face several
challenges because of sweeping regulatory changes under way.

Grand Canyon announced the settlement with former employee Ronald D. Irwin last year and reserved
the $5.2 million at the time.

The case wasn't resolved until a court hearing last week. Irwin filed the claim on behalf of the federal
government under the False Claims Act. The government will receive 73 percent of the settlement
amount and Irwin 27 percent, the company said.

Grand Canyon said the settlement releases it from further administrative actions by the U.S. Department
of Education over the incentive-compensation issues in the lawsuit. The release covers 2001 through
April 28, 2010.

Under Department of Education regulations, schools that receive federal financial aid are not allowed to
tie recruiters' pay to the number of students they enroll, though there are exceptions.

The lawsuit alleged that Grand Canyon violated the so-called incentive-compensation ban with, among
other things, non-cash awards for enrollment counselors.

Phoenix-based Apollo Group, parent of the University of Phoenix, settled a whistle-blower lawsuit over
the same issues for $78.5 million last year.

Grand Canyon has said its compensation policies and practices have not been based on success in
enrolling students, but it notes, as many of its competitors contend, that the rules are not clear.

The rules, designed to protect students from aggressive sales tactics and the government from loan
defaults, are currently under review and expected to become more strict.

In addition to the new regulations, Grand Canyon still will face a program review by the Education
Department, where one of the issues is recruiter compensation, and an Office of Inspector General
investigation tied to the whistle-blower case.
3
%% c
 ) 
(+
The Orange County Register
August 19, 2010

Ranking 35th is Multi-Fineline Electronix, an Anaheim maker of circuit boards for electronic devices. Its
three-year revenue growth is 20%, earnings-per-share growth is 88% and total return on investment 13%.

Weighing in at 79th is Corinthian Colleges, the Santa Ana-based private career college with 110
campuses. It bought Heald College in 2009, which added 11 campuses and 12,900 students, which
helped boost it to 21% revenue growth and 114% earnings-per-share growth. It return on investment
declined 15%.

The worldwide list, which will be in the Sept. 6 print edition of the magazine, is based on three-years of
growth in revenue, earnings per share and return on investment.

This is an improvement over 2009 when Orange County had no companies on the Fortune fastest
growing list.

In 2008, four Orange County companies made the list.

Tops on Fortune's 2010 list are:

1. Eldorado Gold, British Columbia

2. Green Mountain Coffee Roasters, Waterbury, Vt.
3. Ebix, Atlanta, Ga.
4. salesforce.com, San Francisco
5. KapStone Paper and Packaging, Northbrook, Ill.

California tops all other locations with 15 companies on the list followed by:
* All international locations, 20
* Texas, 8
* New York, 6
* Illinois, Massachusetts and Michigan, 5 each

Fortune calls the list "Our annual collection of rising phenoms... succeeding even in a stagnant economy."
That seems to be an understatement, given that this year's list covers a period that had one of the worst
recessions in 70 years.
c


  

  
 &*

Wisconsin Watch.org
August 20, 2010
By Kate Golden

Janesville resident Melissa Willes, who is suing Westwood College for operating without state approval,
says she and her husband, Eric Willes, were "heavily misled" by Westwood. They owe about $50,000 for
their schooling but have no degrees to show for it. Photo by Dan Lassiter/The Janesville Gazette

Now that she knows Westwood College was never authorized to operate in Wisconsin, Janesville
resident Melissa Willes wants her $25,000 back.

³The biggest mistake of my life was attending college,´ said Willes, 23, one of at least 200 Wisconsin
students who have taken online classes through Westwood.

The major for-profit college, based in Denver, is coming under intensified federal scrutiny since a recent
government report documented improper recruiting practices within the nation¶s fast-growing for-profit
college sector.

Willes said a Westwood recruiter assured her the $75,000 online bachelor¶s degree in interior design she
was considering wasn¶t approved yet in Wisconsin, but it would be by the end of her three-year program.

Willes never finished the degree after maxing out her borrowing limit for federal student loans. Westwood
credits generally aren¶t transferable to other schools, the college acknowledges.

On July 7, Willes sued Westwood in Rock County Circuit Court, and on Aug. 6 Westwood moved the case
to U.S. District Court in Madison. Willes charged that the college was operating without the required state
approval, which is designed to ensure educational quality and protect students from fraud. She has asked
the court to certify her suit as a class action.

In her lawsuit, Willes claimed that misleading marketing tactics by Westwood enticed her to enroll in a
substandard program and take on excessive tuition debt in pursuit of a ³largely useless´ degree.

State regulators confirm Westwood never applied for approval.

Other major for-profit online colleges, such as Capella University, are licensed in Wisconsin by the
Educational Approval Board, which oversees for-profit colleges and technical schools, out-of-state
nonprofits, and Wisconsin nonprofit colleges incorporated since 1992. Among those exempt from its
oversight are the University of Wisconsin system and schools regulated by other agencies, such as
cosmetology or real estate.

David Dies, executive secretary of the EAB, said that ³technically speaking,´ thousands of schools like
Westwood could violate state statute by signing up Wisconsin students without board approval. However,
Dies said, the board doesn¶t have the means or the will to oversee them all.

In response to questions from the Wisconsin Center for Investigative Journalism, Westwood spokesman
Gil Rudawsky didn¶t deny the college lacked official approval in Wisconsin but wrote in an e-mail that the
³licensing of online colleges in individual states is an ongoing and developing issue across the country.´
The Texas Workforce Commission ordered Westwood to stop offering online courses there after the law
firm representing Willes filed a similar lawsuit in Texas over Westwood¶s lack of a license to operate in
that state.

For-profit schools have grown dramatically across the country in recent years, and taxpayer-funded
student loans are their bread and butter. The $25 billion they raked in from federal grants and loans in
2009 had doubled over 10 years, according to a U.S. Senate report.

