[Senate Hearing 111-1162]
[From the U.S. Government Publishing Office]
S. Hrg. 111-1162
THE FEDERAL INVESTMENT IN FOR-PROFIT EDUCATION: ARE STUDENTS
SUCCEEDING?
=======================================================================
HEARING
OF THE
COMMITTEE ON HEALTH, EDUCATION,
LABOR, AND PENSIONS
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
ON
EXAMINING THE FEDERAL INVESTMENT IN FOR-PROFIT EDUCATION, FOCUSING ON
IF STUDENTS ARE SUCCEEDING
__________
SEPTEMBER 30, 2010
__________
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Pensions
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COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS
TOM HARKIN, Iowa, Chairman
CHRISTOPHER J. DODD, Connecticut MICHAEL B. ENZI, Wyoming
BARBARA A. MIKULSKI, Maryland JUDD GREGG, New Hampshire
JEFF BINGAMAN, New Mexico LAMAR ALEXANDER, Tennessee
PATTY MURRAY, Washington RICHARD BURR, North Carolina
JACK REED, Rhode Island JOHNNY ISAKSON, Georgia
BERNARD SANDERS (I), Vermont JOHN McCAIN, Arizona
ROBERT P. CASEY, JR., Pennsylvania ORRIN G. HATCH, Utah
KAY R. HAGAN, North Carolina LISA MURKOWSKI, Alaska
JEFF MERKLEY, Oregon TOM COBURN, M.D., Oklahoma
AL FRANKEN, Minnesota PAT ROBERTS, Kansas
MICHAEL F. BENNET, Colorado
CARTE P. GOODWIN, West Virginia
Daniel E. Smith, Staff Director
Pamela Smith, Deputy Staff Director
Frank Macchiarola, Republican Staff Director and Chief Counsel
(ii)
C O N T E N T S
__________
STATEMENTS
THURSDAY, SEPTEMBER 30, 2010
Page
Harkin, Hon. Tom, Chairman, Committee on Health, Education,
Labor, and Pensions, opening statement......................... 1
Enzi, Hon. Michael B., a U.S. Senator from the State of Wyoming,
opening statement.............................................. 4
Johnson, Danielle, Tama, IA...................................... 10
Prepared statement........................................... 11
Mitchem, Arnold, Ph.D., President, Council For Opportunity in
Education...................................................... 13
Prepared statement........................................... 15
Bittel, Kathleen A., Acme, PA.................................... 17
Prepared statement........................................... 19
Asher, Lauren, President, The Institute for College Access and
Success, Oakland, CA........................................... 22
Prepared statement........................................... 24
Burr, Hon. Richard, a U.S. Senator from the State of North
Carolina....................................................... 38
Franken, Hon. Al, a U.S. Senator from the State of Minnesota..... 41
Merkley, Hon. Jeff, a U.S. Senator from the State of Oregon...... 44
McCain, Hon. John, a U.S. Senator from the State of Arizona...... 45
Casey, Hon. Robert P., Jr., a U.S. Senator from the State of
Pennsylvania................................................... 50
Prepared statement........................................... 52
Reed, Hon. Jack, a U.S. Senator from the State of Rhode Island... 53
ADDITIONAL MATERIAL
Statements, articles, publications, letters, etc.:
Response to questions of Senator Harkin and Senator Enzi by
Arnold Mitchem, Ph.D....................................... 68
Response to questions of Senator Enzi by Kathleen Bittel..... 70
Response to questions of Senator Enzi by Lauren Asher........ 79
Letters from:
Iowa Chapter--Mid-America Educational Opportunity Program
Personnel (IA--MAEOPP)................................. 83
Council for Opportunity in Education (COE)............... 84
Education Management Corporation (EDMC).................. 85
Kaplan University........................................ 93
Senator Harkin to Susan Spivey, Kaplan University........ 94
(iii)
THE FEDERAL INVESTMENT IN FOR-PROFIT EDUCATION: ARE STUDENTS
SUCCEEDING?
----------
THURSDAY, SEPTEMBER 30, 2010
U.S. Senate,
Committee on Health, Education, Labor, and Pensions,
Washington, DC.
The committee met, pursuant to notice, at 10:07 a.m., in
Room SD-124, Dirksen Senate Office Building, Hon. Tom Harkin ,
chairman of the committee, presiding.
Present: Senators Harkin, Reed, Casey, Merkley, Franken,
Enzi, Burr, and McCain.
Opening Statement of Senator Harkin
The Chairman. The Senate Committee on Health, Education,
Labor, and Pensions will come to order.
This is the third in a series of hearings by this committee
examining the Federal investment in for-profit colleges and
universities. As we have seen in recent months, this is a very
wealthy and powerful industry. It has spent a small fortune on
full-page ads in major newspapers drawing attention to its
schools.
I certainly agree, that at their best, for-profit colleges
may offer an alternative model for higher education. But this
committee's ongoing investigation has brought to light
disturbing practices that appear to be systemic to this
industry and that raise serious questions about the enormous
taxpayer investments in these schools.
During our hearing on August 4, the Government
Accountability Office presented a troubling picture of student
recruitment at for-profit colleges. Undercover investigators
from GAO visited 15 campuses of 12 companies and found
misleading, deceptive, overly aggressive or fraudulent
practices at every one of those campuses. We heard testimony
that these recruitment practices result in students unprepared
or poorly matched to their academic program, with a high
probability of dropping out, leaving school not with a degree
but with a mountain of debt.
Frankly, it is hard to imagine that an educational
relationship that begins with a school deliberately misleading
and sometimes outright lying to the student could result in a
meaningful degree or a positive outcome. Nevertheless, we
continue to hear claims from for-profit colleges that, despite
deceptive marketing, they provide a meaningful educational
opportunity to low-income college students. At today's hearing
we will explore the credibility of that claim.
Following our last hearing, I issued a request for
documents from 30 for-profit higher education companies. Each
of those companies has complied and cooperated. I'd like to
thank the companies, especially the smaller schools, who may
not have expected to be included and have provided particularly
clear and thorough responses. I look forward to the completed
submissions in the next 2 weeks.
The information provided by the companies is helping to
fill in the serious gaps in publicly available information
about the for-profit education sector and its students and
about what taxpayers are getting for the $24 billion annual
investment in these schools. Let me repeat that: the taxpayers'
investment is $24 billion a year.
In preparation for today's hearing, I asked my staff to
assemble a report based in large part on data about Federal and
State revenues and student outcomes provided by the companies
and analyzed by my staff. I'd like to ask consent to put this
report and the summary sheet of data, which I have here, in the
record at this point.
Senator Enzi. To the extent the documents included with the
report are not proprietary or trade secret data, I have no
problem with it.
The Chairman. And they don't.
[The material referred to may be accessed electronically at
http://harkin.senate.gov/documents/pdf/4caf6639e24c3.pdf.]
I will say that late last evening, about 8 o'clock, we were
informed by one of the larger companies that they had provided
inaccurate data to this committee. The HELP Committee depends
on companies to completely and accurately provide information
for analysis. If this incorrect data provided by the school
requires adjustment to the report, it will be made accordingly.
I might just add that this is one of the larger companies.
They called last night at 8 o'clock. They went through the
methodology for a couple of hours with my staff. My staff
thought it was resolved at about 10 p.m. last night. At 5 a.m.
today, we received another email, followed by a phone call at 7
a.m. today, to my staff, from the same company, saying that
they still had additional inaccuracies.
This makes me wonder. If a large company like this can't
even provide an accurate list of their students, what is going
on?
The report is titled ``The Federal Investment in For-Profit
Higher Education: Debt Without a Diploma.'' It shows how for-
profit colleges have raised the stakes for the Federal
taxpayers and for students. I have a series of slides that kind
of indicate this.
[Slide.]
Slide 1 shows that, because of their almost total reliance
on taxpayers' dollars, for-profit colleges have made the
Federal Government their primary free-money spigot. And I think
that slide shows that at least at 14 of these schools, 87
percent of their money came from the Federal Government. At
least four of these, the Federal dollars now account for over
90 percent of the revenues. But at 16 companies, profits in
2009 totaled $2.7 billion, with some profit margins going as
high as 37 percent. I think the Standard and Poor's last year
was about 6.5 percent.
View Slide No. 2.
[Slide.]
Second, by obligating almost every student to take out
loans, for-profit colleges have turned higher education into a
high-stakes gamble for low-income students. Ninety-five percent
of for-profit college students borrow to attend school,
compared to just 16 percent of community college students. For-
profit colleges account for only 10 percent of students
enrolled in higher education, but those students receive 23
percent of Federal student loans and grants and account for 44
percent of the student loan defaults.
[Slide.]
The new report examines the rate at which students withdraw
from 16 institutions. Of students who enrolled during the 2008-
9 school year, 57 percent had withdrawn by this past summer.
That is 57 percent of students withdrawing within the first 2
years, based on self-reported numbers by the institutions
themselves. Now, these students take with them thousands of
dollars in student loan debt and none of the earning potential
that comes with a college degree.
Over the past 3 years, almost 2 million students have
withdrawn from for-profit colleges. None of these students
gained a degree or a certificate, but almost every one of them
left with a debt that they are struggling to repay, debt that
is not dischargeable in bankruptcy and could bar them from
getting future student loans. Let me repeat that. Over the past
3 years, almost 2 million students have withdrawn from for-
profit colleges. They got neither a degree nor a certificate,
but almost every one left with debts, sometimes huge debts, not
dischargeable in bankruptcy and could bar them from getting
future student loans.
The bottom line is this. For students enrolling in for-
profit schools, graduation with a degree is a possibility, but
a debt without a diploma is a probability. Going to college
should not be like going to a casino, where the odds are
stacked against you and the house usually wins.
[Slide.]
This last slide shows the tuition costs for average
withdrawing bachelor's degree students. As you can see, it
ranges from $8,904 up to $11,328, and that is for a period of
15 to 22 weeks. That's not per year. For some of them, their
semesters range from 15 weeks to 22 weeks. But that's the
tuition cost for 15 to 22 weeks, as high as $11,000.
I had some students in at my breakfast yesterday morning
from one of the for-profit colleges located in my home State.
Nice young people. They all receive both scholastic and sports
scholarships. I just happened to randomly ask one of the
basketball players, who was there on a basketball scholarship,
I asked him if he'd taken out student loans. He said, ``Yes.''
I said, ``How much is your debt?'' He said, ``About $50,000.''
And he hasn't even graduated yet.
I turned to another young person who was there on a track
scholarship. I said, ``Do you take out student loans?'' He
said, ``Yes.'' I said, ``Well, how many have you taken out?''
He said, ``Oh, about $40,000.''
Think about these kids. Even if they are lucky enough to
graduate, what kind of jobs are they going to get to pay back
that kind of a huge debt?
So, given the financial risks that some for-profit schools
pose to prospective students, my question is, are they the
right institutions to be targeting low-income students? Today
we'll hear from several witnesses with insight on this
question.
Now I invite Senator Enzi to give his opening statement.
Opening Statement of Senator Enzi
Senator Enzi. Thank you, Mr. Chairman.
I agree there is clearly a problem in higher education.
Now, you'll notice I didn't limit that comment to for-profit
schools. Students are taking on too much debt, defaults are too
high, and students are having too much difficulty finding jobs
or even completing their program of study. After two hearings
devoted to highlighting these issues in the for-profit sector,
which amounts to only 10 percent of higher education
enrollments, I don't think there's a single person in the room
that would disagree that there is a problem.
However, it's naive to think that these problems are
limited to just the for-profit sector. We've been looking at
this in a vacuum. $24 billion of taxpayer money, that's money
that goes to students for their tuition help, which of course
winds up with the institution. That's no different than other
colleges and universities where the students get help from the
Federal Government. That also goes to that institution, not to
mention the taxpayer dollars from the States and other sources
that go into that sector.
Two million withdrew and had debt. How many have withdrawn
from community colleges and other colleges and had debt? We're
looking at this issue in a vacuum. For instance, I saw an
article this last week about law schools and the amount of
tuition they charge, the students completing it, how much debt
they have, and that's one of the sectors where they're
overstocked with people. So we're just looking at all of this
in a vacuum and that's not fair.
As Senator Burr correctly explained during the last
hearing, many public and private nonprofit schools are having
difficulty graduating even 20 percent of their students. Just
this month we learned that the cohort default rate has
increased over the past year in every sector of higher
education--public, nonprofit, and for-profit. And underlying
all of this is the fact that tuition continues to rise in all
sectors of higher education faster than the rate of inflation,
putting the dream of a college education out of reach for many
of our most financially vulnerable students.
So what are we going to do about it? Are we going to find
solutions? Why aren't we holding hearings with experts who can
offer constructive solutions? If we want to make the for-profit
sector better, why aren't we looking at what is being done
right as an example of how to move forward? If we want to weed
out the bad actors, why have these hearings been designed to
suggest that all for-profits are inherently bad? If we want to
understand why defaults are increasing and completion rates are
declining, why have only one-third of the witnesses in the past
two hearings had any expertise in education policy? If we want
to make sure that students have access to high-quality college
education and make higher education more affordable, why are we
not looking at these problems throughout higher education?
Furthermore, why are we not looking at the dramatic
regulatory changes being proposed by the Department of
Education?
Mr. Chairman, this committee has an obligation to protect
the interests of students. Unfortunately, the interests of
students are not being served by this series of hearings.
Moreover, Mr. Chairman, you've requested hundreds of thousands
of pages of information, much of which is highly confidential
information, from 30 for-profit schools. Onerous document
requests, hastily conducted investigations, and narrowly
focused anecdotal data analysis that blatantly ignore the
problems faced by the vast majority of students are not the way
to address this or any other problem.
I came here to make a difference, not to make headlines. So
I'm ready and willing to work with the chairman to begin
addressing these problems and help achieve the President's goal
of being first in the world in college completion by 2020.
However, instead of working to find solutions to improve these
schools, the two previous hearings have focused entirely on
tearing these schools down. After reviewing Chairman Harkin's
report and reading the testimony of the witnesses, it appears
that this hearing will simply be more of the same.
This hearing appears to have been planned in conjunction
with the Department of Education's proposed Gainful Employment
Rule, discriminating against all for-profit schools while
ignoring colleges and universities with the same record. That
rule drew 90,000 comments. Several full-page ads about the
effect on low-income students have been in the newspapers. You
probably recognize this one. I hope everybody not only
recognizes it, but reads the text that goes with it.
I would mention that the proposed rule has been partially
withdrawn by the Administration. Actually, it's been delayed
until next year. That would be after elections, right?
So I ask that the text of my letter making comments on that
rule be included in the record.
[The material referred to was not available at time of
print.]
Senator Enzi. And I ask that the text from this ad by the
National Black Chamber of Commerce be included in the record as
well. According to the NBCC, the Department's proposed Gainful
Employment Rule, will lead to 400,000 students leaving
postsecondary education, it will lead to a 15 percent reduction
in lifetime salary for those students, it will eliminate 90,000
to 100,000 jobs, and it will create a $5.3 billion burden on
taxpayers. That's according to the National Black Chamber of
Commerce. That's some of the text that's on that page.
[The material referred to was not available at time of
print.]
Senator Enzi. These numbers are staggering and not
something the committee should ignore, especially in a down
economy. But that hasn't stopped the pounding here. There are
problems in all sectors of higher education and it's not fair
to pick on and abuse one sector in a vacuum.
Finally, you'll notice there are no Republican witnesses on
this panel. During the two previous hearings we invited
individuals with extensive and highly respected backgrounds in
education. Each acknowledged that the for-profit sector is not
perfect and that there's room for improvement. However, instead
of engaging in a productive and professional conversation about
what we can do to fix the problems, the majority chose to
mischaracterize their testimony and attempted to lead them into
misstatements. Given the hostile treatment received by our
previous witnesses, I refrained from leading other witnesses
into that kind of treatment.
I also want to point out that this isn't just a college
thing. I have the ``Diary of Alpha Kappa Psi.'' It's a business
fraternity that I belonged to when I was in college, and every
month it has an article that deals with ethics. This one's
called ``Servant Leadership'' and it says,
``I was asked by a reporter recently, how can servant
leadership in a capitalistic society be based on greed?
The answer was simple: The free enterprise system works
best when business leaders are servant leaders. Why?
Because servant leaders listen to the customers. The
theory of the invisible hand is that each producer is
free to choose what to sell and at what price, and if
each consumer is free to choose what to buy and at what
price then the market will settle on the product and
prices that are beneficial not only to the
individuals.''
I would ask permission that the entire article be included
in the record. It's a good discussion of greed and whether it's
widespread and what to do about it. That's what we ought to be
concentrating on, what to do about it.
[The material referred to follows:]
[Diary of Alpha Kappa Psi: Summer 2010, (Vol. 99, N0. 2)]
Servant Leadership: Making the Free Enterprise System Work Better
(By Dr. Kent M. Keith, CEO, Greenleaf Center for Servant Leadership)
Indianapolis.--I was asked by a reporter recently,
``How can servant leadership work in a capitalist system that
is based on greed?''
My answer was simple.
The free enterprise system works best when business leaders
are servant-leaders. Why? Because servant-leaders listen to
their customers.
Capitalism is not about greed, it's about the freedom to choose
Let's start by unraveling some of the assumptions in that
reporter's question. First of all, I don't accept the assumption that
capitalism is based on greed. Capitalism is an economic system in which
the means of production and distribution are privately owned by
individuals or corporations, instead of being owned by the government.
It is characterized by the existence of a free market for goods and
services.
Yes, there have been--and still are--some greedy capitalists. But
the idea that ``greed is good'' is not part of the definition of
capitalism. In 1776, the Scottish philosopher Adam Smith published An
Inquiry into the Nature and Causes of the Wealth of Nations, which may
have been the first modern work on economics. Smith described the
advantages of the division of labor, and the way in which an
``invisible hand'' would lead to the efficient allocation of resources
in the marketplace. That ``invisible hand'' was the sum of millions of
decisions that individuals made about what to produce, where to work,
what to buy and at what price. It was not about greed, but about the
freedom to choose.
The theory of the ``invisible hand'' is that if each producer is
free to choose what to sell and at what price, and if each consumer is
free to choose what to buy and at what price, then the market will
settle on the products and prices that are beneficial not only to
individuals but to the community as a whole. Producers will provide
what consumers really want, at prices they are willing to pay.
Is there self-interest in all this? Of course. People prefer to
work at some tasks and not others; producers try to be efficient in
order to make the most money; investors go where the return promises to
be the highest; consumers prefer to buy some products and not others;
and buyers like low prices. No surprises, here. But self-interest
expresses itself not as greed, but as free choice in the marketplace,
leading to the optimum allocation of resources.
There is another reason that ``greed is good'' doesn't match up
well with Adam Smith. Few people know that Adam Smith considered
himself a moral philosopher, and he thought his best book was The
Theory of Moral Sentiments. He argued that it was in our self-interest
to be compassionate and sympathetic toward others. Invisible hand, yes;
greedy hand, no.
Servant-leaders don't begin with the answer. They don't begin
with their own knowledge or expertise. They begin with
questions that will help identify the wants and needs of their
customers. Once those wants and needs are identified, servant-
leaders find the people and resources to respond with the right
programs, products or services to make their customers happy.
Making better choices
Now--if the essence of the capitalist system is the freedom to
choose, then the free enterprise system works best when companies
choose to make the things that people really want. Let's say that a
company decides to produce item A, and the marketing and sales
departments work hard to sell it. But what if consumers don't want to
buy A? What if they prefer B, instead? Then a lot of time and money is
wasted developing, producing, and trying to sell an unwanted product.
But what if that company had really listened to its customers
before creating A? Imagine that the company had done market research
through surveys and focus groups. They also asked their frontline sales
and service colleagues to give them input. What are customers saying?
What are they asking for? What do they like and not like? If the
company had been good at listening, it might have discovered that
people wanted B. If they had created B, the customer would have been
happy, and the company would have been more profitable. It would not
only have sold a lot of B, it would also have saved all the money it
wasted creating and marketing A. When companies are close to the
customer, they make better choices, and the free enterprise system as a
whole is more efficient and effective in allocating resources.
Listening
So, what's the tie-in to servant leadership? Listening.
One of the key practices of servant-leaders is listening. Robert
Greenleaf, the businessman who launched the modern servant leadership
movement, said that only a natural servant leader begins by listening.
Listening to your customers is of fundamental importance. It's the
way you become relevant, the way you link up. How can you meet the
needs of your customers if you don't know what those needs are? And how
will you know if you don't listen?
The main point is this: Servant-leaders don't begin with the
answer. They don't begin with their own knowledge or expertise. They
begin with questions that will help identify the wants and needs of
their customers. Once those wants and needs are identified, servant-
leaders find the people and resources to respond with the right
programs, products or services to make their customers happy.
Howard Behar is a member of the board of trustees of the Greenleaf
Center for Servant Leadership and the author of It's Not About the
Coffee: Leadership Principles from a Life at Starbucks. Howard Behar
joined Starbucks in 1989 when it had only 28 stores. Over the years he
was executive vice president of sales and operations, president of
Starbucks International, and president of Starbucks North America.
Howard has a sign on his wall that has two words on it: ``compassionate
emptiness.'' He says:
Compassionate emptiness involves listening with compassion
but without preconceived notions. Compassionate emptiness asks
us to be caring but empty of opinions and advice.
That's how we can listen--being truly attentive to the person who
is speaking, instead of thinking about what we are going to say next.
That makes it possible to really hear, and then respond appropriately.
One of the most relentless listeners I have ever met is Dick
Pieper, recently retired chairman of PPC Partners, Inc., headquartered
in Milwaukee. Dick is chairman of the board of trustees of the
Greenleaf Center for Servant Leadership. PPC Partners owns a series of
electrical service and construction firms. Dick joined Pieper Electric
as president in 1960, when the family-owned business had eight
employees doing $250,000 of business per year. Today, PPC Partners,
Inc. employs 900 to 1,100 people, does hundreds of millions of dollars
in sales, and is one of the top electrical contracting firms in the
United States.
One reason for the company's dramatic growth is that Dick is always
getting feedback from colleagues and customers. He is always asking and
listening, inside and outside the company.
Comments are solicited and studied, and the follow-up is
comprehensive. At Dick's company, listening is a broad-based,
systematic process with a focus on constant improvement.
Muhammad Yunus has changed the lives of hundreds of thousands of
people in Bangladesh through micro-credit. He and his bank, Grameen
Bank, won the 2006 Nobel Peace Prize for their work, which has spread
to other parts of the world. In his book, Creating a World without
Poverty, he describes how he was an economics professor, teaching about
the nation's long-term plans. But things in Bangladesh were not getting
better.
Finally, Yunus went out into the villages and listened. What he
discovered was that people needed small amounts of capital. They had no
collateral, so banks would not loan money to them. But the villagers
had energy and potential, and the amounts of capital they needed were
very small--50 cents or 75 cents. Yunus made 42 loans out of his own
pocket, for a total of $27. He asked for no collateral, but the
villagers paid their loans back. Yunus has continued to watch and
listen, and has launched an array of companies, each designed to give
opportunities to the poor. Hundreds of thousands of people in
Bangladesh and around the world are now part of this micro-credit
revolution. It would have never happened if Yunus had not decided to
listen first.
We cherish the free enterprise system. If we want it to be as
efficient as possible in allocating resources and meeting the needs of
consumers, we must have the kind of leaders who are good at listening:
Servant-leaders.
Through the fraternity's partnership with the Greenleaf Center for
Servant Leadership, our members get discounted memberships and access
to conferences. Learn more about what it means to be a servant-leader
and take advantage of this special Alpha Kappa Psi member benefit by
visiting akpsi.org.
Senator Enzi. I do stand ready to work with the chair on
solutions to the problems facing our Nation's students and
higher education. Over the past 15 years, wages of young
college graduates ages 25 to 34 have basically remained
stagnant, while tuition and fees at public and private 4-year
colleges have risen dramatically. Over the past 3 years, that
cycle has accelerated. Let's get to work solving that problem,
Mr. Chairman.
In my 14 years, I haven't been through a series of hearings
that have been this one-sided.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Enzi. I'd just say that I
guess it is less than 10 percent of all the students, but it's
now approaching 25 percent of all the Federal money. And that's
growing. That's one of the reasons that drew our attention to
this.
The question had to do with how many withdraw from
community colleges and whether or not we're focusing just in a
vacuum on this. Well, the point is that only 16 percent of
community college students borrow money. Ninety-five percent of
for-profit college students borrow money and they borrow money
at a higher amount than students at community colleges.
Plus there's the whole thing of tuition. In our report that
we put in the record, according to GAO's August 4 testimony, of
the 15 schools investigated 14 had higher tuition than the
nearest public college offering a similar program. One
particular for-profit college offered a, ``computer-aided
drafting certificate'' for $13,945, when the same program at a
community college would cost $520. That's from the GAO, not
from me.
The cost of an associate's degree offered by the second
largest for-profit school is over $38,000 and a bachelor's
degree from the same school can cost up to $96,500. Thus, a
student who enrolls in a for-profit school, even for a short
period of time, can amass many thousands of dollars of debt
that can take years to repay.
So again, I agree with my friend from Wyoming that it is
about access to poor kids, but access to what? A quality
education or a lifetime of debt, without a diploma or without a
degree?
Senator Enzi. When we had our first meeting on this, I
mentioned that we should not do it in a vacuum, that we should
include all institutions of higher education--and not just use
some selective statistics. So I'll leave you to go ahead and
beat up on the for-profit schools.
The Chairman. Well, I just looked at that ad. By our
estimation, the for-profit schools have spent $3.3 million on
these ads, and guess where the money came from? It came from
you, the taxpayers. Ninety percent of all their money comes
from the taxpayers, paying for these ads.
In response to my friend, I say that, look, they talk about
proprietary information. If you're getting over 90 percent of
your money from the taxpayers, it seems to me the taxpayers
have a right to know the data and the information about what's
happening to those students, what their debt loads are, what is
happening to them out there. That's why we're looking at this.
Now, I would say that this is not new. In 1991--and I spoke
with him on the phone recently--Senator Sam Nunn had an
investigation into this same thing. As a result of those
investigations, rules and regulations were adopted and laws
were passed to tighten down on this industry. That was 1991.
But what happened is those things that were enacted were
taken off later on. I might point out that at that time in 1991
there were fewer students enrolled in the entire for-profit
sector than there are enrolled today in just one university. In
1991, the University of Phoenix enrolled just over 7,000
students. Last year it had 475,000 students. So, it is a lot
bigger, there is a lot more money, a lot more power, a lot more
ads.
So I hardly think that this one Senator is beating up on
the for-profit industry. We're just trying to get information
about what's happening to $24 billion a year in taxpayers'
dollars.
Well, to move right along, let me introduce each of our
witnesses who are here today to testify. First we have Danielle
Johnson, who is currently seeking her practical nursing diploma
at Kaplan University, Cedar Rapids, IA, campus. She lives on
the Meskwaki Settlement in Tama, IA, with her husband and
children.
Next is Dr. Arnold Mitchem, founder and president of the
Council for Opportunity in Education. COE is a national
nonprofit organization established in 1981 and is dedicated to
expanding college opportunities for low-income, first
generation students and students with disabilities. The council
works in conjunction with colleges, universities, and agencies
that host Federal TRIO programs to help low-income students
enter college and graduate.
After Dr. Mitchem, we'll hear from Kathleen Bittel, who is
a career services adviser at Education Management Corporation
and lives in Acme, PA. She's the proud mother of three children
and has been employed by EDMC for almost 3 years, working 16
months as an assistant director of admissions for Argosy
University and approximately a year and a half as a career
services adviser for the Art Institute of Pittsburgh Online.
Finally, we welcome Lauren Asher, president of the
Institute for College Access and Success, an independent
nonprofit organization working to make higher education more
available and affordable for people of all backgrounds. Ms.
Asher is a nationally recognized expert on student loans and
financial aid and co-founded the Project on Student Debt.
I thank you all for joining us here today. We will start
first with Danielle Johnson and then we'll work down the line.
All of your statements will be made a part of the record in
their entirety. I read them all last evening. They're very good
statements.
What I'd like is for each of you to summarize your
statements in 5 minutes or so and sum up what it is you want
our committee to know for the record.
Ms. Johnson, welcome. Again, I've read your testimony, and
please just tell us in your own words what it is you want us to
know.
STATEMENT OF DANIELLE JOHNSON, STUDENT, TAMA, IA
Ms. Johnson. Thank you. First of all, I would like to say
that I am very grateful for the chance to tell my story.
My name is Danielle Johnson and I live on the Meskwaki
Settlement in Tama, IA. This is where my husband and children
have our home. My mother passed away when I was 8 years old, I
never knew my father, and I have no siblings. After my mother's
passing, my grandparents raised me. I graduated from an all-
Native American high school in Flandreau, SD.
I ended up pregnant with my first daughter at the age of
21. I worked odd jobs until my child was about 3 years old and
I decided it was time to get serious about life and moved away
to Waterloo, IA, to go to college. I was a single mother living
on welfare, trying to get through college, and taking out a lot
of student loans, to go to hair school and community college.
I worked at a hair salon, but I had to stop after injuries
from a car accident that made me unable to withstand long hours
on my feet. This all sent me into a depression for quite some
time. I felt all sorts of emotions as I had spent a lot of
time, money, and effort on acquiring this schooling, only to
find out that it was all just a waste.
I moved back to Tama with my grandmother in 2000 to try and
start over. I decided to go back to school so that I could work
at our newly built health facility on the settlement and help
my community.
I enrolled in Kaplan University's practical nursing program
in Cedar Rapids, IA, in February 2010 and currently am a
student. I decided to choose Kaplan because they told me that
they could accommodate me, as most of their students were those
who hadn't been in school for a while, middle aged, family-
oriented, and people who needed to work on the side. I also
chose it because I was told that I could do my clinical
training at the facility on the settlement. It's a 2-hour
commute and I was concerned about the gas, time, and what it
would take away from my responsibilities at home. But I was
assured during the admissions process that the classroom work
in Cedar Rapids would taper off and I would be able to finish
my clinical work on the settlement. I was relieved that I could
be close to home and continue taking care of my kids and
grandmother while also earning my practical nursing diploma.
Into my second term, I found out there was no possible way
that I was able to do my clinical work on the settlement. The
director of nursing asked me who told me this and I told her
how they had told me this during the admissions process. I was
placed in Vinton, IA, which is also a 2-hour commute, and it
was taking quite a toll on me.
I am discouraged and overwhelmed. If I knew that things
were going to be this way I would never have tried to go to the
school there. Not only that, but now I have added almost
$10,000 more in student loans to what I already borrowed to go
to hair school and community college. Right now I owe more than
$26,000 and will continue to take on more debt as I continue in
the program.
I now feel like I am at a place where I am stuck and have
no real future. This has been a very disheartening experience
and I hope by telling my story I can prevent it from happening
to anyone else.
[The prepared statement of Ms. Johnson follows:]
Prepared Statement of Danielle Johnson
First of all, I would like to say that I am very grateful for the
chance to tell my story. My name is Danielle Johnson and I live on the
Meskwaki Settlement in Tama, IA. This is where my husband and children
have our home. This is also where I can be close to take care of my
grandmother. My mother passed away when I was 8 years old, I never knew
my father, and I have no siblings. After my mother's passing, my
grandparents raised me. My grandfather died the summer after my 6th
grade year, but my grandma continued to take care of me. I graduated
from an all Native American high school in Flandreau, SD. This is where
I chose to go because I felt more comfortable fitting in and also to be
around peers my age.
After high school, I tried to go to college right away but really
had no interest. I chose to work and play. I ended up pregnant with my
first daughter at the age of 21. I continued working odd jobs but when
my child was about 3 years old, I decided it was time to get serious
about life and moved away to Waterloo, IA to go to college. I was a
single mother, living on welfare, trying to get through college, and
taking a lot of student loans out. I had been cutting hair ever since I
was in junior high for the fun of it, so I thought that it would be a
smart idea to get licensed in cosmetology as a source of income. I
believed that once I obtained this license, I could do hair on the side
while I went back to the community college. It wasn't until after I
completed hair school and began working at a salon, that I began to
develop pain in my neck and back. After numerous doctor visits, I
learned that I could not physically withstand long hours on my feet and
that this all stemmed from a 1995 car accident that I was involved in.
A car had rear ended mine going full speed on a highway that year but I
didn't begin to experience the results until after trying to work full-
time. This all sent me into a depression for quite some time. I felt
all sorts of emotions, as I had spent a lot of time, money and effort
on acquiring this schooling only to find out that it seemed all just a
waste. After enough of sitting in my pity, I moved back to Tama to try
and start over. I moved in with my grandmother in 2000 and found a job
working for the tribe. I worked as a personnel assistant for a couple
years before I joined the Natural Resources Department as a Soil
Technician for another year. Somewhere in this timeframe, I met and
married my husband and had my second daughter. He had four from a
previous marriage, making us a blended family. We decided that I would
stay home with our youngest and did that until she was old enough for
school, then went back to work in order to make ends meet.
Over the years, I have continued to care for my grandmother as she
has been losing her independence with age. She has been unable to drive
for awhile so I've been responsible for getting her to the grocery
store, doctor appointments, and any other places that she needs to get
to. One day I took her to the Meskwaki Senior Center, where they were
having a birthday luncheon. The director from the health clinic was
there to speak about the newly built facility that was getting up and
running on the settlement. He was describing the different kinds of
services they wanted to incorporate there and how they were looking for
people from the community to become involved as they wanted to become
self-sufficient. One of the things that I thought was a great idea was
that they wanted to get a nursing home going. Being that my grandmother
is getting up in the years, I wanted to see this happen for her as well
as the other elders in our tribe. Throughout the years, we have had to
hire outside help and even send out our elderly to nursing homes where
they are not as familiar with others as they are with those they've
been in the community with. This way at least they could stay with each
other and continue to share their common culture, heritage and
language. It was perfect and I wanted to be a part of it.
This is when I first began to form an interest in taking action on
what I was seeing. I believe that I am good with people, genuinely care
for others, and am capable of building up our tribe. There were some
clinic workers there so I voiced my interests with them and they told
me that they had new x-ray equipment there but no one to run it. After
I got home that evening, I went online and began searching for any
local schools that could offer x-ray technician training. There was a
place about an hour away in Cedar Rapids, IA called Kaplan University.
They offered a Medical Assisting (MA) Program and the ad read that if I
wanted more information about this then I was to input my contact
information. I did just that and the next morning the recruiter called
me to come in. I explained what my current situation was and what I was
looking for. He told me that their school could accommodate me as most
of their students were those who hadn't been in school for awhile,
middle-aged, family-oriented, and people who needed to work on the
side. I went in and met with the recruiter shortly thereafter and found
out that the MA program would mean that I would probably end up in an
office setting, which is not what I was wanting. I came home and talked
to my cousin who had some medical background, and she told me that I
should try to go for a nursing career. She said that they have more
person to person contact, more income, and that I could still get x-ray
training.
I called the recruiter back and he told me to come back in and meet
with the guy that knew more about the nursing program to see if that
was right for me. I went in and met with the assistant director of
admissions and he told me that these things were indeed true. I
explained to him how we had this newly built facility on our settlement
and how I wanted to help my community. He told me that in the beginning
of the program I would have to be there and go back and forth more
because of the classroom instructing. He said that eventually the
classroom setting would taper off and that I would have to do more
clinical training. I told him that I was concerned about the gas, time,
and what it would take away from my responsibilities at home. The
recruiter told me that I could do some of my clinical training there at
our facility in Tama. He explained that I would just be in Cedar Rapids
mostly in the beginning and then be home more towards the end of my
program.
