Federal attack on for-profit colleges lighter than expected

Somebody has to cater for the generally low-income students who have few other options. New rule: Programs would lose their eligibility if more than 65 percent of former students failed to pay the principal on federal loans, and if their graduates' debt was more than 30 percent of discretionary income and 12 percent of total income. Investors think that most for-profit schools can live with that

For-profit colleges are booming as the unemployed turn to education, but some members of Congress and Obama administration officials say they are growing at the expense of taxpayers and that students are often exploited.

The average profit among such publicly traded higher education companies soared to $229 million in 2009, up from $150 million the year before, with the lion's share of their revenue coming from federal student aid. For example, federal dollars accounted for 86% of revenue at the University of Phoenix, which has more than 458,000 students.

But according to a recent report issued by the Senate Committee on Health, Education, Labor and Pensions, the public's money is often not well spent on the schools. The colleges cater to low-income and minority students often working online with little supervision, yet they charge on average twice as much as public universities charge in-state students.

Investigators believe a high proportion of students drop out, and those who do graduate find their money wasted because their programs are not accredited. Students at for-profit colleges borrow more and are more likely to default on their loans, furthering taxpayer losses.

According to the Chronicle of Higher Education, 30% of students who borrowed from the federal government to attend four-year for-profit institutions have defaulted since 1995. Roughly 15% of students at public four-year colleges and 13.6% at private nonprofit four-year colleges have defaulted since then, the Chronicle reported.

The Department of Education on Friday moved to rein in some for-profit firms with a proposal that would cut off federal student aid to individual programs within colleges that have a high proportion of students who cannot repay their loans after leaving.

"Some proprietary schools have profited and prospered, but their students haven't," Education Secretary Arne Duncan said. "These schools — and their investors — benefit from billions of dollars in subsidies from taxpayers, and in return taxpayers have a right to know that these programs are providing solid preparation for a job."

The proposed regulation, less stringent than originally expected, could put out of business 5% of for-profit programs, a number that critics of the colleges said was not high enough.

"At first glance, the regulation appears to set a low bar," Sen. Tom Harkin (D-Iowa), chairman of the Senate panel that issued the report, said in a statement Friday. "I will be looking closely at this rule to ensure that it goes far enough to protect the $23 billion in federal aid to for-profit schools each year."

Harkin and a chorus of Senate Democrats are leading the call for government to step up regulation of for-profit colleges, saying it must ensure that tax dollars are not wasted and students are not cheated.

But Harris Miller, president of the Career College Assn., which represents for-profit schools, said the schools have a special challenge. "We have millions of students who are not even in the educational system who have been told, 'You're not college material,' " Miller said. "Somebody has to reach out to those people."

Corinthian Colleges spokesman Kent Jenkins said the disproportionate default rate was a consequence of the large number of low-income students in the programs. Reaching low-income students requires the schools to run high advertising budgets, he added. The Senate panel report noted that the schools devote about a third of their budgets to advertising.

The report acknowledges that President Obama's goal of doubling the number of U.S. college graduates by 2020 may hinge on for-profit colleges, which are able to expand faster than public colleges and universities. After a series of painful cuts to the University of California and California State University systems last summer, enrollment at for-profit colleges in California shot up 20%.

Stephen Burd, an education policy expert at the New America Foundation, said the scrutiny is long overdue, but lawmakers will have to contend with the industry's "Teflon lobby." Many concerns have been raised about for-profit colleges, but nothing has stuck, he said. "For-profit college lobbyists are accustomed to flexing their muscles on Capitol Hill and getting their way — no matter how much controversy is swirling around their schools," he said.

Although for-profit colleges were once mom-and-pop operations, the 14 publicly traded institutions enroll 1.4 million students, up from fewer than 200,000 in 1998, according to the Senate committee report. Kathleen Tighe, inspector general for the Department of Education, testified at the panel's June 24 hearing that 70% of the department's investigations involve for-profit colleges, many of which have been found guilty of falsifying student information to obtain more federal funds.

Tighe also testified that she is concerned about the rapid expansion of online programs in recent years because students are eligible for the same amount of federal aid but it is more difficult to track their progress — a potential recipe for fraud.

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Once a Leader, U.S. Lags in College Degrees

The United States used to lead the world in the number of 25- to 34-year-olds with college degrees. Now it ranks 12th among 36 developed nations.

“The growing education deficit is no less a threat to our nation’s long-term well-being than the current fiscal crisis,” Gaston Caperton, the president of the College Board, warned at a meeting on Capitol Hill of education leaders and policy makers, where he released a report detailing the problem and recommending how to fix it. “To improve our college completion rates, we must think ‘P-16’ and improve education from preschool through higher education.”