For-profits under fire for recruiting tactics

Willes¶ lawsuit came as the nationwide for-profit college industry was exposed for widespread aggressive
and deceptive recruiting in a scathing U.S. Government Accountability Office report. That report prompted
U.S. Education Secretary Arne Duncan to promise a crackdown on for-profits¶ recruiting practices.

David Hawkins, director of public policy and research at the National Association of College Admission
Counseling, testified Aug. 4 before a U.S. Senate committee that recruiters have hidden the true cost of
their programs, the quality of the courses and the transferability of credits to other colleges, and have
made ³false statements or misrepresentations about employment prospects and earnings potential.´

³These do not appear to be isolated incidents of bad actors or rogue officers,´ Hawkins said. ³This
appears to be a fairly standard practice.´

Westwood has pledged to clean up its recruiting practices -- paying recruiters salaries instead of
commissions, increasing admissions requirements and investigating its own financial aid and recruitment
processes -- but stands by its schooling.

³We are proud of the work by our 40,000 students and graduates, many of whom are working at
businesses throughout Wisconsin. We will continue to defend their hard work, and the opportunities we
provide them through our online program,´ Rudawsky wrote in response to an interview request from the
Wisconsin Center for Investigative Journalism.

Westwood has filed a motion to force Willes¶ lawsuit out of court and into arbitration, citing an agreement
she signed upon enrollment that any disputes would be resolved that way.

Westwood has 17 brick-and-mortar campuses nationwide. In Wisconsin it offers only online programs,
according to court filings. The college has more than 15,000 students in 27 degree programs and is
owned by Denver-based Alta College Inc.

Westwood admits recruiting problems

At the Senate hearing, the GAO showed hidden-camera videos of Westwood and other for-profit college
recruiters using what appeared to be aggressive and deceptive tactics on undercover agents posing as
potential students.

Of the 12 for-profits in the probe -- including Westwood, the University of Phoenix and Kaplan University,
all of which enroll Wisconsin students -- each one used deceptive practices, GAO director of forensic
audits Gregory Kutz told Congress. And recruiters at four appeared to encourage would-be students to
commit fraud to get federal student loans, Kutz said.

To one agent who claimed to have a $250,000 inheritance in the bank, a recruiter in the GAO video said,
³Frankly, in my opinion, they don¶t need to know how much cash you have.´

GAO agents didn¶t identify the college, but George Burnett, chief executive officer of Westwood,
confirmed to the Denver Post that the recruiter was one of his and said he was ³shaken and appalled.´
Westwood is facing three other federal lawsuits in California, Colorado and Texas from the same Florida
consumer law firm -- James, Hoyer, Newcomer, Smiljanich & Yanchunis -- that is representing Willes.

In turn, Westwood has sued the ³predatory´ law firm for allegedly defaming Westwood, in part by creating
a website called westwoodscammed.me and through ³derogatory Twitter messages.´

Only some colleges seek EAB approval

Willes¶ lawsuit claims Westwood should have sought approval from the state¶s Educational Approval
Board, which regulates educational programs ranging from certificates to teach belly dancing to
doctorates in psychology. The board also helps students resolve disputes with colleges.

According to state law, the EAB¶s charge is to ³protect students, prevent fraud ... and encourage schools
to maintain courses consistent in quality, content and length with generally accepted educational
standards.´

³Unapproved schools are breaking the law,´ EAB¶s website states.

But the website also acknowledges that ³many´ online schools don¶t seek its approval. It recommends
that potential students check with the board to see if schools are approved.

Unapproved schools face $500-per-day fines, according to the EAB¶s website. But Westwood has never
been cited for operating without state approval. The board¶s response to unapproved online schools is not
to punish them, but to try to get them to apply for approval, according to Dies.

Such a school triggers the EAB¶s interest, Dies said, only if the board gets several complaints. Then the
board asks how many Wisconsin students the school has enrolled. If it¶s at least 10 or 12, Dies said, the
EAB will prod the school to apply for approval.

The board has known about Westwood since at least 2006, when it resolved a student¶s billing complaint
in favor of the school. But Westwood¶s status in Wisconsin apparently didn¶t come up then, and Dies said
one complaint wasn¶t enough to concern the board.

Dies called allegations about Westwood and other for-profits¶ deceptive recruiting ³clearly troubling,´ and
the sort of problem that his board would handle. But he also said the board requires a complaint to act,
and hasn¶t gotten any recently from Westwood students or employers.

³We respond to situations that are brought to our attention,´ he said.

Dies said the EAB isn¶t fully equipped to regulate the burgeoning for-profit college industry. Its budget of
about $500,000 has been nearly flat over the past decade, while the number of approved institutions has
grown 46 percent, from 112 to 164.

Husband also out thousands

Willes said her husband also feels betrayed by Westwood. Eric Willes signed up for a video-game design
program at Westwood while living in Illinois -- but never finished after his federal loans ran out.

After that, he made the mistake of accepting Westwood¶s offer of an additional loan -- at a whopping
interest rate of 18 percent. That loan covered three months of schooling, and accounts for half of the total
$25,000 he now owes.
Now he¶s making $12.50 an hour at a furniture store. Melissa Willes is making $11 an hour as an
insurance agent¶s assistant.

The couple cannot afford the minimum $1,200 a month to repay their student loans, so those are on hold,
some accruing interest. Because of their credit problems, they needed co-signers even to rent a home.
They would like to have children, but say they must wait until they have more money.

³Once they¶re done milking you for all you¶re worth, they drop you like a hot potato,´ Melissa Willes said.
³And then, to boot, to find out they¶re not even registered in the state of Wisconsin? It¶s a double
whammy.´