So I went home and set up an appointment with our health director
and spoke to him about my ideas. He told me that it was a very
demanding program and I told him about how they were going to let me do
some of my training there at home. Our health director thought that was
a great idea and was even going to talk to the doctor there to let him
know to be expecting me as a student somewhere down the road. As I
weighed it all out, it seemed worth all the sacrifice. I kept thinking,
I just need to keep my nose to the grindstone and it will eventually
get easier. The recruiter had even told me that doing my training at
the clinic on the settlement would help the transition from me being a
student there to being an actual employee. I thought that everybody
from the school to the clinic at home was on board and had my goals in
sight. I enrolled and so far, I have taken out $9,642.25 in student
loans to attend Kaplan University. This is on top of the $16,640 I
still owe for hair school and community college.
The first term was indeed very demanding as I had 19 credits hours
to complete and pass on top of the daily 2-hour commute. It seemed like
I hardly ever had time to study. I thought that it was strange that I
failed my mid-term and final exams in my Anatomy & Physiology class but
had yet somehow passed. I was puzzled but yet relieved.
It was at the end of my first term that we received our schedules
for 2d-term clinical. They were placing me in Vinton, IA. After
studying it on the map, I figured it to be about the same distance I
was already driving. I let it go for awhile thinking that this was just
all part of getting through the first part of my program. Just out of
curiosity, I decided that I would go and talk with the director of
nursing to see just when exactly I would be able to begin doing my
training at home. This is when she broke the news to me that this would
not be at all possible. She explained that they already had clinical
set up with hospitals in the Cedar Rapids area. She asked me who told
me this and I told her how they told me this in the admissions process.
She apologized for him and tried to explain how in order for them to do
this would mean that she would have to set up an instructor along with
a group of girls to go to Tama and that no one would want to do this,
nor had they ever done this in the past. As I've progressed through the
program and from talking with others, I have found out that this is
most common, if not always, protocol with nursing school; you have to
have your training in a hospital setting. Being that I had no medical
experience before enrolling, I had no way of knowing that this is the
way things worked and left me wondering why the director of admissions,
whom was also in charge of enrolling students into the nursing program,
had failed to share this kind of information with me?
I continued talking with other students, especially those that were
further along in the program and began to get a feel for what I was in
for. I found out that the time and demands only got more intense and
would require more of me being away from home. By 4th term I would have
to go back and forth 6 out of 7 days a week, and that the classes were
going to get more demanding leaving me with less time to study. I
couldn't see how I was going to balance it all. I decided I would just
cut my losses and try to go to school at Marshalltown Community College
(MCC) which is only 15 minutes away from home. The reason I didn't
enroll here in the first place was because I was told that it would
take longer because of pre-requisites and that Kaplan could get me in
and out at a faster pace. I went ahead and got accepted into the fall
program at MCC but did not have my official transcripts from Kaplan. I
requested that Kaplan transfer them over, but they told me that because
it showed that I still owe them that they could not send them for me.
Hindsight, I see how everything happens at too fast of a pace. Our
very first day, during orientation, we were trained in CPR within a
matter of hours. I am now certified but cannot recall how to do
anything and can see how I do not feel confident at all if it came down
to trying to save a life. I now feel like I am at a place where I am
stuck and have no real future with what I am being taught, or being
kept from. I feel like I am at a place where I don't know how I can
continue. I want to but I don't know how. This has been a very
disheartening experience and I hope by telling my story I can prevent
it from happening to anyone else.
The Chairman. Ms. Johnson, thank you very much for a very
poignant statement. Thanks for being here and coming all the
way from Iowa for this. I appreciate it very much.
Dr. Mitchem, welcome to the committee and please proceed.
STATEMENT OF ARNOLD MITCHEM, Ph.D., PRESIDENT, COUNCIL FOR
OPPORTUNITY IN EDUCATION
Mr. Mitchem. Chairman Harkin and members of the Health,
Education, Labor, and Pensions Committee, I deeply appreciate
the opportunity to testify this morning. My name is Arnold
Mitchem and I'm the president of the Council for Opportunity in
Education, an organization representing over a thousand
colleges and over 5,000 administrators, counselors, and
teachers who work every day to provide low-income and first-
generation students a realistic chance to enter and succeed in
college.
In developing my testimony, I spoke with many of these
educators and I also drew upon my own experience of nearly 40
years of working directly with low-income young people and
adults. Throughout these 40 years, I've tried to govern my
interactions with students by a simple maxim: Work so that
other people's children have the same range of options that my
own children had and now my grandchildren have. I believe this
view is consistent with President Johnson's closing remarks as
he signed the Higher Education Act 45 years ago,
parenthetically, paraphrasing: Tell your children and
grandchildren that the doors of opportunity are now open.
At the time he was advancing an equal educational
opportunity policy, a policy that envisioned access to and the
inclusion of all segments of the American family in all
categories of colleges and universities.
Mr. Chairman, I and many others are troubled today by the
over-concentration of low-income Americans in the for-profit
sector institutions. This racial, ethnic, and class
stratification is troubling for two reasons. First, there is
little evidence that this stratification is a result of the
informed choice of students or their families. Second, in far
too many instances the enrollment in a program in the for-
profit sector does not appear to provide upward mobility. Let
me briefly elaborate on each of these points.
What do we know about the circumstances surrounding
students' decisions to attend for-profit institutions? First,
we know that in most instances the low-income student and his
or her family comes to the table with limited information about
college. We all know that discussions about the relative
ranking of colleges, the sticker price of college as opposed to
the actual price, transferability of credits, or how financial
aid works are confusing even to families with resources.
Families without college experience most often do not even know
the right questions to ask.
When low-income, first-generation students enter the
college marketplace, they think they are dealing with
counselors, not sales people. So on one side of the table we
have a poorly informed consumer and on the other side of the
table we have a business that is marketing its products using
sophisticated state-of-the-art marketing techniques.
Over and over again, we were told stories of students being
subjected to high-pressure marketing to enroll in for-profit
institutions. Some would argue that these situations are rare,
that there are only a few bad apples in the for-profit sector
who engage in marketing tactics. Mr. Chairman, I believe this
is a very fair point. But while the most egregious of the
behaviors uncovered by the GAO or your committee are limited,
the basic inequity in the relationship between the low-income
consumer and the industry is inherent. A sophisticated business
with a high-cost product it wants to sell and a poorly informed
consumer is a cocktail for abuse.
TRIO educators over and over again pointed to students
choosing high-cost for-profit programs and taking out large
loans to do so when a comparable program was available to the
same student at a much lower cost, often, often, within
reasonable proximity to their home.
As I said earlier, Mr. Chairman, our second major concern
about the current regulations governing low-income students and
for-profit institutions is that in too many instances a
student's enrollment is not a real opportunity, but instead
results in a situation where the individual is worse off than
they were before they enrolled.
There are a variety of scenarios where such is the case.
No. 1, the school holds out the promise of high-paying jobs in
a field, but either no such jobs exist or they require
education or experience beyond that provided in the program in
which the student was enrolled. No. 2, the student's enrolled
in a program that requires skills beyond those they bring to
college and he or she drops out with no degree or certificate,
just a large loan to pay back. No. 3, the student enrolls in a
program thinking that credits are transferable and they aren't,
so he or she has to pay to get his ultimate academic goal.
A final situation where enrollment in a high-cost for-
profit program does not lead to a better life is when the
student's education does not provide a real and significant
boost in earnings. Paying back student loans over a long period
sometimes makes it impossible, impossible, for the individual
to make the other financial decisions that will create a better
life for his family--buying a house, saving for retirement, or
for one's children.
Mr. Chairman, my final point is this. Earlier this week, I
was able to participate in NBC's Education Summit held in New
York City. Participants from all walks of life--business,
education, local and State politics--reaffirmed a shared belief
that providing the next generation of Americans a high-quality
education is not simply a matter of American competitiveness;
it is in fact now an issue of national security. General Powell
was very, very clear on that point.
A stratified system of postsecondary education, where
individuals with limited information and limited means are
over-concentrated in one sector, is, I am convinced, not at all
good for our country. So I applaud the committee's work and
understanding in addressing these serious and complex concerns.
Thank you.
[The prepared statement of Mr. Mitchem follows:]
Prepared Statement of Arnold Mitchem, Ph.D.
Chairman Harkin, Ranking Member Enzi and members of the Health,
Education, Labor, and Pensions Committee, I deeply appreciate the
opportunity to testify before you today. While I believe that the
question asked in the title of this hearing is an extremely critical
one with respect to the Federal investment in student aid, in my view,
it is a question that must be parsed and expanded. If the committee is
simply questioning whether the Federal Government is getting an
adequate return on aid dollars used by students to attend for-profit
schools, I would probably not be the best witness to have been invited.
However, by asking the question of whether students are succeeding,
the committee, in fact, has raised some deeper, related issues. The
most central one--and the one I believe I am most qualified to speak on
is this: Do the current laws and regulations governing Federal Student
Assistance, particularly student loans, sufficiently protect low-income
students vis-a-vis for-profit schools? This leads to a more basic
question that lies at the heart of this congressional inquiry: Are low-
income students adequately protected from assuming inappropriate loan
debt to attend for-profit schools?
And my answer to these two questions is a resounding NO.
I began my career in higher education over 40 years ago when I was
appointed the first director of the Educational Opportunity Program for
low-income and minority students at Marquette University. My experience
guiding underrepresented students through college was a key motivator
during my years at the university. Currently, the Educational
Opportunity Program and thousands of other TRIO programs continue to
steer low-income, first-generation students towards the most
appropriate means of pursuing and financing their postsecondary
educations. Yet, I appear before the committee today on behalf of the
millions of other low-income students who have not had the benefit of
receiving objective information about colleges. It is these students
that we must seek to protect not only from unscrupulous and abusive
practices within the for-profit sector, but also from the inequities
inherent in the relationship between low-income students and for-profit
institutions.
As you may know, the organization that I direct, the Council for
Opportunity in Education (or ``COE''), represents teachers, counselors
and administrators who work with low-income and first-generation
students. Before COE issued its statement on for-profits and gainful
employment, I consulted with many of these individuals, particularly
those working in TRIO's Educational Opportunity Centers, Veterans
Upward Bound and Talent Search programs, to gain insight into their
perspectives on for-profit institutions. In particular, I wanted to
find out from them:
(1) Were they often able to recommend a for-profit program as the
best fit for their students?
(2) If yes, when was there a particularly good fit? If no, why do
they seldom recommend for-profit programs?
(3) How often did they encounter individuals whom they felt had
previously been treated inappropriately by for-profit institutions?
Almost without exception, each of the answers I received indicated
that it was rare that they found for-profit programs to be the best fit
for the students they counseled. Two reasons emerged. First, almost
always, they could identify less expensive, publicly supported
alternatives in the same area that would not require the student to
assume as high a loan burden. Second, in very many instances, TRIO
counselors found that many for-profit admissions counselors were not
fully forthcoming and did not distinguish their programs from those
offered at other public and independent colleges.
Also, virtually all of these TRIO counselors could identify
individuals who had been, in their view, harmed by enrolling in a for-
profit program. COE is submitting a number of such examples along with
my written testimony.
Many TRIO staff pointed to the marketing techniques of the for-
profit institutions as the root cause of this problem. As a result of
current Federal policy, the playing field for low-income students
simply is not level. Unwittingly, we have created an environment in
which the for-profit institutions have very good reason (and an
exceptional level of resources) to heavily recruit low-income students
while many publically supported and independent colleges have neither
the financial incentives nor the resources to engage in the same state-
of-the-art, well-targeted, high-pressure marketing. Now the GAO, and
TRIO staff, can point to a number of instances that I would say go
beyond ``state-of-the-art, well-targeted marketing.'' But, I would urge
this committee to recognize that even in the absence of unscrupulous or
simply greedy behaviors on the part of institutions or individuals,
currently there simply are not sufficient safeguards in place to
protect low-income students in their interactions with for-profit
institutions.
These institutions hold up the promise of a better life--in fact,
the promise of the American Dream--to individuals of modest means. In
the face of such glossy advertisements and tenacious recruiting
tactics, it is, in my view, unrealistic to assume that a majority of
first-generation and low-income students--who are tackling higher
education on their own--will be able to step back, assemble a team of
wise and experienced advisors, and ultimately make the best decisions.
A concern repeatedly raised by TRIO counselors was the difficulties
many low-
income individuals had distinguishing between the value of a particular
program and the value of ``college.'' Families where parents are
college graduates might find this hard to understand. But many low-
income individuals and families have difficulty distinguishing between
a for-profit education and a traditional college experience when both
can put ``college'' in their names and both are ``endorsed'' by the
Federal Government--which provides financing to facilitate their
attendance.
A story of a former serviceman served by one of TRIO's Veterans
Upward Bound programs comes to mind. This individual completed 54
credits of a 60-credit associate's degree program at a for-profit
``college'' before being deployed to Iraq. When he returned home and
attempted to enroll in a university, he found that none of those
credits were transferable, though he had been assured that they would
transfer. Often TRIO-eligible students begin their postsecondary
careers at for-profit institutions, assuming that it is a building
block in their long-term educational plans. But, too often, their
enrollment at these institutions hinders those plans. Debt to the for-
profit institution, which prevents transfer of credit; confusion about
transferability; and default on student loans after enrollment at a
high-cost for-profit institution can each serve to create a dead-end
for a student's aspirations.
Now, when advocates like me raise concerns about for-profit
institutions, a distinct line of counterarguments emerge. The first and
most pronounced is that for-profits are the only institutions providing
access to postsecondary education for many low-income youth and adults.
This argument is often raised by individuals from minority communities,
like me, who are deeply sensitive to issues of discrimination and
access. My problem with this argument is that I believe it is based on
inaccurate information. In fact, many public and independent colleges
are offering comparable programs to low-income students at a much lower
cost than what is being provided at for-profit institutions. Low-income
students are simply unaware of the entire range of educational
opportunities available to them. At this juncture, I would like to take
a brief moment to commend this committee, which has worked diligently
to address this issue through the reauthorization of Talent Search,
Educational Opportunity Centers and other postsecondary information
programs governed by the Higher Education Act. Your emphasis on
ensuring financial literacy in these programs is particularly timely.
Similarly, efforts made to provide reasonable, income-based repayment
plans for student borrowers are also key.
I think all of us in this room agree that access is critical, but
access to what? Mountains of debt? Personal and career success must be
the answer to the access question. What we are witnessing at COE is
that many low-income and first-generation students are not achieving
success after participating in for-profit programs. Instead, we are
seeing students who emerge with considerable loan burdens and without
the ability to obtain meaningful employment or to transfer the credits
earned at for-profit institutions to accredited, publically supported
or independent institutions.
Similarly, many who oppose greater controls on for-profit
institutions argue simply that freedom in the marketplace is a core
value of American institutions, and that to interfere with the right of
for-profit institutions to make a profit is inappropriate. To go that
route, however, would lead us down a road that too closely parallels
the one that played a major role in the recent recession. As we saw in
the mortgage and banking industries, lending directed at low-income
borrowers that is not closely monitored will, almost without exception,
lead to abuse. My greatest fear is that the presence of such abuses in
the educational arena will--in the foreseeable future--undermine public
support for the entire range of Federal financial assistance programs.
I began this testimony by noting that I had been involved in issues
and programs designed to increase college opportunity for low-income
youth and adults for over 40 years. Throughout these four decades, I
have tried to govern my interactions with students by a simple maxim:
work so that other people's children have the same range of options
that my own children, and now grandchildren, have available to them.
Like most African-Americans and Hispanic-Americans, I am extremely wary
of a two-tiered system of education whereby one set of institutions is
available to individuals with information, guidance and means, and
another set is provided for those with less information, little
guidance and lower means.
If each of the institutions being examined by this committee were
targeting students from a range of economic backgrounds, the necessity
of your work would be lessened. But my experience is that they are not.
Many of these institutions purposely target low-income students. I
believe that there is a moral imperative and a responsibility to ensure
that all students, regardless of background, race or income level, are
fairly represented in higher education. These students can only look to
you for protection, and I am deeply honored, Mr. Chairman, that you
have asked the Council for Opportunity in Education to join with you in
this important work.
The Chairman. Dr. Mitchem, thank you for a very, very
profound statement and for all of the work that you've done in
the past, especially in the TRIO programs, and I'll cover that
with you in my questioning period.
Now, Ms. Bittel, welcome again to the committee and please
proceed.
STATEMENT OF KATHLEEN A. BITTEL, ACME, PA
Ms. Bittel. Mr. Chairman and members of the committee,
thank you for the opportunity to testify before you.
I come here today to ask you to listen to my one little
voice and hear the chorus of voices behind me of those whose
lives are being ruined by insurmountable student debt. I don't
have a lot of money to hire people to fly to Washington and
shout my message into the streets. In fact, I stand to lose
everything by coming here to see you today. Yet, I am willing
to risk all that I have to stop the unethical funneling of tax
dollars through low-income individuals to further fill the
coffers of mega-rich corporations.
As you've seen in previous testimony, high-pressure sales
tactics are being used to recruit individuals targeted from the
lower income sector of our population as they are eligible for
the most amount of aid. Many of the programs offered are in
highly saturated job markets within the passion fields, making
the achievement of gainful employment utilizing their degree
different, if not impossible to achieve.
I assert that the most egregious harm perpetrated upon
these students is the lack of support they receive once they do
graduate the program--if they do graduate their programs. As I
reported in my testimony, there are many tricks and sleight-of-
hand techniques used to create outstanding but unrealistic job
placement statistics. But that does not mean that every
employee of Career Services is dishonest. Very, very much the
contrary. Many of my co-workers are honest individuals doing
everything they can to help as many graduates as they can in
the very limited time to do so.
I see a systemic problem here when there are only nine
employees servicing the students that are being recruited by an
admissions workforce of almost 1,600. Career Services employees
are being paid nearly a third of what the top performers in the
admissions department receive. I believe these facts speak
volumes as to where the real priorities lie within these
companies.
If it truly were the students' success that was of primary
importance to these for-profit institutions, then why not spend
the millions of dollars being spent on trying to convince
America that they are wholesome and good on finding jobs for
their graduates and providing their quality educations?
I believe you need to take a good hard look at these so-
called employment statistics and question just how they are
being derived. Additionally, the Department of Education needs
to be given the authority to monitor these institutions, rather
than the accrediting bodies whose very existence depends upon
the schools they're supposed to be policing.
Across-the-board criteria for just what constitutes a job
placement needs to be developed and enforced so that these
commonplace tricks to justify employment can no longer exist.
Thank you so very much for the opportunity to speak before
this honorable committee today. I would be very happy to answer
any and all of your questions. But since I have 1 minute and 33
seconds left, I would like to say----
The Chairman. You can have a little more than that if you
want.
Ms. Bittel [continuing]. Thank you so very much, Senator
Harkin, for being the champion of so many people who cannot
speak for themselves or are afraid to do what I am doing here
today.
I am appalled that the Republicans have left the room.
The Chairman. We've got one here.
Ms. Johnson. I'm sorry, sir. I'm sorry, sir.
Senator Burr. Go ahead, go right ahead.
Ms. Johnson. I'm sorry. Thank you for being here.
But I would like to make note that I expected to speak with
those gentlemen. I expected to speak with a full panel, and I
expected my voice to be heard. It tells me, OK, thank you.
There is one person in the room who is here to represent them,
but where are the others?
They're accusing you of having a one-sided issue, but yet
the co-chairman has left. I'm sorry, I just find that
offensive. That's totally off the cuff.
[The prepared statement of Ms. Bittel follows:]
Prepared Statement of Kathleen A. Bittel
Mr. Chairman and members of the committee, thank you for the
opportunity to testify before you today. I come here today to talk
about all those whose lives have been ruined by insurmountable student
loan debt.
I began working at Education Management Corporation after being a
stay-at-home mom for 14 years. Those years were the happiest time of my
life and I am thankful that I was afforded a luxury that many families
cannot afford. But that happy time came to an end 3 days after our
third child was born when we discovered that my husband had testicular
cancer. A highly curable cancer, he had surgery and radiation and was
pronounced ``cured'' . . . released from follow up treatment. The
cancer came back with a vengeance 5\1/2\ years later. It was in that
moment I realized the folly of not pursuing higher education. I was a
mom, with no education and no work experience . . . how was I going to
support my children when he died? I immediately enrolled at the
University of Pittsburgh in their psychology program. My goal was to
counsel troubled children. It was also to complete the degree before he
died but that was not meant to be.
Shortly after I began my studies, one of my township supervisors
appeared at my back door and stated that they had become aware of my
situation. Because both my husband and I had been such active
volunteers, doing much good in the community, they wondered if perhaps
I would like them to help me get a job within our county government. I
started in the secretarial pool, and was subsequently promoted through
seven positions culminating in the dual positions of Child Support
Enforcement Officer specializing in Interstate cases and Court Officer
where I helped to prosecute non-compliant cases by presenting evidence
to the presiding judge in court.
I did not pro-actively seek employment with Education Management
Corporation. EDMC contacted me by phone, stating that they had found my
resume on Monster.com and wanted to interview me for the assistant
director of admissions of Argosy University opening.
I have worked at Education Management Corporation for almost the
past 3 years. For the first 16 months I worked in the admissions
department at Argosy University, which is owned by EDMC. The department
was a high-pressure and unsatisfying work environment. We were
constantly pressured to deliver a minimum of two applications per week.
New ``leads'' were to be called three times a day for at least a week,
then you could drop back to two, then one as the month progressed. Most
of these leads were also being sold to the other online schools, so
these poor people were inundated with phone calls mere minutes
following their oftentimes unwittingly submitted information. These
calls would continue to each of them for months.
I did not feel that I was helping students to achieve their goals
beyond their enrollment. Assistant Directors of Admissions (ADAs) were
responsible only to keep the student enrolled and attending the classes
for 1 week. Subsequent to that first week, we were discouraged from
``wasting time'' in speaking with anyone already enrolled in the
program. Out of the 96 students I enrolled, only 46 continued to be
taking classes when I checked on their status 16 months later.
Additionally, more than half of the students still enrolled were on
Academic Probation. This distressed me.
The more I spoke up against what I felt to be inappropriate
direction of the department, the lower I fell in the ``lead stream,''
making the meeting of my quota extremely difficult to do. I worked many
overtime hours to reach my goals. I knew if I was to stay with the
company then I needed to find a healthier work environment.
I found my way into the Career Services Department, working with
the Art Institute brand. Although previously earning $55,000, I took a
pay cut to $36,000 because I was honestly seeking a way in which I
could give back to the students I had talked into the program. I was
also promised an additional $3,000 per quarter as a bonus for meeting
my quota.
At first, I found it very rewarding to have the opportunity to get
to know and work with the industrious graduates of the Art Institutes
who were actively seeking a better life. I felt I could provide
valuable assistance in helping students find good jobs in a poor job
market.
But that feeling did not last long. I realized quickly it was all
about hitting quotas instead of really helping students find meaningful
work. I quickly came to see that career service department's primary
role is to lend credibility to the brands of EDMC by allowing them to
claim such large numbers of successful graduates working in their
fields. But these are not realistic numbers that are being reported.
It is important to note, that although there are approximately
1,600 admissions recruiters at EDMC, there are only 9 career service
advisors to accommodate the graduates of all of their online programs.
This number was broken down into five advisors for the Art Institute
Online graduates, two advisors for the Argosy University Online
graduates, and two advisors for the South University Online graduates.
I worked with the Art Institute brand and was responsible for 50-60
graduates in each class. We were responsible to work three classes
simultaneously. We have only 6 months to work with each class and the
pressure to find gainful employment for so many in such a short period
of time was overwhelming.
Early on in my employment with career services, a co-worker showed
me how to manipulate information received from a student, to ensure
that the student could be listed as ``gainfully employed'' for the
purposes of the company's statistics. This same co-worker later came to
me exhibiting two documents: one was a signed Employment Verification
form from the graduate stating they were working in their field earning
$8,000 a year, the other a printout from salary.com estimating that the
average salary in that field and in their zip code would be $25,000,
which would meet the salary threshold of $10,500 to justify marking
them as employed in their field. ``Which one do you think I'm going to
turn in?'' they laughed as they tossed the graduate's document in the
trash and entered the salary.com data into the student's file. These
kinds of actions were not discouraged by managers. It is important to
note that I immediately reported these actions to the supervisor I had
at the time, who promised to discuss this with the head of the
department. No disciplinary action was taken.
Much to the contrary, this same co-worker who changed the student's
salary data received EDMC's ``North Star Award'' shortly thereafter.
The intent of the award is to exhibit to other employees that ``this
was a star to follow.'' Although the policy is not written down, the
message of the company giving this award was abundantly clear.
Employees who hit their numbers will be rewarded regardless of whether
graduates actually succeed, or whether the information entered truly
represents the graduates' circumstance.
Refusing to cheat my students by withholding my help, I struggled
to reach the increasingly impossible quotas by doing it the honest way.
But as the job market grew dim, it became impossible to honestly reach
the 85.9 percent employment quota. When I missed my quota by \1/10\th
of 1 percent, the company docked $500 from my ``bonus'' and I was told
that I could lose my job if I failed to meet October's goal. That
``verbal warning'' was subsequently put into writing and delivered to
me during the next meeting.
I was constantly reminded that my numbers were not as high as they
wanted them to be. The situation culminated when I was called into a
conference room with my supervisor as well as the head of the
department. The head of the department interrogated me, asking the same
questions over and over. ``Why were my numbers the lowest on the team,
and why did I think that everyone else had the numbers he wanted and
not me?'' He demanded that I provide him with a plan on how I intended
to meet his number, reminding me that my job was in jeopardy should I
fail. He decided that he was going to impose a new weekly quota on me
to place two of my graduates in field-related jobs, it was specified
that no waiver was permitted, it must be field-related employment.
Given that only 3 out of the 11 graduates I was working with were
actively looking for employment, I believed it to be impossible to
achieve this goal without inventing their employment.
In some instances we were able to essentially eliminate graduates
from the employment statistics if we could prove they had extenuating
circumstances that prevented them from seeking field-related
employment. A waiver could be used for:
Military--active duty military or the spouse of a soldier.
Medical Condition--primary caregiver or suffering from a
medical condition or disability preventing them from work.
Established Professional--someone who had worked in an
unrelated field for at least 6 months earning a minimum of 10 percent
more than the average starting salary in their degree program.
Stay-at-Home Parent--one not seeking employment, choosing
to raise their children instead.
Education--one who was continuing their education and
choosing not to seek employment at that time.
In other words, if a graduate was not actively seeking employment
due to one of the above listed situations, they were removed from the
total number of graduates prior to calculating the number of those
gainfully employed. The established professional, by signing this form,
was essentially acknowledging that they could not leave their current
employment due to the ``financial hardship'' it would cause them,
because a job in their degree field would pay them far less than what
they were already earning in the field they had hoped to leave by
obtaining the education.
In addition to these waivers, there were other problems with the
statistics that EDMC reported. I was repeatedly pressured to call
graduates working in unrelated fields and review with them the courses
they had taken while at the Art Institute to find obscure details of
their current jobs where it could be considered that they were indeed
``using their skills.'' If one could convince them that they were using
these ``skills'' at least 25 percent of the time in their current job,
and to sign the employment form stating so, then their job could be
counted as field-related employment. This was rife with abuse.
Employees were expected to convince graduates that skills they used in
jobs such as working as waiters, payroll clerks, retail sales, and gas
station attendants were actually related to their course of study in
areas like graphic design and residential planning.
Also to be counted as employed for EDMC's statistics, a graduate
only needs to be working at their job for merely 1 day. There was no
company policy stating that a graduate had to be currently employed in
order for their job to be counted among the statistics. If they had
worked in their field for 1 day within the time period between
graduation and the 6-month deadline, it was routinely included in the
statistics as gainful employment.
Weekly meetings were held with the team including all nine advisors
and two supervisors where we discussed one another's problem graduates.
By problem graduates I mean those who were either non-responsive, non-
cooperative, lived in remote locations with minimal opportunity
available to them, or unemployed with no viable prospects in sight.
Much brainstorming was done in order to come up with other angles that
we could employ to make them fit into the employment category before
the deadline. Many of the examples that I have previously listed are
the result of these brainstorming meetings.
Reaching the breaking point of my conscience due to the constant
pressure to do things I felt to be morally unethical, I requested, and
was granted, a leave of absence on August 23, 2010. I requested a
meeting with the director of Human Resources and ``blew the whistle''
on all of the practices previously stated in this report. I verbally
provided this information to the director of Human Resources and
answered her many questions, allowing her all the time she needed to
take what appeared to be copious notes. The only information I did not
provide to her was a hard copy of my notes, and I did not name names. I
was assured that the matter would be taken seriously and that there
would be an investigation.
The Art Institute is expensive, ranging from $21,000 for a diploma
to $84,000 for a bachelors degree. This does not include the cost of
books and expensive equipment such as computers, cameras, and software
programs. I know that some of this required software can cost as much
as $1,900. The school also charges a $100 per class in ``lab fee''
which is not included in tuition. This adds an additional $1,500 to the
cost of a diploma, $3,000 to an associates and $6,000 to the bachelors.
The total cost for this education may be more than any of these
students will be able to afford to invest in a home because all of
their future dollars will be going to repay this enormous debt and
interest.
I believe that the EDMC schools, including the Art Institute, do
offer some great courses. There are many excellent teachers, especially
those who teach in the ground facilities. For online courses, because
an 11-week curriculum is squeezed into 5\1/2\ weeks, it can be a
struggle to learn. Students must mostly learn on their own, and there
is often insufficient support provided by the school. If the student
does not have the prior education, background, and abilities needed to
succeed then they will either drop out before completion, or complete
with low-level skills that will never find them ``field-related''
employment earning enough to repay their debt, much less live
meaningful lives.
I believe this to be a systemic problem, and not one found only in
this school system. More focus should be put into researching and
developing programs in the sectors where jobs will be needed in the
future, and training should be being developed in those areas and not
the ``easy sell passion fields.''
Thank you for this opportunity to present this testimony to you
today.
The Chairman. Well, Ms. Bittel, I will say this, that the
Senate did adjourn yesterday and a lot of people have gotten on
planes and are headed back to their respective States. I did
not anticipate that when I set up this hearing today. I figured
we were going to be in all next week, too. So I will excuse
Senators on both sides of the aisle who were anxious to get
back to their States after the adjournment last evening.
I don't know what the situation is with Senator Enzi. He
may be on his way back to Wyoming. I don't know, but I wouldn't
doubt that that is the case for many of them. So I just want to
make that very clear.
And had we been in session and going into next week, we
probably would have had a lot more people here.
Senator Franken. Can we do a bed check and see who's in
town?
[Laughter.]
Ms. Bittel. You understand, you understand my
disappointment.
The Chairman. I understand that.
Ms. Bittel. I believe that this is an issue that they would
be paying attention to.
The Chairman. And I will also talk about your situation
when it comes my time to question.
Ms. Bittel. Thank you.
The Chairman. But I did want to say that also I have a
letter here from the president of EDMC regarding their efforts
to ensure they collect accurate placement data, and I ask that
it also be included in the record, in fairness to EDMC.
[The material referred to may be found in Additional
Material.]
Now, Ms. Asher, Lauren Asher, president of the Institute
for College Access and Success. Welcome and please proceed.
STATEMENT OF LAUREN ASHER, PRESIDENT, THE INSTITUTE FOR COLLEGE
ACCESS AND SUCCESS, OAKLAND, CA
Ms. Asher. Thank you, Chairman Harkin and members of the
committee, for the opportunity to testify today on the Federal
investment and student outcomes of for-profit colleges.
At the Institute for College Access and Success, our
mission is to improve both college opportunity and outcomes so
that more Americans complete meaningful credentials and do so
without burdensome debt. Our Project on Student Debt studies
trends in loan borrowing and repayment and our analyses have
revealed a really disturbing pattern. Compared to other types
of schools, for-profit colleges have the highest share of
students with debt, the highest debt loads for degrees, and the
worst Federal student loan default rates.
Student debt, as you've noted, is pervasive at for-profit
colleges. At least 95 percent of students at both 2- and 4-year
for-profit colleges have loans. This is especially striking
when you consider that just about 15 percent of students at
community colleges have loans and less than half of students at
public 4-year colleges have loans.
It's not just because of the type of students enrolled at
for-profit colleges. Low-income students and students from
underrepresented minorities are much more likely to borrow and
to borrow more at a for-profit college. Low-income African-
American and Hispanic undergraduates are about three times more
likely to borrow Federal student loans and four times more
likely to borrow risky private loans than their counterparts at
other colleges.
Students who complete degrees at for-profit colleges are
also much more likely to have loans and to have more debt than
students at other schools. At for-profit colleges, 98 percent
of those who graduate with an associate degree have loans and
their average debt is nearly $20,000. A majority of those who
graduate from community colleges, in contrast, have no debt.
Those who do borrow, borrow much less, on average around
$10,000.
These numbers point to the fact that students are generally
at much greater risk of ending up with unmanageable debt if
they go to a for-profit school. More than 40 percent of
students at for-profit schools have private student loans and
that further compounds the risk. Private loans are one of the
riskiest ways to pay for college. They typically have variable
interest rates with no cap and they're nearly impossible to
discharge in bankruptcy. They also lack the affordable
repayment options and consumer protections that come with all
Federal student loans and help students repay those loans if
they hit hard times.
If you go to a community college and don't complete a
program, you'll probably have very little debt, if any, to pay
off and it will be Federal loans. But if you don't or can't
finish a program at a for-profit school, you'll almost
certainly have loans and there is a good chance that you'll
have both Federal and private loans.
Even if you complete a program at a for-profit school, as
some of my fellow panelists have noted, there is a good chance
that you might not be able to earn enough to pay back what
you've borrowed. Ending up with a worthless or grossly
overpriced credential, especially if you borrowed to pay for
it, can be worse than no credential at all.
As a recent Government Accountability Office investigation
revealed, students are all too often misled, pressured, and
outright lied to so they'll enroll in for-profit schools and
take out loans. The GAO found that some for-profit colleges
obscure the true cost of attendance and how much borrowing
would be required, grossly exaggerated likely earnings and job
prospects, and one even claimed that Federal loans don't have
to be repaid. Others use aggressive sales tactics to pressure
students to sign contracts before they could see a financial
aid package.
We frequently hear from students whose colleges urged them
to take on private loans as well as Federal loans without
making clear that there was any difference.
Several large for-profit colleges make private loans from
their own funds to their own students, knowing that the
majority will not be able to repay. Corinthian Colleges, for
instance, told investors it will write off nearly 60 percent of
the $270 million in loans it made to its own students in the
last 2 fiscal years.
It should not be surprising, then, that students in the
for-profit sector face the highest risk of default on Federal
student loans. The average 2-year default rate at for-profit
colleges is nearly double the average rate at public colleges
and triple the rate at private nonprofit colleges. The Career
College Association's own study concludes that, even after
controlling for demographics and graduation rates, students at
for-profit colleges are twice as likely to default as their
counterparts at other schools.
Schools clearly have an impact on whether and when students
default. For-profit colleges routinely tell investors that they
can lower their default rates and many for-profit schools have
kept Federal student loan default rates down in the 2-year
window that the Department of Education uses to determine their
access to Federal student aid. However, many seem to lose
interest in their students' outcomes as soon as that window is
over.