While access to college has been the major concern in recent decades, over the last year, college completion, too, has become a leading item on the national agenda. Last July, President Obama announced the American Graduation Initiative, calling for five million more college graduates by 2020, to help the United States again lead the world in educational attainment.

This month, on becoming chairman of the National Governors Association, Gov. Joe Manchin III of West Virginia announced that he would lead a college-completion initiative.

In May, Grantmakers for Education, an organization for those who make gifts to educational programs, convened a group of philanthropists and policy experts to talk about how to bolster college-completion rates.

“We spend a fortune recruiting freshmen but forget to recruit sophomores,” Michael McPherson, president of the Spencer Foundation, said at the meeting.

In April, Melinda Gates gave a speech at the American Association of Community Colleges convention, urging community college officials to lead the way on college completion and pledging that the Bill and Melinda Gates Foundation would contribute up to $110 million to improve remedial programs, in an effort to increase graduation rates.

“The stars are aligning in a way that gives me some hope,” said William Kirwan, chancellor of the University System of Maryland, who hosted the Washington discussion along with Mr. Caperton. “This is a problem that’s been around for too long. But now there’s beginning to emerge a focus of attention and activity that quite frankly we haven’t had till now.”

Mr. Kirwan said that the United States had fallen behind other countries over several decades.

“We led the world in the 1980s, but we didn’t build from there,” he said. “If you look at people 60 and over, about 39-40 percent have college degrees, and if you look at young people, too, about 39-40 percent have college degrees. Meanwhile, other countries have passed us by.”

Canada now leads the world in educational attainment, with about 56 percent of its young adults having earned at least associate’s degrees in 2007, compared with only 40 percent of those in the United States. (The United States’ rate has since risen slightly.)

While almost 70 percent of high school graduates in the United States enroll in college within two years of graduating, only about 57 percent of students who enroll in a bachelor’s degree program graduate within six years, and fewer than 25 percent of students who begin at a community college graduate with an associate’s degree within three years.

The problem is even worse for low-income students and minorities: only 30 percent of African-Americans ages 25-34, and less than 20 percent of Latinos in that age group, have an associate’s degree or higher. And students from the highest income families are almost eight times as likely as those from the lowest income families to earn a bachelor’s degree by age 24.

The problem begins long before college, according to the report released Thursday.

“You can’t address college completion if you don’t do something about K-12 education,” Mr. Kirwan said.

The group’s first five recommendations all concern K-12 education, calling for more state-financed preschool programs, better high school and middle school college counseling, dropout prevention programs, an alignment with international curricular standards and improved teacher quality. College costs were also implicated, with recommendations for more need-based financial aid, and further efforts to keep college affordable.

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Cutting British education quangos 'could save £500m'

Cutting funding to education quangos could save the government more than £500 million a year, a report has claimed. Many quangos – quasi non-governmental organisations – waste taxpayers' money because their services are widely available in the private sector while others spend millions on programmes of questionable value, the study said.

Savings of £520 million could be made by cutting funding for the government-funded bodies, which are designed to support the education system, according to the Chartered Institute of Personnel and Development (CIPD).

The report comes after 700 schools were told that building projects promised to them by the previous government would have to be scrapped due to a lack of funding.

Among the potential savings identified by the CIPD was the £146 million annual budget for the Learning and Skills Improvement Service (LSIS), a body offering free consultancy to course providers such as colleges.

Analysts said the spending of £6.5 million on delivering awards for "outstanding providers and practitioners" and £1 million on promoting healthy life styles within further education "bring into doubt how effectively their resources are being used."

The LSIS was also guilty of "crowding out" private companies which could offer the same service, and was "merely using public funds to boost the performance of colleges", the report added.

Other annual savings included: £51 million from the British Educational Communications and Technology Agency (BECTA), which the government has pledged to close down; £19 million from Lifelong Learning UK (LLUK), a representative body for the skills sector; £7 million from the National Institute of Adult Continuing Education (NIACE), which promotes adult learning; and £89 million from Regional Development Agencies, which are to be scrapped and replaced by Local Enterprise Partnerships under government proposals.

The report concluded: "Even though they are responsible for substantial budgets, the quangos have seldom, if ever, been asked to justify their budgets or outline their contribution to the economy and society as a whole.

"This absence of an accountability mechanism appears to have allowed many quangos to continue their work without being expected to justify their existence and performance."

Tom Richmond, Policy Adviser on Skills, CIPD, said: "With so much money at stake and with imminent spending reductions across many government departments, the role, purpose and operations of each individual quango must therefore be revisited as a matter of urgency."

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