Unfortunately and predictably, weakened regulation and
reduced oversight over the past decade, along with a large
potential revenue stream of Federal dollars, as you described
this morning, have increased the incentives for less scrupulous
for-profit colleges to game the system. This is not the first
time such problems have come to light, but the risks to
students and taxpayers are much larger in scale and cost than
ever before.
In the early 1990s, the last time Congress passed major
reforms to address abuses at for-profit colleges, the industry
was a fraction of its current size. In 1991, fewer students
enrolled in the entire for-profit sector than now enroll in the
University of Phoenix alone.
I thank the committee for shining a spotlight on this
important issue for both students and taxpayers across the
Nation and I look forward to answering your questions.
[The prepared statement of Ms. Asher follows:]
Prepared Statement of Lauren Asher
summary
Lauren Asher is president of The Institute for College Access &
Success (TICAS), an independent, nonpartisan, nonprofit research and
policy organization. TICAS works to increase all Americans' access to
quality and affordable higher education and improve the odds of
successful educational outcomes for students and for society.
Our ongoing analyses of student debt trends at the national, State,
and college level led us to look more closely at what is happening to
students in the growing for-profit college industry. Compared to other
types of colleges, for-profit colleges enroll the highest share of
students with debt, have the highest student debt levels, and the worst
Federal student loan default rates. Students who attend for-profit
colleges are also much more likely to take out risky private student
loans, which are more like credit cards than financial aid, and lack
the basic consumer protections that Federal loans have.
The costs are high for both students and taxpayers when students
take on student loan debt that they cannot repay. Students who default
on their Federal loans will have difficulty renting an apartment or
buying a car, and increasingly, getting a job. The debt can follow you
until you die, and it is nearly impossible to discharge student loans
through bankruptcy. Private student loans can follow you not only to
the grave but beyond, and, unlike comparable forms of consumer debt,
are also rarely dischargeable through bankruptcy.
Because the for-profit college industry relies on federally funded
grants and taxpayer-backed loans for the bulk of its revenue,
taxpayers, as well as students, have a lot at stake in the quality and
cost of for-profit education. The sector enrolls about 10 percent of
college students, but accounted for nearly one in four Federal student
loan dollars (at least $20.3 billion) in 2008-9. This is more than
double the share of Federal student loans that students at for-profit
colleges received a decade earlier. Combined with high default rates,
it is understandable that taxpayers want better information about the
value of their investment.
Unfortunately and predictably, weakened regulation and reduced
oversight, combined with a large potential revenue stream of Federal
dollars, have led once again to an environment where the incentives for
less scrupulous for-profit colleges to game the system appear to exceed
the risks. At the same time, the risks to students and taxpayers are
much larger in scale and cost more than ever before. The last time
Congress passed major reforms to address abuses at for-profit colleges,
the sector was a shadow of the size it is today. In 1991, there were
fewer students enrolled in the entire for-profit sector than there are
enrolled today in just the University of Phoenix. Given the rising
costs and stakes to students and taxpayers, we thank the committee for
raising important questions and for its commitment to preserving
student access to quality, affordable higher education.
______
Chairman Harkin, Ranking Member Enzi and members of the committee,
thank you for the opportunity to testify on the high debt and default
levels for students who attend for-profit colleges, and the need for
greater oversight of the for-profit education industry to protect the
substantial interests of both students and taxpayers.
My name is Lauren Asher. I am president of The Institute for
College Access & Success (TICAS), an independent, nonpartisan,
nonprofit research and policy organization based in Oakland, CA. TICAS
works to increase all Americans' access to quality and affordable
higher education and improve the odds of successful educational
outcomes for students and for society. Our Project on Student Debt,
launched in 2005, focuses on increasing public understanding of rising
student debt and the implications for individuals, families, the
economy, and society.
At TICAS, our mission is to improve both educational opportunity
and outcomes, so that more under-represented students complete
meaningful credentials and do so without burdensome debt. That is why
much of our work has focused on community colleges, which enroll the
largest share of the Nation's low-income, underrepresented minority,
older, and part-time students, as well as students who work full-time
while going to school.\1\ Student loan borrowing rates at community
colleges are quite low compared to other sectors. Indeed, because
Federal student loans can be a valuable tool both for expanding college
access and supporting student success, we have urged community colleges
to participate in the Federal student loan program, so that their
students are not forced to rely on riskier and more expensive forms of
credit if they do need to borrow to stay and succeed in school. We also
developed the underlying policy framework for what has become the
Income-Based Repayment Program (IBR) for Federal student loans. IBR
caps Federal student loan payments at a reasonable percentage of the
borrower's income and forgives any remaining debt after 25 years of
responsible payments, or as soon as 10 years for borrowers who work in
public service.
---------------------------------------------------------------------------
\1\ Calculations by The Institute for College Access & Success on
data from U.S. Department of Education, National Center for Education
Statistics (NCES), National Postsecondary Student Aid Study (NPSAS),
2007-8, http://nces.ed.gov/surveys/npsas. Unless otherwise specified,
``students'' refers to undergraduate students throughout this document.
---------------------------------------------------------------------------
In our ongoing analyses of student debt trends at the national,
State, and college level, a disturbing pattern emerged that led us to
look more closely at what is happening to students in the growing for-
profit college industry. Compared to other types of colleges, for-
profit colleges have the dubious distinction of the highest share of
students with debt, with the highest debt levels for degree completers,
the worst Federal student loan default rates, and the lowest completion
rates for bachelor's degree programs. For-profit colleges now enroll
about 1 in 10 postsecondary students in the United States, but they
absorb a far greater share of Federal student aid: one in four Federal
Pell grant and student loan dollars goes to students in the for-profit
sector. At the same time, for-profit colleges also have the highest
share of students taking out private (nonfederal) student loans, one of
the riskiest ways to pay for higher education.
Because for-profit colleges recruit and enroll a disproportionate
share of low-
income students and students of color, we and many other student,
college access, consumer, and civil rights advocates are particularly
concerned about the disparate impact of this sector's alarmingly high
student debt and default levels. Considered together, the for-profit
college industry's rapid growth, aggressive recruiting practices, heavy
reliance on Federal funds, disturbing student debt patterns, and
disproportionate enrollment of under-represented students clearly point
to high and rising stakes for both students and taxpayers.
Twenty years ago, when the for-profit college industry was much
smaller but similarly lacking in meaningful oversight, these same
patterns and problems emerged. It is striking to see what the U.S.
Senate Permanent Subcommittee on Investigations concluded in 1991, and
how applicable its findings remain today.
Unquestionably, the Guaranteed Student Loan Program [GSLP]
has vastly expanded accessibility to education for those
Americans who seek it. The value of accessibility, however,
depends on what it is that one is being given access to. On
that point, the Subcommittee found that the program has failed,
particularly in the arena of proprietary schools, to insure
[sic] that Federal dollars are providing quality, and not
merely quantity, in education.
As a result, many of the program's intended beneficiaries--
hundreds of thousands of young people, many of whom come from
backgrounds with already limited opportunities--have suffered
further because of their involvement with the GSLP. Victimized
by unscrupulous profiteers and their fraudulent schools,
students have received neither the training nor the skills they
hoped to acquire and, instead, have been left burdened with
debts they cannot repay.
Likewise, the American taxpayer has suffered both in terms of
footing the bill for billions of dollars of losses in defaulted
loans and the ultimate cost of the program's failure to provide
the skilled labor force our Nation needs in the increasingly
competitive global marketplace.\2\
---------------------------------------------------------------------------
\2\ U.S. Senate, Committee on Governmental Affairs, Permanent
Subcommittee on Investigations. Abuses in Federal Student Aid Programs
(Senate-R-102-58). 1991. http://www.eric.ed.gov
/PDFS/ED332631.pdf.
high debt and loan defaults: consequences for students and taxpayers
Not all student loan debt is harmful. Federal student loans fulfill
their purpose when they help more students get quality education and
training, and leave them in a position to pay off their loans, support
themselves and their families, and contribute to our society and
economy, whether as teachers, truck drivers, or technology
entrepreneurs.
While student loans can help students acquire valuable skills and
credentials, they do carry real risks for all borrowers. High student
loan debt, and even low debt when paired with low earnings, can leave
students with unmanageable payments that can jeopardize their families'
basic needs and lead to delinquency and default. Leaving college with
burdensome debt also prevents or delays borrowers from taking important
steps that benefit not only individuals but our society and economy as
a whole. These include starting a business, buying a home, marrying,
having children, saving for retirement, and saving for their own
children's education.
While Federal student loans provide a variety of tools and consumer
protections that can help informed borrowers manage their debt and
avoid default, many borrowers are unaware of their options or lack
access to unbiased advice. Borrowers with private student loans can
face much higher costs and have far fewer options when their payments
become unmanageable. They are really at the mercy of their lender. Even
if a student loan borrower faces severe financial distress and
qualifies for bankruptcy, it is nearly impossible to discharge student
loans under current bankruptcy law.
student debt at for-profit colleges: most students borrow,
and they borrow more
Student loan debt is rising in all sectors, but the for-profit
sector stands out with by far the highest share of students who borrow
and the highest average debt levels. The recent Government
Accountability Office (GAO) investigation found that colleges misled,
pressured, and outright lied to students in order to get them to enroll
in for-profit schools and to borrow to cover the costs. \3\ The GAO
uncovered some for-profit colleges obscuring the true cost of
attendance and understating how much borrowing would be required. It
also revealed schools significantly overstating likely earnings and job
prospects to help justify high borrowing, making students believe that
their debt will be easy to pay off. And it showed colleges using
aggressive sales tactics to get students to sign a contract before they
see a financial aid package. As this committee heard at the June
hearing as well, these tactics are well-documented.\4\ Some colleges
push students to take out risky private loans as well as Federal loans
without making the differences or costs clear.\5\ Several large for-
profit college companies even make private loans directly to their own
students, knowing that the majority of these borrowers will not be able
to repay (I discuss private loans and this practice in more detail
below).
---------------------------------------------------------------------------
\3\ U.S. Government Accountability Office. For-Profit Colleges:
Undercover Testing Finds Colleges Encouraged Fraud and Engaged in
Deceptive and Questionable Marketing Practices (GAO-10-948T). August 4,
2010. http://www.gao.gov/products/GAO-10-948T.
\4\ See also testimony of Margaret Reiter before the Senate Health,
Education, Labor, and Pensions Committee, Hearing on Waste, Fraud and
Abuse in the For-Profit Education Sector, June 24, 2010, http://
help.senate.gov/imo/media/doc/Reiter.pdf.
\5\ See also testimony of Valisha Cooks before the House Committee
on the Judiciary Subcommittee on Commercial and Administrative Law,
Hearing on H.R. 5043, the ``Private Student Loan Bankruptcy Fairness
Act of 2010.'' April 22, 2010. http://judiciary.house.gov/hearings/pdf/
Cooks100422.pdf. Andrews, Wyatt. ``Student Complaints Rising at For-
Profit Schools.'' CBS Evening News. September 5, 2010.
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Any way you slice it, students at for profit-colleges are much more
likely to have debt than students at other types of schools, because
nearly every student who attends a for-profit school gets signed up for
Federal and/or private student loans.
In 2007-8, almost all (97 percent) undergraduates
attending for-profit 2-year colleges took out student loans, while only
13 percent of undergraduates attending public 2-year colleges took out
student loans.\6\
---------------------------------------------------------------------------
\6\ Calculations by The Institute for College Access & Success on
data from U.S. Department of Education, NCES, NPSAS, 2007-8, http://
nces.ed.gov.survey/npsas.
---------------------------------------------------------------------------
In 2007-8, 95 percent of undergraduates attending for-
profit 4-year colleges took out student loans, while only 47 percent of
undergraduates attending public 4-year colleges took out student
loans.\7\
---------------------------------------------------------------------------
\7\ Ibid.
Looking just at those who actually receive an associate's or
bachelor's degree, nearly everyone who graduates from a for-profit
college has loans, compared to significantly lower shares of graduates
of other types of schools. And after graduation, degree holders from
for-profits have a lot more debt to pay off, on average, than those who
---------------------------------------------------------------------------
graduated with debt from other types of schools.
At for-profit institutions, 98 percent of associate's
degree recipients had loans in 2007-8, and their average debt was
$19,700. At public and non-profit colleges, 38 percent of associate's
degree recipients had loans, and their average debt was $10,950.\8\
---------------------------------------------------------------------------
\8\ Ibid.
---------------------------------------------------------------------------
At for-profit institutions, 96 percent of bachelor's
degree recipients had student loans in 2007-8, and their average debt
was $33,050. At public and non-profit colleges, 65 percent of
bachelor's degree recipients had loans, and their average debt was
$22,750. \9\
---------------------------------------------------------------------------
\9\ Ibid.
---------------------------------------------------------------------------
Among bachelor's degree recipients, those who attended
for-profit colleges are much more likely to have very high debt. Almost
one in four (24 percent) of all 2008 graduates from for-profit 4-year
colleges owed at least $40,000 in student loans, compared to just 6
percent of graduates from public 4-year colleges and 15 percent from
private nonprofit 4-year colleges. The average debt for all 4-year
college graduates with loans, from all sectors, was $23,200.\10\
---------------------------------------------------------------------------
\10\ The Institute for College Access & Success. High Hopes, Big
Debts (Class of 2008). May 2010. http://ticas.org/files/pub/
High_Hopes_Big_Debts_2008.pdf.
In addition to the largest share of students with overall debt,
for-profit colleges have the largest proportion of students taking out
private student loans, and the largest increase in this risky type of
---------------------------------------------------------------------------
borrowing.
In 2007-8, 42 percent of all proprietary school students--
not just degree completers--had private loans in 2007-8, up from 12
percent in 2003-4. At private non-profit 4-year schools, which have the
second highest rate, 25 percent of students had private loans in 2007-
8, up from 11 percent in 2003-4. At public colleges, private loan rates
were even lower: 14 percent at public 4-year and 4 percent at public 2-
year colleges in 2007-8.\11\
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\11\ The Institute for College Access & Success. Private Loans
Facts and Trends. August 2009. http://projectonstudentdebt.org/files/
pub/private_loan_facts_trends_09.pdf. Note that ``private loans'' here
refers to bank and lender-originated loans, not all non-Federal loans.
The majority of students who complete a degree or certificate at a
---------------------------------------------------------------------------
for-profit college have private loans.
In 2007-8, 60 percent of students who completed an
associate's degree at a for-profit college had private loans, four
times the rate for associate's degree completers at community colleges
(15 percent).
For bachelor's degree completers, 64 percent graduated
from for-profit colleges with private loans, compared to 28 percent at
public 4-year colleges and 42 percent at private nonprofit 4-year
colleges.
Half (51 percent) of those who completed a certificate at
for-profit colleges had private loans, compared to 12 percent at
community colleges.\12\
---------------------------------------------------------------------------
\12\ Baum, Sandy and Steele, P. How Much are College Students
Borrowing? The College Board. August 2009. http://
advocacy.collegeboard.org/sites/default/files/09b_552_PolicyBrief
_WEB_090730.pdf.
---------------------------------------------------------------------------
low-income and underrepresented minority students borrow more
at for-profit colleges
Most low-income and underrepresented minority undergraduates attend
either public or private nonprofit schools, with the greatest
concentration at community colleges.\13\ Among all African-American and
Hispanic undergraduates, nearly 8 out of 10 (78 percent) attended
public or private nonprofit schools in 2007-8, including 42 percent at
community colleges, while 15 percent attended for-profit colleges.\14\
The proportions are similar for low-income students and adult students
working full-time: 80 percent of students with incomes below the median
attend public and private nonprofit colleges, and 81 percent of
students age 24 and older who are working full-time attend public and
private nonprofit colleges.\15\
---------------------------------------------------------------------------
\13\ Unless otherwise specified ``low-income'' refers to students
whose family income is less than the median income of undergraduates.
Family income includes the student's income for all students plus
parents' income for dependent students and a spouse's income for
married independent students. NPSAS reports the median income for
dependent undergraduate students was $66,637, and the median income for
independent undergraduate students was $26,099. Throughout this
document ``underrepresented minorities'' refers to African-American and
Latino students.
\14\ These percentages do not sum to 100 because some students
attended more than one college during the 2007-8 year.
\15\ Calculations by The Institute for College Access & Success on
data from U.S. Department of Education, NCES, NPSAS, 2007-8, http://
nces.ed.gov/surveys/npsas.
---------------------------------------------------------------------------
However, while most low-income and underrepresented minority
students attend public colleges, these students are also heavily
recruited by many for-profit colleges, where they enroll
disproportionately and in growing numbers.
African-American and Hispanic students make up 28 percent
of all undergraduates, but they represent nearly half (46 percent) of
undergraduates in the for-profit sector.\16\
---------------------------------------------------------------------------
\16\ Ibid.
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Low-income students, many of whom are also students of
color, are also over-represented at for-profits; 64 percent of students
attending for-profit college have incomes below the median for all
undergraduates.\17\
---------------------------------------------------------------------------
\17\ Ibid.
The majority of students who are low-income, underrepresented
minorities, and adults working full-time do not take out student loans
to pay for college. \18\ However, those who attend for-profit colleges
are much more likely to borrow--and borrow more--than their
counterparts at other types of schools. The data clearly show that
across levels of income and categories of race/ethnicity, for-profit
college students borrow more than those who attend elsewhere.
---------------------------------------------------------------------------
\18\ Ibid.
At for-profit colleges, low-income and minority
undergraduates are about three times more likely to borrow Federal
student loans--and four times more likely to borrow private student
loans--as their counterparts at public or private nonprofit
colleges.\19\
---------------------------------------------------------------------------
\19\ Ibid.
---------------------------------------------------------------------------
At for-profit colleges, adults working full-time are
almost five times more likely to borrow Federal student loans--and over
six times more likely to borrow private student loans--than their
counterparts at public or private nonprofit colleges.\20\
---------------------------------------------------------------------------
\20\ Ibid.
---------------------------------------------------------------------------
Pell Grant recipients who graduate from 4-year colleges
are more likely to have high debt if they attended a for-profit
college. Among graduating seniors in 2008, 23 percent of Pell Grant
recipients from for-profit colleges carried at least $40,000 in student
loans, compared to 14 percent at all other colleges. Most Pell Grant
recipients have family incomes below $40,000.\21\
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\21\ High Hopes, Big Debts (Class of 2008), May 2010.
consequences of not completing are worse for students
at for-profit colleges
Regardless of what kind of college you attend, success is what you
hope for, but it is never guaranteed. Completion rates vary
considerably both across and within different types of schools.\22\
Some schools offer more support than others to help students succeed,
and students can face all kinds of obstacles to completing their course
of study, from financial challenges to family health crises. Graduation
rates are much lower at for-profit colleges than at other types of
colleges for students seeking bachelor's degrees, as documented by a
report issued last week by the College Board.
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\22\ See, for example: Haycock, Kati, Lynch, M., and Engle, J.
Opportunity Adrift: Our Flagship Universities are Straying from their
Public Mission. The Education Trust. January 2010. http://
www.edtrust.org/sites/edtrust.org/files/publications/files/
Opportunity%20Adrift%28%29.pdf. Hess, Frederick, et al. Diplomas and
Dropouts: Which Colleges Actually Graduate their
Students (and Which Don't). American Enterprise Institute. June 2009.
http://www.washingtonmonthly.com/college_guide/feature/
college_dropout_factories.php?page=all. Miller, Ben, and Ly, P.
``College Dropout Factories.'' Washington Monthly. August 23, 2010.
http://www.washingtonmonthly.com/college_guide/feature/
college_dropout_factories.php?
page=all.
The 6-year graduation rate for first-time, full-time
bachelor's degree students is just 22 percent at for-profit 4-year
colleges, less than half the rate at public 4-year colleges (55
percent) and only a third of the rate at private nonprofit 4-year
colleges (65 percent).
This rate is lowest (16 percent) for African-American
students at for-profit colleges, much lower than for African-American
students at public 4-year colleges (39 percent) or private nonprofit
colleges (45 percent). For-profit colleges also have the widest gap
between bachelor's degree completion rates for African-American
students and for White and Asian students.\23\
---------------------------------------------------------------------------
\23\ Baum, Sandy, Ma, J., and Payea, K. Education Pays: The
Benefits of Higher Education for Individuals and Society. The College
Board. September 2010. http://trends.collegeboard.org/files/
Education_Pays_2010.pdf.
Currently, the graduation rates reported by the U.S. Department of
Education only capture full-time students who complete a degree or
certificate from the college where they first enrolled. By excluding
part-time, returning, and transfer students, as well as in many cases
students who do not start college in the fall semester, these rates
paint an imperfect picture of completions. In response to widespread
concern about the need for more meaningful graduation figures for 2-
year schools in particular, the Higher Education Opportunity Act of
2008 established a task force to study the issue and develop
recommendations for alternative measures.\24\ But for now, the only
graduation rates available for students completing associate degrees or
certificates have the significant limitations described above. These
data indicate that for first-time, full-time students, completion rates
for associate degrees and certificates combined are higher at for-
profit 2-year colleges (60 percent) than at public 2-year colleges (22
percent). Notably, the vast majority of these completions at for-profit
colleges are short-term certificate programs, while most community
college completions are 2-year associate's degrees.\25\
---------------------------------------------------------------------------
\24\ ``U.S. Education Secretary Appoints Members and Chair of New
Committee on Measures of Student Success.'' U.S. Department of
Education. June 2, 2010 Available at http://www.ed.
gov/news/press-releases/us-education-secretary-appoints-members-and-
chair-new-committee-measures-student.
\25\ Baum, Ma, and Payea, 2010.
---------------------------------------------------------------------------
Regardless of programs of study, the consequences of non-completion
are far worse for students who drop out of for-profit schools. If you
borrowed to help pay for school and did not complete your program of
study, the more you borrowed, the worse off you are. You do not have a
degree, certificate, or better job to show for your time in school, but
you still have to pay your loans. That puts non-completers at for-
profit colleges in the worst position, as they are the most likely to
borrow, and borrow larger amounts than students at other types of
colleges. Even at 2-year schools, nearly every for-profit college
student takes out loans. A full 97 percent of students enrolled at for-
profit 2-year colleges have loans, compared to just 13 percent of
students at public 2-year colleges.\26\
---------------------------------------------------------------------------
\26\ Calculations by The Institute for College Access & Success on
data from U.S. Department of Education, NCES, NPSAS, 2007-8, http://
nces.ed.gov/surveys/npsas.
---------------------------------------------------------------------------
When students drop out of a quality, affordable program, there are
other costs, as well. They have foregone earnings and time without the
benefit of a recognized credential. There are also social costs,
because in addition to being more likely to have a job and higher
taxable earnings, college graduates are also more likely to vote, to be
healthier, and to pass on the value of education to their children.\27\
---------------------------------------------------------------------------
\27\ Baum, Sandy, Ma, J., and Payea, K. Education Pays: The
Benefits of Higher Education for Individuals and Society. The College
Board. September 2010. http://trends.collegeboard.org/files/
Education_Pays_2010.pdf.
---------------------------------------------------------------------------
In general, students are taking a much bigger risk by going to a
costly for-profit school than to a community college. If you do not or
cannot finish a program of study at a for-profit school, the odds are
very high that you will be left with a lot of debt that will be
difficult to pay off, since nearly all students at for-profits borrow
to cover the high costs, and for more than 40 percent that borrowing
includes risky private student loans.\28\ But if you go to a community
college and find that you are not suited to the field you were
pursuing, or cannot keep up with the coursework because of a family
illness or job loss, you will probably have very little debt, if any,
to pay off. If you did borrow to attend community college, in most
cases you will have only Federal student loans, which give borrowers
many more options for managing their debt and staying out of default.
---------------------------------------------------------------------------
\28\ Private Loans Facts and Trends, 2009.
---------------------------------------------------------------------------
debt for worthless degrees--when completion doesn't pay
While college completion, in general, leaves you better off, a
worthless or grossly overpriced credential can be worse than no
credential--especially if you took out student loans. That is what
happened to Yasmine Issa, a single mother who testified before this
committee in June.\29\ She completed a for-profit program that
purported to prepare her for work as a sonographer, only to find out
$32,000 later--including $15,000 in loans--that the program did not
actually qualify her to sit for the licensing exam or work in the
field. While the school's aggressive recruiters went out of their way
to tell her that the school was accredited, its sonography program was
un-accredited and effectively worthless. She found out too late that
the local community college offered an accredited sonography program
for about half the cost.
---------------------------------------------------------------------------
\29\ Testimony of Yasmine Issa before the Senate Health, Education,
Labor, and Pensions Committee, Hearing on Waste, Fraud and Abuse in the
For-Profit Education Sector, June 24, 2010, http://help.senate.gov/imo/
media/doc/Issa.pdf.
---------------------------------------------------------------------------
Unless you work in higher education policy or watched the June
hearing, it would never occur to you that an accredited school could
offer an unaccredited program. This is just one way that hard-working
students who follow the rules--along with taxpayers--are getting ripped
off by some for-profit schools and left with loans they cannot repay.
Another unfortunate student, Michelle Zuver, shared her story at a
forum Senator Durbin held in Chicago on August 31, 2010. Michelle
earned a bachelor's degree in criminal justice from a for-profit
college, but her degree is not recognized by any law enforcement
agencies in her area, although she went to school specifically to
qualify for that profession. A college recruiter pressured her to
enroll and told her the program would cost $52,000. She ended up
borrowing $86,000, mostly in private student loans, for a degree she
cannot use. Her credits will not even transfer to a properly accredited
program in her field.
All 15 of the colleges investigated in the GAO's recent report
received at least 89 percent of their revenues from Federal student
grants and loans, and all 15 engaged in at least some deceptive
practices designed to get students to borrow more than they planned or
realized, and several committed outright fraud. In one striking
example, a beauty school recruiter told a prospective student that once
he completed their program, he would earn $150,000-$250,00 a year as a
barber. The GAO report notes that 90 percent of barbers actually earn
less than $43,000 a year.\30\
---------------------------------------------------------------------------
\30\ GAO, 2010.
---------------------------------------------------------------------------
higher default rates at for-profit colleges: not just demographics
Students who attend for-profit colleges face much higher odds of
defaulting on a Federal student loan than those who attend other types
of schools. As a sector, for-profit colleges have the highest default
rate for Federal student loans.\31\
---------------------------------------------------------------------------
\31\ Unless otherwise noted, default rates and shares of defaulters
reflect only those who default within 2 years of first entering
repayment. Federal student loan default data are not available by
borrowers' income or race/ethnicity.
Nearly half of all Federal student loan borrowers who
entered repayment in 2008 and defaulted by 2010 attended for-profit
schools (43 percent), even though only about 10 percent of students
attended these schools.\32\
---------------------------------------------------------------------------
\32\ Calculations by The Institute for College Access & Success on
data from U.S. Department of Education, ``Official Cohort Default Rates
for Schools,'' http://www2.ed.gov/offices/OSFAP/defaultmanagement/
cdr.html, accessed September 13, 2010 and U.S. Department of Education,
National Center for Education Statistics (NCES), Integrated
Postsecondary Education Data System (IPEDS), http://nces.ed.gov.ipeds.
Default figures include borrowers who entered repayment in Federal
fiscal year 2008 and had defaulted by the end of the 2009 Federal
fiscal year.
---------------------------------------------------------------------------
The average 2-year default rate for Federal loan borrowers
at for-profit colleges is nearly double the average rate at public
colleges, and it is triple the rate at private non-profit colleges.\33\
---------------------------------------------------------------------------
\33\ U.S. Department of Education. ``Student Loan Default Rates
Increase.'' September 13, 2010. http://www.ed.gov/news/press-releases/
student-loan-default-rates-increase-0.
While student demographics play a role, the evidence is clear that
demographics are by no means the sole explanation for the sector's high
---------------------------------------------------------------------------
default rates. Schools play an important role as well.
The Career College Association's own study concludes that
even after accounting for differences in student demographics, students
attending for-profit colleges are twice as likely to default as
students at other types of colleges. \34\
---------------------------------------------------------------------------
\34\ Charles River Associates for the Career College Association.
``Report on Gainful Employment,'' April, 2010. http://
www.whitehouse.gov/sites/default/files/omb/assets/oira_1840/
1840_04232010-h.pdf.
Lenders have noted that attending a for-profit school is a
risk factor for default.\35\ In its private student loan business,
Sallie Mae has reported that it expects to see a 30 percent difference
in default rates for a borrower with a FICO score greater than 700,
``depending on the school that borrower attends.'' \36\
---------------------------------------------------------------------------
\35\ Student Lending Analytics. ``Sallie Mae To Discontinue Career
Training Loan Program.'' January 15, 2010. http://
studentlendinganalytics.typepad.com/student_lending_analytics/2010/01/
sallie-mae-to-discontinue-career-training-loan-program.html.
\36\ Student Lending Analytics. ``Highlights of Sallie Mae Investor
Meeting at Credit Suisse Conference.'' February 12, 2010. http://
studentlendinganalytics.typepad.com/student_lending
_analytics/2010/02/highlights-of-sallie-mae-investor-meeting-at-credit-
suisse-conference.html.
---------------------------------------------------------------------------
For-profit schools regularly tell investors that they can
lower their default rates. For example, on a recent earnings call,
Corinthian Colleges stated, ``[W]e are aggressively attacking cohort
default rates, and expect to see measurable results.'' \37\ ITT
Educational Services stated on an earnings call, ``default management
is a very important part of what we'll be doing and focusing on in
2010.'' \38\
---------------------------------------------------------------------------
\37\ Call transcript available online at: http://seekingalpha.com/
article/186144-corinthian-colleges-inc-f2q10-qtr-end-12-31-09-earnings-
call-transcript?page=-1.
\38\ Call transcript available online at: http://seekingalpha.com/
article/183751-itt-educational-services-inc-q4-2009-earnings-call-
transcript?page=-1.
---------------------------------------------------------------------------
A recent report by Education Sector documents the role
schools can play in lowering default rates: ``the experience of the
Texas HBCUs, along with a new statistical analysis of cohort default
rates, suggests that dangerously high default rates for institutions
that serve at-risk students are not inevitable . . . Their [the Texas
HBCUs] success is not only applicable to other similar institutions,
but to all schools that serve those students most at risk for default
and who are committed to helping them succeed.'' \39\
---------------------------------------------------------------------------
\39\ Dillon, Erin and Smiles, Robert. ``Lowering Student Loan
Default Rates: What One Consortium of Historically Black Institutions
Did to Succeed.'' Education Sector. February 2010. http://
www.educationsector.org/usr_doc/Default_Rates_HBCU.pdf.
Many for-profit schools have kept Federal student loan default
rates down during the period when cohort default rates are measured and
could affect schools' eligibility for Federal student aid.\40\ Last
December, in preparation for the shift from measuring a school's cohort
default rate based on the first 2 years of repayment to the first 3
years of repayment, the U.S. Department of Education published data
showing what school default rates would look like based on a 3-year
window. The default rates at 183 for-profit institutions were at least
15 percentage points higher for a 3-year window compared to a 2-year
window. This suggests that the colleges were aggressive about keeping
defaults down during, but not after, the period in which they were
being tracked as a measure of institutional accountability. These 183
for-profit institutions collectively enrolled 9 percent of all students
attending for-profit institutions. By comparison, only 20 schools in
all other sectors saw a similar increase in their default rates when
the window was extended from 2 to 3 years, and these 20 schools
enrolled one-tenth of 1 percent of students in all other sectors.\41\
---------------------------------------------------------------------------
\40\ ITT Educational Services, Inc. Q4 2009 Earnings Call
Transcript. January 21, 2010. http://seekingalpha.com/article/183751-
itt-educational-services-inc-q4-2009-earnings-call-transcript?
page=-1.
\41\ Calculations by The Institute for College Access & Success on
data from the U.S. Department of Education, ``Trial Three-Year Cohort
Default Rates FY 2007.'' Excludes institutions with 50 or fewer
borrowers who entered repayment in Federal fiscal year 2007.
---------------------------------------------------------------------------
Clearly, for-profit colleges are not powerless in the face of
student demographics when it comes to managing default rates, and they
are responsive to changes in policy that have implications for their
bottom line.
what happens to students who default
Defaulting on a Federal student loan has severe and long-lasting
consequences.\42\ It wrecks your credit rating, making it difficult to
rent an apartment or buy a car, and increasingly, to get a job. You
will likely be hounded by collectors, and your debt will increase
significantly because of default and collection fees. You cannot get
Federal grants or loans to return to school, and the debt can follow
you until you die. There is no statute of limitations, and the
government can garnish your wages, seize your tax refunds, and
eventually take a slice of your Social Security check. Even if you are
in such severe financial distress that you meet the requirements for
declaring bankruptcy, it is nearly impossible to discharge student
loans.
---------------------------------------------------------------------------
\42\ U.S. Department of Education. Collections Guide to Defaulted
Student Loans. Accessed September 26, 2010 at http://www2.ed.gov/
offices/OSFAP/DCS/index.html. See also, Student Loan Borrower
Assistance, National Consumer Law Center. Default and Delinquency.
Accessed on September 26, 2010 at http://
www.studentloanborrowerassistance.org/default-and-delinquency/.
---------------------------------------------------------------------------
Private student loans can follow you not only to the grave but also
beyond. Unlike Federal loans, most private loans have co-signers and
remain collectible even if the borrower dies.\43\ Since 2005, private
student loans have been treated just as harshly as Federal student
loans in bankruptcy. While similar kinds of private, profit-driven
consumer debt are discharged when you are approved for bankruptcy,
private student loans are not. Ironically, it is easier to get relief
from credit cards and gambling debt than from private student loan
debt.
---------------------------------------------------------------------------
\43\ National Consumer Law Center's Student Loan Borrower
Assistance Web site: Disability and Death section. Available at http://
www.studentloanborrowerassistance.org/loan-cancellation/disability-and-
death/. See also Pilon, Mary. ``When Student Loans Live on After
Death.'' Wall St. Journal. August 7, 2010. http://online.wsj.com/
article/SB100014240527487047419045
75409510529783860.html.
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private student loans: a particular problem at for-profit schools
As noted above, in addition to high overall student debt, the for-
profit college sector has the largest share of students with private
student loans, which carry serious financial risks for borrowers. While
private student loans are no more a form of financial aid than a credit
card is when used to pay for tuition or books, they are sometimes
included in financial aid packages, and some for-profit colleges even
offer their own private loans directly to students.
The odds of having a private loan are highest for students
at for-profit colleges, where 42 percent used a private loan in 2007-8,
the most recent year for which data are available. Next come students
at private nonprofit 4-year schools at 25 percent, public 4-year
schools at 14 percent, and community colleges at 4 percent.
Due at least in part to their over-representation at for-
profit colleges, 17 percent of African-American undergraduates took out
a private student loan in 2007-8, making them the most likely to borrow
these risky products among all racial and ethnic groups. Their rate of
private loan borrowing also rose the most steeply, quadrupling from
2003-4 to 2007-8.\44\
---------------------------------------------------------------------------
\44\ Private Loans: Facts and Trends, August 2009.
Like credit cards, private student loans typically have uncapped,
variable interest rates that are highest for those who can least afford
them. Lenders typically reserve the right to raise interest rates and
charge high fees for myriad reasons and to declare borrowers in default
for something as simple as being a day late on a payment. These loans
also lack the important deferment options, affordable repayment plans,
loan forgiveness programs, and cancellation rights in cases of death,
severe disability, and school closure that Federal student loans
provide. But, as noted above, unlike credit card debt and other
consumer loans, private student loans are virtually impossible for
borrowers to discharge in bankruptcy.
Some for-profit colleges are aggressively expanding their own
private lending to students who are at very high risk of default.\45\
Pushing these students to take on private loan debt they cannot repay
can be devastating for the students in the long run, but quite
profitable for the school.
---------------------------------------------------------------------------
\45\ Pope, Justin. ``For-Profit Colleges' Increased Lending Prompts
Concerns.'' Associated Press. August 15, 2009. http://www.usatoday.com/
news/education/2009-08-15-profit-college-lending_N.htm.
For example, Corinthian Colleges, Inc. made $150 million
of such loans in the fiscal year that ended this June, as well as $120
million the year before. They fully expect a shocking 56 to 58 percent
of the borrowers to default.\46\ Yet they consider these loans good
investments because they will increase enrollment and with it a
profitable flow of Federal grant and loan dollars that outweighs the
planned write-offs. Corinthian owns more than 100 colleges across the
United States.\47\ Other large for-profit college companies, such as
ITT and Career Education Corporation, are also lending to their own
students and expecting very high defaults.\48\
---------------------------------------------------------------------------
\46\ ``Corinthian Colleges, Inc. F4Q09 (Qtr End 06/30/09) Earnings
Call Transcript'' http://seekingalpha.com/article/158257-corinthian-
colleges-inc-f4q09-qtr-end-06-30-09-earnings-call-
transcript?source=bnet; and ``Corinthian Colleges, Inc. F2Q10 (Qtr End
12/31/09) Earnings Call Transcript'' http://seekingalpha.com/article/
186144-corinthian-colleges-inc-f2q10-qtr-end-12-31-09-earnings-call-
transcript?part=qanda.
\47\ From Corinthian College's Web site as of September 22, 2010:
http://www.cci.edu/brands.
\48\ ``Career Education Corporation Q1 2009 Earnings Call
Transcript'' http://seekingalpha
.com/article/136209-career-education-corporation-q1-2009-earnings-call-
transcript?page=-1. Wall Street Journal, ``For-Profit Schools Face
Detention Not Expulsion,'' Aug. 20, 2010.
---------------------------------------------------------------------------
In addition to using these loans to gain access to
profitable amounts of Federal student aid, for-profit colleges can
immediately count these private loans towards the 10 percent of
revenues these schools are required to get from sources other than
Federal student aid. From July 2008 through June 2012, the Higher
Education Opportunity Act (HEOA) lets for-profit colleges count the net
present value of their institutional loans as non-Federal revenue in
the year these loans are made, rather than counting them as revenue if
and when they are actually repaid by the students.\49\
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\49\ ``For loans made to students by the institution from July 1,
2008, but before July 1, 2012, the net present value of the loans made
during a fiscal year if the loans are evidenced by promissory notes,
issued at intervals related to the institution's enrollment periods,
and are subject to regular loan repayments and collections. For loans
made on or after July 1, 2012, only the amount of loan repayments the
institution receives during a fiscal year, excluding repayment on any
loans for which the institution previously used the net present value
in its 90/10 calculation.'' From U.S. Department of Education, ``Dear
Colleague'' letter summarizing the Higher Education Opportunity Act
(DCL ID: GEN-08-12 FP-08-10). December 2010. http://www.
ifap.ed.gov/dpcletters/attachments/GEN0812FP0810AttachHEOADCL.pdf.
These are attempts to get around market corrections that
appropriately reduced access to expensive, subprime private loans for
very high risk borrowers, and to justify prices for for-profit
education and training programs that may exceed Federal aid limits. In
2008, Sallie Mae stopped most of its lending to these types of schools
because of high default rates and other questionable practices. But
whether the source is their own school or an outside lender, the
students who are pushed into private loans they cannot afford are stuck
with them even in bankruptcy, while the lenders are free to move on.
costs and risks for taxpayers
Because the for-profit college industry relies on federally funded
grants and taxpayer-backed loans for the bulk of its revenue,
taxpayers, as well as students, have a lot at stake in the quality and
cost of for-profit education. While for-profit schools have a fiduciary
responsibility to act in the best interest of their shareholders and
generate profits, Congress has a fiduciary responsibility to act in the
best interest of taxpayers.
This committee's June 2010 report, Emerging Risk, outlined just how
heavily taxpayers are subsidizing the for-profit college industry.\50\
While for-profit colleges may get up to 90 percent of their revenue
from Federal student aid (title IV grants and loans), that
extraordinarily high percentage currently excludes some Federal student
loans, and it does not include other government revenue sources, such
as GI bill benefits or Federal job training funds. Here are just a few
examples of how much taxpayers are spending on for-profit colleges.
---------------------------------------------------------------------------
\50\ U.S. Senate Health, Education, Labor, and Pensions Committee.
``Emerging Risk?: An Overview of growth, Spending, Student Debt and
Unanswered Questions in For-Profit Higher Education.'' U.S. Senate.
June 24, 2010. http://harkin.senate.gov/documents/pdf/4c23515814
dca.pdf.
One in four Federal Pell grant dollars (more than $7.3
billion) went to students attending for-profit schools in 2009-10,
almost double the share a decade earlier.\51\
---------------------------------------------------------------------------
\51\ Calculations by TICAS on data from U.S. Department of
Education, Federal Student Aid Data Center, Programmatic Volume
Reports. http://federalstudentaid.ed.gov/datacenter/programmatic.html,
accessed July 22, 2010; U.S. Department of Education, Office of
Postsecondary Education (OPE). ``Pell End of Year Report, 1999-2000.''
http://www2.ed.gov/finaid/prof/resources/data/pell-data.html, accessed
July 28, 2010.
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Nearly one in four Federal student loan dollars (at least
$20.3 billion) went to students at for-profit schools in 2008-9 (the
latest year of available data), more than double the share in 1999-
2000.\52\ In the coming year, for-profit colleges are expected to
absorb an estimated $30 billion in Federal student loans.\53\
---------------------------------------------------------------------------
\52\ Calculations by The Institute for College Access & Success on
data from U.S. Department of Education, Federal Student Aid Data
Center, Programmatic Volume Reports. http://federalstudentaid.ed.gov/
datacenter/programmatic.html, accessed September 27, 2010.
\53\ Calculations by The Institute for College Access & Success on
data from the U.S. Department of Education. ``Fiscal Year 2011 Budget
Request: STUDENT LOANS OVERVIEW.'' http://www2.ed.gov/about/overview/
budget/budget11/justifications/t-loansoverview.pdf, accessed June 22,
2010.
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Since August 2009, taxpayers have spent $618 million on
tuition and fees at for-profit colleges through the post-9/11 GI bill.
That amounts to more than a third (35 percent) of taxpayer spending in
that period on veterans' tuition and fees.\54\
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\54\ Golden, Dan. ``Veterans Failing Shows Hazards of For-Profit
Schools in GI Bill.'' Bloomberg News. September 23, 2010. http://
www.bloomberg.com/news/2010-09-23/veterans-failing-to-learn-show-
hazards-of-for-profit-schools-under-gi-bill.html.
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In fiscal year 2010, an estimated $230 million in tuition
assistance for active-duty troops went to for-profit, online
colleges.\55\
---------------------------------------------------------------------------
\55\ Reed. Charlie. ``DOD to tighten scrutiny of for-profit, online
colleges.'' Stars and Stripes. September 24, 2010. http://
www.stripes.com/news/dod-to-tighten-scrutiny-of-for-profit-online-
colleges-1.119391.
The best available estimate for the average, undiscounted cost of
tuition and fees for all for-profit colleges in 2009-10 is nearly
$14,200, which is more than twice the average undiscounted cost for in-
State students at public 4-year colleges, and more than five times the
cost at public 2-year colleges.\56\ For-profit colleges, which have an
obligation to maximize profits for shareholders, can set their prices
to generate the maximum possible revenue from Federal student loans, as
well as other Federal and State Government sources.
---------------------------------------------------------------------------
\56\ The College Board. Trends in College Pricing 2009. http://
www.trends-collegeboard.com/college_pricing/
1_1_published_prices_by_sector.html?expandable=0. See also http://
www.trends-collegeboard.com/college_pricing/introduction.html.
---------------------------------------------------------------------------
Online colleges that market heavily to members of the
military typically price their course credits at the maximum amount
covered by GI benefits, $250, which is five times more than the typical
cost of community college credits offered on military bases, according
to a Bloomberg News analysis.\57\
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\57\ Golden, Dan. ``Marine Can't Recall His Lessons at For-Profit
College.'' Bloomberg. December 15, 2009. http://www.bloomberg.com/apps/
news?pid=newsarchive&sid=al8HttoCG.ps.
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Some State grants can be used to attend for-profit
colleges. For example, California's Cal Grant program made some awards
of more than $15,000 to students at for-profit colleges in 2007-8,
including colleges that the California Attorney General found in 2005
to have falsified job placement and salary data for graduates. This is
roughly 10 times the value of a typical Cal Grant received by a
community college student.\58\
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\58\ California Student Aid Commission, ``Cal Grant Statistics,
Academic Year 2007-8.'' http://www.csac.ca.gov/pubs/forms/grnt_frm/07-
08PreliminaryGrantStatistics.pdf. See also, California Office of the
Attorney General, July 31, 2007, ``Brown Reaches Multi-Million
Settlement with Corinthian Vocational School.'' http://ag.ca.gov/
newsalerts/release.php?id=1444.
Even after taking substantial State subsidies for public colleges
into account, taxpayers and students combined can still end up paying
less for career education programs at public colleges than at for-
profit colleges. This is what the Florida Office of Program Policy
Analysis and Government Accountability (OPPAGA) found earlier this
year, when it compared five career education programs offered by both
public and for-profit colleges in the State.\59\
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\59\ Florida Office of Program Policy Analysis and Government
Accountability (OPPAGA), Public Career Education Programs Differ From
Private Programs on Their Admission Requirements, Costs, Financial Aid
Availability, and Student Outcomes, January 2010. Report 10-18. http://
www.oppaga.state.fl.us/MonitorDocs/Reports/pdf/1018rpt.pdf.
Three out of the five programs studied cost thousands of
dollars less at public colleges than at for-profit colleges after
combining the student and State contributions. These programs were
$2,250 to nearly $5,100 cheaper at public colleges. The two programs
that cost less at for-profit colleges were cheaper by much smaller
amounts: $46 and $837.
One for-profit program--massage therapy--had a per-student
cost more than double the public college program's cost, along with
fewer completions and a lower pass rate on the licensure exam.
The public programs also had much higher rates of
accreditation and much higher pass rates on licensure and certification
exams. For example, 95 percent of the public phlebotomy programs were
accredited, compared to 26 percent of the for-profit programs.
deja vu all over again
Sadly, this is not the first time that policymakers have had to
raise concerns about these kinds of problems in the for-profit college
sector. Following the creation of the GI bill in 1944, thousands of
for-profit colleges sprung up virtually overnight to enroll
veterans.\60\ In response to well-founded concerns about waste, fraud
and abuse, Congress established an important market mechanism for
veteran education programs. It capped the percentage of a program's
students that could receive veteran benefits at 85 percent. This ``85-
15 Rule'' is intended to ensure that at least 15 percent of a program's
students are willing to pay the sticker price without the Federal
subsidy. \61\
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\60\ Altschuler, Glenn C. and Stuart M. Blumin. The G.I. Bill: A
New Deal for Veterans. Oxford University Press. 2009.
\61\ Decision by the U.S. Supreme Court: 435 U.S. 213, 98 S.Ct.
1024, 55 L.Ed.2d 225, Max CLELAND, Administrator of the Veterans
Administration, et al. v. NATIONAL COLLEGE OF BUSINESS, No. 77-716.
March 20, 1978.
---------------------------------------------------------------------------
In 1972, amendments to the Higher Education Act allowed for-profit
schools to participate in the Federal title IV student financial
assistance programs for the first time. Problems arose almost
immediately. Throughout the next two decades, there were congressional
hearings, investigations and legislative attempts to uncover and thwart
deceptive and fraudulent practices in the proprietary sector. The most
notable investigation came in 1990, when the Senate Permanent
Subcommittee on Investigations of the Committee on Governmental Affair,
led by Senator Sam Nunn, documented a wide range of pervasive problems
plaguing virtually every part of for-profit college administration and
oversight.\62\
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\62\ The 1990 hearings culminated in Senate Report 102-58, Abuses
in Federal Student Aid Programs, Report Made by the Permanent
Subcommittee on Investigations of the Committee on Governmental
Affairs, United States Senate, May 17, 1991.
---------------------------------------------------------------------------
In response, Congress passed a series of reforms in 1992. These
included establishing an 85-15 rule for title IV financial aid, modeled
after the GI bill provision but focused on revenues rather than
students. It required proprietary schools to get at least 15 percent of
their revenues from sources other than title IV programs. A ``50
percent Rule'' made schools ineligible for title IV funds if more than
half their courses were provided through correspondence. Importantly,
the 1992 reforms also banned incentive compensation for college
recruiters and personnel.
The results were clear. In less than 10 years, for-profit sector
default rates fell from 29 percent in 1991 to 9 percent in 2000.\63\
---------------------------------------------------------------------------
\63\ Calculations by The Institute for College Access & Success on
U.S. Department of Education data on student loan defaults, for Federal
Fiscal Years 1991 and 2000.
---------------------------------------------------------------------------
However, it did not take long for the newly strengthened rules to
get weakened under intense lobbying from the for-profit college
industry. In 1998, Congress reduced the percentage of revenue that
schools had to obtain from non-title IV sources from 15 percent to 10
percent (changing the 85-15 rule to 90-10). This was just 1 year after
a GAO report concluded that proprietary schools that relied more
heavily on title IV funds tended to have poorer student outcomes: ``Our
analysis showed that, on average, the higher a school's reliance on
Title IV, the lower its students' completion and placement rates, and
the higher its students' default rates.'' \64\ The rules continued to
be watered down through the 2000s, including: \65\
---------------------------------------------------------------------------
\64\ GAO. ``Proprietary Schools: Poorer Student Outcomes at Schools
That Rely More on Federal Student Aid,'' GAO/HEHS-97-103 Proprietary
Schools and Student Aid. June 1997.
\65\ Congressional Research Service Report RL-33909. Institutional
Eligibility for Participation in Title IV Student Aid Programs Under
the Higher Education Act: Background and Reauthorization Issues, by
Rebecca R. Skinner.
2002--The Department of Education added ``safe harbors''
to the ban on incentive compensation which, in direct contradiction to
the statute, allowed forms of incentive compensation. These loopholes
directly contributed to the growth of high-pressure recruiting tactics
at some for-profit colleges. \66\
---------------------------------------------------------------------------
\66\ Testimony of David Hawkins, Director of Public Policy and
Research, National Association for College Admission Counseling, before
the Senate Health, Education, Labor, and Pensions Committee, Hearing on
Marketing and Recruitment in For-Profit Education. August 4, 2010.
http://help.senate.gov/imo/media/doc/Hawkins1.pdf.
---------------------------------------------------------------------------
2005--The rule limiting distance courses to 50 percent of
a college's total enrollment was gutted by eliminating the requirement
that eligible telecommunications (i.e., online) courses be part of
programs at least 1 year in length, opening doors to 100 percent online
colleges. In the Internet age, this allowed colleges to double in size
virtually overnight.
2008--The Higher Education Opportunity Act (HEOA)
substantially weakened the already weak 90-10 rule for title IV student
aid. It allowed for-profit schools to immediately count institutional
loans towards their 10 percent of non-Federal revenues, rather than
counting them as they are repaid; allowed schools to count some title
IV aid towards the 10 percent, rather than the 90 percent, side of the
90-10 calculation; and eased penalties for proprietary institutions
that fail to comply with the 90-10 rule.
Unfortunately and predictably, weakened regulation and reduced
oversight, combined with a large potential revenue stream of Federal
dollars, have led once again to an environment where the incentives for
less scrupulous for-profit colleges to game the system appear to exceed
the risks. At the same time, the risks to students and taxpayers are
much larger in scale and cost than ever before.
The last time Congress cracked down on abuses at for-profit
colleges, the sector was a shadow of the size it is today. In 1991--the
point at which the Permanent Subcommittee on Investigations found
proprietary colleges to be ``leaving hundreds of thousands of students
with little or no training, no jobs, and significant debts that they
cannot possibly repay''--there were fewer students enrolled in the
entire for-profit sector than there are enrolled today in just the
University of Phoenix. In 1991, the University of Phoenix enrolled just
over 7,000 students. Last fall, it enrolled more than 475,000.\67\
---------------------------------------------------------------------------
\67\ Calculations by TICAS on IPEDS for the years noted.
---------------------------------------------------------------------------
In 1991, Ashford University did not exist. It was then a tiny
nonprofit college in Iowa with a different name and fewer than 300
students. In 2005, the year Congress eliminated the rule limiting aid
to online schools, this tiny nonprofit college with fewer than 1,000
students became Ashford University. By last year, just 4 years later,
it was a publicly traded for-profit corporation with more than 46,000
students--more than the University of Iowa or Iowa State, and more than
all the colleges in Wyoming combined.\68\
---------------------------------------------------------------------------
\68\ Ibid.
---------------------------------------------------------------------------
The fact that for-profit schools are growing quickly is not
inherently problematic, but the high stakes for both students and
taxpayers suggest that the sector should be actively and carefully
monitored. Our higher education and financial aid systems are very
complicated, even for highly educated consumers. As David Hawkins of
the National Association for College Admission Counseling (NACAC)
testified before this committee in August, ``the information asymmetry
between the employees in charge of recruiting and prospective students
is immense. In an unregulated environment, the potential for
misrepresentation and outright fraud is a clear and present threat,
which can result in harm to students and, in the case of Federal aid
and loans, to the taxpayer.'' \69\
---------------------------------------------------------------------------
\69\ Testimony of David Hawkins, Director of Public Policy and
Research, National Association for College Admission Counseling, before
the Senate Health, Education, Labor, and Pensions Committee, Hearing on
Marketing and Recruitment in For-Profit Education. August 4, 2010.
http://help.senate.gov/imo/media/doc/Hawkins1.pdf.
---------------------------------------------------------------------------
For example, an article in this June's issue of Good Housekeeping
magazine offered a thoughtful but daunting list of 11 different kinds
of research students should do if they are considering a for-profit
college for career education--from checking with local public colleges
to see if they offer similar programs at lower cost, to interviewing
prospective employers, to figuring out the name of the school's parent
company and, if it is publicly held, reading its most recent 10-K
filing with the SEC.
Missing from this already long list are any questions about
program-level accreditation and licensing requirements, which, as this
committee heard from Yasmine Issa in June, are arcane issues that can
render even a completed credential completely useless. This level of
sophisticated, defensive research and analysis is more than should be
required of any consumer, and is particularly burdensome for the less-
educated consumers deliberately targeted by much of this industry. The
ability to interpret corporate SEC filings and detailed knowledge of
the different types of accreditation should not be required to avoid
getting ripped off by a for-profit school.
Thank you again for holding today's hearing and for the opportunity
to testify today. I look forward to answering your questions.
The Chairman. Thank you very much, all of you, for your
testimony. We'll now begin a round of 5-minute questions.
Ms. Asher, we'll start where you just left off. I read your
testimony. You gave an example here about expanding their
private lending to students. Some of these colleges, for-
profits, say they also loan money. You pointed out an example
in your written testimony that Corinthian Colleges, Inc., made
$150 million of such loans in the fiscal year that ended this
June, as well as $120 million the year before.
Now, most career colleges tout that as a good thing, that
they're loaning money to students. Yet you say,
``They fully expect a shocking 56 to 58 percent of
the borrowers to default. Yet they consider these loans
good investments because they will increase enrollment
and with it a profitable flow of Federal grant and loan
dollars that outweighs the planned writeoffs.''
Would you want to elaborate on that?
Ms. Asher. Sure.
The Chairman. Tell us what you mean by that?
Ms. Asher. First of all, it's important to note that this
information was provided by Corinthian to investors in public
calls as well as in some SEC filings.
What's interesting about this lending pattern is partly
that it has expanded at Corinthian and some other schools like
ITT Tech and Career Education Corporation as Sallie Mae and
some other lenders withdrew from the subprime private student
lending industry. Many of them were making subprime loans,
expensive loans to students who probably couldn't afford them,
during the credit boom that we also saw in the mortgage
industry, and pulled out once the risks could no longer be
offloaded onto third parties.
Some schools stepped in to fill that gap because of the
financial interest in their larger amount of financial aid from
the Federal Government that students could bring in.
The Chairman. I think what you're saying in your
testimony--correct me if I'm wrong--is that they were willing
to make those loans, write them off because students would
default, knowing that if they're loaning $150, they may get
$300 in Federal money coming in, which means they get a profit
of 150 bucks.
Ms. Asher. I suspect it's much more.
The Chairman. Well, I'm just using that as an example. In
other words, that's what you're saying, that they were willing
to do that because it brings in more students.
Ms. Asher. That's correct.
The Chairman. Also, is it your observation that these
schools basically first go after the lowest income students
because they get the most Federal dollars?
Ms. Asher. I would refer in part to my esteemed co-panelist
here, but yes, it's clear that if you can make more money by
capturing more Federal aid per student and convert that into
profits, that's a very, very strong incentive for some of the
abuses that these hearings have documented.
The Chairman. Ms. Bittel, again I'm well aware of the risks
that you've taken to come here and to testify. Rarely we get
people that I call real profiles in courage. You are one of
those. In a very tough job market, I know that you're risking
your employment to be here.
I've read your testimony thoroughly and of course I
listened intently to your comments. I just want to read from
your written testimony one thing and take a little bit of time
to do this, just about a minute. You talked about a co-worker
who came to you to verify employment. Someone had sent it in
saying they were making $8,000 a year, but they went to
salary.com, ``estimating average salary in that field in their
ZIP code would be $25,000.'' They threw the one from the real
person in the wastebasket and used the one from the salary.com.
You said that you had taken this action to the supervisor,
and no disciplinary action was taken, and you said,
``Much to the contrary, this same co-worker who
changed the student's salary data received EDMC's North
Star Award shortly thereafter. The intent of the award
is to exhibit to other employees that `this was a star
to follow'.''
Are you saying that basically it was an encouragement to do
that?
Ms. Bittel. That was the way I took it. It wasn't written
down in a memo. They're far too smart for that. As you saw a
minute ago, I'm not afraid to speak up, and when I thought I
saw wrongdoing I went to my supervisor about it. I was outraged
that such a thing could happen. I was assured that they would
go to the head of the department and I anticipated seeing some
sort of disciplinary action of some sort. But I saw those types
of actions continue. And when the award was given, the legend
of the North Star is that that is the star that the mariners
followed for clear direction. That's the meaning of the award.
What more could I take from that? I mean, no, it didn't
come to me in a written policy, but I saw that person rewarded
in many ways, and it to me was subliminally--it was put out
there. Actions speak louder than words, and this is the way I
took it to be.
The Chairman. Thank you very much.
My 5 minutes are up. We'll continue 5-minute rounds.
Senator Burr.
Statement of Senator Burr
Senator Burr. Thank you, Mr. Chairman. The only Republican
in the room.
Ms. Bittel, I thought that was very telling, the comment
that you said, and I apologize for the other members that have
other committees or hearings that they may find as important as
this one. Quite honestly, I would rather see the panel a little
more balanced than it is. But I think the Ranking Member stated
it very well.
Let me move to the letter that the chairman was so gracious
to put in the record from EDMC. I take for granted, Mr.
Chairman, that's the letter dated September 29?
The Chairman. It's dated September 30.
Senator Burr. Well, let me ask unanimous consent to enter
into the record the letter you have from September 29 to
yourself and to Chairman Enzi.
[The material referred to may be found in Additional
Material.]
Ms. Bittel, if what this letter states is correct you're
currently on leave at your request. Is that right?
Ms. Bittel. That is correct, sir.
Senator Burr. Upon learning of the allegations, EDMC
company policy, and consistent with company policy, conducted a
full internal investigation, and part of that was to ask you
for specific information. Is that correct?
Ms. Bittel. That is correct, sir.
Senator Burr. And this letter states that you refused to
provide that information.
Ms. Bittel. That's not entirely accurate, sir. When I--
first of all, clearly----
Senator Burr. What part's not accurate?
Ms. Bittel. That----
Senator Burr. Did you supply the information they
requested?
Ms. Bittel. Please let me just explain, if you would,
please.
Senator Burr. Well, I'm just asking, did you supply the
information----
Ms. Bittel. I did supply information, yes, sir.
Senator Burr [continuing]. That they requested for the
internal investigation?
Ms. Bittel. Yes, sir.
Senator Burr. You supplied it?
Ms. Bittel. I supplied--I went to them. I sat with them for
more than an hour. I had talking notes that I had written. I
spoke with the human resources director for quite some time and
I allowed her to ask all questions. I answered all questions.
Senator Burr. Let me just read the letter and you tell me
what part you disagree with. It says,
``Ms. Bittel refused to provide specific information
about her allegations, despite being informed that the
failure to do so would hinder the investigation.''
Ms. Bittel. The only thing that I refused to provide were
the names of people. I did not feel that it was proper for me
to do so. They have the records to be able to see.
Senator Burr. Let me go on to state, the letter:
``The internal investigation found no support for Ms.
Bittel's claim of undue pressure placed upon Career
Service advisers at EDMC Online Higher Education to
meet placement goals or to falsely graduate or verify
graduates' employment was released to their field of
study.''
Now, clearly you've got a difference with the company, but
I think it's important for the record--and again, I would ask
unanimous consent that this be a part of the record, Mr.
Chairman, since it is a response to you.
Let me turn now to the panel. I have one simple question
that I will ask all of you: Is it more important whether an
institution is for-profit or not-for-profit or is it more
important what the graduation rate is of the institutions in
this country? Let me go to you, Ms. Johnson. Graduation rates
or the profit or nonprofit status of a company, of an
institution?
The Chairman. What was the question?
Senator Burr. The question is, is it more important whether
an institution is for-profit or not-for-profit or what the
graduation rate is of the institution, how many kids leave the
door achieving the goal of why they went there? Which is more
important, the graduation rate or the status of the
institution--profit or nonprofit?
Ms. Johnson.
Ms. Johnson. Well, when I went into this school I guess my
goal was to graduate.
Senator Burr. OK, I'll take that as graduation.
Dr. Mitchem.
Mr. Mitchem. Graduation.
Senator Burr. Graduation.
Ms. Bittel.
Ms. Bittel. Graduation is, but it's the job that follows
graduation.
Senator Burr. Ms. Asher.
Ms. Asher. Graduation rates matter, but not all graduation
rates capture----
The Chairman. I can't hear you, Ms. Asher.
Ms. Asher. Graduation rates clearly matter, but they do not
capture the full extent of what's happening at schools. As my
full testimony documents, there are great limitations to the
official graduation rates currently collected by the Federal
Government. They only cover those who enroll for the first time
at the same school that they graduate from and attend full-
time.
Whether or not you borrow matters and what happens after
you graduate matters a lot, too.
Senator Burr. It sure does, and the lack of the ability to
graduate limits one's marketability, employment opportunities,
whether it's high school, whether it's 2-year or 4-year.
Now let me share with you just some quick statistics
because my time is up. North Carolina has 58 4-year
institutions, 58. Graduation rate after 4 years, 9 institutions
exceed 50 percent; after 6 years, 22 institutions exceed 50
percent; after 8 years, 24 institutions exceed 50 percent
graduation rate.
In the 2-year institutions, we have 120 of those
institutions. Twenty-six institutions have a graduation rate of
over 50 percent after 3 years. Twenty of those institutions are
for-profit; six are not-for-profit. We have 94 institutions
that after 3 years have a graduation rate below 50 percent. Of
that, 88 are public institutions, not-for-profit; 6 are for-
profit institutions.
As the only Republican here, let me say this is something
we need to look at, the question of whether the value of what
our students receive, whether it's from a for-profit or not-
for-profit institution, is in fact delivered.
But let me just caution my fellow members. As our
population grows, the need for outlets for continued education
is going to continue to grow. Right now when we look at our
returning veterans who come back with a Federal commitment to
supply an education for them based upon the commitment they
made to their country, the preferred choice is the for-profit
institutions that are around the country that provide them the
skills they need to find a job.
The wrong thing we do here not just continues this quest,
that I think this committee has been on as it relates to for-
profits, which is not to weed out the bad apples; I think it's
to eliminate the for-profit side as it relates to public--Ms.
Bittel, this is my time now; you've had your show--to eliminate
the taxpayer participation for the for-profit side.
Let me just caution you: When you do that, you will be
making the first step toward telling these service members that
come back: No, you can only use that GI money where we say you
can use it; you can't use it to go to the NASCAR 2-year
institution that teaches you to be a mechanic.
The Chairman. Senator Burr.
Senator Burr. Well, Mr. Chairman, I'm the only one here.
The Chairman. I will let you. I tried to set the example by
going for 5 minutes. I will let people go to 8 minutes since I
had an opening statement and you didn't, so I took about 3
minutes on my opening statement.
Senator Burr. Mr. Chairman.
The Chairman. But we'll go around. We'll come back to you.
Senator Burr. No, you're gracious and I probably can't take
but a few more minutes of it. I think I know what I'm going to
hear. But I appreciate the fact that you've allowed me to come
and be a part of this.
The Chairman. You can stay as long as you want.
Senator Burr. I can assure you that I have built some
character this morning that I didn't plan to build.
The Chairman. Obviously, stay as long as you want. It's an
open hearing.
Senator Burr. But the purpose of mine was to point out,
we're focused on the wrong thing, Mr. Chairman. I know you'd
like to go on. Let me just make this and I'll shut up.
The Chairman. We have other Senators who are here who would
like to ask questions.
Senator Burr. I hope that at some point collectively we
look at the graduation rate of our students and whether they
get across the goal line, getting that certificate that
entitles them to a greater future, and not a witch hunt. Thank
you.
The Chairman. Thank you, Senator Burr.
Senator Franken.
Statement of Senator Franken
Senator Franken. Boy. I don't know what to say. I feel like
my motives have been impugned. I have no goal to de-fund from
Federal money the good actors. We have Walden in Minnesota that
does a great job.
We had the Ranking Member say that we treated the witnesses
that were called by the minority the last time, that we treated
them rudely. We had someone from DeVry here that I thought I
treated--that I actually complimented them. I don't get this, I
really don't. If you wanted to hear some more balanced panel,
it might have been nice if the minority had actually called
some folks.
I hear all this stuff about the invisible hand. Well, that
all depends on informed choices. There are these enormous
marketing budgets that some of these bad actors have, and we're
trying to--look, when my wife was 18 months old her father
died, leaving her mother widowed at age 29 with 5 kids, 4 of
them girls. They all graduated from college with combinations
of scholarships and Pell grants. I'm a big champion of Pell
grants. But I don't want Pell grants being used in a way that
is just going to waste.
We should be talking about all kinds of education, and it
isn't as if we can't. The Ranking Member made a big speech and
left, and he's a friend of mine, but--look, these private
schools, these private colleges or postsecondary institutions,
have 10 percent of the students and 44 percent of the defaults.
So there's an issue here.
I, like the chairman, have done everything I can every time
to fight for Pell grants, but I don't want them wasted.
So let's talk about this, the invisible hand. We heard
about Adam Smith's invisible hand and that's always going to do
the job. Dr. Mitchem, in your testimony you say that some low-
quality for-profit colleges have the upper hand over cheaper,
higher-quality programs because they have the resources to run,
``state-of-the-art marketing and recruitment campaigns.''
As Members of Congress, what can we do to encourage a
marketplace where the competition among schools is based on the
quality of the education, not the quality of marketing?
Mr. Mitchem. Congress can do a lot of things, Senator, but
I don't know if you can assure that. It's a very complex issue.
The truth is that our independent colleges and our publicly
supported colleges don't have the resources to compete with the
marketing techniques and tactics that are used by the
proprietary schools. So that will always be an uneven battle.
They just can't invest the same amount of resources in the
admissions.
I wish that the proprietary schools would invest more of
their resources in supportive services for the students that
they do indeed recruit. I wish that the proprietary schools
would look to the Federal Government for more support from the
TRIO program, the student supportive services program. They
don't provide anything like that, which is an issue and a
concern.
So I don't know if we can ever right this balance, is the
bottom line.
Senator Franken. Now, the TRIO programs are focused on
first-generation----
Mr. Mitchem. Exactly.
Senator Franken. I was the first generation going to
college. But also minority and impoverished folks, right? And
TRIO does an amazing job.
Mr. Mitchem. It's a class-based program. In fact, the
majority of the students in the TRIO programs right now are
white, because it's class-based.
Senator Franken. Thank you.
Ms. Asher, most students who enroll in the schools analyzed
in Chairman Harkin's report eventually drop out, right?
Ms. Asher. As I understand it, yes, sir.
Senator Franken. While many of these students drop out
after only 20 weeks, they nevertheless rack up a substantial
amount of debt. And student loan debt is uniquely damaging, a
uniquely damaging form of debt, because it cannot be discharged
in bankruptcy.
This year I joined Senators Durbin and Whitehouse in
introducing the Fairness for Struggling Students Act, which
would treat private student loans just like credit cards, auto
loans, and mortgages in bankruptcies. Do you think it's unfair
that student loan debt is treated differently than most other
forms of debt in bankruptcy, and what effect does this have on
students who default?
Ms. Asher. I certainly do think it's unfair that private
student loans are treated like unpaid criminal fines rather
than like very similar forms of consumer debt like credit
cards. We don't say that a credit card is financial aid when
you use it to pay for tuition and books and neither are private
student loans.
We strongly support the Senate and House efforts to restore
fair treatment to private student loans in bankruptcy,
especially because these loans can follow you not just to, but
past, the grave. Very few have even a discharge provision in
the case of the borrower's death.
Senator Franken. I'm going to take the chairman up on his
8-minute offer.
For all of you: At the last hearing we learned that all 15
of the schools investigated by the GAO deceived students they
were trying to recruit. Ms. Bittel, that's what you're talking
about and, Ms. Johnson, that's what you're talking about,
right? You were deceived?
Ms. Johnson. Yes.
Senator Franken. So isn't it our job, I would think, on our
committee and our job as Senators to uncover deception so that
when the invisible hand is operating it isn't an invisible hand
with a card up its sleeve? I think so, and I think that's why
these hearings are important.
Now, let me speak also to my colleague's point on
graduation rates. Ms. Asher, are these statistics self-
reported?
Ms. Asher. Graduation rates are collected based on a pretty
narrow definition of what counts. So these are Federal
statistics based on what are called first-time, full-time
students, and only count those who go all the way through at
the same school after starting for the first time in college as
a full-time student. As we all know, there are lots and lots of
ways of going to college. Increasingly, people are attending in
other ways.
They also don't capture transfer students, which are an
important part of what we hope people are accomplishing when
they----
Senator Franken. Let me get to this, though, because a lot
of this is self-reporting.
Ms. Asher. The job placement rates are self-reported and
that is a particular concern, as previous hearings have noted,
as well as a number of investigations, including one in
California.
Senator Franken. OK, because when people are self-reporting
you've kind of got to trust them.
Ms. Johnson, you graduated, right, or are going to
graduate?
Ms. Johnson. No, I'm halfway through my program.
Senator Franken. You're halfway through your program.
Ms. Johnson. Yes.
Senator Franken. But you were deceived, right?
Ms. Johnson. Yes.
Senator Franken. And as a result, you just--what you were
told was that you'd be able to go to school and then do your
clinical work--that's the part you're doing now--you'd be able
to do it at home?
Ms. Johnson. Yes.
Senator Franken. And be with your kids?
Ms. Johnson. Yes.
Senator Franken. And it turned out that wasn't the case at
all.
Ms. Johnson. No, that's not the case.
Senator Franken. Do you feel you have any recourse because
of this? You obviously don't because it's a whole rigmarole
that would cost a lot of money and involve lawyers.
Ms. Johnson. Yes.
Senator Franken. And you obviously are in no position to do
that.
Ms. Johnson. No.
Senator Franken. I'm over my time, so thank you.
Thank you all for testifying, and I wish we had someone
from the industry who could be speaking before us today, and
I'm sure we will be talking about other parts of the higher
education industry.
The Chairman. Thank you, Senator.
I just would state that, in regards to our service members
and what's happening there, our staff is looking into that and
that will certainly be a part of a future hearing that we are
already working on right now.
Senator Casey was next, but he had to leave. He'll be back
momentarily. So we'll turn to Senator Merkley.
Statement of Senator Merkley
Senator Merkley. Thank you very much, all of you, for your
testimony.
I want to throw a couple things out there just to see if
any of you have had experience with it or have insight on it.
The first is that we have had folks testify who were in
programs, or a specific woman who was in a program, that was
unaccredited. So when she went out to get a job she couldn't
figure out why her particular degree didn't allow her to get a
job. Finally someone took her aside and said, Well, your
program wasn't accredited. It turned out she could have paid
far less at a community college for an accredited program.
Should student loans be extended to programs that are
unaccredited?
Ms. Asher. This is a problem that is actually surfacing
quite a bit, of people who are pressured to enroll in school,
told the school is accredited, and then only later find out,
sometimes after completion, that the program is not accredited,
which means they're not in that case qualified to take the
licensing exam or work in the field.
That's why it's important to qualify the importance of
graduation rates. Aside from the quality of the information and
the scope that it captures of actual students in the field, it
also may not mean that someone gets the benefit of the
credential they've acquired.
Senator Merkley. So should we short-circuit that on the
front end by not allowing student loans for a program that's
unaccred-
ited?
Ms. Asher. Certainly there's a need for greater examination
of how programs qualify for Federal student aid. Some of that
is happening in a regulatory process under way now at the
Department of Education, and these are really important
questions that need to be examined further.
Senator Merkley. Anyone else want to comment on that?
Ms. Bittel. Yes, sir. I would say that they absolutely
should be accredited before receiving funds. Otherwise, what
recourse do the students have to find jobs? It's just outright
cheating.
Senator Merkley. A second question I wanted to explore was,
it's my understanding that sometimes the commitment that one
makes when one signs up isn't just for a single term or a
single semester, but often for multiple semesters, so that if a
student attends, if you will, the first 13 days or 3 weeks the
operator of a school can claim the funds for a full year even
if somebody drops out after a couple weeks.
Have you run into that? Are you familiar with that? Do you
have any thoughts on that?
Ms. Bittel. It's my understanding, sir, that that does
happen and that there is a certain time limit within, as long
as the student stays within the school for that time limit, the
schools are permitted to keep the Pell grants, and that there
have been pressures to keep people for that 1 more day, knowing
full well that then the money would be owed. But I can't speak
to that directly. I have not had personal experience. I've just
received letters from students who have told me of such, and
admissions people who have told me of such.
Ms. Asher. It's certainly a problem that so many students
are withdrawing, often because they've begun to recognize the
lack of value in the training they're being offered, while the
school can still retain the full value of their Federal aid.
Just to address your previous question, certainly we should
be questioning the eligibility of unaccredited programs for
Federal student aid.
Senator Merkley. So it sounds like there is nothing I'm
missing in terms of why someone who only goes a couple weeks,
in other words drops out during the first semester, why should
a college get the value, if you will, of being able to take
multiple semesters' worth of Pell grants if they're not
providing multiple semesters' worth of education? Am I missing
anything on this question?
[No response.]
No, OK.
Thank you very much, Mr. Chairman.
The Chairman. You get an extra 3 minutes if you'd like.
Senator Merkley. You know what, why don't I defer to other
folks who have questions.
The Chairman. I took 8. I said I'd give everybody else 8
minutes since I had an opening statement and nobody else did.
Senator Merkley. I'll defer, but I may have a few more when
we conclude.
The Chairman. All right.
Senator Merkley. Thanks.
The Chairman. Senator McCain.
Statement of Senator McCain
Senator McCain. Well, thank you, Mr. Chairman. I'm sorry I
had to leave. There's another hearing on the Energy and Natural
Resources Committee that I had to attend.
You know, there's an individual that I've gotten to know
over the years. We've done battle on many occasions. I have the
highest respect and regard for him. His name is Lanny Davis and
Lanny Davis is involved in this issue. In fact, I think he's an
advocate for the ``nasty'' for-profit Americans. ``For-
profit,'' that alone I can see offends some on this committee.
But I think I'd like to just make some comments from Lanny
Davis' piece that appeared in the well-known conservative blog,
the HuffPost:
``Suppose that a conservative Republican
administration in the middle of high unemployment and
economic slowdown proposed new regulations that would
most hurt lower income people and minority groups and
the for-profit colleges and universities that serve
them. Can you imagine the cries of outrage from liberal
critics condemning hard-hearted Republicans targeting
the most vulnerable young people in our society? Yet
that's exactly what the Department of Education's
proposed `Gainful Employment' Regulations would likely
do. They are almost exclusively aimed at for-profit
private colleges, which are predominantly comprised of
lower income and minority students.
``Let's be careful about characterizing, as some
liberals have done, those schools catering to such
vulnerable at-risk students with open admission
policies as `bad actors', whereas the most selective,
elitist Harvards and Stanfords, with less student loan
defaults, are deemed `good actors'. That has the
uncomfortable look and feel of disparate class and
racial treatment--which should make liberals very
uncomfortable.
``So how do you explain the paradox that, in fact,
these proposed regulations are being proposed by a
progressive Democratic administration and it's
strongest proponents are liberal members of Congress?
''
It goes on to say there are ``three explanations, one less
meritorious than the other.'' I won't go through all of those.
``First is a simple misunderstanding of the facts.''
``Second is a classic example of overly broad
regulations confirming the law of unintended
consequences.''
And the third explanation,
``A classic example of ideology trumping facts, the
instinctive negative reaction of many liberals to the
word `profit' when associated with providing education.
This seems uncomfortably similar to opposition by most
liberals to private charter schools''
Which I have experienced myself--within urban public school
districts, opposition that seems increasingly paradoxical as
more and more inner city parents supported having the choice of
charter schools for their children.
``The fact is, it's precisely the profit motive that
causes for-profits to offer more flexible, consumer-
responsive schedules and courses, such as night
classes, online courses, and new curricula that are
directly responsive to recent changes in the job
market.''
On one of the most rare occasions in my long political
career, I find myself in complete agreement with Lanny Davis.
That's really what this is all about: Let's get the for-
profits. Of course there needs to be action taken to stop the
abuses that the chairman ad nauseam continues to point out. So
we need to fix the problems. We need to make sure that there
are no abuses both in recruiting and also in all of the other
areas that has been pointed out in the GAO report.
But to kill off the for-profit institutions because of
abuses and problems that exist--we'd be literally doing away
with every branch--with every department of the Federal
Government, because I've sat in hearing after hearing of abuses
and misapplication and fraud and abuse, one of them as short a
time ago as yesterday.
So I regret that this debate sort of exemplifies the really
sharp divisions between our two parties and our two
philosophies of government. Hopefully, maybe in January it
seems pretty clear that maybe we will have a different agenda
for this committee and the U.S. Senate.
I thank you, Mr. Chairman.
Senator Franken. Go ahead, Mr. Chairman.
The Chairman. It's now my time.
Senator McCain. It's great to be with you.
The Chairman. From listening to this----
Senator Franken. I would love to ask the Senator a
question.
The Chairman. Oh, I don't think he'd respond.
Senator Franken. I'm wondering if he can hear me.
Can I just say something? Or I know you'd like to, so
you're the chairman.
The Chairman. No, no, no, no.
I never anticipated that this would devolve into a
political issue between Republicans and Democrats. Never in my
wildest dreams did I think that. I cleared things with the
Ranking Member before. We talked about this.
But I must respond to the Senator from Arizona. Is he
implying politically that if the Republicans take over the
Senate, that they won't do anything about the for-profit
sector; they can just continue to go on like they're doing;
that there's nothing wrong? I hope that's not the case. I think
there's enough here that we do need to do something. Something
needs to be done. We just can't continue to go on.
I'm not here to tell you exactly what needs to be done,
because we haven't finished all of our investigations yet.
That's why I've had a deliberate policy of not saying we need
to do this or do that. I'm trying to get information and data.
I issued a report this morning, which I just put into the
record. This is a report based upon information that we have
gotten from the for-profit schools themselves. But it just begs
to be looked at when you see the tremendous growth. When one
college in 2005 had 320 students and today has 65,000 students,
you've got to ask what's happening. And when you see the
tremendous growth in Pell grants and student loans going to
this sector, you have to ask about the business model itself
and the systemic nature of this.
Are there bad actors? Yes, but are good actors being sucked
into a vortex of a bad business system--a system that
encourages people to go after student loans and Pell grants to
maximize profits? I don't mind profits. The profit motive's
fine. But over 90 percent of profits comes from the taxpayers,
which is money that goes to the poor students. We have enough
evidence that many of these schools are going out looking at
the poor students because they get the maximum amount of Pell
grants and the maximum amount of student loans.
So I have a problem when taxpayer money's coming to poor
students, poor students turn it over to a for-profit
institution, they don't get the supporting services they need
and the help they need, they drop out, they've got the debt,
the shareholders and others in the business have the profits,
and the taxpayer's out the money.
This is the business model, and this is what we're trying
to get our hands on and trying to figure out what it is that we
need to do to straighten it out.
I'm sure Mr. Davis is a good lawyer, and he represents the
for-profit industry. Fine. And there are a lot of them around
this town, I can tell you that. Many of my friends that I have
been friends with for a long time represent that industry, and
that's their right to do so. Everyone is entitled to a good
lawyer.
But I think our responsibility is twofold: one, to look at
what's happening to the lowest income students in this country,
what's happening to their lives; and then our obligation to
protect taxpayers, what's happening to the taxpayers' money?
And we let the shoe fall where it may.
We'll continue on with our hearings, and at some point we
will have recommendations for doing something about this. I am
not going to say any more about it in a political nature. If my
friend from Arizona wants to do it in a political nature,
that's his right to do so. But I'm not going to do it. I'm
going to do it in the nature of our obligations as lawmakers
here and representing both taxpayers and low-income students to
make sure that they get value, that both the taxpayers and the
students get value for the dollar that they're putting into the
system.
Well, I've got about 3 more minutes left of my 8 minutes. I
wanted to ask Ms. Johnson. You've come all the way here from
Iowa. I wanted to ask you this. I understand that you were
trying to go to Marshalltown Community College to do your
nursing program there, to finish up there; is that correct?
Ms. Johnson. Yes. Once I found out that I wasn't going to
be able to finish or do my clinicals at home, I tried to
transfer to a community college which is about 15 minutes away
from my home. The reason why I hadn't gone there in the first
place was because I was told that it would take me longer
because I would have to do my prerequisites; at Kaplan I
wouldn't have to do that.
So balancing everything out, I thought by going to Kaplan
and doing the commute in the beginning and being able to do my
clinicals at home toward the end of my program, it would all
balance out.
The Chairman. Well, what's happened? Why don't you
transfer?
Ms. Johnson. I went ahead and I applied at the Marshalltown
Community College, was accepted for the fall program, had
everything lined up, except they didn't have a copy of my
official transcript. So I asked Kaplan to transfer them. They
said they couldn't because it showed that I owed money still.
The Chairman. So Kaplan will not transfer your transcript
to Marshalltown Community College, where you can go, because
you owe Kaplan some money?
Ms. Johnson. Yes.
The Chairman. How much money do you owe Kaplan, do you
know?
Ms. Johnson. It was like $877.
The Chairman. You owe Kaplan $877?
Ms. Johnson. Yes.
The Chairman. And they will not transfer your transcript to
Marshalltown Community College so you could transfer there?
Ms. Johnson. No.
The Chairman. That shocks my conscience. I am sorry, my
friends. That shocks my conscience.
Dr. Mitchem, you wanted to weigh in on this.
Mr. Mitchem. Mr. Chairman, we've found that again and again
as we talk with our colleagues across the country, where
students wanted to get out of that system, wanted to go to a
community college or to a 4-year institution, and couldn't
because they owed a balance with the proprietary and thus they
couldn't get the transcript, and so they were stuck. This is
the pattern.
The Chairman. Ms. Bittel, did you have something on this?
Ms. Bittel. Yes, sir. In our diploma programs, the diploma
programs are set up in 15 classes. Financial aid will only pay
for two classes at a time. So there's always one class left
over, and that means that they owe the money. They're going to
have to pay that money out of their own pocket because
financial aid won't pay for that last class.
Therefore, that leaves them with a balance. So if they do
choose to go on from the diploma program, there's nowhere they
can go. It's very commonplace to not give transcripts if
money's owed, no matter how small.
The Chairman. Are you aware of this, Ms. Asher?
Ms. Asher. I'm learning of the specific practice today, but
I can also say that there's a bigger problem, even if you can
get your transcript transferred, of whether or not your credits
will transfer. Unfortunately, in many cases they will not.
The Chairman. Well, at the first hearing we had a student
whose credits wouldn't transfer; they wouldn't accept the
credits that she had gotten, and she had completed the course.
But this is one that I find shocking. Transferring could get
you to a community college 15 minutes from your home, so you
could complete your program.
Ms. Johnson. Yes. They also said that if I--but it looks
like if I continue and finish the program at Kaplan, I won't
owe anything because I'll be taking out more loans.
The Chairman. Say that again?
Ms. Johnson. If I finish the program----
The Chairman. At Kaplan?
Ms. Johnson [continuing]. At Kaplan, then they said I won't
owe anything. But in reality it's because I'll be taking out
more loans.
The Chairman. Well, you won't owe any money to Kaplan, but
you'll owe money on borrowed student loans.
Ms. Johnson. Right, right. But that's how they explained it
to me, that I'll have zero balance in the end.
The Chairman. Ms. Johnson, do you sometimes feel like
you're just caught in a web and you just can't get out of it?
Ms. Johnson. You know, I guess it just sort of came to a
head. You know, I feel like I got stuck. I don't know how I'm
supposed to continue on at this point.
The Chairman. Thank you.
Dr. Mitchem, I haven't had much of a chance and my time is
out again, but in my next round I want to engage and talk with
you about the TRIO programs and the need for low-income
students who don't have the kind of resources that--you
mentioned before the inequity between their bargaining
positions, but the kind of support services, supporting things
that low-income students need to be able to succeed in college.
I would like to explore that with you, but I'll do that on my
next round.
Now we come to Senator Casey.
Statement of Senator Casey
Senator Casey. Mr. Chairman, thank you. Sorry I had to run
out and come back. I'm grateful that you called this hearing. I
know it's a difficult day when we've adjourned yesterday.
I want to thank our witnesses for being here. Let me just
say preliminarily three things, and I think it's important to
make at least these three points. When we're approaching this
topic--and there's a heated debate here, there's no question
about that. You can feel it here, you can feel it in the
audience, you can feel it in all the public comment and the
news stories. But I think we've got to keep our eye on the two
most important groups, at least in my judgment. No. 1 are
taxpayers and No. 2 are students. After that, it just doesn't--
no other group rises to that level.
When I look at the report that the chairman and his staff
and others have worked on, one line among many, but there's one
line that really jumped off the page. It's on page 7, talking
about something we often say, public officials say it, but we
need to be reminded of and actually put it into practice, and
that's ``to ensure that taxpayer dollars are being spent
effectively on educating the students attending for-profit
schools.''
That's critically important. I don't think that that
priority is somehow reasonably balanced with some other
priority. That priority is singular and has to be the
obligation that undergirds that priority has to be met, no
matter what, just like it does for any other program.
The second group of Americans we're deeply concerned about
here are students, what result do they get, what happened to
them along the way, do they have an adequate education, are
they able to pay their loans back, are they able to move on in
life in a way that's productive?
Usually when you get some degree or some advancement in
higher education it's a source of happiness and fulfillment. It
shouldn't be in any way a terrible burden and a problem.
So that's point No. 1. Point No. 2, the report itself that
we're just reviewing now in the last couple of hours really, is
critically important. That's why we need witnesses to help to
amplify and to explain a lot of these issues.
And point No. 3, I'd say that it's critically important--I
think the chairman has tried to do this from the very
beginning, as we discussed months ago in these hearings. He's
worked very hard and I think others have worked very hard not
to paint with a broad brush in either side of this debate, to
be very specific and factual. Every allegation, every charge,
has to be backed up with facts. That's the only way that we can
reasonably arrive at truth or as close to the truth that we
can.
So part of that is asking questions, and obviously in this
hearing it's important that we have a chance to ask questions
of people that have been in this field a long time.
I wanted to start with Dr. Mitchem. In your prepared
testimony, I'm not sure--because I know you had to summarize,
but I wanted to read from your prepared testimony the first
page, which I thought were two important questions. The first
question you asked was: ``Do the current laws and regulations
governing Federal student assistance, particularly student
loans, sufficiently protect low-income students vis-a-vis for-
profit schools?'' That was question No. 1, a very critical
question.
The second question, related thereto, was: ``Are low-income
students adequately protected from assuming inappropriate loan
debt to attend for-profit schools?'' You said that the answer
to both of those questions was a resounding no. And I know
you've answered this in one way or another, but I want to go
back to it just on those specific questions.
Why is your answer a resounding ``no'' to both of those?
Mr. Mitchem. Well, if we look at the experience, if we look
at the record, there is absolutely no indication that low-
income students who have enrolled on proprietary schools have
gotten any sort of protections. If you look at the loan
burdens, if you look at the success rates, it's clear that
they're wide open to all sorts of abuses. There's no evidence
that these students are getting quality treatment. It's not a
quality opportunity. They're not graduating at the rates that
they should. When they do graduate, they don't necessarily have
the skills that are requisite to get the employment that is
necessary, particularly the employment that's necessary to
overcome the massive amounts of debt that they often incur
because the price differentials between proprietary schools and
comparable education in community colleges, independent
colleges, and public colleges are so vastly different.
So we've got to remember that the Federal Government is an
enabler here. We're the ones that, with taxpayers' dollars,
we're providing the loan money. We're providing the Pell grant
money. We're creating the situation. These people find
themselves kind of being pulled in this because they want to
change their life circumstances and have the same opportunities
that all of us enjoy. So there's this pull and we've created
that situation. It's a positive situation. It's good. But also
it's created these opportunities because we haven't regulated
the industry or tweaked the program. I'm not an expert on
financial aid or the administration of proprietaries or even
nonproprietaries, but it's clear that something is wrong.
As the chairman pointed out earlier, we've got to drill
down, dig down, probe out, and fix the situation. It's an
intolerable situation. These people are being exploited.
Senator Casey. Is there any--just in terms of--maybe you
don't have any today or maybe you could submit these for the
record, but do you have just specific recommendations you could
suggest that would help us?
Mr. Mitchem. Well, I suppose we could start with what the
administration has already proposed, which I recognize is
controversial. But it seems to me they're moving in a direction
to try to put more stringent requirements on the industry where
there appears to be problems. It seems to me that's a rational
response to the situation that we find ourselves in.
There may be more that they could do. But again, I'm not an
expert in that regard.
Senator Casey. I know I only have a little time left and I
won't get to all four of you. But Ms. Bittel, I want to thank
you for being here today. I know that's a long trip from the
corner of Pennsylvania you live in. That's a long ride.
I wanted to ask you about, going back to those two basic
questions that I asked about, or two basic points I made about
taxpayers and students: What do you believe is the most
important--or maybe it's more than one, but at least one or
two--what are the most important facts that you think you can
assert that are irrefutable that are most important to both
taxpayers and students? Because you're obviously in a dispute
here, and you've heard some of the debate here about some of
your testimony. But as we try to put real facts on the table, I
just want to get your sense of what are the most important
facts you think we should know that focus intensively on both
the priority for protecting students and the priority of making
sure taxpayers' money is spent appropriately?
Ms. Bittel. I think it's very important to spend taxpayers'
money appropriately. I think the more appropriately and the
more frugal we can be with that, the more we can provide to our
children and our grandchildren. I think that it's not about
eliminating for-profit. I could tell you--I could sit here and
spend the afternoon and tell you about many good experiences
that I've had. I've loved my jobs there, and I've worked with
many people and I've helped many people. But I've also seen
people who were not prepared for the program.
I think it's more about price-gouging. I'm not sure if
you're aware, but the bachelor's student at one of our colleges
racks up almost $100,000 in debt. Now, my son went to Allegheny
College of Meadville. He got his master's degree at the
University of Pittsburgh. He's been in school for a long, long
time, and he has nowhere near the debt that somebody who's
getting out with an interior design degree from the Art
Institute has.
I think that it's a twofold thing. I think we need to give
the taxpayers the best for their money. I don't think that the
for-profits should be eliminated. I think they have a wonderful
place. There are stay-at-home moms that can't go to school
otherwise. There are many reasons to have for-profit colleges.
I don't want to see them eliminated. I just don't think they're
worth $100,000.
Senator Casey. Mr. Chairman, thank you.
[The prepared statement of Senator Casey follows:]
Prepared Statement of Senator Casey
Mr. Chairman, thank you very much for holding this series
of hearings to examine the Federal investment in the for-profit
education sector. Congressional committees must provide
oversight to ensure that tax dollars are spent lawfully,
efficiently and effectively. Investigations like this are
necessary, not for pointing fingers, but to gather information
that will help us address concerns that have been raised about
the use of taxpayer funds. As Senators, we're held accountable
by the people back in our home States who pay taxes, so we need
to look very closely at how the executive branch--in this case
the Department of Education--is spending taxpayers' money.
Mr. Chairman, I disagree with those who would suggest that
you or any other Senator is attempting to take down an
industry, or that in holding these hearings we are acting with
some nefarious intent. The document request that this committee
issued to 30 for-profit colleges has yielded an enormous amount
of data, and we need to take our time in sorting through it. We
need to look at what the data tells us, what might be missing,
and think carefully about what policy changes to make based on
any conclusions we draw. At the same time, we have to remember
that there are over 3,000 career colleges in this country, many
of which do a great job educating their students and helping
them find jobs with good wages. I would also imagine that there
are thousands of employees of for-profit schools, and that many
of them are proud of the institutions for which they work and
the positive results for the students they serve.
But by collecting this information, Mr. Chairman, you have
placed the emphasis on facts and hard data and I think that's
extremely important. I hope that as we move forward, our focus
will be on examining the Chairman's report and the underlying
data, and that any allegations that are made are supported with
solid, irrefutable evidence. We must continue to exercise our
oversight role by taking a fair and balanced approach to this
issue with the welfare of the taxpayers and the students as the
central focus in these hearings.
The Chairman. Thank you, Senator Casey.
Senator Reed.
Statement of Senator Reed
Senator Reed. Thank you very much, Mr. Chairman. I want to
commend you because you have identified a significant issue,
both the impact on the taxpayer and the impact on the people
who we're trying to help, students, people all across this
country. I think you're trying to look at appropriate practical
responses to deal with the issue and, to Ms. Bittel's comment,
to recognize the value that some institutions, for-profit or
nonprofit, can provide, but not to provide sort of an unchecked
cash flow without regards to the benefit of students. So thank
you, Mr. Chairman, for that.
Senator Casey said it very well. This is about taxpayers
and it's about students.
One question I would address to all of you is that--and I
think you've probably responded to it in different ways
throughout the morning. But can you just give me a sense of,
when a student sees that Federal funds are attached, they can
get Federal funds, does that raise assumptions or presumptions
in their mind that this is a quality program? Otherwise, why
would the Federal Government let them borrow money, et cetera?
Ms. Asher, you might start. Does that generate sort of bad or
good vibes? Can you comment?
Ms. Asher. Gladly. Certainly we've seen in the marketing
materials of many for-profit colleges and heard from many
students that the apparent imprimatur of the Federal Government
does encourage them to invest a great deal of trust in
institutions that may or may not be acting in their best
interests.
Senator Reed. Ms. Bittel or Dr. Mitchem or Ms. Johnson, is
that your sense? Or is it just peripheral?
Mr. Mitchem. Not necessarily--am I on?
Senator Reed. I've known you a long time. You don't need a
microphone.
[Laughter.]
Mr. Mitchem. I don't need it, OK.
Not necessarily. They don't necessarily assume or presume
quality. They see opportunity. Quality can be a sophisticated
perception, if you understand what I'm saying.
Senator Reed. Ms. Bittel or Ms. Johnson?
Ms. Bittel. Yes, sir, thank you. I would say that the
instance where I would think that that would lead to credence
or lend an aura that it is a good program is in instances where
the programs themselves do not have accreditation, and then
they get out of the program and they can go nowhere with a job.
I would think that the student, the average student, would
believe that if the government's giving me money for this then
it must be a good program.
Other than that, I don't know that there's that much of an
impact.
Senator Reed. Ms. Johnson, any comments?
Ms. Johnson. I would like to say, when I went into this
program I was a little skeptical. I thought that what I was
buying was a quick deal. I didn't know for sure that I would be
getting quality and I was willing to take that risk. Like I
said, I was trying to balance out everything between family and
home and my responsibilities.
But now that I look back at the training that I've had,
another big concern that I've had along the way is I don't
believe that I've gotten quality education as far as nursing.
Coming out and working into a medical field, I don't feel
confident in working with people's lives. And I think about all
the other students that they're putting out.
For example, like the CPR training that I had, we were
complete and within a matter of hours I'm certified, but I
don't feel like I would know how to perform on someone.
Senator Reed. Thank you for your testimony.
Just a final question I could address to Ms. Asher
specifically. We're very pleased that Brown University has
produced such a talented and public-spirited person, so let me
get in a plug for the home team.
We have a proposal on the table and, as Dr. Mitchem said,
it has generated controversy. But I think one of the values of
what the chairman is doing is that we're looking for practical
ways to maximize the benefit to students, for responsible
behavior on all the participants, for-profit, not-for-profit.
Are there any other approaches that you are thinking of and you
might suggest to us to deal with this issue of making sure that
we're funding quality education that leads to real
opportunities, not simply to 4 or 5 years in school with no
opportunities?
Ms. Asher. Thank you for your question, and I'm a great fan
of Providence, RI.
This is a complex problem and, as I mentioned earlier, the
regulatory process under way is taking on a very important
piece of it. We and many other civil rights, student activists,
and consumer groups, including my esteemed colleague Dr.
Mitchem, have called for the rules to be strengthened in some
areas to better protect students and taxpayers.
But, as you may know, there are many different pieces of
this puzzle, and these hearings are doing a wonderful job of
starting to look into all of those pieces and to bring more
data to bear. One issue that comes up is that there is
sometimes a passing of the hat about oversight. States play a
role, accreditors play a role, the Federal Government plays a
role, but there are too many loopholes in that current
structure.
We also have problems with data quality, as we've
discussed. Reporting of job placement information, for
instance, is self-reported, not independently verified.
Graduation rates are too narrow, and I believe that Congress in
the HEOA required the Department of Education to do something
it recently did, which was convene an expert panel to come up
with some recommendations for graduation rates that might
better capture what's happening in the field, including some of
the churn that was described today.
There are issues around the accreditation of programs, as
well as schools, and also the other Federal dollars. VA and
other money that's going to current active military as well as
veterans, a very significant flow. There have been a number of
stories and a recent hearing on that as well.
So we need to be looking across the board.
Senator Reed. Well, thank you very much.
Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Reed.
Now we go back to Senator Franken.
Senator Franken. Thank you, Mr. Chairman.
I just want to point out one thing here or a couple things.
Lanny Davis is a paid lobbyist, as you mentioned, for profit
schools. There's nothing wrong with that, but he wrote that
piece that Senator McCain quoted as part of his job. He was
paid to do that, and he represents Argosy University, the Art
Institute, ATI Career Training Center, Beckfield College,
Bluecliff College, Brown-Mackie. That's ``A'' and ``B,'' so you
have some idea.
The content of that was, that we're somehow elitists, that
we're comparing these schools, which have a large low-income
population and minority--and he actually said it--to Harvard,
and that we're elitists. Are you an elitist, Dr. Mitchem?
Mr. Mitchem. I don't think so. No, I don't think so.
Senator Franken. And the people that are in TRIO are low-
income, right?
Mr. Mitchem. They're low-income Americans, yes, sir.
Senator Franken. And then this idea that we Democrats just
don't like for-profit, I just love that. I worked in a for-
profit industry. In fact, I got criticized during my campaign
for having made a lot of money. I did it because the entities I
worked for made a profit because--in fact, the entertainment
industry is one of the few industries in this country that
actually has a positive balance of trade. I'm very proud of
that industry.
The Chairman. Agriculture.
Senator Franken. Yes. As everyone knows, I was a for-profit
soybean farmer, and comedian.
So it's just irritating. I just find that irritating, that
they throw up that stuff all the time.
We are using the imprimatur of the Federal Government, as
Ms. Asher said, and they do that to attract students. Staff at
Hope Street and Lutheran Social Services, which runs homeless
shelters in the Twin Cities, recently contacted my office. They
expressed their concerns about for-profit colleges recruiting
homeless youth who were struggling with mental health and drug
issues, many of them not ready for college and who often go in
and borrow, get money from the government, and end up dropping
out only after amassing a mountain of debt.
Ms. Bittel, how do the colleges get away with this practice
when the Federal law requires--or anybody on this--requires
that their students have a high school degree or pass a college
readiness test?
Ms. Bittel. Maybe it's because the fox is guarding the
henhouse. The accreditation bodies are paid for by the
colleges. I mean, who's checking these people?
Senator Franken. So what we have is, this is again sort of
agency capture, where, yes, the people who are guarding the
henhouse are in the industry and being paid by people in the
industry, and Lanny Davis is being paid by the industry to make
these arguments that we get regurgitated here.
During the last recess, I went to visit Walden, which is
one of the oldest of these schools in Minnesota, in
Minneapolis, a tremendous place. They've been in this for 40
years, before there was an Internet. They do a lot of online
stuff. And Lanny Davis is talking this thing about that these
for-profits adapt to the way people work now. Most of their
students are getting graduate degrees. Most of them are
working, working as nurses or working as teachers, teachers who
are becoming principals. They do a good job.
I have nothing against for-profit. I have nothing against
this industry, other than the bad actors. What we're trying to
do here--and I would appreciate it if the other members would
stay instead of making a comment, quoting a paid lobbyist, and
then--with great umbrage, and then leaving. I don't think
that's doing our jobs. I don't think our job is to sit here--
Ms. Bittel, you raised your hand.
Ms. Bittel. Yes, sir. Personally, I'm quite offended. I've
put my life on the line here.
Senator Franken. Yes, you basically are a whistleblower and
you're in danger of losing----
Ms. Bittel. These people don't have the courtesy to listen
to what I have to say?
Senator Franken. Well, many of them do have other duties,
I'm sure.
Ms. Bittel. But some of them made a grandstand play and
left.
Senator Franken. Or that. Well, again, we can't necessarily
say whether it was one or both, one or the other or both.
Anyway, so let's talk about this advertising, marketing. In
the health care bill, I wrote a provision called the medical
loss ratio. In this we say that insurance companies have to
spend, if they do a large group plan, 85 percent of the
premiums that they get in on actual health care, and that's
part of the law. They can spend 15 percent on administrative
costs, on profits, and on marketing.
Is there any possibility here that--and anyone can talk,
speak to this--that we can limit the amount of marketing? After
all, it's Federal money. We're looking after the taxpayer here
and that's what my friends on the other side who aren't here
should read, because I know they'll go back and read the whole
transcript of this. They should read--that's what we're talking
about here, because we're talking about all these deficits and
all this money that's going to these for-profits that--is there
any way that we could write some regulation that you can only
do so much on marketing and the rest has to go to actual
education, a certain percentage?
Any reaction to that? Ms. Bittel?
Ms. Bittel. Sir, I would say that, rather than limiting
marketing, you should focus on the education and require that a
percentage of the dollars be spent on education. What's left
can be spent on marketing.
Senator Franken. That would be one way of achieving it.
Ms. Asher.
Ms. Asher. I think we need to look at the whole incentive
structure right now and what is driving the large marketing
expenditures, which is the ability to make a tremendous amount
of money through Federal student aid. So it is one piece of a
larger puzzle, and these hearings are bringing more and more
information to bear on just the flow of funds from Federal
sources and where that money's going.
Senator Franken. Thank you.
I've expended my time, Mr. Chairman. Thank you.
The Chairman. Senator Casey.
Senator Casey. I know we're running low on time. I just had
one question for Ms. Asher.
The Chairman. I'm sorry, Senator Casey. Would you just
withhold 1 second, please?
Senator Casey. Sure.
The Chairman. I appreciate it.
I just wanted to respond. Senator Franken was talking about
profits and profit motives. I thought I'd put on the screen the
profit margins that we found--it's in our report; and for some
of the 16 companies that we analyzed, total profits amounted to
$2.7 billion.
But I just wanted to point out that they varied from 16
percent to 37 percent profit margins. I think that's probably
even better than your entertainment industry. I don't know. I
don't know what it is. I have no idea.
Senator Franken. ``The Titanic'' did better than that.
The Chairman. I'm sorry, Senator Casey.
Senator Casey. Sure.
Ms. Asher, I just wanted to ask you, and I know you've
provided a lot of both written testimony and answers to
questions, as others have. But at the end of hearings like this
sometimes if we get a chance in terms of wrapping up--and I
know we could be here for hours to continue it, but I wanted to
ask you, in light of the concern that all of us I think have
about taxpayers and students primarily, and they're the top
priority, but also the concern about not painting with a broad
brush and pointing out bad actors versus those who are trying
to do the right thing and have a good record to establish
that--what would you recommend if you had three things that you
think the U.S. Congress could do to mitigate or confront
directly some of the problems that have been raised in the
report, as well as in other places as well: the questions about
debt and there's a lot of debate about that; the question about
withdrawals, people leaving schools at high numbers.
When you confront the most difficult problems here, what
would you recommend as a series of steps we could take in terms
of statutory or the administration maybe making regulatory
change?
Ms. Asher. As I mentioned before, I think this is a very
complex issue, with a lot of incentives that point in the wrong
direction and that encourage the less scrupulous institutions
to misuse Federal funds at great cost to both students and to
taxpayers.
I did want to take a moment to point out just one example
that I think is really notable in terms of how differently
students may be served at similar types of institutions even
within this sector. In San Bernadino, CA, there are two for-
profit campuses--one Everest College and one Concord Career
College--about a mile away from each other. They serve a
similar share, a majority share of Pell recipients, they're
pretty similar in size, they offer very similar programs, in
fact some identical programs. One, Everest College--they charge
the same amount, within a thousand dollars. Everest College has
a 31 percent Federal student loan default rate and Concord
College has a 9 percent default rate. That tells us that
there's a lot of room for improvement and for shifting
incentives for colleges to focus more on outcomes for students.
I'd be happy to work with you and members of the committee
on developing any number of approaches.
Senator Casey. And I'd ask you, and I know we have time to
have our witnesses submit for the record, if you could sit down
and try to do kind of a match, a problem and asserting facts
that support the argument or assertion of a problem, and then
next to that a corresponding action that the Congress can take.
I think it would be very helpful for us in terms of guidance,
because we don't want at the end of these hearings and this
debate not to have asked your help and others, all of our
witnesses today, as well as others who will appear and have
appeared. We don't want to miss the chance of having specific
recommendations to deal with specific factual scenarios that
set forth a real problem.
Thank you very much.
The Chairman. Thank you. Thank you, Senator Casey.
Dr. Mitchem, I said I wanted to have an interchange with
you. Obviously, I know a great deal about your background and
all that you've done in your lifetime. I wanted to focus again
just a little bit more on low-income students who don't have
the family resources, may have struggled to get through school,
and when they enter school don't have the kind of support
systems they may need to help them get through. And yet, when
they sign up and they get recruited by a school and their
courses are online and they have no supporting mechanisms to
help them, how different is that than, say, a student who comes
from a family that has resources, money, maybe the parents have
gone to college or at least finished high school, they're
middle income or upper middle income, and then that student is
recruited?
The one thing I've always liked about the TRIO programs is
that they gave that kind of support to kids that didn't have
that at home. They've been pretty successful, I think, because
they've gotten that.
But in this area, they don't get that kind of help. They're
sort of out there on their own. Would you talk about that with
us?
Mr. Mitchem. Yes. First of all, we all need to understand
there's a radical difference in educating and graduating a low-
income first-generation student than there is a middle-income
student. That difference hasn't been sufficiently recognized,
in my opinion, in terms of Federal policy.
We have to understand that there are two sets of barriers.
There are the financial barriers. Financial aid is absolutely
essential. And there's also cultural, class, and academic
barriers. Both of those issues or sets of issues have to be
addressed.
One of the reasons we're having this conversation this
morning, in my opinion, is that when we talk about the for-
profit sector they address the financial barriers, but they
have not adequately addressed the supportive services barriers.
What am I talking about when I talk about supportive services?
I'm talking about you have to engage these students. You have
to provide intensive counseling. You have to provide mentoring,
you have to provide tutoring, you have to provide learning
communities. There's a variety of tactics, services, and
treatments that you have to put in play to work with this
individual. You have to work with them in a holistic way.
In other words, a supportive services program, if I may say
so, is a surrogate parent. See, those of us who are not first
generation, we got our supportive services from our parents. It
was invisible and we didn't even recognize what was going on.
Our confidence, our skills, our expectations, our aspirations.
These students do not have those advantages, and so thus they
get led into these traps and have problems and don't succeed.
Our attainment rates, as you know, Mr. Chairman, are going
down in our colleges and universities. Our President, thank
God, is addressing these issues with his 2020 goals. Part of
the reason for that is, while we've invested billions of
dollars in Federal financial aid since we initiated the EOG
program in 1965, we have not kept up in any kind of
proportionate way in terms of supportive services.
We know the record. We know, for example, that Pell grant
recipients who do not receive supportive services do not
graduate at the same rates as Pell grant recipients who do
receive supportive services. We have not addressed those gaps.
So again, you're seeing it in spades when you talk about
proprietary colleges, and that's part of the reason we're here
this morning.
The Chairman. Let me follow up on that. We know there are
millions of kids out there that have gone to these schools,
they've dropped out, over 2 million in the last couple years,
they have debt loads, some of them pretty significant. But we
don't seem to know who they are and it's hard to find them. In
our investigations, one thing kind of came through to me. I
don't know how true it is, but we're going to try to get a
handle on this. That is that many of these kids have signed up,
they started taking an online course, they ran into problems,
they didn't understand things, they didn't have the supportive
mechanisms, they dropped out, and somehow they feel it's their
fault. They feel it's their fault and so they're embarrassed by
it. They don't want to come. They have a debt now and they
think, well, other people made it through doing that and I
didn't, so it's my fault.
Mr. Mitchem. That's very common. Burton Clark, a scholar,
wrote about that 30 years ago, the warehousing of these kids,
where people blame themselves as opposed to recognizing that
they were put in an untenable situation. And that's very, very
unfortunate and very, very sad.
The Chairman. Do you know, Ms. Johnson, do you know any of
your fellow students that have been with you that have dropped
out of school? Do you know any of your friends who have dropped
out of the school?
Ms. Johnson. In my program, I think we began with 22 girls
and now we're down to maybe like 15.
The Chairman. And that's just in what, in how many years,
in how long a period of time?
Ms. Johnson. Oh, that was just like 20 weeks.
The Chairman. Oh, in 20 weeks?
Ms. Johnson. Yes.
The Chairman. Oh, in 20 weeks it went from 22 to 15. But
obviously you wouldn't know what their debt load or anything
was.
But that's why when I hear about that somehow we, Senator
Franken and I and others, are somehow picking on poorer
students by denying them this opportunity. We see that chart
that was up there, ``Give Me a Chance,'' and we see all these
full-page ads that somehow we're denying opportunity to these
kids, when in fact what we're trying to do is to have a system
whereby they have a better chance at having that success and
what needs to be done to ensure that.
So this is not any attempt by me, at least, I don't think,
and neither Senator Franken, to pick on poor kids. That's where
we came from. It's to try to figure out how we utilize the tax
dollars, $24 billion a year through loans and Pell grants, how
do we utilize that in the best possible way to ensure that low-
income kids have not only access and not only graduate, but
that they have the supportive services--not only have access,
but they have the supportive services that will get them
through, and also not have a mountain of debt on their heads
when they get through.
As I pointed out in our report here, I pointed out there's
one school that charged $13,000 or $15,000 for a course that
the local community college charged $520 for. Well, the
response on that, the rejoinder on that might be: Well, but the
community college, they don't have room for everybody. Well,
maybe if we put $25 billion into them they might have room for
everybody. So maybe we're looking at it in the wrong light,
that we need to do more to support those community colleges.
But I just wanted to have that interchange with you on the
supporting mechanisms, and that's what seems to be coming
through all the time, and this idea that these students blame
themselves for this.
There is one other question, Dr. Mitchem, I wanted to ask
you. Are there any differences, that you believe, between the
smaller schools, maybe some of the smaller for-profit or maybe
those that are even nonprofit, smaller for-profit schools, and
the large publicly traded ones in terms of the level of student
services? And I'm probably going to ask Ms. Asher if she has
any information on that, too. Are there any differences between
some of the smaller schools that are for-profit and the large
publicly traded ones in terms of the level of student services?
Do you have any knowledge of that?
Mr. Mitchem. In terms of my limited view, I couldn't
comment on that. I really don't know.
The Chairman. I see.
Ms. Asher, do you have any observation on that?
Ms. Asher. I'm not familiar with any data that's collected
that would help shed light on that question. But certainly
there are wide variations in outcomes for students at all
different types of schools within the sector.
The Chairman. Ms. Bittel, I had another question I wanted
to ask you and that had to do with the number of people.
What does it mean that Career Services only sees about
3,000 graduating students of 31,200 a year among 9 people? Is
that right, you had nine people?
Ms. Bittel. There are nine employees in the Career Services
office.
The Chairman. Pardon?
Ms. Bittel. There are nine Career Service advisers that
service the entire student body of the Art Institute, the
Argosy--Art Institute On Line, Argosy University On Line, and
South University On Line.
The Chairman. How many would that be?
Ms. Bittel. Typically, there were five advisers that worked
exclusively with the Art Institute. Typically, we would have
approximately 50 to 60 students in each class. We were
typically working with three classes at a time.
The Chairman. Now, what does it mean that Career Services
only sees about 3,000, as I understand it, out of 31,200, and
they've got 9 people? Dr. Mitchem, what does this say to you,
that you've only got so few people?
Mr. Mitchem. Well, it's worse than the ratios we have in
our worst public schools, where we don't have enough counselors
to the number of students involved. I mean, it's an outrage.
They're not getting any services.
Ms. Bittel. I would have loved to have been able to do so
much more for my grads. But there was no time. It was push them
through, get the number, get the number, get the number. I
heard that about 20 times a day: Get the number, get the
number. Not, have you helped Sally Lou find a job in her field?
The Chairman. What did it mean to have to make your
numbers? What did that mean?
Ms. Bittel. I was required to provide documentation that
85.9 percent of all the graduates under my care were employed
in field-related employment earning more than $30,000. I would
ask you, sir, from an online art school in these times and in
this economy and with this job market, do you honestly believe
that that is achievable? That was my quota. That was my
requirement, 85.9 percent in field-related jobs earning $30,000
or more.
The Chairman. I have one more thing. I understand the Art
Institute has five career staff for the entire online program.
Is that true?
Ms. Bittel. That is correct.
There are two for Argosy University, all of their grads;
there are two Career Service advisers for all of the grads from
South University.
The Chairman. Again, I just have a question: How can so few
people serve so many online students? How can they possibly do
that. Do they work 24 hours a day?
Ms. Bittel. No, we don't get overtime.
The Chairman. Senator Franken, I've used up a lot of my
time and I'd be glad to yield to you for any further questions.
I have a couple more things that I wanted to get out.
Senator Franken. No, but I thank you, Mr. Chairman, and I
thank all the witnesses for your testimony. Ms. Johnson, I wish
you the very best in what you do. I want to thank you all.
The Chairman. Ms. Johnson, one last question. What upsets
you the most about your experience and what do you want other
current and prospective students, not just at Kaplan but others
at all for-profit schools, what do you want them to know from
your experience? What upsets you the most? What do you want
other students that may be in your situation to know?
Ms. Johnson. What upsets me the most was that I was lied
to. As far as all for-profit schools, I can't speak for all of
them because I don't know what goes on everywhere else. But
there's been many things that I've seen at the school that I go
to that I don't necessarily agree with. I have talked to people
that are even staff there and I've brought up this complaint
about being deceived, and it seems like what I hear is, yes,
they'll tell you what you want to hear. I just think that needs
to stop. I feel like it's almost like you're being sold a car,
but getting a lemon.
I don't know. I feel like that was my whole purpose in
coming here--that's my hope, that they'll stop lying to people
who are really trying to get somewhere in their life.
The Chairman. Thank you.
Ms. Bittel, I was informed of a situation that took place
with your sister. Now, if you don't want to talk about that we
don't have to talk about it. I was informed about it.
Ms. Bittel. I'm fine with that. I would love to talk about
that.
The Chairman. Will you tell us about that? I think that's
interesting for the public record that we should know this.
Ms. Bittel. First of all, I should tell you that my sister
has had a very, very different experience than I in her time
with EDMC. She works for South University as an admissions
counselor and she has a great, great sense of responsibility to
her students. She has a great deal of passion. She not only
helps her students, but she helps everyone on the floor around
her with any question, any help, anything that is needed. She
works many, many, many hours.
She has kept in touch with every one of the students that
she's brought on board. She checks their grades. When their
grades are slipping, she calls them up and yells at them and
calls them to task and says, ``What's going on here? You're
spending a lot of money; you need to get going on this. Come
on, you can do better than that.''
She embodies the best of online education, and I don't want
to see online education go away. There's a lot of good in
online education and she's a very big part of that.
What happened to my sister was--they've made a great deal
of press about how I refused to cooperate with them. Although,
yes, I did refuse to give names. I did not feel that that was--
in my good conscience, I didn't want to point fingers at
anyone. They have enough records to be able to tell who the bad
actors were. They didn't need me.
I had reported what I had reported an entire month ahead of
time, and on the morning of my son's wedding at 7:13 a.m. they
called--they sent me an email essentially demanding that I
appear before them and answer their questions.
The day prior to that----
The Chairman. This was on the morning of your son's
wedding?
Ms. Bittel. The morning of my son's wedding, 7:13 a.m.,
they expected that I should drive 100 miles to Pittsburgh,
because I drive 100 miles a day to go to work. I live in a very
rural area. I live in Acme, PA.
It's very difficult to find work in that small town. There
is not a town; it's just a post office.
I'm sorry, I'm getting ahead of myself. They were trying to
get information from my sister about me and what I had said.
They had had an entire month to contact me. I had promised them
that I would be completely available to them and would answer
any questions that they wanted of me. And they waited until it
became public knowledge that my letter had gotten out before
they began to actually really do a true investigation.
They took my sister off the floor. Now, my sister's very
popular with her co-workers because they love her, because she
helps them all the time. That's the type of person that she is.
They seized her computer. They did this publicly, in front of
everyone on the floor, humiliating her, making everyone think
that she had done something wrong, put her under a gag order.
She wasn't allowed to tell anyone or defend herself. She
couldn't speak to anyone about this.
They called her into a room. They held her there for more
than 2 hours, and then sent her home on administrative leave,
and she was gone for, I believe it was at least 2 days. I'm not
sure if she went back to work Tuesday or Wednesday. So she was
on administrative leave from Friday and Monday and perhaps even
Tuesday. It might have been Tuesday that she returned to work.
All the while, not telling the employees anything about
this. All the while, everyone, her co-workers, her colleagues,
think that she's done something wrong. And it's all because
they're trying to get out of her what she knows about what I
know: What did I tell her, what have we spoken about, did I
give her any names of the people that I felt were the
wrongdoers?
I just found it to be an unconscionable situation, when I
would have gladly given them everything but names at any point
in time the prior month.
So that's the ``not cooperating.''
The Chairman. Well, Ms. Bittel, I just want to thank you
very much for being here. I want the record to show that it was
not this committee that released that letter, by the way. It
did not come from here. We would not have made that public. It
came from someplace else.
I just want to thank you for that. I've been there. Forty
years ago this summer, I blew the whistle on some government
people and I got fired from my job, 40 years ago this summer.
And I've got to tell you, a member of my own party, a high-
ranking Member of the House of Representatives of my own party
said, ``Tom Harkin will never again work in the United States
Congress.''
The next summer, Bill Moorhead, a wonderful Congressman
from Pennsylvania, wanted to hire me for something and he was
stopped from doing so by members of my own party. So that was
40 years ago, and here I am.
Ms. Bittel. Well, I hope to live your example, sir, because
at this point I do fear that I'll be blackballed from
employment in the future.
The Chairman. Well, if we can be of any help we'll try. I
think people who come forward with honest information and stuff
at the request of this committee should not be penalized in any
way for responding to the legitimate, legal, ethical inquiries
that we are making of people.
Let me close this hearing by saying three things. First of
all, thank all of our witnesses for being here. We'll leave the
record open for 10 days.
I wanted to point out three things again for the record and
for the benefit of people here and those who may be watching.
In 1991 our esteemed colleague Senator Sam Nunn of Georgia had
a number of hearings similar to these, on this same issue of
the for-profit colleges. Out of that came really three items
that were changed. First, there was a rule, a law against no
incentive payments for recruiting. Second, there was a 50
percent rule that had applied to correspondence courses before,
that was now applied to online courses--because there wasn't
much online in 1991. The 50 percent rule said that 50 percent
of students had to be campus-based and the other 50 percent
could be online.
Then there was an 85-15 rule that had originated back to
the Korean War GI bill, but for for-profit schools it mandated
that a for-profit school could only get 85 percent of its money
from the government. The other 15 percent had to come from
other resources.
Well, those three things were put in the law as a way of
stopping some of the abuses that were seen by Senator Nunn and
that committee at that time. I was not on that committee.
Well, guess what happened. The 85-15 rule was changed later
on to 90-10. Then they could get 90 percent of their money from
the Federal Government. And that, by the way, does not include
GI bill benefits. That's not included in the 90 percent. So, we
are finding out, that some of these schools have as high as 93,
94 percent of their revenue coming from the Federal Government,
when you include GI bill benefits into that. So that was
changed.
For the incentive pay for recruiting, the Department of
Education promulgated rules in 2001, which they called ``safe
harbors''--interesting phrase, ``safe harbors''--which
basically did away with the rule, which opened it up for
incentive payments for recruiting. That started in 2001.
Then in 2005, in the Reconciliation Act of 2005--and again,
if you're not an insider you don't know what a ``Reconciliation
Act'' means. It means that we don't really get a vote on items
in that. It's nondebatable, as they say. There were no votes on
it. It was a big package. Slipped into that package was a
removal of the 50 percent rule in 2005. So no longer did 50
percent of your students have to be campus-based. They could
all be online.
We have data now, I think enough data to show that after
that the amount of students going to these for-profit schools
skyrocketed, not campus-based but online, because they didn't
have to have 50 percent campus-based any longer.
So I wanted to just point out a little bit of that history
that transpired.
The other thing I'm concerned about is that things have
really gone awry. Now, no, I don't want to paint with a broad
brush everyone. One of my colleagues over here said that, we're
not painting with a broad brush, because there are some very
good schools out there doing some good things. But what we see
happening is that the system, the way it's set up, encourages
people who may be good actors to become bad actors, to be
sucked into this vortex.
What do I mean by ``this vortex?'' It's this: Because of
the easy availability of student loans and that the lower
income you are the more you get, and because of what we've done
to increase Pell grants--and maybe I'm to blame for that. We
just changed the Higher Education Act to get rid of the
guaranteed student loan program and moved to the direct loan
program. We saved $65 billion over 10 years, and I insisted
that that be put into Pell grants for poor kids.
So we've got more Pell grants. So you have a system that
says to someone who just wants to make a lot of profit: ``Well,
gee, I can go out and recruit all these low-income kids,
maximize the amount of Pell grants they get and the student
loans they get. Now I can do GI bill, now I can do military,''
but that's for a later hearing. Imagine my surprise to find out
that a semester is not really a semester; it can be, what, 15
weeks, 12 weeks? It can be anything. How many?
Ms. Bittel. Five.
The Chairman. Five weeks?
Ms. Bittel. Five and a half weeks.
The Chairman. Five and a half weeks, that's a semester.
Ms. Bittel. Well, it's a session.
The Chairman. I can't hear you.
Ms. Bittel. I'm sorry, sir. It's 5\1/2\-week sessions, 2 of
them back to back. So you are learning 11 weeks' worth of
material in 5\1/2\ weeks.
The Chairman. Well, except the ``semesters'' are defined
differently.
Ms. Bittel. Right. But the classes, the class is really
5\1/2\ weeks long.
The Chairman. I understand that.
So they get this money in, and if they don't provide
supportive services to these students they drop out. What
obligation does this institution have to that student? None.
They've got their money, they made their profit, huge profits,
and the student's gone.
But the student has a huge debt hanging around his or her
neck. And that's what really bothers--what bothers me is that
we say we've gone after the bad actors, but the system has a
problem that I'm looking at here, a systemic problem.
Now, there may be people out there, and there are, who
don't follow that. They aren't out there doing that. God bless
them. That's wonderful. But the system invites abuse. It
invites abusive practices, and that's what I'm concerned about.
And they say they're for-profit. But if 90 percent or 94
percent of their money is coming from the taxpayers, what's the
profit? I think of profit as you make something and you go out
and people voluntarily buy it or don't buy it, or you entertain
somebody and they either go to your show or they don't. The
profit motive is wonderful.
But in this situation, where it all comes from the
government through a very low-income student, passes through to
an institution, and they're making, as my chart up there shows,
immense profits, a lot more than the Standard and Poor 500
index, which is around 6 percent--they're making 30 percent, 20
percent, 19 percent, 16 percent profits.
I mean, you really have to ask about the system itself that
encourages that. It takes money from taxpayers, funnels it
through poor kids, goes into the for-profit school, they pay
the shareholders or, if it's privately held, they keep it
themselves, and 2 million students who dropped out in the last
couple years have a huge debt hanging around their necks. Now,
that system cries out for some kind of a resolution, some kind
of fixing.
They figured out how to be profitable even when the
students are not successful, and getting more money from the
government. There is irrefutable evidence, irrefutable
evidence, now that something has gone wrong with this industry,
gone wrong. Now, I'm not saying everybody's bad in that
industry. I'm just saying that the system has gone wrong.
So I intend to continue this investigation to shine more
sunlight on this sector of higher education. But I intend to
look for solutions to make sure that students and taxpayers are
protected, students and taxpayers are protected. I'll do
everything in my power to avoid and try not to get sucked into
some kind of a Democratic-
Republican debate on this. I mean, all of us are in politics
and so when someone lobs a political argument at you the
natural response from one of us is to have a political argument
back. We can't go there. We just can't go there.
We've got to look at this and, as I think Senator Casey
said, drill down, or someone said, you've got to drill down. I
think you said that, Dr. Mitchem, drill down and get the facts
and get the data, so that we can make informed decisions as to
what we want to do.
I don't believe that we have learned enough at this point
to draw a lot of conclusions. Some, yes, in which we see some
conclusions that, well, obviously that the rate of profit
margins has gone up precipitously. We know how many students
are dropping out. At least we have a good handle on that. So we
do see some things there. But I don't know exactly what needs
to be done right now.
But we've learned enough to tell everyone here that we will
be exploring legislative changes. I can assure you this
committee will explore legislative changes to get this system
right again, so that our lowest income students are not put in
the same position that Ms. Johnson is in--it just shouldn't be
happening--and to make sure that we have the kind of supportive
services, Dr. Mitchem, that these low-income students need to
be successful.
It's just not enough to say, ``Well, we're going to give
you this money, we're going to loan you this money and we'll
give you this Pell grant and you're on your own.'' That doesn't
work. That doesn't work for low-income students. They need
better support services than that.
I'm sorry if some people feel that I'm saying this ad
nauseam. I don't want to make anybody ill. I just want to make
sure that people understand what's happening. And, as Dr.
Mitchem said, we're going to drill down and get as much data
and facts as we can. We will be having yet another hearing in
early December. We don't have a date set yet, but we will have
one more hearing in early December, and then looking at some
time probably next year of coming up with some kind of
legislative changes in this sector.
So if there's nothing else to add, I thank you all very
much for coming here. I thank you all for what you have been
doing in all your ways. Ms. Johnson, again thank you for coming
here from Iowa and for testifying, and I hope you get your
transcript.
The committee will stand adjourned.
[Additional material follows.]
ADDITIONAL MATERIAL
Response to Questions of Senator Harkin and Senator Enzi
by Arnold Mitchem, Ph.D.
Council for Opportunity in Education (COE),
Washington, DC 20005,
October 20, 2010.
Hon. Tom Harkin, Chairman,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
428 Dirksen Senate Office Building,
Washington, DC 20510.
Hon. Michael B. Enzi, Ranking Member,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
833 Hart Senate Office Building,
Washington, DC 20510.
Dear Chairman Harkin and Senator Enzi: Thank you for the
opportunity to provide testimony at the recent hearing entitled, ``The
Federal Investment in For-Profit Education: Are Students Succeeding?''
as well as the chance to respond to the follow-up questions below. It
is my intention--through both my previous testimony and my continuing
work with Congress to advance the TRIO programs--to protect the rights
and interests of low-income, first-generation students as well as
learners with disabilities. I hope this stance is reflected in the
responses below.
______
Question 1. You have spent much of your career advocating on behalf
of low-
income Americans. As I am sure you will agree, education is one of the
best ways to improve an individual's earning potential. However,
tuition and fees in all sectors of higher education have risen
dramatically over the past 15 years at faster [rate] than the rate of
inflation. At the same time, wages for young college grads, ages 25-34
have remained relatively flat. Congress has responded by expanding
Federal student aid programs, but tuition continues to rise. What
should Congress be doing to address the rapidly rising cost of higher
education?
Answer 1. My understanding is that one of the primary drivers of
increased college costs is reduced support of public colleges and
universities at the State and local levels. Given the very difficult
financial outlook for so many of our States, it is unrealistic to
assume a turnaround in this reality in the near term. In light of this,
I believe Congress must focus on assuring that the taxpayers and the
students are getting an adequate return on institutional and public
investments in access.
Question 2. Secretary Duncan recently made the following remarks
about for-
profit schools:
``For profit institutions play a vital role in training young
people and adults for jobs and for profits will continue to
help families secure a better future for themselves. They are
helping America meet the President's 2020 goal and helping us
meet the growing demand for skills that our public institutions
cannot begin to meet alone, especially in these economically
challenging times.''
Given the need identified by the Secretary, how do we eliminate the
bad actors while ensuring that the good actors can fulfill this needed
role?
Answer 2. The implementation of rules on gainful employment and
incentive compensation is a necessary start to ensuring the bad actors
do not receive Federal funds to target underrepresented students. As to
the question of what would constitute the most appropriate scope for
the regulations, I defer to my colleagues representing non-profit
public and private institutions. However, I do wish to underscore that
the regulations do not seek simply to target for-profit institutions,
casting all as bad actors. Rather, the rules explicitly target those
institutions that fail to prepare its students for the marketplace and,
subsequently, enable them to repay their educational loans.
As I stated in my testimony on September 30, I am not criticizing
all of the for-profit industry. I agree with the Senators on the
committee who stated that there are many worthy for-profit institutions
across the country that provide excellent educational opportunities to
their students. However, as a lifelong advocate and President of the
only national organization whose mission is to protect and advance the
educational attainment of first-generation and low-income students and
students with disabilities, I believe that it is critical that the
government regulate this industry to protect students against those bad
actors.
By hosting this series of hearings and commissioning reports such
as Emerging Risk?: An Overview of Growth, Spending, Student Debt and
Unanswered Questions in For-Profit Higher Education and The Return on
the Federal Investment in For-Profit Education: Debt Without a Diploma,
this committee is taking the vital first steps to eliminating the bad
actors within the for-profit sector. It is my hope that, as indicated
by Chairman Harkin at the September 30 hearing, the committee will
continue its investigation and achieve an appropriate legislative
solution.
Question 3. During the hearing, you discussed how many students are
unable to obtain a copy of their transcript due to unpaid accounts with
a school. This is a standard practice at many public and non-profit
institutions of higher education. What other recourse do schools have
to collect unpaid account balances? What policy recommendations do you
have to address this situation?
Answer 3. I appreciate the opportunity to expand further upon this
issue so as to better reflect the testimonies of the students the
Council for Opportunity (COE) represents. As you state, many
institutions make it a practice to withhold transcripts or other
documents in instances where students have outstanding balances. Yet,
unlike its non-profit counterparts, it appears that many for-profit
institutions impose rules whereby a student cannot simply sign up for a
single course. In consulting with low-income students who had
previously been enrolled in for-profit institutions, the same theme
emerged again and again. Simply, many for-profit institutions require
students to register for a set of courses for an entire term. If
students dropped out of even one course, which they often did as they
arrived to the institution ill-prepared, they lost credit for the
entire academic term. Once coupled with the high cost of for-profit
schooling and students' inability to pay, it is easy to see how low-
income students at for-profit institutions experience more difficulties
in obtaining their academic records.
Question 4. In your written statement, you argue that for-profit
institutions need to be subjected to greater accountability. As you
know, I have been a long time supporter of such accountability in the
TRIO program. The Wyoming TRIO program is a model of what I believe
needs to be required of the entire TRIO program. It has done a
remarkable job in providing data and tracking outcomes for its
students. Given that the TRIO program is federally funded, do you
believe greater accountability for outcomes should be required of TRIO
program? If not, why?
Answer 4. The TRIO programs in Wyoming do, indeed, have a wonderful
track record. Central Wyoming College's Upward Bound program can boast
of a 95 percent high school graduation rate. The Student Support
Services program at Laramie County Community College has a retention
rate of 83 percent, which far exceeds the institution's retention rate
for low-income students (51 percent). Meanwhile, 78 percent of students
who participate in the McNair Postbaccalaureate Achievement Program at
the University of Wyoming enroll in graduate degree programs.
Thankfully, such successes are not unique to Wyoming as TRIO programs
across the country continue to promote student access and success. This
is evidenced by the data provided by TRIO programs each year to the
Department of Education.
Each TRIO grant recipient is required to submit data annually to
the Department of Education, outlining its progress in meeting the
goals set forth in its application. This data is then factored into the
grantee's score upon reapplication for continuing grant funds; thus,
accountability measures are built into the TRIO grant process.
Additionally, the Department of Education has embarked on numerous
studies of TRIO programs and their effectiveness.\1\ To directly
address the heart of your question, however, COE strongly supports
accountability within all federally funded programs. Such measures
protect not only the students we serve, but the public dollars
entrusted to our program. As such, the research arm of COE--the Pell
Institute for the Study of Opportunity in Higher Education--partnered
with the Pathways to College Network to produce a free Evaluation
Toolkit to enable individual TRIO programs to use data more effectively
to gauge their progress and identify key ``best practices'' that
support greater student outcomes.\2\
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\1\ See, e.g., Bradford, C., Muraskin, L, Cahalan, M., & Rak, R.
(1997). National study of Student Support Services: Third-year
longitudinal study of results and program implementation study update.
Washington, DC: U.S. Department of Education; Constantine, J.M.,
Seftor, N.S., Martin, E.S., Silva, T., & Myers, D. (2006). A study of
the effect of the Talent Search program on secondary and postsecondary
outcomes in Florida, Indiana, and Texas: Final report from phase II of
the national evaluation. Washington, DC: U.S. Department of Education;
and Olsen, R., Seftor, N., Silva, T., Myers, D., DesRoches, D., &
Young, J. (2008). Upward Bound Math-Science: Program description and
interim impacts. Princeton, NJ: Mathematica Policy Research, Inc.
\2\ The Evaluation Toolkit may be viewed online at http://
toolkit.pellinstitute.org/.
Question 5. Does the Council for Opportunity in Education have any
ongoing relationship(s) with hedge funds seeking to short sell for-
profit schools equities or individuals or organizations suing for-
profit schools?
Answer 5. No. COE does not have any ongoing relationships with any
hedge funds seeking to short sell for-profit schools equities or
individuals or organizations suing for-profit schools.
Question 6. Does COE believe that financial literacy is important?
Should efforts be made to improve financial literacy in elementary and
secondary education?
Answer 6. COE recognizes the importance of financial literacy for
first-generation and low-income families. In fact, one of COE's
priorities is the training of TRIO personnel on various aspects of
financial aid and financial literacy so that they can better prepare
their participants for making informed financial decisions about
college and beyond. For the last several years, the Council has
provided such training at sites across the country. Most recently, we
applied for and received funding from the Department of Education to
continue to conduct these national trainings.
Additionally, as a result of the recent work of this committee in
reauthorizing the Higher Education Act of 1965, financial literacy is
now an even more integral part of the work of TRIO. HEOA explicitly
incorporates a financial literacy component into each of the TRIO
programs. Ultimately, we believe that improving the financial literacy
of our students will lead more low-income students and families to
better assess college options and make smarter decisions about the best
fit for them. Such learning will also allow them to maintain an
understanding of the financial aid process, loan repayment, and general
money management.
I hope that the committee finds these responses to be insightful
and instructive in its efforts to prevent abuses by for-profit
institutions in their dealings with students. I look forward to
continuing to work with the committee to ensure that low-income, first-
generation students and students with disabilities are well able to
achieve their educational pursuits.
Arnold Mitchem,
President.
Response to Questions of Senator Enzi by Kathleen Bittel
Kathleen Bittel,
Acme, PA 15610,
October 20, 2010.
Hon. Tom Harkin,
Hon. Michael Enzi,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
Washington, DC 20510-6300.
Dear Senators Harkin and Enzi: Thank you for the opportunity to
continue to assist with your investigation. Following, you will find my
responses to Senator Enzi's questions posed in your letter of October
13, 2010. I have answered these questions honestly, and to the best of
my ability. I do not profess to be an expert in the field of education
reform such as those who sat on either side of me at the September 30,
2010 hearing. I certainly hope you asked some of these questions of my
esteemed panel members, as I am certain their expertise in some of
these areas far outweighs mine.
In that regard, I note that a number of Senator Enzi's questions
seemed to presume such an expertise and/or a familiarity with it;
similarly, some questions seemed to call for a more purposeful,
scholarly type analysis. While I will do my best to answer based upon
what I have seen and experienced, let me reiterate that my testimony
was based solely upon my honest observations and a deep, fundamental
respect for the decency, dignity and sincerity of those who aspire to
better themselves and struggle constantly to do so. In the course of my
experiences, I did not anticipate the need to make any particular,
itemized or systematic recount of my work history, nor to make a
comparative study of these experiences relative to any research
existing on the matter; rather I sought only to relay a common sense,
intuitive summary of my daily experiences--the tenor and tones of which
were unmistakable and pervasive, if not calculated, to lead to certain
outcomes that, too frequently, were bad for both the students and the
American taxpayer. Under the circumstances, Senator Enzi, I trust that
you have asked these questions honestly and in that same sense of
respect and decency--i.e. to seek the input and opinion of a concerned
citizen, and not to demean my answers or to mischaracterize them later
for any admitted lack of a more specific expertise.
Likewise Senator Enzi, and contrary to your tone at the hearing,
neither my intent nor my participation thus far should be fairly
characterized as uncooperative. Nor do I deserve any cheap and
incurious or evasive dismissal as a disgruntled employee. Rather, you
should consider the difficulties that I have endured to come forward.
I had spent the previous 3 years working in an environment where it
was getting harder and harder to do an honest day's work with each day
passing. The things I was being asked to do were going beyond what my
moral principals felt were right. But I desperately needed that
paycheck. I don't have money to invest in the stock market; I'm
struggling to put gas in my 1999 VW Beetle to make the almost 100-mile
daily commute to work! But my conscience would not allow me to walk
away from the so many desperate individuals I came to know while in my
employ at EDMC. Students with great debt and minimum wage jobs--if they
had a job at all--were being pushed aside in deference to falsifying
numbers. I could not live with myself if I did not speak out to try to
affect change. I went to my employer in good faith, with no results.
My decision to then reach out to the Senate subcommittee was a
difficult one for me to make. I had to be prepared to lose everything I
own because my testimony was likely to put me among the ranks of my
unemployed graduates along with many, many, many others of my fellow
Americans. Additionally, I know that the big money corporations have a
big stake in for-profit education. My employer via the stock market is
Goldman Sachs. Their history and reputation precedes them. I must
consider all possibilities that might occur should I speak on a
national level about the abuses I have witnessed and felt, particularly
when my adversary will be such a Goliath in the industry as Goldman
Sachs and EDMC.
I was very anxious about coming before you on September 30, 2010.
It is my heartfelt belief that I am risking everything to reveal to you
the wrong-doings I have personally witnessed. I was not expecting to be
so disrespected by the very few Republican representatives who bothered
to show up to the hearing. I certainly could never have anticipated
that you and your cronies would leave the room in a huff without having
the courtesy to listen to what I came to say. This is not a Republican
vs. Democrat issue!
This issue will affect every American in the future if reform is
not enforced! If one is not bothered by the idea of America's most
vulnerable citizens being preyed upon for a multi-billion dollar tap
into the Federal Financial Aid to Students monies, then everyone should
be bothered by the idea that we will all be paying more taxes in the
future to repay monies that unemployed graduates cannot!
These schools are worse than payday loans and predatory lenders.
They take our most vulnerable population--the poor and the desperate--
they use as hard a sell as bill collectors do when collecting, and lure
people with a promise of the most important thing to these people--a
decent job--and then back it up with bogus statistics. Many of the
graduates are unprepared and maybe ill-suited for the rigors of the
professions even assuming there ARE jobs. It is simply not fair to
mislead these people into thinking they have the aptitude and/or
talents for their dream jobs, and taking their money is the biggest con
of all.
As your investigation has already exhibited, these schools sucker
students in with promises and lies, many fail, and now they still have
no decent job, and no future, and a debt that will never go away. It is
as, or more immoral than predatory lenders and akin to a lottery scam.
If we can get over the immorality, we are left with another, and
different problem, and that is the abuse and waste of Federal money
needed for really educating people to obtain good jobs. There is only
so much to go around (and getting less every day). If there is to be a
future for the entire system, the loans need to be paid back.
This has been difficult for me to stand strong and speak up for my
voice to be heard, and yet, as frightened and as lonely as the effort
leaves me, I cannot, nor should you, lose sight of the basic matter of
decency that is at issue here.
Indeed, please keep in mind as you read my responses, that I am
representative of the average American. I am grateful for and honored
by the opportunity to speak for others who cannot, for after all, the
opinion of our citizenry is still the foundation of this great country.
I am ``Jane Q. Public.'' Although not an expert in the field, I did
witness, and was subjected to what I believe to be abuses in one for-
profit education corporation. That is the scope of my expertise. I came
forward simply to provide you with the knowledge of what I had
experienced so that you could take these alleged abuses into careful
consideration while deliberating on what is in the best interest of
students and the taxpayers who will foot the bill if students default
on their loans. I don't have a vendetta against for-profit education. I
simply want to see it regulated to eliminate the abuses I witnessed or
to at least temper the rampant, systemic self-interest that, in my
opinion, has outstripped its basic and decent goals. Whether by intent
or merely opportunistic indifference, the system now is far too open to
the abuse of those who rightfully dare to dream; what is at stake is
not just the taxpayer's money, however, but the beliefs and the
perspectives and, therefore, the inspiration of our youth and their
ability to carry us all forward. My hope was only to identify the
aspects of the problem that I am familiar with, so that a responsive
and responsible Legislature would leave politics and ideology aside to
openly consider that matter in conjunction with the experts and act
accordingly.
By asking these questions of me, you have afforded me the
opportunity to provide common sense answers from the common citizen's
perspective. Senator Enzi, since you have asked this of me, it is my
expectation that you will give my responses more respect than you did
my testimony.
Sincerely,
Kathleen Bittel.
______
You alleged that I was ``critical of the number of staff Argosy and
the Art Institute had devoted to career planning and placement'' and
posed the following questions to me:
Question 1. How many staff do you believe should have been assigned
to career planning and placement?
Answer 1. As many as it takes to do an adequate and honest job! In
my experience there were approximately 1,600 employees bringing new
students into the programs, and 9 employees dealing with the end
results, with each class getting larger than the last. It does not take
rocket science to understand the deficiency in that poor ratio.
Additionally, these staff should be receiving a level of
compensation commensurate with the service they are performing, at the
very least a salary comparable to some of the top enrollment staff. If
a college or university, regardless of whether they are for-profit,
public, or private, is going to use these statistics as a marketing
tool, then they should actually be providing the service to all who
request it, and also should be paying those who provide this service
with a living wage. It is simple common sense.
Question 2. On average, how many staff are assigned to career
planning and placement at other Pennsylvania public colleges and
universities?
Answer 2. I never professed to be an expert on public colleges and
universities. I can only speak with truth, from the perspective in
which I have lived. I have no knowledge of the statistics of
Pennsylvania public colleges and universities as I've never had a need
to. I believe there are many others, with far more expertise than I,
with whom you could consult for that data.
Question 3. What steps can be taken to encourage schools to have a
sufficient number of career planning and placement staff to meet the
needs of their students?
Answer 3. There is only one step that matters at this point, and
that is Federal Legislation! By granting the authority to the
Department of Education to oversee these schools, uniform guidelines
can be developed and enforced. I am aghast that the DOE does not
already have this power and authority over for-profit schools! Why was
that allowed to happen?
You stated that I ``suggested that schools should be required to
spend a minimum percentage of their revenue on education'' and posed
the following questions:
Question 4a. How much do you feel should be spent on education, and
why?
Answer 4a. I'm not going to pretend to be an expert business and
education analyst and provide you with statistics and percentages to
back up my opinion. You have far better qualified experts at your
fingertips with whom you can consult for those types of details. What I
can offer you, about my feelings pertaining to the amount of money
being spent on the ``education'' that is being delivered in many of
these online programs, whatever it is . . . it is not enough. I speak
from my own experience.
I did not have the opportunity to attend college right out of high
school, my father told me point blank (in 1968) that he ``would never
waste money on educating a female, as all [we] were good for was
getting married and having babies.'' So I did just that. I married my
high school sweetheart, moved to the country, bore three children, and
we lived happily ever after . . . until my husband was diagnosed with
testicular cancer. Fearing the worst, I scrambled to achieve a higher
education so that I could make a living wage to support my children if
I had to do so alone. I earned 83 credits before my husband died. As my
children were then approaching the college age, my education took a
hiatus in deference to finding money for theirs.
When I accepted the initial job as ``The Assistant Director of
Admissions'' I was thrilled that EDMC offered free tuition to all of
their programs. I saw it as a great avenue to complete my baccalaureate
as I had been studying psychology at the University of Pittsburgh, and
Argosy University was also known as ``The American School for
Professional Psychology.'' I enrolled in classes the minute I was
qualified to do so (an employee must have worked for 6 months to
qualify for a tuition grant). Excited as I was to begin, I was quickly
disappointed in the quality of the ``education'' that was being offered
in the bachelor's program.
In one of my classes, things started out fine and for 4 weeks the
lessons went well. But in weeks 5, 6, and 7 the lessons became
disjointed from the syllabus. It seemed as though the programmer had
worked on the design of the class, diligently completing 4 weeks of
curriculum, was then suddenly told the deadline was moved up to
``tomorrow''. Suddenly nothing matched up. I would spend hours
contemplating the reading assignment, only to discover that the
homework assignment was on a completely different topic. Worse than
that, the topic of the homework assignment was never discussed anywhere
within the assigned textbook, nor was it addressed in the online
reading assignment! The last 3 weeks of that class was nothing more
than an exercise in frustration.
Within the final weeks of this class there was a lesson on the DSM-
IV. For the uninitiated, the DSM-IV is essentially ``the bible'' of
psychological study: the ultimate and most important resource. I knew
of its significance from my studies at the University of Pittsburgh. I
was mortified when I clicked on the link ``to learn more about the DSM-
IV'' and the link took me to Wikipedia! Now, I don't mean to disparage
Wikipedia as that site has many useful purposes, but if I am not
allowed to quote Wikipedia in my homework assignments, then why should
that be considered to be an acceptable link to the most important
resource a psychology student has? Particularly when the price tag on
the ``education'' rivals that of Harvard?
Trust me, for 2 years I reported this gross deficiency to everyone
who would listen, and there were many, like you Senator Enzi, who did
not. From the ``content alert'' function within the lesson to the
Director of Student Services (my boss), I gave them the course number
and specific lesson; no one cared. I checked that ``classroom'' shortly
before I took my leave of absence and, at that time, there had been no
changes made, including the link to Wikipedia.
The final blow to pursuing the completion of my degree in Argosy
University's Bachelor's program came when my academic counselor
scheduled me to take a ``Statistics 2'' class (they were not titled
that way) prior to my taking ``Statistics 1''. The classes were
categorized as math classes, therefore I did not understand, nor was I
advised, as to the significance of the level I had entered into. I
taught myself and held my own until the onset of week 5, when I knew I
was lost. I contacted the newly hired facilitator who was responsible
for the class, only to have him explain to me the concept of a
``nominal number''. That was the lesson from week 1! I knew then that
if I were ever to complete my bachelor's degree in psychology, I was
going back to the University of Pittsburgh to do so. It was then that I
switched schools and pursued my passions in Web site design and
photography at the Art Institute of Pittsburgh ground campus.
You asked me how I feel about how much is enough to invest in the
actual product that is being delivered at such an exorbitant price.
Common sense would say, enough to make the transaction beneficial to
both parties entering into it. Nobody likes to be ripped off! It is my
opinion, based on my experience in the online classroom in Argosy
University's Bachelor of Science in Psychology program that even I, one
who paid zero dollars in tuition but did invest a large chunk of time
in my life, did not get what I paid for within this ``educational''
system. I feel ripped off even though I did not spend a dime.
Although I cannot offer you an exact figure as to how much more is
needed, I can attest that from my experience, that not enough is being
delivered for the price being charged. I did not see a focus on the
quality of the education being delivered. Nor did I see adequate
resolution of student problems and issues (including mine). But the
worst of all transgressions perpetrated upon the student graduates is
the complete disregard as to whether they are actually using the skills
they paid so dearly to learn in a field-related job.
How much is enough? Whatever amount is needed to provide an
education commensurate with the price being charged and to fulfill
promises made at the time of admission. It is simple common sense.
Question 4b. Should this be required only of for-profits, or all
institutions of higher education? Why?
Answer 4b. Absolutely this should be across the board! My opinion
is that you start with the for-profits, because they are the most
strife with abuse, and then you build a roadmap to reform for the
others. One step at a time! Why? Because I have spent the last 8 years
trying to enable my three children to complete their higher education.
Higher education was not an option in our household. I forced my
children into continuing their educations, because I believed that it
was their best option to fully contribute to our society. My son
completed his baccalaureate with honors at Allegheny College of
Meadville, his MFA at the University of Pittsburgh (on a full
scholarship); my middle daughter completed her baccalaureate with
honors, at California University of Pennsylvania, and continued on to
receive a 4.0 in her completion of the Master's of Education--
Instructional Leadership program at Argosy University (on a full
scholarship). My youngest daughter is a Junior at Penn State
University, University Park. My point would be, I saddled my children
with a huge debt to achieve this. I could not afford to pay their
tuition; I'm struggling to survive on the paltry wages paid to a career
services advisor at EDMC. If my children did not have access to the
Federal financial aid system, they would not have been able to reach
their full potential through education! I fear that our Federal
financial aid system will follow the path of the mortgage industry and
that my grandchildren will not have access to the same benefits as
their parents.
I definitely believe that my children have been overcharged for
many of the services they received. I would like to see reform on the
whole sector. I have no doubt that there are abuses in every college,
public and private. I, as a taxpayer, call upon you, Senator Enzi to
pay attention, find them, and fix them!
Question 5. During the hearing, you responded to a question about
recruiting violations posed by Senator Franken. In your response you
suggested that accrediting bodies are not doing enough to combat
inappropriate behavior at for-profit institutions. Please elaborate on
this statement and describe specific instances from your own
experiences at Argosy University and the Art Institute where
accrediting agencies failed to fulfill their legal obligations.
Answer 5. I worked for almost 3 years within EDMC-OHE, in several
different departments. I never once saw a compliance team from the
accrediting body checking up on what we were doing. I can only speak to
what I experienced. From my experience, I saw no evidence that the
accrediting bodies were fulfilling their legal obligations to monitor
in any way.
Question 6. You indicated that you have had many good experiences
with for-
profit schools. Please describe several of these experiences.
Answer 6. I had one really good online class at Argosy University
in Forensic Psychology. The teacher was top-notch and experienced in
her field. In addition, her husband is a police officer. I thoroughly
enjoyed the high quality exchange in the classroom, and learned much.
My other examples would all lie within the ground campus at the Art
Institute of Pittsburgh. My admissions officer is someone I would count
as a friend, as I would most of whom I met while there. We have
conversed via email many times since my enrollment, helping one another
in many ways. My financial aid officer answered my every need
instantaneously and thoroughly. My academic advisor was not only
helpful, but fun to talk with. My teachers were top notch. They went
out of their way to give us what one termed as ``our money's worth.'' I
once got a response to a question at 2 a.m. on a Sunday morning! I have
had a wonderful experience on campus in Pittsburgh. I learned much and
had fun doing it.
Question 7. Please describe the process you followed as a career
services advisor to report job placements, including the review process
by managers.
Answer 7. First, you must understand the hierarchy. I reported to
two supervisors who both reported to the head of the department. My
immediate supervisor monitored everything I did, to the point of
micromanagement. This person made constant ``suggestions'' as to how to
convert the graduate into a statistic. I followed, as best I could in
good conscience, the suggestions, and when it was deemed to be
``enough'' as per the opinion of my immediate supervisor, it was then
submitted to the next level supervisor for acceptance. This second
level supervisor was the ``gatekeeper.'' Because this person had to
sign their name in acceptance, and more importantly, because this
person is also an honest individual, it was tough for me to ``sell''
placements that I did not in my heart believe were worthy of the status
of a genuine job placement, but I was forced to try many times.
Next, you must understand my personality through which I dealt
within this environment. I am an inherently honest person, I have never
been any good at lying. I largely gave that up as a teenager, the truth
is so much easier to remember. Occasionally, life presents us with
situations where it is impossible not to lie, (Does this outfit make me
look fat?) but even then I stutter and stumble for words, so for the
balance of my life I have always sought the truthful path. I can be a
great salesman if I believe in the product, but the minute I am
disillusioned, I'm done. I could not defend these questionable
submissions to the second level supervisor because I never believed
they should count as placements in the first place. I was merely
following directions imposed upon me. So when things were questioned, I
backed off rather than to try to lie. But, it might surprise you to
know, that not everyone in this world is so concerned with the truth
and that some actually find it quite easy to lie! Those individuals had
their stories and documentation strategically specific before they got
to the gatekeeper and when questioned, had no difficulty in looking her
straight in the eye and saying whatever was needed to get the
submission approved.
The third level of review was at the corporate level. We had
quarterly closeouts when the placements were tallied into statistics
for the students who had graduated 6 months prior. We ``closed out''
their files and put them away in a common filing cabinet, regardless of
their true employment status. On this day ``specialists'' from the
corporate level asked many questions about the placements. The day of
closeout was pure hell for some, as we were held accountable for the
graduates we had ``placed''. I was not often asked many questions on
those days as my submissions were solid. But I did, at times, watch
some coworkers scramble all day long to answer a multitude of
questions.
Question 8. Did you ever have submissions regarding student job
placements rejected or questioned by your supervisors at EDMC? Without
disclosing identifying information about individual students, please
describe why any of your submissions were rejected by EDMC management.
Answer 8. I did submit several students for approval, against my
wishes, but always at the direction and insistence of my immediate
supervisor. I have had approvals withheld pending more information. One
such student, a Residential Planning Diploma graduate, worked as a
package handler on an assembly line earning minimum wage. The student
had provided an unsolicited suggestion to his employer advising how to
redesign the flow of their production to save costs. The graduate
stated that his redesign saved his company 30% in costs by this new
work-flow. Although the graduate was employed at the time of
graduation, he had subsequently quit the job when he was not
compensated nor recognized by the company for his volunteered
suggestion.
At the time of submission, the graduate was unemployed and looking
for work. I was instructed to submit the graduate as employed in his
field, relating the volunteer redesign as a field-related task. It did
not matter that the graduate was no longer employed in any way, as he
had worked at least 1 day following graduation so he could be counted
as employed. The submission was rejected at the second level. I was
told to go back and research the Web site of the former company of the
graduate, and to find proof that the job description for a package
handler included a requirement for space planning skills and then it
would be accepted.
Question 9. Please provide any copies of company policies or other
documents to substantiate the claims made in your written and oral
testimony.
Answer 9. Actions speak louder than words. Senator Enzi, if you
think for a minute that any of these pressures were voiced via the
written word then you are naive as to how Corporate America really
works. I did not take a leave of absence from my employer with the
intention of testifying before the Senate. I did not stockpile
information prior to leaving, in anticipation of your follow up
questions. Any documentation that I may or may not have, I am certain,
would be considered proprietary in nature by my employer. I went, in
good faith, upon the words of John Kline in a recent ``All Company
Meeting,'' and reported the wrong-doing I experienced to my Human
Resources Department. John Kline, president of EDMC-OHE, stated over
and over again in that meeting, ``If it doesn't feel good, then you
shouldn't be doing it.'' I trusted he was sincere in his words and
believed when I took my leave that the company would take care of the
problem.
In my exit interview with the director of Human Resources, I
provided answers to all questions except that I declined to provide
names. It is my belief that since they can track our every keystroke
and monitor our every call, that if they looked, they could easily find
the transgressions and the transgressors. Common sense says that all it
would take would be a phone call to each graduate to confirm the
information in the documentation. If each advisor had an average of 50
students in their care, and there are 9 advisors, that would be
approximately 450 calls. EDMC expects their admissions staff to make
400 phone calls a day . . . what's so hard about 450?
Let the guilty parties be found by the proof in their files. The
identity of the coworker who taught me how to cheat is widely known to
my supervisors, as well as, to the department head. I had reported the
misconduct immediately upon it being shown to me early in my time in
that department; at that time I did reveal the name of the perpetrator.
Based on conversations I have had over the years, many people within
the management at EDMC know the identity of this person, and have known
for years.
I did provide documentation to the director of Human Resources, but
said documentation includes personal information pertaining to the
students. I would prefer if you obtain this documentation directly from
EDMC, or obtain their permission for me to release it to you. I do not
believe it would be proper of me to release this personal information
about students without a directive from my employer.
It was not until 3 weeks following my whistle-blowing to the
director of Human Resources at EDMC that I contemplated contacting the
Senate subcommittee. The window of opportunity to speak to the
subcommittee was rapidly closing. I saw no evidence that my claim was
being taken seriously by EDMC.
I had not received any follow up calls or questions from my
employer and the most egregious and well-known perpetrator of these
questionable tactics was, to the best of my knowledge, still employed
there. I felt a moral obligation to speak from my heart about my
personal experiences. So I reached out to you for help. But Senator
Enzi, you refused to listen to me! Consequently, I must question your
true motivation for your sudden interest in what I have to say now.
However, since you have asked the questions, it is now incumbent upon
me to give you my honest answers.
Finally, to address the only time that I refused to cooperate with
EDMC: after no attempt had been made to contact me with follow up
questions for more than a month, I received an email from the director
of Human Resources at 7:13 a.m. on the morning of my son's wedding. I
was essentially instructed to submit myself for questioning over the
weekend, ``Monday at latest.'' At that time, 268 of my closest family
and friends were traveling from all over the country to a remote little
meadow on a mountaintop, where we experienced one of the greatest days
of our lives. Pardon me if EDMC's lack of planning did not constitute
an emergency on my part! Too little, too late. They had their chance
and they, like you, did not listen to what I had to say.
Question 10. Are you aware that EDMC has an anonymous hotline to
report suspected conduct?
Answer 10. I am only vaguely aware of the existence of said
hotline. In all honesty, the only time I remember hearing of its
existence was in the context of office gossip about an alleged sexual
misconduct. I thought it was used for personal issues such as sexual
misconduct and never pursued further information about it. My employer
may or may not have sent emails and/or posted Web sites, but if they
did, it was in a manner that was not noticed by me. I was too busy
trying to find time to actually help my graduates, I didn't have time
to read all of their many promotional emails. I thought I was doing the
right thing by following the chain of command upwards to the Human
Resources director.
Question 11. Did you ever use that hotline?
Answer 11. No, as per reasons stated above.
Question 12a. You quoted me as saying, ``More focus should be put
into researching and developing programs in those sectors where jobs
will be needed in the future, and the training should be being
developed in those areas and not the `easy sell passion fields' ''--
Kathleen Bittel
Please describe what fields and programs you believe will be needed
in the future and the basis of your conclusion.
Answer 12a. Again, let me remind you that I am not here to provide
expert testimony on any of these points. Since you've asked for my
opinion, then I can only address your questions through what I saw and
learned while employed at EDMC. My job entailed searching the job
markets for ever-changing demographics, nationwide. I have done so for
approximately 18 months. Although I generally searched for specific
art-related jobs, oftentimes my graduates lived in remote areas so I
researched all jobs in a wide radius of their zip codes. I noticed many
trends in a variety of cities by repeated searching of the job
postings.
I saw many genuine job opportunities that remained posted for many
weeks. I would look curiously at those ads to see what the employers
were looking for because I was puzzled as to why, in this economy and
jobless rate, were they not finding a qualified candidate? I noticed a
pattern in these unfilled job openings, they all required a very
specific training, one that apparently was not commonly out there,
certainly nothing my schools were offering.
I am not an expert in this field. I do not have a crystal ball to
tell you what the trends of the future might be, but I can tell you
this . . . if you truly want to know what is needed in future
education, look at what is being asked for in the genuine job
opportunities being posted. If you isolate every genuine job posting
that has been posted for longer than 2-3 weeks and investigate what
they are looking for, compile your data, then you'll have your answer.
Question 12b. Please describe what you mean by ``easy sell passion
fields'' and the basis of your conclusions that they will not be needed
in the future.
Answer 12b. You need to understand the true nature of Artists to
understand a passion field. I have a passion for photography and Web
site design. I chose to spend an exorbitant amount of time pursuing
further education at the Art Institute because I so desired to know
more about these fields. Will I ever make any money in either of these
fields? Probably not, but I wanted the knowledge anyway, and I had free
tuition through my employer. I had a passion for it. It is important to
note, where I spent excessive time, the students who are in these
programs are spending excessive time and money.
America is blessed with many talented and passionate people. One
can be very passionate about their art, but that does not necessarily
equate into true talent in the field. The Arts have never been an easy
cash flow stream in America. One must be truly talented to rise to the
level of a good income. I would never conclude that any area of the
Arts would not be needed in the future! In fact, I would call out to
America to embrace our artistic talent and support them to eliminate
the ``starving artist'' syndrome that is so prevalent in this arena!
What I mean by ``easy sell'' is that there are no portfolio
requirements for admission to the Art Institutes. In a traditional art
school, one must prove via a portfolio of their work, that they have
the talent and ability to complete the program prior to admission. From
my perspective, it seems to me that all one needs is a pulse and the
ability to tap into the Federal Financial Aid system to be admitted to
the Art Institute Online. It is easy to sell something that is
passionately desired by someone. Artists are passionate people. They
dream of being able to do something with their art. These programs are
selling dreams and not the reality of how difficult it is to find
gainful employment in the Arts. These programs are over saturating
these markets with minimally talented artists by these sales tactics.
Moreover, when these students complete their degree, it has been my
experience that the graduates are not truly helped to find employment
that is, in fact, within their field of study.
Case in point: update on the situation of ``the Toys R Us kid.''
Since my leave from the department, it has been suggested to him by the
Career Services Department at EDMC that he apply at Target or Best Buy
for a job. I wasn't aware that either of those firms included a video
game design department in their corporate structure. This individual is
a talented artist, one of the best I have seen in my time in Career
Services. He is now struggling to repay his Federal loans and is making
regular payments on them from his $8.30 an hour job.
Allow me to digress for a moment to point out that I had
erroneously reported $8.90 per hour as his wage, when it is actually
$8.30 per hour. He has been with this company for at least 8 years!
To continue on my point: he reports that the private loan
company(ies) is/are now hounding him with collection calls for their
money. He has no more to give them. He was advised by them, that all he
needed was a letter on the Art Institute letterhead stating that they
were working with him to find a job and they could arrange a temporary
forbearance for him until he found one. Despite repeated phone calls
and emails, the Career Services Department at EDMC has yet to comply
with his simple request.
Question 12c. What available Department of Labor and Department of
Education resources, including data bases, have you used to help
address this concern?
Answer 12c. Is this a trick question? Senator Enzi, don't you get
it? I am Jane Q. Public who has come forward to voice my concerns about
the abuses I have seen and felt within this corrupt system. What would
make you think that it is incumbent upon me to research Department of
Labor and Department of Education resources to find a solution to this
debacle? Is that not YOUR job?
I call upon you, Senator Enzi, to do the job your constituents
entrusted you with! I would extend that challenge to your cronies,
Senators Burr and McCain, who were equally disrespectful of my
testimony. From a private citizen's point of view your ridiculous
political posturing is boring and enraging at the same time. No wonder
so many Americans tune out instead of paying attention to the important
issues that will ultimately affect them deeply! Instead of vehemently
protecting the for-profit industry without looking at the evidence,
should you not be evaluating every piece of evidence within your reach
to come to a responsible conclusion? Is it not your sworn duty to
protect American citizens from the predatory practices of mega-
corporations? Particularly if there exists a possibility that these
predatory practices could indeed cause the eventual collapse of our
Federal Financial Aid for Students program and subsequently cause
higher taxes to be imposed upon the American taxpayer? Do you sincerely
believe that these activities should be allowed to continue unchecked?
Have you taken the time to understand the issues at hand?
Senators Enzi, Burr, and McCain, have you contacted students and
graduates in your home States of Wyoming, North Carolina, and Arizona
to listen to their opinions on this topic? Aren't they the people you
are sworn to represent? It would appear, in my experience, that your
actions and words speak loudly as to whom you truly represent. In your
defense, ``you guys'' have given citizenship privileges to these mega-
corporations, so perhaps these are the only ``citizens'' of concern to
you now?
It is my hope and belief that many Americans are giving my
observations more attention and respect than you, Senators Enzi, Burr,
and McCain, have done in the past, therefore I call to them in this
public message for a restoration of sanity in America. Am I the only
one who thinks it is insane for any human being, much less an elected
official entrusted with our representation, to coldly turn their backs
on the reality that countless numbers of lives have been forever
changed for the worse by these predatory practices?
Your previous histrionics as exhibited in the hearing held
September 30, 2010 have left me less than confident that you will
genuinely consider any of my continued testimony. Therefore, since you
have opened the door for me to speak, on the record, to the American
citizens whom I stand strong to represent, I choose to now speak
directly to my fellow citizens:
Pay attention, America! Although I represent many of you in my
quest for a solution to these immoral practices being perpetrated upon
our most vulnerable citizens, the rest of you need to speak up! Pay
attention to these issues that will most definitely affect you and your
loved ones in the future! Call your representatives in the Congress and
Senate and tell them what you think! All of their phone numbers are
posted on the Internet; it only takes a simple phone call to make a
difference.
America! Don't simply vote Republican or Democrat this November!
Pay attention to what the candidates are actually doing with their
opportunity to represent you! Vote based on whether or not you believe
the person is capable of truly doing good for our society, not based on
the commercials and advertisements you are being bombarded with . . .
most of those are nothing more than smear campaigns and political
posturing regardless of the political party paying for the ad. It is
time we interject some common sense, common citizen wisdom into the
leadership of our country!
Speak up, America! Rally for Sanity in America! Not everyone can
travel to Washington, DC on October 30, but I'm pretty sure that most
of us can make a phone call. Gandhi said, ``We must be the change we
wish to see in the world.'' Be that change!
In closing, I would like to thank Senator Harkin for facilitating
the delivery of Senator Enzi's questions, and for his trust in me that
I am indeed all that I profess. I would most sincerely like to thank
Senator Enzi for giving me the opportunity to share my common sense
opinions for solutions to the problems at hand. If Senator Enzi feels
the need to consult with me again in the future, I would welcome any
questions he may have for me. Contrary to the malicious innuendos being
made about my willingness to cooperate, I have never denied any
reasonable request. I would like for that to be duly noted as a matter
of public record.
Sincerely,
Kathleen Bittel.
Response to Questions of Senator Enzi by Lauren Asher
The Institute for College Access & Success,
Oakland, CA 94612,
October 27, 2010.
Hon. Tom Harkin, Chairman,
Hon. Mike Enzi, Ranking Member,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
Washington DC, 20210.
Dear Senator Harkin and Senator Enzi: Thank you once again for the
opportunity to testify last month on the high debt and default levels
for students who attend for-profit colleges, and the need for greater
oversight of the for-profit education industry to protect the
substantial interests of both students and taxpayers.
Please find attached my responses to Senator Enzi's written
questions, for inclusion in the record. I have also submitted them
electronically to Terri Roney and Christopher Eyler, per your request.
I look forward to answering any other questions you may have.
Sincerely,
Lauren Asher.
______
Question 1. Your written testimony discusses at length the burden
of student loan debt. Over the past 15 years, tuition and fees in all
sectors of higher education have increased far faster than inflation.
Congress has responded by increasing Federal loan limits and the
maximum Pell grant. However, tuition and fees continue to rise and
students are forced to take on increasingly more debt. Expanding
Federal student aid is not the solution to college affordability.
Therefore, what other steps can Congress take to address the rising
cost of higher education?
Answer 1. While college sticker price tuition and fees have been
rising faster than inflation for some time, Federal student aid as well
as other sources of student financial assistance from States and
colleges can and do help many students and families afford college. The
College Board has found that, on average, net prices have risen much
more slowly than sticker prices, especially for lower income students
at public and private nonprofit colleges.\1\ Research has found that
grant aid supports college participation, and that increases in Federal
grant aid do not lead to increases in college costs.\2\ However,
experts have raised concerns about the effectiveness of Federal student
loans and the impact of higher Federal student loan limits on college
pricing.\3\
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\1\ See Figures 8 and 9 in The College Board, ``Trends in College
Pricing 2009,'' October 2009, http://trends.collegeboard.org/files/
2009__Trends_College_Pricing.pdf.
\2\ ``The Effectiveness of Financial Aid in Improving College
Enrollment: Lessons for Policy,'' by Bridget Terry Long, Harvard
Graduate School of Education, NBER, and NCPR, January 2008. Available
at http://gseacademic.harvard.edu/- longbr/Long_-
_Effectiveness_of_Aid_-_Lesson_for_Policy_(1-08).pdf. ``Costs, Prices
and Affordability: A Background Paper for the Secretary's Commission on
the Future of Higher Education,'' by Jane V. Wellman, 2006. Available
at http://www2.ed.gov/about/bdscomm/list/hiedfuture/reports/
wellman.pdf. And ``A Crucial Safety Net,'' by Patrick M. Callan,
president of the National Center for Public Policy and Higher
Education. Published in the New York Times, February 3, 2010 and
available at http://roomfordebate.blogs.nytimes.com/2010/02/03/rising-
college-costs-a-federal-role/.
\3\ ``The Effectiveness of Financial Aid in Improving College
Enrollment: Lessons for Policy'', by Bridget Terry Long, Harvard
Graduate School of Education, NBER, and NCPR, January 2008. Available
at http://gseacademic.harvard.edu/- - longbr/Long_-
_Effectiveness_of_Aid_-_Lessons_for_Policy_(1-08).pdf. ``Class
Differences,'' by Arthur Hauptman. Published in the New York Times,
February 3, 2010. Available at http://roomfordebate.blogs.nytimes.com/
2010/02/03/rising-college-costs-a-federal-role/#arthur.
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About three quarters of all undergraduate students in the United
States attend public colleges and universities, where changes in
tuition are driven primarily by State budgets.\4\ In addition, both
State and college financial aid programs and policies can affect what
students actually pay. As shown by our most recent annual report on
student debt levels, there is very wide variation in the average debt
of 4-year college graduates from State to State and college to college,
even among schools with similar sticker prices.\5\
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\4\ Kane, Thomas, Peter Orzag and David Gunter, ``Spending: The
Role of Medicaid and the Business Cycle,'' The Urban-Brookings Tax
Policy Center Discussion Paper #11,The Urban Institute, May 2003,
http://www.urban.org/UploadedPDF/310787_TPC_DP11.pdf. Percentage of
undergraduates at public institutions from calculations by The
Institute for College Access & Success on data from U.S. Department of
Education, National Center for Education Statistics (NCES), Integrated
Postsecondary Education Data System (IPEDS), http://nces.ed.gov.ipeds.
\5\ ``Student Debt and the Class of 2009,'' Project on Student
Debt, The Institute for College Access & Success, October 2010.
Available online at http://projectonstudentdebt.org/files/pub/
classof2009.pdf.
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To help keep college within reach for families of modest means,
need-based grant aid is essential. Even after the recent historic
increase, which has helped millions of students enroll and stay in
college during these tough times, the maximum Federal Pell grant covers
only about 35 percent of the average cost of attending a public 4-year
college. Congress should preserve and build on the Pell grant increases
enacted earlier this year, and also consider ways to encourage States
and colleges to help increase the total amount of need-based aid
available to low- and moderate-income students. The share of State
grant dollars that are distributed based on financial need has been
declining for more than 20 years.\6\ Even at public colleges, less than
half of all grants to their own students go to meet financial need.\7\
Congress should also be wary of proposals to increase Federal student
loan limits, since, as noted above, such steps may actually contribute
to price increases.
---------------------------------------------------------------------------
\6\ Trends in Student Aid 2009. The College Board. 2009. Available
online at http://www.trends-collegeboard.com/student_aid/.
\7\ Ibid.
---------------------------------------------------------------------------
Making college-level data on costs and student debt more
accessible, comparable, and transparent would not only help students
and families make more informed choices, but also help researchers and
policymakers identify both promising and worrisome trends and
practices. Some colleges, particularly in the for-profit sector, do not
even disclose prices on their Web site. Congress should ensure that all
colleges disclose the cost of attendance for each of their programs in
a prominent, clear, and conspicuous manner, and in a format that is
easily comparable across institutions. In addition, as noted above,
there are lots of colleges that are more affordable than their sticker
prices indicate. It should not be so hard for students and families to
find out what it might cost someone like them to attend a particular
college, and to make apples-to-apples comparisons with likely costs and
debt at other schools. As part of the Higher Education Opportunity Act,
Congress required colleges to disclose campus averages for net price
and to provide net price calculators for students to get individualized
estimates. The calculators become mandatory in October 2011, and they
are required to provide prospective students with a clear estimate of
what costs they would still have to cover--through work, savings, or
loans--after subtracting likely grant aid from the full cost of
attendance. However, there are already signs that some schools and
calculator developers are emphasizing a different definition of net
cost or ``out-of-pocket cost,'' which deceptively emphasizes the cost
to the student after work study and various types of loans.\8\ Congress
should send a strong signal about the purpose of the net price
calculators and ensure that they are working as intended.
---------------------------------------------------------------------------
\8\ ``A First Look at Net Price Data,'' by Matt Reed, Institute for
College Access & Success. Available at http://views.ticas.org/2010/08/
a_first_look_at_net_price_data.html.
---------------------------------------------------------------------------
Congress should also support the Federal collection and
dissemination of student debt data at the college level, including
information on both Federal and nonFederal student loans. The only
college-level data currently available for cumulative student debt are
from privately conducted, voluntary, unverified surveys. Please see our
report reference above, Student Debt and the Class of 2009, for
specific recommendations for improving the amount and quality of
student debt information available to the public and policymakers.
Question 2. Congress enacted a number of changes in the Higher
Education Opportunity Act to address many of the problems you raise in
your testimony. What additional changes would you suggest to address
those problems?
Answer 2. As noted in my testimony, the Higher Education
Opportunity Act (HEOA) substantially weakened the 90-10 rule for title
IV student aid. It allowed for-profit schools to immediately count
institutional loans towards their minimum required 10 percent of non-
Federal revenues, rather than counting them as they are repaid; allowed
schools to count some Federal title IV aid on the non-Federal side of
the ledger; and eased penalties for proprietary institutions that fail
to comply with the 90-10 rule. To provide a more meaningful measure of
defaults and increase college accountability for student outcomes, the
HEOA did increase the time period covered by Federal student loan
cohort default rates from 2 to 3 years after borrowers enter repayment.
However, this improved measure does not go into effect until 2014.
To better protect students and taxpayers from undue risk and
unacceptable practices in the for-profit sector, such as those
uncovered by the U.S. Government Accountability Office and in this
series of oversight hearings, the Department of Education should
swiftly finalize and fully enforce rules restoring the statutory ban on
incentive compensation and implementing a strong definition of gainful
employment for career education programs, as supported by a broad range
of student, consumer, higher education and civil rights
organizations.\9\ Policymakers should also quickly move forward on
three additional fronts to help increase accountability for
institutions and outcomes for students and taxpayers. One is to improve
the quality and consistency of Federal data on student outcomes,
including graduation, completion, and job placement for career
education program. Another is to improve the accreditation and State
oversight of for-profit colleges, including reducing conflicts of
interest in accreditation and the ease with which colleges can acquire
another college's accredited status; addressing the problem of
accredited schools offering unaccredited programs (as discussed in
hearings and in my testimony); and ensuring that States have adequate
and sufficiently independent mechanisms in place to both catch and
prevent fraud and abuse. Finally, Congress should better align Federal
funding and incentives with desired student outcomes, by either
strengthening the 90-10 Rule or putting a stronger and more effective
mechanism in its place to protect both students and taxpayers.
---------------------------------------------------------------------------
\9\ See http://protectstudentsandtaxpayers.org/?page_id=215 for a
list of organizations that have called for a strong gainful employment
regulation.
Question 3. Debt, default and low completion is a problem for many
students attending traditional institutions of higher education. Why
shouldn't the Department's proposed Gainful Employment rule also be
applied to all institutions of higher education?
Answer 3. The Department's proposed Gainful Employment rule does,
in fact, apply to public and non-profit colleges. Federal law specifies
which career education and training programs are required to ``prepare
students for gainful employment in a recognized occupation'' in order
to participate in Federal student aid programs. Covered programs
include most for-profit programs and all public and non-profit programs
of less than 2 years. According to the Department of Education, the
majority of covered programs are at public colleges, and the rule
applies to more public colleges than for-profit colleges.
Question 4. The Department of Education received 90,000 comments on
its proposed Gainful Employment rule. The National Black Chamber of
Commerce recently ran the following ad in the Washington Post and Roll
Call (chart). In it, they project that the Department of Education's
proposed Gainful Employment rule would result in 400,000 students
leaving postsecondary education each year. Many of the traditional
institutions of higher education have stated that they do not have the
capacity to handle a higher volume of students. What other options are
available to students who now currently attend for-profit programs?
Answer 4. The projection that 400,000 students would leave
postsecondary education because the rule comes from a study
commissioned and paid for by Corinthian Colleges, a for-profit college
company which opposes the proposed rule. The study's projection is
based in large part on its assumption that ``capacity will often not
exist to absorb . . . the displaced students'' in the for-profit
college sector.\10\ However, this assumption is inconsistent with the
industry's well-documented ability to rapidly expand its capacity, and
the fact that most for-profit programs would remain eligible for
Federal funding. The proposed regulation is designed to create
incentives for schools offering low-quality or over-priced programs to
improve them and/or expand programs that are better preparing students
to repay their loans.
---------------------------------------------------------------------------
\10\ The Parthenon Group, ``Assessment of Missouri Estimate of
Impact,'' September 9, 2010, p. 7, and ``Parthenon Perspective on
Missouri Gainful Employment Estimates,'' September 2010.
---------------------------------------------------------------------------
The Department of Education's Notice of Proposed Rulemaking (NPRM)
projects that between 16,000 and 32,000 students would not continue
their postsecondary education. \11\ A recent study by Education Sector,
an independent non-profit think tank, concluded that the proposed
gainful employment rule would likely force even fewer programs to close
(4 percent) than the NPRM projects.\12\ In addition, these estimates
may overstate the impact of the proposed rule since colleges will have
time to improve their programs before the rule goes into effect.
---------------------------------------------------------------------------
\11\ Notice of Proposed Rulemaking, Federal Register, Vol. 75, No.
142, July 26, 2010, page 43632.
\12\ ``Are You Gainfully Employed? Setting Standards for For-Profit
Degrees,'' Education Sector, September 2010.
---------------------------------------------------------------------------
We and a large coalition of advocates for college access, civil
rights, students and consumers believe that a strong definition of
gainful employment is one of the best ways to increase student access
to quality, affordable education and training. That is why more than 40
organizations, including the U.S. Student Association, Council for
Opportunity in Education, NAACP, Rainbow PUSH Coalition, National
Council of La Raza and LULAC, have called on the Administration to
issue a strong regulation and/or submitted comments in support of a
strong regulation.
Question 5. You indicated that there are great limitations in how
the Federal Government collects graduation rates. What are those
limitations? How can the Federal Government better capture the true
number of students completing their course of study?
Answer 5. As currently collected and reported, official graduation
rates capture outcomes for only a portion of students who enroll at a
given college. These graduation rates include only full-time students
who are new to postsecondary education, are identified by the
institution to be seeking a degree or certificate, and, for most
colleges in the country, first enrolled in the fall term of the
academic year. That means that students who enroll part-time, are
transfer or re-entry students, or even first enrolled in the spring
term are generally excluded. An additional limitation of the current
rates is that they are self-reported by institutions.
Congress highlighted the need for more robust graduation data in
the Higher Education Opportunity Act. As required by Section 485 of the
HEOA, the Secretary of Education has created an expert Committee on
Measures of Student Success to develop recommendations on how to better
document student outcomes at 2-year colleges.\13\
---------------------------------------------------------------------------
\13\ For details about the Committee on Measures of Student
Success, see http://www2.ed.gov/about/bdscomm/list/acmss.html#charter.
---------------------------------------------------------------------------
More comprehensive means of tracking outcomes could include looking
at different points along a continuum to gauge students' educational
trajectories. For instance, all students who enroll in a college in a
given year are either still enrolled at the end of the year or have
left the institution due to graduation, transferring to another
institution, or dropping out. Looking at the outcomes of students who
left the college at some point within a given time period, such as an
academic year--as opposed to still being enrolled at the end of the
year--would provide a better sense of how many students left the
college with a credential in hand and how many left empty-handed.
Question 6. During the hearing, you raised the issue of transfer of
credit. This is a problem throughout higher education. What can be done
to encourage transfer of credit between institutions?
Answer 6. While we are not experts on transfer of credit issues, we
recognize that eliminating unnecessary course duplication through
appropriate recognition of previous academic work would allow transfer
students to graduate sooner and reduce costs and risks for both
students and taxpayers. While this issue is relevant to students at all
types of institutions, there is reason to believe that it may be more
problematic for students who seek to transfer from for-profit to public
or non-profit colleges. For example, many for-profit colleges are
nationally, not regionally, accredited, and credits from nationally
accredited institutions are much less likely to be accepted for
transfer. For recommendations about what can be done to improve the
transferability of credit, we recommend contacting the American
Association of Collegiate Registrars and Admissions Officers.
Question 7. Does TICAS have any ongoing relationship(s) with hedge
funds seeking to short sell for-profit schools equities or individuals
or organizations suing for-profit schools? Please describe those
relationships.
Answer 7. A wide range of organizations and individuals interested
in student financial aid policies and practices regularly contact
TICAS, including advocates for students, consumers, civil rights and
college access, colleges, reporters, lenders, and researchers and
professionals in academia, at think tanks and in the for-profit sector.
TICAS has no financial interest or affiliation with any hedge funds or
individuals or organizations suing for-profit schools.
Question 8. Did TICAS receive a copy of the Department of
Education's Notice of Proposed Rulemaking on Gainful Employment before
it was published in the Federal Register and/or released to the public?
Please describe the sources.
Answer 8. No, we did not obtain a copy of the Notice of Proposed
Rulemaking on gainful employment before it was posted on the
Department's public Web site on Friday, July 23, 2010.
Question 9. Does TICAS participate in a ``Gainful Employment
Coalition?'' If so, please explain the goals of the coalition and
provide a list of members of the coalition and their affiliations with
companies or organizations.
Answer 9. TICAS is part of a broad coalition of advocates for
students, consumers, higher education, civil rights and college access
that support long overdue steps to enforce Federal law requiring career
education programs to prepare students for gainful employment in a
recognized occupation. All of the coalition letters urging the
Administration to take prompt action to protect students and taxpayers
from career education programs that over-promise and under-deliver are
posted on www.
ProtectStudentsandTaxpayers.org. The organizations that created this
Web site and the partner organizations are also listed on the Web site.
Question 10. Does TICAS believe Income-Based Repayment Programs are
beneficial to students? Should use of the IBR program count against the
student, the program or the school in any way if used by students?
Answer 10. TICAS is among the strongest supporters the Income-Based
Repayment Program (IBR), having led the coalition that developed the
Plan for Fair Loan Payments on which IBR was modeled. We would
therefore be the first to object to any proposal that would discourage
students from enrolling in IBR. The proposed gainful employment rule's
repayment rate does not do that, as many if not most students in IBR
will be paying down their loans. The proposed rule would, however,
discourage schools from loading students with debts they cannot repay.
It would also help discourage schools from pushing borrowers to go into
forbearance or to consolidate when it is not in the student's interest
to do so.
The gainful employment rule's repayment rate measures the extent to
which former students are successfully paying down their loan
principal. It appropriately counts loans in IBR whose principal is
being paid down as being repaid, but not loans in IBR whose loan
balances are increasing after they leave the school. If the gainful
employment repayment rate measure automatically counted all borrowers
in IBR as repaying their loans, then bad-actor schools saddling
students with excessive debt would merely have to get their students in
IBR and their programs would be guaranteed to remain fully eligible for
Federal funding.
IBR is intended to be a safeguard for borrowers, not a shelter for
schools, just as mortgage insurance is intended to protect homeowners,
not to enable builders to build dangerous, substandard homes.
______
Iowa Chapter--Mid-America Educational Opportunity
Program Personnel (IA--MAEOPP),
Calamar, IA 52132,
September 8, 2010.
Dear Senator Harkin: On behalf of the Board of the Directors of the
Iowa Chapter of the Mid-America Association of Education Program
Personnel (MAEOPP), I write in strong support of the op-ed authored by
you in the September 3, 2010, Washington Post, ``A fairer deal for
college students.'' As the only higher education organization in Iowa
with the mission to bring together into a work and study community
those persons who have an active interest in or who are professionally
involved in broadening accessibility to success in formal postsecondary
education for students from low-income and minority backgrounds and
those who are the first in their family to attend college, the IA--
MAEOPP association commends you for supporting necessary steps to
ensure that disadvantaged students are protected from accruing
unmanageable debt and a lack of employment opportunities upon
graduation.
As you state in your opinion piece, career colleges and the for-
profit higher education sector target low-income and first-generation
students to attend their schools--promising flexible hours and a job-
friendly curriculum. However, as we have seen time and time again, many
students enter these institutions without guidance on financial aid and
are subject to unsavory and unfair recruiting tactics. These students
start their higher education dreams with high aspirations and under
false pretenses. Unfortunately, many of them are left with no viable
career options and mountains of debt.
The Federal TRIO programs assist students in making sound financial
decisions--from college selection to financial literacy, FAFSA
completion, and financial aid awareness. However, today TRIO programs
in Iowa serve more than 1,300 fewer students than in fiscal year 2005
and that number continues to grow. Yet, as President Obama and his
administration continue to emphasize, a college degree is now more
important than ever. While setting necessary and important safeguards
over career colleges and the for-profit sector through measures like
gainful employment is commendable, it cannot solve the problem alone.
Programs like TRIO must be expanded so students who enter into
certificate and degree programs at colleges and universities in all
sectors are able to make educated and informed decisions.
On behalf of all of Iowa's low-income students and families, the
TRIO programs throughout Iowa thank you and your staff for taking the
necessary steps to prevent abuse and fraud in the for-profit higher
education sector and protecting students as they enter into and
complete their postsecondary education. We look forward to working with
you on means to further promote educational access and achievement for
low-income and first-generation students in TRIO Iowa and beyond.
Sincerely,
Katherine Whitsitt,
President, IA--MAEOPP.
______
Council for Opportunity in Education (COE),
Washington, DC 20005,
September 9, 2010.
Ms. Jessica Finkel,
U.S. Department of Education,
1990 K Street, NW, Room 8301,
Washington, DC 20006-8502.
Re: Docket ID ED-2010-0PE-0012; Program Integrity: Gainful Employment
Dear Ms. Finkel: On behalf of the Board of the Directors of the
Council for Opportunity in Education (COE), I write in response to the
recent safeguards issued by the Department of Education on the for-
profit sector to protect low-income and first-generation students and
learners with disabilities. As the only higher education organization
with the mission to advance and defend the idea of equal opportunity in
postsecondary education, COE commends Secretary Duncan and the U.S.
Department of Education for proposing necessary steps to ensure that
disadvantaged students are protected from accruing unmanageable debt
and a dearth of employment opportunities upon receipt of their
certificates or degrees.
Career colleges and the for-profit higher education sector target
low-income and first-generation students to attend their schools--
promising flexible hours and a job-friendly curriculum. However, as we
have seen time and time again, many students enter these institutions
without guidance on financial aid and are subject to unsavory and
unfair recruiting tactics. These students start their higher education
dreams with high aspirations and under false pretenses. Unfortunately,
many of them are left with no viable career options and mountains of
debt.
The data on for-profit institutions and the cost of tuition and
default rates is extremely alarming as it relates to low-income
students. According to a recent study by the College Board, in the
2009-10 academic year, the average for-profit institution charged
$14,174 in tuition and fees and the average community college charged
only $2,544. In addition, recent data provided by the Department of
Education showed that 93 of the 100 postsecondary institutions with a
default rate of 30 percent or more in 2006 and 2007 were for-profit
institutions--the same institutions targeting disadvantaged students
without the knowledge and support system to make sound decisions.
While setting necessary and important safeguards for career
colleges and the for-profit sector through measures like gainful
employment is commendable, that alone cannot solve the problem.
Programs like TRIO's Talent Search and Education Opportunity Centers
are necessary to ensure that students are making sound decisions
regarding higher education. These programs provide financial aid
counseling where participants receive information about college
admissions requirements, scholarships, FAFSA completion and various
student financial aid programs.
On behalf of all low-income students and families, COE thanks the
Department of Education for taking the necessary steps to prevent abuse
and fraud in the for-profit higher education sector and protecting
students as they enter in and complete their postsecondary education. I
look forward to working with this Administration on means to further
promote educational access and achievement for low-income and first-
generation students in TRIO and beyond.
Sincerely,
Arnold Mitchem,
President.
Education Management Corporation (EDMC),
September 29, 2010.
Hon. Tom Harkin, Chairman,
Committee on Health, Education, Labor, and Pensions,
428 Dirksen Senate Office Building,
Washington, DC 20510.
Hon. Michael B. Enzi, Ranking Member,
Committee on Health, Education, Labor, and Pensions,
835 Hart Senate Office Building,
Washington, DC 20510.
Dear Chairman Harkin and Ranking Member Enzi: Education Management
Corporation (EDMC) recently learned of the testimony before the Senate
Health, Education, Labor, and Pensions (HELP) Committee of a current
employee of our organization, Ms. Kathleen Bittel. Permit me the
opportunity to provide the committee a fuller context in an effort to
ensure a fair portrayal of the facts, prior to the hearing on Thursday.
One of the most important responsibilities of our institutions is
to help our graduates find productive and rewarding work in their
fields following graduation. Across the Company, EDMC has over 300
employees who are dedicated to helping our graduates find the jobs they
have worked and studied hard to qualify for, and who are also
responsible for ensuring that the Company accurately and fairly reports
its success at job placement for the benefit of current and prospective
students.
Ms. Bittel is a Career Services Advisor currently on leave, at her
request, from EDMC Online Higher Education. She has raised issues
concerning the general conduct of co-workers and the Company.
Specifically, she has alleged that the Company pressured career
services staff to improperly report placement statistics and included
several unspecified examples of alleged improper conduct.
Ms. Bittel initially made her allegations in August, immediately
prior to going on leave. Upon learning of the allegations, EDMC,
consistent with Company policy, conducted a full internal
investigation. Ms. Bittel refused to provide specific information about
her allegations despite being informed that the failure to do so would
hinder the investigation. The internal investigation found no support
for Ms. Bittel's claims of undue pressure placed upon Career Services
Advisors at EDMC Online Higher Education to meet placement goals or
falsely verify graduates' employment was related to their field of
study.
We subsequently received from a member of the media a copy of the
letter Ms. Bittel sent to the HELP Committee, and promptly undertook a
second investigation led by Jones Day, outside counsel to the Company.
Thus far, the team assembled by Jones Day has spent hundreds of hours
interviewing over 20 employees, including all of Ms. Bittel's fellow
Career Services Advisors and supervisors at EDMC Online Higher
Education, and reviewing documents in an attempt to determine the
veracity of the information set forth in the letter. We again reached
out to Ms. Bittel and implored her to meet with us only to see her
respond by again refusing to provide specifics or meet with us. Though
again hampered by the lack of specifics due to Ms. Bittel's refusal to
cooperate, the continuing investigation by Jones Day has likewise found
no support for the claims that the Company has pressured employees to
violate placement policies and procedures.
Precisely to avoid instances such as those Ms. Bittel alleges, EDMC
has long utilized a process designed to ensure the accurate collection
and reporting of graduate employment statistics. This process serves as
a series of checks and balances to safeguard against an employee's
ability to report inaccurate data and includes the following steps:
Placement documentation is obtained by a Career Services
Advisor directly from an employer or a graduate whenever possible;
A department supervisor is responsible for checking the
accuracy of all information entered by Career Services;
Advisors and confirming that verifications are documented;
All unusual salary fluctuations and certain waivers from
placement are independently reviewed by our corporate staff;
Our corporate staff performs a separate review of all data
prior to records being finalized, including a review of whether the
employment listed for each graduate is related to his or her field of
study.
In fact, Ms. Bittel's own career services placement portfolio
revealed instances of job placements she submitted that were identified
by her supervisors to be of a questionable nature. This data was
captured through our standard operating processes, investigated, and
ultimately rejected by supervisors through the course of routine
reviews. We have provided copies of our career placement policies to
the HELP Committee's staff in connection with our response to the
committee's document request.
Based on our investigations, we believe that Ms. Bittel's
allegations are unfair to the tens of thousands of men and women
working to serve students across the country as part of the EDMC
family. They are particularly troubling in light of her consistent
refusal to provide to the Company, or our outside counsel, basic
details necessary to confirm their veracity. As an organization that
strives to achieve the highest ethical standards, we recognize the
vital role played by each of our employees. While we are disappointed
that Ms. Bittel has chosen to make non-specific allegations in an
increasingly public way, please be assured that we take seriously our
commitment to work with graduates to assist them in finding employment
and we will not tolerate employees falsifying career placement data.
We are committed to thoroughly scrutinizing and taking action
regarding any inappropriate conduct at any level within the Company. We
have an anonymous reporting hotline in place to enable employees to
report suspected misconduct without any fear of retribution. Employees
found to have violated our Code of Business Ethics and Conduct are
subject to disciplinary action up to and including termination. We
fully support efforts to eliminate deceptive practices in higher
education and remain committed to ensuring that appropriate safeguards
are in place to ensure that those who may be responsible for purposely
misrepresenting facts are held accountable. We continually seek to
improve all aspects of our operations, including our marketing,
admissions, and career services activities.
Thank you for your fair consideration of our position on this
matter as the committee commences hearings on our sector of higher
education. We look forward to continuing to work with you in good faith
for the benefit of students.
Sincerely,
Todd S. Nelson,
Chief Executive Officer.
______
Education Management Corporation (EDMC),
September 30, 2010.
Hon. Tom Harkin, Chairman,
Committee on Health, Education, Labor, and Pensions,
428 Dirksen Senate Office Building,
Washington, DC 20510.
Hon. Michael B. Enzi, Ranking Member,
Committee on Health, Education, Labor, and Pensions,
835 Hart Senate Office Building,
Washington, DC 20510.
Dear Chairman Harkin and Senator Enzi: Yesterday, I sent to you a
letter that conveyed Education Management Corporation's (``EDMC'')
position concerning the expected testimony of one of our employees,
Kathleen Bittel, at today's hearing. Since that time we have been given
a copy of the written testimony submitted by Ms. Bittel. Having
reviewed that testimony, I believe it is important to focus the
committee on two aspects of her testimony.
At the outset, it is important to recognize that the company's
career services personnel work very hard at assisting graduates in
obtaining employment in what is currently a very challenging
marketplace. In fact, as Ms. Bittel points out, we expect our employees
in career services to produce results for our graduates. We make no
apologies for holding our employees to high standards. We are proud of
their success in assisting graduates of our institutions.
Those high standards, however, are coupled with policies and
procedures designed to prevent from being reflected in our placement
statistics the kind of behavior Ms. Bittel identifies. One glaring
omission from Ms. Bittel's testimony is her failure to discuss EDMC's
policies and procedures for verifying and approving job placement
statistics, including the multiple levels of review designed to ensure
accuracy in reporting that data, which I discussed in my earlier
letter. We believe these controls work well in practice, and have led
us to reject what we believe to be improper submissions, including some
made by Ms. Bittel. Importantly, Ms. Bittel's proposed testimony, while
alleging that our reporting of graduate results is ``rife with abuse,''
identifies no specific instance in which any of the examples she cites
ended up in our publicly reported data. Thank you again for your fair
consideration of our position on this matter.
Sincerely yours,
Todd S. Nelson,
Chief Executive Officer.
______
Education Management Corporation (EDMC),
October 8, 2010.
Hon. Tom Harkin, Chairman,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
428 Dirksen Senate Office Building,
Washington, DC 20510.
Hon. Michael B. Enzi, Ranking Member,
Committee on Health, Education, Labor, and Pensions,
U.S. Senate,
833 Hart Senate Office Building,
Washington, DC 20510.
Dear Senators: Thank you for your consideration of my September 29
and 30, 2010 letters to the committee on behalf of Education Management
Corporation (EDMC), and for their inclusion in the committee's official
record. I appreciate your willingness to consider the facts included in
those letters as the committee heard testimony on private sector higher
education and, more specifically, testimony from an EDMC employee. I
respectfully submit this additional communication for entry into the
official committee record in response to the September 30, 2010
hearing, ``The Federal Investment in For-Profit Education: Are Students
Succeeding?''
EDMC continues to express its sincere interest in working with
Congress and the U.S. Department of Education (the ``Department'') to
develop meaningful solutions to our Nation's higher education
challenges. We remain profoundly concerned that the Department's
proposed gainful employment regulations are flawed, lack sufficient
support, and reflect misguided policy. Likewise, we respectfully
suggest that the series of hearings held by the committee have provided
an incomplete view of the higher education landscape and the quality
and caliber of education proprietary institutions deliver, and have
failed to further our shared goal of addressing mounting student debt
and strengthening higher education in America.
I am particularly concerned with certain specific assertions made
during the September 30 hearing, both in testimony and as part of the
committee's report, ``The Return on the Federal Investment in For-
Profit Education: Debt Without a Diploma.'' The following facts--
contained in this letter and the attached key data charts--should help
provide clarification in order to complete the official record.
edmc career services
On September 30, the committee received testimony that EDMC employs
only nine full-time Career Services advisors for tens of thousands of
graduates. In fact, across our education systems, EDMC employs more
than 250 full-time career services advisors, with 10 advisors dedicated
exclusively to graduates of its online higher education programs.
An online higher education career service advisor's average
``active'' caseload is 55 graduates per quarter, but at any point in
time a portion of online graduates assigned to each advisor are already
employed in their field, or not actively seeking employment. Graduates
may be active military; seeking further education; unable to work due
to medical difficulties; international students; stay at home parents;
or employed in an unrelated profession and simply chose to obtain a
degree outside of their area of expertise. Consequently, we believe the
typical active caseload of online higher education graduates is
appropriate. We also note that a significant number of programs offered
by EDMC schools are relatively new and that we will increase the number
of career service advisors as the number of graduates from the programs
increase.
``fast growing schools'' and ``fast departing students''
This section of the September 30, 2010 committee report does not
take into account the underlying reason for the growth of our sector:
proprietary schools provide greater access, more flexibility, better
course options, superior technology, and a greater career focus than do
many public and private not-for-profit colleges and universities. In a
challenging global economy, today's students and working adults must
acquire career skills they need to gain a competitive advantage over
their counterparts. Proprietary schools have the proven ability to
respond more quickly to marketplace needs and workforce demands than do
its traditional school peers. This, too, has contributed to rapid
growth in our sector.
In assessing students at proprietary institutions who do not finish
their studies, the committee report fails to note that student drop-out
rates can vary significantly by student profile. Older students and
those with fewer financial resources often have other responsibilities
that require them to take breaks during their pursuit of an education.
In addition, many traditional-aged students choose not to take any
coursework during the summer term. Based on the committee's methodology
for calculating drop-out rates, such students would be counted as
having dropped out, when in reality they are simply not taking courses
for several months, with many continuing their education in a future
term. In fact, over the last 5-year period, students who initially
enrolled in EDMC schools and stopped taking courses for a period of
time represented nearly 30 percent of all ``drop-outs,'' which explains
why graduation rates are higher than the rates implied by the
committee's calculation. Finally, when comparing similar student
profiles, retention rates at proprietary institutions are similar to
those at public and not-for-profit institutions. According to the
Department's Integrated Postsecondary Education Data System, in 2008,
for all degree-granting institutions with more than 40 percent of
students receiving Pell grants, the full-time retention rate was 57
percent at proprietary institutions, as compared to 60 percent at
public and 61 percent at not-for-profit institutions.
``large and growing profits''
The committee report overlooks the fact that, unlike their
traditional, not-for-profit peers, proprietary colleges and
universities incur significant State and Federal tax liabilities.
During calendar year 2009, the 13 largest publicly traded postsecondary
institutions paid more than $1.2 billion in taxes. Moreover, the report
also fails to consider taxpayer subsidies, Federal, State, and local
grants, appropriations, and contracts received by traditional, not-for-
profit institutions. Excluding title IV funding, government bodies
contributed $150 billion in taxpayer funds to these institutions during
fiscal year 2008, with over one-third coming from the Federal
Government.\1\
---------------------------------------------------------------------------
\1\ U.S. Department of Education, NCES 2010-152, April 2010, Table
3.
---------------------------------------------------------------------------
Furthermore, it should be noted that EDMC invests significantly in
capital projects, spending $175 million on capital improvements during
our most recent fiscal year ending June 30, 2010. EDMC has invested
more than $1 billion in capital projects over the last 10 years,
expanding facilities to meet demand, investing in higher capital-
intensive programs such as culinary arts, building an online
infrastructure to expand access to quality education, and investing in
our facilities and technology to provide students a productive,
learning environment. We are extremely proud of our investment in the
student experience.
``growing dependence on financial aid'' and ``rapidly increasing
federal dollars''
The committee report acknowledged, but did not fully address, the
impact of the demographic profile of large numbers of students
enrolling in proprietary institutions. Because our schools often serve
non-traditional students--men and women whose demographic profile,
family income, and work situations pose obstacles to earning a college
degree--students in our sector's schools appear to receive a
disproportionate amount of financial aid when compared with their peers
at traditional schools.
A closer examination of the facts shows that while our students--
who tend to be lower income--receive a higher aggregate amount of
Federal aid, our sector's student outcomes are quite similar to those
of traditional, not-for-profit schools when comparing similar student
populations. For 4-year, degree-granting institutions like EDMC (with
40 percent or more of their student population receiving Pell grants),
our graduation rate of 41 percent is in line with those at both not-
for-profit and other proprietary institutions and well above the 33
percent rate at public schools. Likewise, proprietary schools also
report similar student loan default rates as the overall postsecondary
education industry when factoring in similar student populations. For
4-year, degree-granting institutions with 40 percent or more of their
student population receiving Pell grants, EDMC's cohort default rate of
7.3 percent is better than the averages reported across all sectors of
post-secondary education.
As noted in the report, there have been rapid and dramatic
increases in the amount of title IV aid awarded to students attending
proprietary schools. These increases are not related to changes in
business practices by proprietary schools over the past several years,
nor are they related to changes in the practices of traditional public
or not-for-profit schools. Rather, the increases reflect substantial
increases in the availability title IV aid together with the
demographics of the students we serve, the collapse of the private
credit markets and the associated narrowing of private student lending,
and a deteriorating economy that includes tremendous job losses and
reductions in or elimination of State grant aid.
The factors giving rise to increased amounts of title IV aid
awarded to students at proprietary schools have affected students at
traditional schools as well. For example, the University of Georgia
recently reported that its number of Pell grant recipients this year
grew to 5,322 students, which is a 52 percent increase over the 2 years
from the 2007-8 academic year. [Testimony of Bonnie C. Joerschke,
Director, Office of Student Financial Aid, University of Georgia to the
Advisory Committee on Student Financial Assistance, June 25, 2010]. The
historic increases in title IV aid adopted by recent congressional
actions grew Pell grants and student loan funding for students across
all of higher education, not just the proprietary sector.
The increases in Federal title IV aid have been championed by many
members of the Senate HELP Committee, and rightfully so, because a
priority of the Higher Education Act is ``to prepare students from low-
income families for postsecondary education'' [20 U.S.C. Section
1070(a)(4)]. These increases, however, are related to the students we
serve, not to our business model, and apply across all of higher
education, not just the proprietary sector.
In closing, I sincerely appreciate the committee's consideration of
the information EDMC has offered to date, and for its close examination
of the data and information contained in this letter. As EDMC has
consistently conveyed to the committee and to the Department, we remain
committed to doing what is right for the benefit of our students. We
stand ready to assist in the development of policies that accomplish
shared goals on behalf of all of our Nation's students. In doing so,
however, we ask that the committee fully examine facts from across all
of higher education, not just the small portion represented by
proprietary schools, and in doing so, disaggregate the data examined so
that both alleged problems and proposed solutions are examined through
a lens that can help in addressing the root of the problems.
Establishing regulations or legislation based on an incomplete view of
the higher education landscape will only lead to unintended
consequences and further barriers to a college degree for those
students who need improved access the most.
Sincerely yours,
Todd S. Nelson,
Chief Executive Officer,
Education Management Corporation.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Kaplan University,
Cedar Rapids, IA 52404,
October 12, 2010.
Hon. Tom Harkin, Chairman,
Committee on Health, Education, Labor, and Pensions,
428 Senate Dirksen Office Building,
Washington, DC 20510.
Dear Chairman Harkin: Kaplan University--Cedar Rapids (KU--Cedar
Rapids) is committed to ensuring that students who enroll in our
programs are provided with every opportunity for success. I was
therefore concerned when I heard, for the first time in connection with
your recent hearing, that KU--Cedar Rapids student Danielle Johnson
plans on dropping out of her Practical Nursing program.
My administrators and instructors take extraordinary steps to help
our students succeed in and out of the classroom. This level of
dedication has led to a 92 percent placement rate and 65 percent
graduation rate in the Practical Nursing program. In fact, 80 percent
of Ms. Johnson's classmates with whom she started her program are
successfully progressing toward graduation.
Practical Nursing is an intensive program that requires a high
level of student dedication. In addition to classroom studies,
Practical Nursing students attend hands-on clinical rotations at
hospitals and care centers. These locations are pre-set instructional
sites. Clinical rotations are taught to multiple students at the same
time by KU--Cedar Rapids instructors as part of the students' overall
course schedule. This is different from an externship where an
individual student, with campus oversight and approval, works in a job-
related to his/her program for class credit. Occasionally, students are
able to set up externships with a facility or an office that is close
to their home.
Ms. Johnson originally enrolled in the Medical Assisting (MA)
program before deciding to switch to the Practical Nursing program. The
MA program requires externships. During her MA enrollment process, she
was made aware of the possibility of setting up a MA externship near
her home in Tama, IA. However, when she changed programs, she was
informed correctly that she would have to complete a Practical Nursing
clinical rotation at the pre-set clinical instruction sites. Ms.
Johnson, like all students in the program, underwent 2 days of
orientation before starting the Practical Nursing program during which
she was informed in detail about the program's requirements including
the expectations and locations of the school's 14 clinical sites.
Furthermore, she was made aware of her clinical rotation location
during the first term and attended a clinical rotation orientation
describing the requirements of the sites to which she was to be sent.
At no time during these orientations did Ms. Johnson question
whether she could attend a clinical site at her home in Tama, IA. When,
weeks later during her first clinical rotation, Ms. Johnson inquired
about the possibility, she was told clearly that, like all other
students, she would need to attend the approved clinical sites to which
she was assigned. It is apparent that Ms. Johnson is confusing what she
was correctly told about MA externship sites with the clear
requirements of the Practical Nursing clinical instruction sites.
Ms. Johnson's decision to drop out of her program is especially
disappointing because her instructors and academic advisors have worked
diligently to help her be successful. They have provided additional
tutoring and even offered textbooks on tape to help her study during
her commute.
When I learned as a result of your hearing that, despite these
efforts, Ms. Johnson wished to transfer to another school, I
immediately searched our records and found that Ms. Johnson had not
officially requested her transcript from the KU--Cedar Rapids campus.
Due to the Federal student privacy laws, KU--Cedar Rapids is unable to
release student transcripts without a written request and student
release. It is true that our general policy is not to release official
transcripts until a student's balance is fully paid (a policy identical
to, for example, that at the University of Iowa,\1\ Drake University
\2\ and Iowa State University \3\) However, due to her personal
difficulties, of course we will provide the transcript to Ms. Johnson
as soon as she requests it. I have sent Ms. Johnson a copy of the
necessary request and release.
---------------------------------------------------------------------------
\1\ http://www.uiowa.edu/ubill/common_questions/answers.html.
\2\ http://www.drake.edu/accounts/.
\3\ http://www. public.iastate.edu/registrar/info/transcpt.html.
---------------------------------------------------------------------------
Mr. Chairman, I am proud of KU--Cedar Rapids' programs and the
success our graduates have enjoyed. Since 2006, we have graduated 300
students from the Practical Nursing program. Over 90 percent of these
graduates have gone on to successful nursing careers across Iowa at
institutions such as University of Iowa Hospitals and Clinics, Mercy
Medical Center and Clinics, and St. Luke's Hospital and Clinics. These
professional former KU students are serving their communities by
improving people's lives. While I am saddened that Ms. Johnson is
choosing to leave prior to achieving her goals, I remain committed to
working with all of our students to help them to learn, graduate, and
obtain rewarding careers.
Sincerely,
Susan Spivey, President,
Kaplan University--Cedar Rapids.
______
U.S. Senate,
Committee on Health, Education, Labor, and
Pensions,
Washington, DC 20510-6300,
October 26, 2010.
Ms. Susan Spivey, President,
Kaplan University, Cedar Rapids,
3165 Edgewood Park, SW,
Cedar Rapids, IA 52404.
Dear President Spivey: This letter is to notify you that your
letter of October 12, 2010 with regard to Danielle Johnson a student at
Kaplan Cedar Rapids and a witness at the Senate HELP Committee hearing
of September 30, ``The Federal Investment in Education: Are Students
Succeeding?'' has been included in the hearing record.
However, I would note that the facts in your letter differ from
previous explanations and interpretations provided to staff, and indeed
the explanation in the letter that Ms. Johnson must have confused
information she received about the Medical Assisting program's
externship sites with the Practical Nursing program's clinical
instruction sites is not one that was previously provided.
Ms. Johnson's testimony is unequivocal on this point, and I believe
it is clear that she was misled during the recruiting and enrollment
process. Moreover, the misinformation she received caused her to borrow
loans and enroll in a program that did not best suit her needs.
The letter also states that Ms. Johnson never officially requested
her transcript when she decided in May 2010 that she wanted to transfer
to another institution. As she makes clear in her letter to you, the
registrar's office told her that they would not send a copy of her
transcript until she paid her balance, so she never officially
requested it. Since the hearing, my office has received two additional
inquiries from other students at Kaplan Iowa campuses who have also
been told they cannot obtain transcripts until they have cleared
similar balances.
I look forward to working together to improve the outcomes of
students attending Kaplan University including its five Iowa campuses
and to ensure that students in Iowa and across the country have the
opportunity and support they need to be successful.
Sincerely,
Tom Harkin,
Chairman.
[Whereupon, at 12:44 p.m., the hearing was adjourned.]